On January 23, 2019, Whitney Lundeen, founder of Sonnet James, a maker of dresses for active mothers, appeared on the Shark Tank in hopes of securing a business partner and financial investor to contribute $350,000 in exchange for 25% equity in her company, a $1.4 million business valuation.
Sara Blakely, a Shark Tank visiting judge and investor who likes to invest in female entrepreneurs, noted that Sonnet James produces dress designs similar to many other producers, but accepted Whitney's deal for $350,000 in exchange for 25% of her company because she liked Whitney very much.
Kevin O’Leary, a regular Shark Tank judge complimented Whitney on a job well done and said that he felt her presentation was the best clothing presentation they have seen over 10 seasons of Shark Tank.
Whitney is a single mom of two boys who developed the Sonnet James line of women’s dresses to allow moms to have one outfit for every occasion. Whether they are in a business meeting, out to dinner, on the playground or riding bikes with their kids, women would have an option for clothing that is comfortable and fashionable for all occasions. Not only has Sonnet James introduced a high-quality product into the mothers market, but they have also created a network of moms which is very important for brand awareness and advocacy.
Click To Enlarge
As Whitney explained to the Sharks, the idea for her company came about when she got tired of mom-look staples like yoga pants and wanted to come up with something fashionable, but easy to clean. Lundeen elaborated.
“I was going through a difficult time in my life, and so I had this idea of making a dress that my mom could have worn that could have reminded her to play with me when I was little. And I said, ‘Alright, this year, I’m going to take the idea, and I’m going to teach myself how to sew, and I’m going to pattern draft.’ And every night, I would pretty much sit on the kitchen floor crying, trying to teach myself how to do two things I didn’t know how to do.”
The Sharks asked Lundeen to explain what she meant by the idea of the dress reminding her mom to play with her. Holding back tears, Lundeen says that she had a challenging childhood that included some abuse. She explained.
“My parents did the best they could with what they had. I found when I became a mom, I couldn’t engage with my kids as much as I wanted to. And I wanted something that could help me be the mother that I had always wanted to be, and something that could remind me every day when I put it on what my priorities were.”
Whitney wanted something fashionable, yet durable enough for rough and tumble play. She made her own dresses out of four-way stretch modal spandex. On New Year’s Day, 2013, Lundeen resolved to make her own dress line and she designed 12 different styles of what would become Sonnet James dresses. Next she sourced fabrics and started making dresses for moms.
Click To Enlarge
She got her business going back in August 2013 with a successful Kickstarter campaign that raised $58,245 and provided proof of product-market fit. That’s when Sonnet James became a real business. The dresses are playful and durable. They have the classic lines of designer dresses, but they’re safe for “play clothes.” Sonnet James designs cost between $100-$160 and come with a three-day, no hassle try-on guarantee.
Click To Enlarge
Whitney developed the Sonnet James "playtime" dress line to remind her to be a mom who is present and plays with their kids while feeling confident and put together. The dresses in the Sonnet James line are all washable and made of quality spandex fabric that has stretch and compression so that it retains its shape throughout washing cycles. Whitney has designed all of the dresses in her line as well as taught herself how to sew and how to design and create a website.
Click To Enlarge
Sonnet James operates a direct-to-consumer (D2C) revenue model through their website (see below) and had $1.2 million in sales at the end of 2018 with a 75% product margin. The average order size is 2 dresses and their rate of return is 23% which is below the retail average of 30%.
Click To Enlarge
Sonnet James dresses are made in San Francisco, from fabric produced in New York City and printed in Los Angeles. As part of a community of supportive women, it is important to Whitney that the fabric and the production house work environment are a healthy place for the seamstresses to work. As she told The Hive Magazine, even though she may pay more for the production and thereby make less profit, she wants to maintain a close, one-to-one relationship with the production end of her business. It is “important to me to feel good about where these dresses were being made.” And what is her advice for other mothers who might want to start their own business? Despite all the snags, fears, problems and long, hard hours of work, Whitney says simply: “Just do it!”
