In the last two decades, we have been spoilt with new businesses overhauling the traditional ways in which products and services are delivered.
The range in scale is enormous, from the likes of Amazon and Uber at one end, picking off retail and transport between them, to the recent example of 10 year old Jack Bonneau (seen above), who has turned the humble lemonade stand into a licence to print (pocket) money (if you haven’t read the story, you can find it here).
They are all branded “disruptive”, and some of them actually are.
Health, beauty and personal care are areas where we have seen a surge in interest among the investment community. They too have seen their fair share of ostensibly “disruptive” models, including subscription delivery services for make-up products and vertically integrated spectacle retailers. But do they stand up to scrutiny? I recently got my hands on a shaving set from one of the US based subscription services promising to reduce my outlay on razor blades. After cutting through the attractive packaging and reassuring brand messaging, it was the razor’s turn to cut through my stubble…and leave crimson streaks in its wake. After the nostalgia of bleeding like an adolescent shaving for the first time had worn off, inspection proved that the product wasn’t faulty – it was just mediocre, and certainly inferior to those offered by better established manufacturers. Vertical integration clearly isn’t everything.
My cursory glance at the online reviews had already yielded the mixed bag of forum ratings the brand achieves, but it wasn’t enough to deter me. Fortunately, in our role as advisors to the investment community, we have access to more rigorous techniques to evaluate consumers’ perceptions of a brand. Of course, these techniques go far beyond giving us a score out of ten against specific criteria. They can also identify the characteristics of the profile of a customer base, and of its behaviour, which enable us to distinguish between fads that put investors’ capital at extreme risk, and brands that are on their way to establishing long-lasting relationships with loyal customers who have the potential to become stronger advocates over time.
Good consumer research can provide the robust quantitative data needed to turn instinct into insight that can distinguish fads from trends.