Disruption is how the majority of today’s start-ups flourish. If you consider some of the biggest start-up success stories of the past five years (Uber and Etsy are the first that spring to mind), the single attribute they have in common is they are all outliers. These companies have made their billions by unbundling the products and services, and marketing approaches, that have been disappointing customers for years, and followed a path of disruption in order to deliver something that people really want.
Take Uber, for example. It cleverly tapped into the pent up frustration of taxi customers who were fed up of standing in the rain trying to hail a cab, travelling in dirty cars, experiencing poor customer service and needing to always have cash in hand. Uber set out to reinvent the entire experience and tackled the whole gamete of problems inherent in the system, bringing in mobile hailing, Google maps integration for driver tracking, easy payments, better cars, and exceptional customer service.
The way these businesses disrupt, test and learn is a real lesson to marketers. They are never overawed by the incumbent business model and the immense marketing budgets sloshing around. Nor are they limited by marketing dogma and traditional planning structures.
Here we look at five lessons big brands can learn from these disruptive start-ups…
Product and service differentiation
Bill Gurley of Benchmark, the investor for both eBay and Uber, says Uber’s phenomenal growth is all down to its product. “The product is so good, there is no one spending hundreds of thousands of dollars on marketing,” he explains.
Uber was mould shattering. It didn’t just try to fix one aspect of the taxi cab system, as so often start-ups do. Instead it overhauled the entire taxi experience from the ground up, finding solutions to the problems that customers have experienced for decades; creating a product that people really wanted. This explains why the business is today valued at $40bn.
Airbnb is a similar story. It’s disruption of the hotel industry was achieved through the simple innovation of its product, which completely challenged the market’s traditional source of supply. Instead of establishing an inventory of hotel accommodation via typical methods, such as acquiring a hotel chain, it set about creating a new model of supply, turning to anyone with a spare room and a mattress to run their own BnB. No one had previously imagined an inventory of travel accommodation that was comprised of urban households. It was a service that immediately appealed to the price-conscious traveller, and as supply increased, so did demand.
Who says you need a phenomenal marketing budget to make a multi-billion dollar business success story?
Handmade marketplace Etsy, now a publicly trading company with a $2bn valuation, is a shining example of the incredible growth a business can experience through tapping into its online network of influencers. Since 2011, organic channels have represented 87% to 91% of Etsy’s traffic, while paid ads have been responsible for between just 2% to 7% of traffic. It has relied almost exclusively on the leveraging of its organic, social network of anti-capitalist, feminist-driven crafters. In the early days particularly it sought out high profile feminist crafters, who were already well established in the real world, to open up stores and sell their wares on Etsy. These artists had a thriving offline customer base, but little ecommerce presence, so they were motivated to send buyers to the site. Word of mouth recommendation was an additional driving force, coming from female bloggers and localised online communities. Connecting to this community of influencers meant that Etsy spent next to nothing on customer acquisition.
It’s rare that you see businesses within the same sector collaborating with each other. But that is exactly what online payments start-up Stripe has done. Its growing success can be largely attributed to the relationships it has established with other providers in the payments industry, such as AliPay and VISA, plus deals with retail sites such as Catch Of The Day and RedBalloon. Its creators have held the attitude that the more users and partners you can pull into your platform, the greater the traction, and also the deeper the collaboration.
Although Stripe goes head-to-head with PayPal, it has also secured investment from three out of five PayPal co-founders, indicating there is an opportunity for multiple players in the space.
Disruptive start-ups very often have the confidence to stretch outside of traditional marketing techniques, and don’t necessarily feel compelled to spend the big bucks that their incumbent brand competitors are.
Uber has relied almost exclusively on word of mouth for its business growth, spending virtually nothing on marketing. It is known for frequently offering free trials of its service, to capture customer loyalty and retention. But in addition, it has needed to master the art of intelligent PR. As Uber launches into new markets, it often finds itself facing legal challenges, and local resistance from competing taxi firms. But rather than drowning in litigation, it has learnt how to maximise the positives of such controversy, to drum up public support and achieve local and national press coverage. In some cities this has even led to a change in law so that it can operate, and helped to raise awareness of how Uber is transforming the taxi business.
All too often we see marketers lagging behind consumers, when it comes to technology adoption. Start-ups who are nimble enough to leap ahead, and innovate around emerging technology trends, have the opportunity to leap ahead some of the biggest, most established brands in their sector.
Esty has easily achieved this with mobile. While many businesses are still struggling to deliver their products and services to a mobile environment, Etsy recognised the growing mobile trend among its customer base some time ago and was quick to respond. Towards the end of 2011 it released its iPhone app, which in less than four months had surpassed 1m downloads. A year later, Etsy released its iPad and Android apps. At the beginning of 2013, it acquired the team behind the iOS photo collage app called Mixel. To cut a long story short, by 2014, 36.1% of Etsy’s $1.93bn in GMS came from mobile devices.