HOW TO ENTER EMERGING MARKETS AS A STARTUP OR REPOSITION INTO ONE AS AN SME
Crisis Series - Part 3
In our last article, we looked at how brands reacted during the onset of the COVID crisis and how these lessons can be applied to building a resilient brand no matter the crisis.
We covered how to best react using brand values, personality and purpose. Today we look at starting afresh by looking at emerging markets and opportunities the post-COVID world and the recession has provided.
The Need to Reposition
Although it’s been a while since COVID cast its dark shadow on our industries, we, as a strategically-led design studio, still come across clients desperately trying to cling to an old way of working, hoping things will eventually get back to normal. But this begs the question, does clinging to an old business model serve us as a business owner or our customers?
A post-COVID world may seem like a strange scene from a dystopian novel but it may become a new reality so it is much better to prepare as the virus forces companies to either change or collapse.
On a positive note, this type of large-scale, widespread change to business models is not unprecedented and therefore we have somewhat of a roadmap to a new future.
For example, the success of the internet changed the landscape by causing some businesses to change, some to go extinct while giving birth to many more. Blockbuster’s demise and Netflix’s emergence is a testament to this.
Disruptive-tech can be seen doing the same thing with the emergence of apps like Uber, making regular taxis services rethink their business model. And when it comes to AI, well… let’s not go there just yet!
Here’s what Simon Sinek had to say:
Learning from the past, companies that clung to ‘how do we do what we used to do?’ and ‘how do we go back to the old way of doing business?’, trying to protect their old business model, struggled. Whereas those who looked at how they can serve in the new climate have thrived. A key takeaway here is, don’t be dogmatic, be innovative.
Embracing an evolving business model approach
For established businesses, instead of having a fixed-business-model-mindset, we should take a note from the startup scrum approach, where an iterative process is used until there is a product-market fit. This means to adjust your business model and core offering to the needs of your new consumers with small incremental changes after every test (market feedback). This is to ensure you have the right business offer for your new market.
An evolving business model allows us to continue to stay in business while we keep an ear to the ground paying attention to what the market wants. But to do this genuinely means sticking to your brand purpose, so you are not seen as a business with no focus and just an opportunist.
Repositioning and making changes to your business model as the market shifts, whether that’s a global pandemic or a recession, will be the wisest decision you make.
What it was Before & How it has Changed
Before we rush into repositioning our brand, understanding a little from behavioural psychology and our underlying thoughts and emotions will also help guide us in times of uncertainty. How do people react in a crisis and what motivates them? Let’s take a look at the mechanics of human psychology.
We may think there is no structure to what drives our behaviour as humans, however, the psychologist Maslow found there is a clear pattern that we all follow.
“Maslow wanted to understand what motivates people. He believed that people possess a set of motivation systems unrelated to rewards or unconscious desires. Maslow stated that people are motivated to achieve certain needs. When one need is fulfilled a person seeks to fulfil the next one, and so on.”
Saul McLeod, SimplyPsychology.org
By having a good understanding of Maslow’s hierarchy of needs you can get ahead of the curb in uncertain times by looking for social, cultural, and market shifts and anticipate the next shift in the pyramid. This way you can look for new opportunities and better ways to serve emerging needs.
The reality is pre-COVID consumers’ needs were moving towards the top of the pyramid (self-actualisation) and brands were emerging to provide for this demand. But the virus has brought us back to the bottom of the pyramid.
This article from The Drum states that:
“McKinsey’s most recent consumer study shows that in the US, it’s only spending on ‘essentials’ that has remained at, or above, pre-pandemic levels. The recovery in intent to spend on ‘discretionary’ categories has been declining since mid-June. Most people continue to believe that the impact of the crisis on their routines and personal finances will last beyond the next four months.”
The pyramid has, in actual fact, been reversed. With the job losses, basic needs have become the priority, and businesses in those areas will succeed. That is where the demand is.
Meet Them Where They Are
You can see which industries are still in business because of where we are in Maslow’s hierarchy.
Find a consumer need that overlaps with the skills, products, and services you have and reposition your business. If you are not repositioning your business and instead looking for new opportunities to create a startup, the above list may be helpful.
Here are examples of Startups that came out of crisis situations. And this article is forecasting for the next decade of startups.