So how well has Sonnet James done since the Shark Tank investment by Sara Blakely? Sonnet James is still in business and still designs out of Whitney's home in Palo Alto. As of June 2021, Sonnet James is thriving and reported revenues of $6 million.
COMMENTARY: Sonnet James is a classic example of an entrepreneurial success story driven by incredible passion and drive and very little capital. Sara Blakely, the Shark Tank investor who accepted Whitney Lundeen's offer of a 25% share of her young company, noted that Sonnet James dresses were not much different than those made by other garment manufacturers. So what is the secret to Sonnet James success? The answer: POSITIONING, STORYTELLING and MADE IN USA
Sonnet James does not owe its success to being first-to-market, product differentiation, lowest cost producer, or even great apparel designs. Instead, Sonnet James has succeeded where others have failed in a very crowded women's apparel market through crafty storytelling, product positioning and manufacturing in the USA. Whitney Lundeen has positioned Sonnet James as a designer of "playtime" dresses for moms -- a new women's apparel category. Whitney's successful appearance on the Shark Tank is a marketing storyteller's dream. A true "rags-to-riches" story. Whitney's success post-Shark Tank has produced a lot of "free" publicity which is worth its weight in gold.
I don't know how much Sonnet James spends on paid advertising, but going from $1.2 million in revenues at the end of 2018 to $6 million by June 2021 can't all be due to positioning, crafty storytelling or manufacturing in the USA. The "Made in USA" label probably contributes to Sonnet James success for several reasons:
Job Creation - Made in he USA means creating jobs right here in the good ole USA.
Quality - Made in the USA has always stood for better quality compared to goods made in China, India or other Asian countries. Economists at The Boston Consulting group found that 60 percent of Chinese consumers are willing to pay more for products labeled “Made in the USA” than for those labeled “Made in China.”
Better For Families - Products made in America are better for consumers because they must follow American consumer protection laws and safety standards. Many foreign countries have far less extensive product safety standards than those in the United States, frequently leading to recalls and safety issues.
Addressing Poor Conditions - Many countries do not enforce the same worker safety and child protection controls of Western countries. It can be hard for companies to compete on cost with regimes willing to exploit their own people. You’re supporting a higher standard of working conditions when you buy American-made.
S0nnet James has identified or created a new category or "Blue Ocean" as described in the book Blue Ocean Strategy in the women's apparel market: "playtime" apparel for women. In 2020, there were 15.6 million single mothers living with young children in he USA. There are presently 43.5 million mothers (ages 15 to 50) in the USA. The COVID pandemic, inflation and the Ukraine war with Russia has put a brake on U.S. birth rates. Whether birth rates will continue to decline remains to be seen, but something that Sonnet James needs to keep a careful eye on going forward.
Courtesy of an article dated February 14, 2019 appearing in Business2Community, a tweet dated January 23, 2019 appearing in Twitter, an article dated February 3, 2019 appearing in Tiny Beans, an article dated May 2019 appearing in the Shark Tank Blog, an article dated January 14, 2019 appearing in Shark Tank Products, an article dated April 21, 2021 appearing in Infoplease and an article dated August 28, 2017 appearing in Made In America Movement
In today’s economy, many people are launching new businesses, services and products with the help of crowdfunding platforms like Kickstarter, Indiegogo and even Patron. When using these platforms, community building for crowdfunding is essential; obviously, a big userbase means more funding and a higher chance of success.
But crowdfunding community other benefits, too. Your community can:
Advocate your brand, business and products to their networks
Provide a base for future marketing
Provide a base for future crowdfunding
With so many benefits to cultivating a crowdfunding community, you’ll want to be prepared before launching a campaign.
PREPARING THE FOUNDATION OF CROWDFUNDING COMMUNITIES
Keep Focus on the Community
Your pitch shouldn’t just “sell” your brand, product or service to prospective investors and customers. It should do that while focusing on user benefit. You want to create a community to fund your venture, so deliver a bold vision of what the world could be—and how your community will play a role in bringing it about.
