Disruptive Business Models, 2022


ABSTRACT

This report contains data from a variety of marketing silos in regards to the most noteworthy business strategies observed in the last couple of years. The timeline specifically focuses on changes in the marketplace as a response to Covid-19 and other environmental factors.


INTRODUCTION

Hubspot CEO, Brian Halligan, discussed the five major genetic adaptations seen in the marketplace today:

  • experience-market fit
  • personalization
  • selling through customers
  • frictionless
  • business model busters

Businesses that implement these adaptations all have one thing in common which is how they sell is why they win. I will be going into more detail as well as providing examples of three of them: business model busters, personalization, and selling through customers. I will also discuss which disruptor is the most important and then finally, provide two examples of disruptor businesses that I interact with daily.


BUSINESS MODEL BUSTERS

This adaptation is exemplified by businesses that completely rethink the business model for their respective markets. An example of this type of disruptor is Airbnb, who reinvented the travel booking industry in the last decade through their unconventional peer-to-peer business model, competitive pricing, and unique stay experience.


According to Statista, “Airbnb ranks fourth among hotel or accommodation booking platforms” with 25% of the market share as of November 2021 (Loose 5). Their innovative peer-to-peer structure allows individual sellers to create accounts on the Airbnb app and rent out their property for travelers to book. According to a 2014 Mintel report, Airbnb hosts “can offer guests anything from their living room couch to an entire house, and rates can range from a fraction of the price of a hotel room to the equivalent of a luxury suite” (Loose 22).

This has been a successful alternative to traditional hotel booking services like Expedia and Hotels.com due to its competitive pricing in the industry. When surveyed about why people chose Airbnb over competitors, 57% of respondents reported that it was because Airbnb was less expensive, as seen in the graph below (Morgan). With this lower price, vacationing has not only become more popular amongst lower and middle classes, but it has also extended the average stay of a vacation. So not only is Airbnb changing the travel experience for its users, but it has also had a profound impact on the travel economy in general. Longer vacations mean more business for popular tourist attractions, restaurants, and other vendors in the area, especially if the city is particularly reliant on the tourism industry.


PERSONALIZATION

The personalization disruptor benefits businesses that provide goods or services that are hyper specific to each individual user’s wants and needs. Brain Halligan refers to this as a business that has “a unique fingerprint for every one of its users and the more you engage with the platform, the better the fingerprint gets” (Halligan). One business that employs personalization is Tesla.


One of the many technological advancements this company has made in recent years is allowing users to create driver profiles. This feature “remembers and restores positions for the driver’s seat, driver’s side view mirror, and steering wheel” (“A Quick...” 1). It also tracks the preferences for other features such as temperature, maps, lights, and driving mode. Having this level of unique user preference helps Tesla achieve high customer satisfaction because of the ease in which users can operate their products and how each model can mold itself into the perfect car for every individual. Additionally, high degrees of personalization often fix problems that buyers aren’t aware they have. Some drivers might just accept the fact that when sharing a car with someone taller than them or who prefers a cooler temperature setting, they would have to adjust their driving preferences manually. Tesla recognized this problem and through personalization, has amended it and made it easier for consumers to just get where they need to go instead of adjusting settings.


SELLING THROUGH CUSTOMERS

The Sell Through Customers adaptation can be described as a brand whose main source of promotion isn’t through advertisements that are crafted internally, but their promotion is done by their customers. They are not simply selling to their customers, but actually having their customers selling their products for them. One example of this would be the L'Oréal USA who saw a dramatic increase in sales of their CeraVe products in 2021.


Statistics show that the second leading health and beauty care product category of 2020 is skincare (Winsight). In fact, in terms of sales, this category ranks higher than shampoo, conditioner, and deodorant. With high prices and high margins, the skincare market was expanding rapidly in the 2010s. However, Covid-19 quickly began affecting the global economy with regular income halted starting in early 2020. Because of this period of economic uncertainty, “consumers [were] less willing to ‘take a risk’ and experiment with new products and brands, leading them to rely on experts, such as dermatologists, for recommendations” (Hennigan 23). In fact, a study done on the popular social media app, TikTok, found that “32% of TikTok users state that they have bought products because influencers advertised them” (Loose 12).


A self proclaimed skincare enthusiast, Hyram Yarbo, quickly gained over 6 million followers on the platform in 2020 for his videos that informed viewers about the various ingredients in skincare products. He analyzed and reviewed dozens of serums, face washes, and moisturizers (both high end and drugstore brands) and demonstrated that these products don’t need to break the bank in order to be effective. One of the major brands he promoted for it’s high quality, safe ingredients, and affordable price was CeraVe by L’Oréal USA. The recommendations from Hyram are likely associated with the 41.2% increase in overall sales at L’Oréal USA, as seen in the chart below, and the 112.9% increase in sales of CeraVe products that they observed from 2020 to 2021 (Hennigan 24, 59). By having customers like Hyram and other influencers promoting CeraVe products for them, L’Oréal is a prime example of an experience disruptor that is currently dominating the beauty industry.



MOST IMPORTANT DISRUPTORS

Of the five genetic adaptations, selling through customers is the most important disruptor. As mentioned earlier in the report, the data tells us that recommendations from experts and other online influencers have a profound effect on whether or not someone is willing to try a new product. This is likely due to the brand loyalty that a convincing recommendation demonstrates. For an individual to like a product so much that they feel compelled to rave about it online, clearly illustrates a high degree of loyalty to that product and viewers more often than not are willing to give the product a try from that one good recommendation alone. If you are lacking in marketing and outreach to new customers, any of these other genetic adaptations will not be given the chance to demonstrate their revolutionary business model, experience, frictionless strategy, or personalization abilities. Good marketing is key for any of these disruptors to work and therefore selling through customers is a perfect way to attract new business to your company.


EVERYDAY DISRUPTORS

Two examples of business disruptors I use on a daily basis are Spotify and Hulu. Data has shown that Generation Z has a very short attention span when it comes to the media they consume. These platforms have really amazing personalization software that makes navigating the apps very simple and finding new content quicker and easier. For example, Spotify will analyze the current songs you are listening to and then create the Discover Weekly playlist in which their algorithm recommends new songs for you based on songs by similar artists, your most listened to genres, and other factors. This combination of filtering then puts these new songs into a unique playlist for each user that updates weekly as music preferences change.


Spotify has developed this algorithm to personalize user’s music preferences is why they are the biggest streaming service in the world (Porter). Hulu has a similar feature where they use the data on the movies you’ve been watching to create a new set of suggestions based off of those prior choices. Both of these personalization features create a great atmosphere in the app that allow users to feel heard in their preferences and more understood by the app, exemplifying that how they sell is why they win. Additionally, constant interaction with the platforms has tangible benefits that make it more user friendly thereby increasing the engagement. Personalization has become one of the most important criteria for me in terms of genetic adaptations and is something I will continue to look for as a consumer.


CONCLUSION

The only thing that is a constant in business, is change. Businesses today have to be able to adapt to the environmental factors and differentiate themselves from competitors. The five genetic adaptations, business model busters, personalization, frictionless, experience-market fit, and selling through customers are all prime examples of ways that business can really disrupt the marketplace and dominate over their competition. Not only is the implementation of disruptive business strategies encouraged by experts and analysts of this topic, but it is imperative for a firm’s survival and success in their respective industries. 


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