Cultural Shifts
A crisis can create monumental cultural shifts. If we analyse the needs and pain points of our consumers, we can see where emerging markets may be.
The global branding firm Forsman & Bodenfors identified 8 cultural shifts occasioned or accelerated by the pandemic.
1. Frugality vs. Consumption: people expect durability, longer shelf life but still wish to consume in order to regulate their moods and fill in the emptiness.
2. Meaningfulness: people are looking for diversions, ways to fill in their idle leisure time.
3. Tech Matters: tech that helps people to connect is most valued.
4. Business Practices spotlight: corporate social responsibility and activism matter.
5. Agenda: altruistic, community-oriented, prosocial, and charitable businesses will come on top.
6. Community: communal ties are strengthening and so does social solidarity.
7. Relationships: re-examining and reframing interpersonal relationships such as friendships and marriages.
8. Self-Care: social distancing can spur self-growth (or self-neglect).
Let’s look at how some of these can lead to emerging markets and business opportunities.
Emerging Markets & Opportunities
Socialising The need to improve ways of connecting and communicating while everyone is feeling isolated during the social distancing measures. Relationships have become strained. Is there an opportunity for better video calling?
Perhaps a multiplayer console-style game adapted to be played on your phone or desktop or laptop for digital family-time, besides the usual video call? Allowing wider audience reach and not confined to only those with consoles. Maybe a more immersive experience?
How do we bring the humanity back into these online interactions? Here’s an example of research and development going into creating a more emotionally intelligent digital world using AI.
Personal Brand With everyone working online, social media usage has increased, especially as it gives small businesses access to low-cost marketing. It means more people are focusing on their personal brands, encompassing self-image, avatars, personal tone of voice, video background images, all in an effort to stand out in the noise. Have a look at how Gucci is doing virtual fashion now that everyone is online.
Networking & Jobs With many jobs becoming temporarily nonexistent, people are looking for other ways to earn money or pivot their careers. How can job seekers be discovered amidst the noise? Simply having a platform that connects job seekers with employers isn’t enough as everyone is on them. How do job seekers build a human connection with a prospective employer? Will adding a video to a profile be the solution or is there an opportunity here to innovate further?
Mental Health COVID continues to increase mental health challenges in those already suffering as well as those who never had any challenges before (e.g. depression from self-isolation). Many are seeking other ways to be fulfilled beyond just FaceTime calls with loved ones, especially as they are spending more time with themselves and their own issues. Opportunities here are, apart from the usual apps and family Zoom calls, what else can be done to help mental health? Mood or morale lifting activities have seen an increase, for instance, home entertainment, indulgent treats, retail therapy (which has just moved online).
Physical Health With people being taken down a notch in Maslow’s pyramid, they are reassessing what they value; material possessions vs their health and loved ones. Health is the new wealth, in a way, at least temporarily.
As well as keeping fit, staying safe and virus free, there’s also an opportunity to innovate and create COVID appropriate environment for society to fully function in. E.g. interior environments designed with social distancing in mind. There are a whole host of problems to solve here.
Media Entertainment As we seek comfort and escapism, media entertainment consumption is on the rise. “…Gen Z, online video consumption jumped during the pandemic…Millennials, video consumption went up across the board, with linear, online, and connected TV.” Forsman & Bodenfors. The demand is creating a rise in independent genre based streaming services, e.g. SHUDDER is a streaming service just for horror movies and MUBI caters more to arthouse cinema. Opportunities will be in specialist streaming services especially in the credible documentary genre.
Education With a loss of trust in authority, along with online education and training becoming more accessible, students are skipping formal institutions and their gatekeepers.
University courses are becoming replaced with a variety of boot-camp professional standard online courses. This rise in non-traditional educational platforms had already been seen in the tech world for a while with industry-specific or software-based courses like General Assembly, Shillington College, Adobe and now ‘Google Career Certificates’ joins the party.
There is clearly an opportunity here. The internet has lowered the barriers of entry to become a teacher, mentor or coach, especially if these coaches are active industry practitioners. Having years of knowledge allows experts to teach what they know and build a loyal following. The successful ones will naturally develop into setting up online institutions.
Social Causes People tend to seek spiritual fulfilment when there is a crisis and look for a higher purpose. Where some organisations have failed, others have sought to fill this spiritual vacuum. It was filled with new-age spirituality for some, self-actualisation through career/hobbies for others, and then brands moved into this space to fill the void.