Basically, you don’t want to just focus on self-promotion. What’s in it for the user? Once you’ve established a vision, you can target like-minded users in your community building for crowdfunding efforts. Your pitch might also include suggested tweets, memes and content that funders can share to their own networks to further spread the message.
Identify Key Community Members when Building Your Online Community
Before you launch your campaign, you must lay the foundation for your community by identifying key community members. These individuals will support and boost your campaign from day one, ensuring it gets off to a healthy start. As far as community-building goes, they will be the first advocates to invite others in. Your friends, family and colleagues are good starting points. Consider giving them a list of goals and actions so they know how and where to support. These might be:
A quota on users to engage per day, online or off
On-brand community hashtags to use
A quote on posts per social network promoting the campaign
A list of key dates with their amount goals
In addition to this first-level network, you’ll want to seek out key stakeholders, notable investors and community leaders. Essentially, these are influencers you’ll want to enlist who can support your campaign and share it with their communities. You’ll want a small handful of these—about two to four—and they should also be on-board before your campaign launch.
By assembling this initial community, your campaign can start off with a bang. Having a substantial amount of money pledged from the beginning increases your optics; you’ll also have a dedicated team that will help community building for crowdfunding as they spread the word.
If your business has an established community already, you might lead up to the campaign with teases of exciting news. This builds enthusiasm so you can leverage the community for funding.
Online Communities for Crowdfunding Should Strike a Real Connection
Building crowdfunding communities is about forming relationships. Therefore, your campaign rewards should give supporters a tangible sense of playing a role in the brand or community. Media companies, for example, often offer producer credits to their supporters.
You might even allow backers to become a part of the production’s process. For example, a game company might offer a reward in which a supporter can design a character. A business might arrange for a supporter tier to meet the team or tour the company. Think of how you can truly involve your community—don’t just offer cool gifts, products or tokens of appreciation.
Using Social Media for Building Your Online Community
Choose a handful of social networks you’ll spread your campaign and message on. Once you’ve done this, tailor your message to those networks. For example, LinkedIn skews more professional within certain industries; Twitter, meanwhile, favors brevity and big thinking.
CROWDFUNDING COMMUNITIES DURING AND AFTER THE CAMPAIGN
Host an Event to Launch Communities for Crowdfunding
Events are a great way to build enthusiasm, expand your reach and grow your community. At your campaign’s launch, or throughout the campaign, host an event online or at a venue to attract attention. These events are celebratory and make your campaign more memorable. Seeing others in-person can encourage your supporters to put their money where their mouth is—and give your campaign public validation.
Push news of events and invites to your social channels and existing online communities. You might also consider a calendar of events and content which you can post. For example, try an “ask me anything” on Reddit half-way through the campaign to drive community engagement and address prospective backers’ concerns.
Stretch goals also provide an opportunity to engage your community. Tap into the userbase to ask for ideas they’d like as stretch goals. Provide incentives for backers to share the campaign with their friends to further keep them invested and expand your reach.
Stay Communicative & Show Appreciation for Your Crowdfunding Communities
Always be communicative! Don’t leave your community in the dark; keep them in-the-know every step through the process. Otherwise, you risk betraying their trust. Crowdfunding platforms commonly offer a blog where you can make announcements and show progress, but you should do this on social media and your website as well.
Finally, show appreciation for your online communities. This humanizes your brand with the community, but also provides an opportunity to strengthen your message. Highlight messages from community members, write about who inspires you or your idea, or share a heartfelt story about who helped you get where you are today. Whatever you do, bring it back to your campaign’s original vision and community’s shared values.
Keep Your Community Inviting
Finally, don’t forget to use comment moderation to make your community as inviting as possible. With a tool like Smart Moderation, you can unify comments across all your social platforms. You can also automatically moderate comments in accordance to your brand’s moderation approach.
