[MUSIC] We've talked about differentiation in theory. Let's now delve down into a couple of cases and look at how it might play out in practice. I want to look at two examples, one in the area of online giving and the other in the area of reusable shopping bags. Very different areas, but I want to look at two socially conscious kind of firms, they're out there and trying to find their place in the market. So let's start with Blue Avocado. This is a startup company that began just a number of years ago in Austin, Texas with the idea of providing a new model for shoppers who do grocery shopping, but who don't want to constantly use new plastic bags every time they go. So they came up with the idea of a system, a set of bags that you could use when you go the market that would work together, that would all fold into one. And they would be stylish and attractive and would have very functional features of having refrigeration kind of capacity in terms of being able to keep cold products cold because of insulation. They would have produce bags that would be designed to hold produce without damaging it, but the whole thing would be designed as a system. Now when they started this enterprise, they asked the question, how could we really have a position in this complex, very crowded market of shopping bags that would make us stand out, that make us different? So they asked the kind of question, well, what is the product we're going to produce, what customer we're going to try to reach, and where are we going to access these customers? The product, as I said, was a system of shopping bags that could be constantly reused. The customer they went after was a fashionable customer. They decided, they thought there are a lot of ugly bags, and there is a place for a good-looking set of reusable bags. So they wanted to go after fashionable shoppers that have a green or environmental sensibility. And finally, they thought they would sell those in places where people do their grocery shopping. They ultimately came to a slightly different kind of take as they got deeper into their project. They realized they really had to have something that was not just stylish but was functional, portable, and that really stood out as a integrated system. As they thought more about the customer from their initial idea, they said, we need to really focus on women, because women are the ones who are going to really be conscious about this question of style and high functionality. So they went after women shoppers with a green focus, and they decided initially to focus very broadly on the United States, and not just in shopping places, but also online and a whole different set of distribution options in terms of how they would reach their customers. So from an initial kind of take on where they thought they fit, they evolved and got it broader. But a key part of their moment of how they got from an initial idea to a much more developed idea about how they would fit in was through competitive analysis. They sat down and looked at who else is out there offering alternatives to plastic and paper bags. And they came up with a group of key competitors. What they thought were four important firms who are out there doing similar things to what they wanted to do. But they chose a set of five dimensions that they thought were going to be key in determining market success. One is, do you have a system? Are these bags integrated into a set that works together? Are they style conscious? Are they good-looking? How functional are they? Do they work well? Portability and lightweight was another key criteria they thought, and finally, price was a key dimension. Now, as they looked across this matrix, they felt like they had hit at least four of the five right on the number. They had produced, across the first four dimensions, a product they thought would stand out, that no one else had everything. But they did note, when they did their competitive analysis, that the price that they were going to charge, $50, was substantially higher than anything else. And the big question then was, does this Blue Avocado system of bags have what it takes to overcome the higher price on the basis of the other features that these bags possess? They ultimately determined that these bags had what it takes to make it in the marketplace, even with a higher price point. What they eventually did is they start to add even more features. They started to say, if we're going to charge more, we need to really communicate that this company has a green mission that is focused and run by women. In fact, the two founders were women entrepreneurs. Third, they said, what if we created a special organization forum for this, a B-Corporation, which is a benefit corporation that has a social mission from the get-go? What if we had a philanthropy, they said, that did the work of communicating to the world the fact that this company has a conscience, and that it is engaged in the community? And finally, they said, can we find a way to moderate the effects of price by allowing people to buy the system in parts? So to drop the price by allowing people to buy the system little by little. The bottom line is that competitive analysis is very important in this start-up enterprise because it gives Blue Avocado a chance to look around and say, what else is out there? Who else is doing this work? How are we different? How are we better? And if we're going to charge a higher price, what would justify it? So think about competitive analysis at the startup phase as giving you that initial orientation that takes you from an idea to a reasonable market position. [MUSIC]