Now with COVID exposing what is truly valuable to consumers and the revelation of what material consumption is doing to the environment, brands that were put on pedestals to be worshipped are also being shunned. There is in fact a trend of minimalism.
The new way of fulfilment and higher purpose has become social causes; the ultimate act of altruism. These may be championing women, or diverse races, or the environment to mention a few. There is indeed much opportunity to do good and champion much-needed causes, but be cautious here… words must be followed with action. Anything that is not genuine or authentic will be called out.
Customisation With a consumer base that is more ‘selfie’ centred, the positive side of this is, brands catering more and more to the individual needs of the consumer has led to changes in how services are offered by businesses. Taking stock of what Subways did with sandwiches you can now make your own pizza in some restaurants (before COVID), watch on-demand media; Netflix, design your own custom Converse shoes. Anything that can be further customised and individualised will do well and is an area of growth.
Internet Culture Now that everyone is online, will it change the current ubiquitous millennial internet culture? How will this shift and change as Gen X, and older join the party? Or do they all turn into millennials? The internet has always been a young person’s realm, but how will this mature with the new audience and users?
A trivial example is perhaps improving or creating different types of emojis that mature people understand. Will there be an evolution of shorthand online language too?
The laughing emoji is being misunderstood as a crying emoji by older users, with horrifying results
Emojis and internet slang aside, there is an opportunity to cater to audiences of all ages, with products, services and user experience.
Purpose based market entry
With so many exciting opportunities, an entrepreneur can’t help feeling like a child in a sweet shop. We’ll assume your mind is bubbling with ideas!
But we would urge caution. Having an evolving business model may make us believe we can jump in and out of industries tailoring offers to consumers under the same brand. And while that may seem like a fabulous business plan, your branding will take a hit. You will be seen as a business taking advantage of the situation to ‘make a quick buck’.
So, how can you take advantage of the opportunities emerging whilst still seen as authentic and credible? Having a set of core beliefs and a brand purpose will allow you to move into markets that share these same values and beliefs. These set of principles can help guide your decisions and make the best choice. For example, if McDonald’s starts to sell furniture because everyone is at home and wants to be comfortable, this would be called out as a cash grab.
However, when an car insurance price comparison company moves into the soft toy market, it’s not a problem. This is because instead of damaging the brand, the industry jump is seen as strengthening the brand. It is tied together with a core idea, ‘market’ sounds like ‘meerkat’ when said in a Russian accent.
Although this is not a purpose-led example, it is an example of an advertising concept which led to creating a memorable brand. It still illustrates how you can branch into other markets when you have a core idea, belief, values and set of principles that ties your brand together.
A great example of purposeful market switching and repositioning is Brewdog who went from beers to hand sanitiser. Another great example is IKEA & LEGO, but we’ll go more into that in the next article.
For established companies, going back and examining your brand purpose will help you decide which markets make the most sense. For startups who have not launched yet, you will still have a set of core beliefs as founders, hone in on that to help guide your decision on the market to choose.
Recession proofing
But is it too late now? Has the time passed? If history has taught us anything, it’s that there’s plenty of turbulence ahead, waiting to test the resilience of your brand. The time to fortify is now.
Brands that will survive the recession will need to think fast and reposition in order to meet needs.
“Predicting the categories that will weather a recession will be dependent on an organisation’s ability to rethink and reinvent business models for an uncertain future, whilst executing at warp speed,”
Kenny Powar, founder Rebel Owl
Conclusion
There is a need to adapt business models to respond to the changing market. We need to reposition our brands to meet customers where they are. This new reality has revealed many emerging markets and opportunities that you can explore.
To ensure your core offering, (product or service) meets the demands and needs of your new consumer, you need to adopt an evolving business model to reflect the evolving market. You may do this through an iterative approach of amending your offer until its just right. But to reposition successfully, and avoid being seen by your consumers as an opportunist business, staying true to your brand purpose will allow you to make the right decisions and communicate authenticity.
To determine your new positioning, look at the current needs of consumers, your skills and expertise and where the market shifts are happening. This will help you prepare for the oncoming recession.
You can also ensure repositioning success by, purpose-driven collaboration. We’ll discuss this further in our next article.
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If you need help repositioning your business book a strategy session today and we can help align the direction of your business and your brand to your customers.
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