With automated moderation, you can keep your community free from trolls, spam and abuse around the clock. Having such a system in place lets you respond more quickly to engagement. Because it’s important that you answer essential questions and respond to criticisms to gain support, you’ll need comment moderation to increase your focus on converting users.
COMMENTARY: I have stated in previous posts about crowdfunding that one of the most important steps required for a successful crowdfunding campaign is developing a crowdfunding community or crowd. Your crowd should consist of loyal supporters who have bought into your crowdfunding offering and are likely to serve as brand advocates who will spread the word concerning your crowdfunding campaign.
It is vitally important that you develop a network of loyal supporters who love your product or invention and believe in your vision of the future. This must be done early (four-to-six months) before you launch your crowdfunding campaign. Remember, you may have a great product or invention, but without a crowd you are setting yourself up for failure. I created a self-running slideshow about reward-based crowdfunding listed below. You may enlarge or stop the slideshow at any time by clicking the screen.
Courtesy of an article dated January 30, 2018 appearing in Smart Moderation
Prominent VCs and angel investors may dominate the headlines with their big sticker investments, but personal loans and credit – along with investments from friends and family – make up the lion's share of funding for startups in the U.S.
According to data compiled by Fundable, only 0.91 percent of startups are funded by angel investors, while a measly 0.05 percent are funded by VCs. In contrast, 57 percent of startups are funded by personal loans and credit, while 38 percent receive funding from family and friends.
Click Image To Enlarge
COMMENTARY: Financing a startup is not a simple process. Below we break down every step of the process and how it impacts your ownership. The first thing to understand about startup funding is that is not done all at once. There are multiple rounds of funding that occur as the business grows.
In the beginning stages, funding will typically come from your savings, loans, and family members. You should create a pitch deck, demonstrate an understanding of the market, and use this as an opportunity to show you have the skills necessary to run a business.
After you have solidified your pitch, you should consider bringing on a startup co-founder. This person can be someone to bounce your ideas off, or even someone that compliments your skillset. Keep in mind that startups with two co-founders raise 30% more than startups with only one.
The next stage is known as pre-seed funding. This is when you present your fine-tuned pitch to family and friends, and potential angel investors. Keep your expectations in check, startup funding for this round typically doesn’t exceed a million dollars. However, this money will be critical to the success of your company, allowing you to hire your first employees or even secure an office to work out of. Another option at this stage is to secure a business loan. You’ll have to pay back the loan with interest, but you also won’t be giving up equity.
The next stage is called the seed round. $1.7 million is the typical amount raised during this phase. This is the stage where venture capitalist funds and accelerators start to show interest in your company. However, depending on the source of funding, you may give up 10-25% of equity during this stage.
The Series A round is the funding round that switches the focus from your company’s potential to its traction in the marketplace. Positive market reception increased revenue, and savvy use of previous investments will all play a role in this round of funding. Venture capitalists, hedge funds, and private equity firms will all be interested during this stage. Series A investments average around $10.5 million and may cost anywhere from 15 to 50% of the equity in exchange. Some businesses elect to try equity crowdfunding at this stage if they don’t attract a lot of interest from large investors.
The Series B round funding is traditionally used to scale your business to keep up with increased demand amid strong signs of growth and success. In this round, you can expect around $25 million in funds in exchange for 15-30% of equity. Series B funding will also draw more scrutiny from potential investors, so make sure the business is fully fleshed out and ready to operate on a much larger scale.
The Series C round is typically the last funding round before a potential initial public offering (IPO). Investment banks and private equity firms will be targets during this stage. If you make it to this round, your company will not be seen as a risky investment and more attractive to more conservative investors. Money raised during this round could be used to acquire competitors, increase the company’s global footprint, or increase the valuation before an IPO.
During all the startup funding rounds described above, the shares of the company are privately held, and can’t be offered to the public. Through an IPO, the previously private shares can now be sold to the public. This allows investors to liquidate their shares if they choose and allows the company to raise even more money. Once a company goes public, the value of the company switches from an investor’s valuation to the trust and judgment of the public at large.
Courtesy of an article dated November 20, 2013 appearing in Entrepreneur.comand an article dated October 26, 2019 appearing in My Startup Land
Over the last two decades of building and running businesses, and the last couple of years working full time with dozens of startup founders and CEOs on their strategies and funding plans in my consultancy business, I have observed that there are a common set of reasons that startups struggle and fail, and a consistent set of factors that make startup companies successful.
I wondered if my observations were supported by hard data, and my curiosity around startup success and failure eventually got the best of me. I decided to do some in-depth investigation around this topic. I wondered if there were any research studies that showed why startups succeed and fail? I found several articles that were filled with unsubstantiated opinions and a few sources that had really great hard research around the topic.
Why do companies fail?
According to an article in FastCompany, "Why Most Venture Backed Companies Fail," 75 percent of venture-backed startups fail. This statistic is based on a Harvard Business School study by Shikhar Ghosh. In a study by Statistic Brain, Startup Business Failure Rate by Industry, the failure rate of all U.S. companies after five years was over 50 percent, and over 70 percent after 10 years.
This study also asked company leadership the reason for business failure, giving a list of four main reasons for failure with sub-categories below those. They also gave a list of 12 leading management mistakes. It is worth checking out the details. This research-based analysis confirmed some of my observations. I bracket the Statistic Brain finding into seven key reasons for that entrepreneurs experienced business failure:
Lack of focus
Lack of motivation, commitment and passion
Too much pride, resulting in an unwillingness to see or listen
Taking advice from the wrong people
Lacking good mentorship
Lack of general and domain-specific business knowledge: finance, operations, and marketing
Raising too much money too soon
All of these focus on the decision-making of the entrepreneur and general business knowledge.
In another study, CB Insights looked at the post-mortems of 101 startups to compile a list of the Top 20 Reasons Startups Fail. The focus was on company level reasons for failure. I think this list is instructive, but each of these reasons for failure is due to a failure in leadership at some level. The top nine most significant from this study are:
No market need
Ran out of cash
Not the right team
Got outcompeted
Pricing/cost issue
Poor product
Need/lack business model
Poor marketing
Ignore customers
Notice that all of these are business- and team-related issues, even the ones that relate to the product. Issues like there are always tied to leadership and the leader’s ability to build a strong team and drive a business model and business thought process and discipline. Also, keep in mind, if running out of money is the ultimate reason for failure, there are always other factors that cause this result.
Why do startups succeed?
Next, I looked for sources of information of why businesses were successful. I found some good research from Harvard Business School, Performance Persistence in Entrepreneurship, which suggest that serial entrepreneurs that have prior success are more likely to have success, and that the best VCs are good at picking serial entrepreneurs. However, that really didn’t answer my question about the qualities of the entrepreneur.
The best comprehensive research that helped to answer the “reasons for success” question that I could find was from The Ecommerce Genome by Compass in their Startup Genome report, which looked at 650 internet startups. Although this research is tech industry specific, I still think it is very instructive. The report stated 14 indicators of success. Some of the 14 were a bit redundant, but you should review the report yourself. This analysis also confirmed some of my observations. I bracketed these 14 indicators into nine key factors for success:
Founders are driven by impact, resulting in passion and commitment
Commitment to stay the course and stick with a chosen path
Willingness to adjust, but not constantly adjusting
Patience and persistence due to the timing mismatch of expectations and reality
Willingness to observe, listen and learn
Develop the right mentoring relationships
Leadership with general and domain specific business knowledge
Implementing “Lean Startup” principles: Raising just enough money in a funding round to hit the next set of key milestones
Balance of technical and business knowledge, with necessary technical expertise in product development
Are the reasons for success the opposite of those for failure?
There are things that you must possess to be a successful entrepreneur, but they won't guarantee success. That said, it stands to reason that if you fixed the reasons for business failure, you would at least improve your chances of success. So, I decided to look at the side-by-side comparison of the reasons for failure and the factors for success.
If you look at both the reasons for failure and the factors for success, it is clear that commitment to a plan is key. This, of course, implies having a plan. This does not mean that you are completely inflexible, but you can stay the course. This is why the most successful companies have one or two pivots. I do not think that every little business adjustment or fine-tuning as a pivot.
A true pivot is a change in course of direction that results in a material change in the product-market strategy. It could be along the product axis or the market axis, but it has to be enough of a change that it really requires an adjustment in strategy and a corresponding adjustment in resource allocation. At least, that’s my definition. Passion and motivation are the obvious factors. Every entrepreneur, business coach, consultant, advisor, newscaster, investor and industry analyst talks about passion. Steve Jobs is quoted all the time about this. It’s probably become too cliché and overused at this point.
What I like about this analysis is that it goes to the root of the passion. People that are successful believe in what they are doing. The successful entrepreneur feels that they can make an impact and a difference in the world. There is so much inertia and negativity around getting a startup off the ground, much less getting it to “escape velocity,” that if you don’t have this deep-seated commitment to making an impact, you will surely give up. Successful entrepreneurs are competitive. They play to win, and they hate to lose. This trait may show-up differently with different personality types, but I have never met a successful entrepreneur that doesn’t have a competitive spirit and a will to win.
The next two things go hand-in-hand. I kept them separate since I think mentorship is so important, and it has played such a huge role in my career success. Just because you are willing to learn does not mean that you are willing to seek a mentor and listen to their guidance. By the way, I’m not advocating that you take every piece of advice and guidance from your mentors, but if you have selected strong mentors that have significant domain, technical or business expertise, you should at least consider thoughtfully consider what they have to say. Otherwise, why have them around as a mentor? It gets to humility. It’s one of those things when you think you have it, you don’t.
Successful startups are businesses. It therefore stands to reason that you need to establish and implement solid fundamental business principles and practices to improve your chances of success. Many technical founders fall in love with their product idea and consciously or unconsciously believe that if they build a better mousetrap, the world will beat a path to their door. However, both the success and failure studies show that you need leadership in the company with general and domain-specific business knowledge to be successful. Of course, you also need to have strong technical expertise in your chosen product development area.
Does this mean that a technical founder cannot be successful as a CEO? No, it doesn't. Look at Dr. Irwin Jacobs, the co-founder and founding CEO of Qualcomm, as a classic example. Dr. Jacobs is a brilliant engineer and former professor at MIT. However, he also has a brilliant business mind and a lot of business knowledge. Prior to Qualcomm, Dr. Jacobs ran another company, MA-Com, so he had experience running a company. He also surrounded himself with a strong management team. There are many other examples of this success formula, but there are far more where there is a seasoned businessperson who has domain expertise leading the company, and a strong technical team driving product development. Steve Jobs (Apple, NeXT, and Pixar) is the classic example as a business-oriented founder. Meg Whitman (eBay) and Eric Schmidt (Google) are great examples of CEOs who were brought into companies at an early stage to complement an exceptional team of technical founders.
Finally, having a clear and realistic idea of how long things take, setting intermediate milestones for every 12 to 18 months, and raising just enough money it to get to the next set of key milestones, is not only important to capital efficiency, it is also important for success.
How do I become a member of the $100 million club?
Interestingly, according to the Kauffman Institute, in its article The Constant: Companies that Matter, the pace at which the United States produces $100-million companies has been stable over the last 20 years despite changes in the economy. The study sates, “Anywhere from 125 to 250 companies per year (out of roughly 552,000 new employer firms) are founded in the United States that reach $100 million in revenues.” My former company, Entropic, achieved this status. How do you become part of that club? You need some luck and a good sense of timing. However, as said by the Roman philosopher Seneca, “Luck is what happens when preparedness meets opportunity.”
Beyond that, you need a plan, persistence, perseverance, a willingness to be flexible, and a world-class team. You also need to be frugal, bright, and cultivate strong mentors. The best way know to do all these things well and efficiently is to follow a systematic process where you plan, commit, track results, promote accomplishments and raise the necessary capital, or "fuel in the tank," to drive the growth of your startup.
Plan. Commit. Win.
COMMENTARY: As a consultant it always pains me when a startup client launches successfully and gains traction, but never seems to quite "cross the chasm" that all startups encounter, and must cross in order to "get to the next level." Crossing the chasm simply means helping a product, service or technology move from "early adopters" to a larger market segment, sometimes called the "early majority," in the Product Adoption Curve (see below).
Product Adoption Curve
The product adoption curve is a standard model that reflects who buys your products and when.
Think of it as the big picture view of your product adoption. It takes the product lifecycle and considers what happens at different points.
In most product adoption models, there are five distinct stages. Each stage represents an arbitrary amount of time, so what’s most important here is the process as a whole.
Now let’s break this down step by step, stage by stage.
Stage 1. Innovators
The innovators are the first group of people to invest in your product.
This is a unique group. People who buy super early are usually obsessed with technology and want to keep up with the cutting edge of technology. When the first Apple iPhone was first launched on July 29, 2007, the innovators were the very first to buy the iPhone.
What’s most important about the innovators group is its size. You might have noticed that it’s small. That’s completely normal.
This is why you might only get a few sales immediately after you launch. You’ll typically get about 2.5% of your total sales from innovators.
The Innovators
Stage 2. Early Adopters
At some point, you’ll see a swell in sales, and you’ll start to get a steadier conversion rate.
This is probably because the early adopters have arrived.
Like innovators, early adopters tend to be ahead of everyone else, willing to test the waters.
Early Adopters
Although early adopters are similar to innovators, there are some important differences.
It could be the case that early adopters have purposely waited to buy your product.
Whereas innovators are fine with rushing in and testing out something new, early adopters are a bit more hesitant. They still want to try something new, but they want a few reviews to consult.
Then again, it could be the case that they just found out about your product.
Expect your percentage of adoption to go up to about 13.5% or so.
Stage 3. Early Majority
Here’s when your product really gets some momentum going.
You’ve got a good amount of sales from innovators and early adopters. At this point, usually an even larger group sweeps in and gives you a heck of a lot more sales. Specifically, about 34%.
The people in the early majority are usually pragmatic and will only buy something once it’s been road-tested (at least a little bit) and has proven its value.
Early Majority
This is the beginning of your product’s peak. Maybe it’s gained traction with more marketing or word of mouth.
Stage 4. Late Majority
At stage 4, your product has been out for a while, and there’s widespread use.
However, there are still some people who are a bit skeptical of your product. Once they’ve put their worries to rest, they buy your product, and these people are usually in the late majority or laggards.
Late Majority
At some point during the early or late majority phase, you’ll have your peak where you get more sales than ever, and your product is at the height of its popularity.
Interestingly, in terms of adoption rates, the early and late majorities are usually roughly equal, around 34%.
Stage 5. Laggards
These are the people who buy your product after all the hype has died down. Sometimes, laggards purchase a product years after it’s been released.
Laggards might be extreme skeptics or people who have only heard about your product a long time after you launched it. Whatever the reason, these people don’t buy until much later in the product lifecycle.
The Laggards
Surprisingly, this is a pretty big group. 16% of your product adoption will come from laggards.
Try to wrap your head around the fact that laggards have a higher adoption rate than early adopters.
Change Your Marketing as Your Product Ages
At each stage of the product adoption curve, it’s likely there’s going to be certain demographics buying your product.
For example, innovators are more likely to buy on impulse, while buyers in the late majority will do lots of research before purchasing.
And as your product gets older, it will become more well-known. So you might start out with a product no one knows but end up with a product everyone and their brother has heard of.
Given these facts, consider changing your marketing messages as your product ages.
The Apple iPhone Marketing Messages Over Time
The marketing of each successive version of the Apple iPhone illustrates how Apple changed its marketing message to appeal to innovators, early adopters, early majority, late majority and laggards.
A commercial for iPhone 2showed off a lot of the hip new features: music, email, and Internet browsing, to name a few.
iPhone 2 TV Commercial
This obviously appealed to a younger, more tech-savvy audience.
Then in 2010, three years after the first iPhone launched in 2007, the iPhone 4 came out with a commercial that featured two grandparents celebrating their granddaughter’s graduation:
iPhone 4 TV Commercial
Apple wanted to show that even grandparents (who may not have understood smartphones back in 2010) could benefit from the iPhone. This is important because older consumers are typically late adopters.
Apple’s strategy was clear: Begin by showcasing all the bells and whistles, then open up the audience to include more types of customers.
In the same way, you should think about what your marketing should look like at each stage of the product adoption curve.
For example, when the innovators and early adopters come rolling in, your marketing should clearly describe the value and benefits of your product.
Later on, perhaps in the late majority stage, you can utilize customer testimonials and reviews. This can help address the skepticism that later adopters typically have.
Think about addressing the common questions that each group has, innovators will ask themselves what’s so unique about your product, while the early majority wants to know what other people think about your product and why it’s useful.
Thinking like this can completely change your marketing. By sending a customized message every step of the way, you’ll battle objections and questions head-on.
Know How to Overcome The Chasm
In most product adoption curves, there’s a point that can make or break the success of the product.
It’s called the chasm. It’s the point between the early adopterstage and the early majority stage.
The Chasm
As the chart above represents, crossing the chasm means breaking into the mainstream market. It’s one of the most difficult aspects of product adoption, but it’s one of the most important aspects to get right. There’s even a bestselling book on the topic––Crossing the Chasm.
Crossing the chasm is particularly tough to do for a few reasons. One reason is that as your product ages and grows, your audience will have higher expectations. Specifically, your potential customers will want increasingly better reasons to buy your product. You have to be ready to meet these demands throughout your product’s lifecycle, but it’s especially important in getting past the chasm.
As impulse buyers, the innovators and early adopters didn’t need huge reasons to buy your product. But to get the early majority to convert, that’s exactly what you’ll need. You have to think about your branding and not just your product. You have to offer value and not just features.
Another reason for the difficulty is the possible necessity of pivoting. In other words, to cross the chasm you may need to take a new angle for your campaign. Early on, you may be hedging on the idea behind your product. Early adopters are cool with that, but the early majority wants consistency. In other words, to cross the chasm you may need to take a new angle for your campaign. Early on, you may be hedging on the idea behind your product. Early adopters are cool with that, but the early majority wants consistency.
The Chasm
If you’re at the chasm right now, you might need to pivot yourself or even improve your product.
Don’t Forget The Laggards
You can’t stop after your product has hit its pinnacle and is riding the waves of success. It's important to remember, the second largest adoption group is laggards, coming in at 16%. A lot of people will be buying your product well after the hype dies down, and you can’t forget or alienate this audience.
Laggards are often skeptics, so at the end of your product lifecycle, your marketing should be laser-focused on overcoming objections. Think about it––you’re marketing to people who resist change and may not even want to be a customer. They’re going to need awesome reasons to invest in your brand. (A slew of positive testimonials, reviews, and press mentions will come in handy for this.)
Time also plays an important role. Think back to the iPhone example; sure, older folks are commonly seen with iPhones, but it’s been a decade since the device’s initial release. It might take a lot of time and exposure to your brand for laggards to adopt your brand.
Finally, you’ll also need to brace for the declining sales that inevitably occur at the end of the product life cycle. If your brand is experiencing one or more of these symptoms (see below) listed in the Product Life Cycle chart, its time to evaluate whether you can extend its life by introducing an improved version, replace the product with an entirely new product or dump the brand or line entirely.
Product Life Cycle
Courtesy of an article appearing in September 2014 issue of Entrepreneur and an article dated October 23, 2017 appearing in The Daily Egg and an article dated October 23, 2017 appearing in The Daily Egg
Recent Comments