Market Entry: What Founders Can Learn From Tesla’s Cybertruck

February 3, 2020
From the Fund

When you ask your future customers what they want, what do they tell you?

On June 26th, 2018, Elon Musk asked his Twitter followers a question: “What would you love to see in a Tesla pickup truck?” Sent by anyone other than Musk, this tweet wouldn’t have raised eyebrows.

With the U.S. pickup truck market topping out at $100 billion and light trucks snagging the top spots in American vehicle sales each year, it’s no wonder Musk and Tesla wanted a piece of the action. Major brands enter new markets all the time, typically by identifying a profitable market segment, gathering survey data on consumer preferences, and creating a product that gives target consumers exactly what they say they want.

What appeared onstage at Tesla’s November 2019 Cybertruck launch was, to put it mildly, not your average truck for your average truck buyer.

With a stark, Minecraft-meets-Bladerunner design unlike anything that’s ever rolled out of a Ford or GM factory, the Cybertruck led many to question whether Musk’s attack on the traditional truck market was dead (or cracked) on arrival.

Brett Winton’s tweet about Tesla’s Cybertruck announcement.

Others, however, asked a more important question: was Musk really trying to beat Ford, Chevy, and Ram head-to-head in the pickup truck market they’ve owned for 70 years or were the Cybertruck’s radical looks and capabilities built to open up a whole new market with a whole new type of customer?

We aren’t here to stir the Cybertruck Twitter pot, but Musk’s strategy raises another critical question for early-stage founders: are you entering a market or making one?

Market Entrant, Market Shifter, or Market Maker: Which One Are You?

With the exception of tech’s do-anything buzzword “disruption,” few concepts are as important to founders and executives as market entry. From corporate giants to scrappy startups, today’s companies search constantly for better market opportunities and new sources of growth to satisfy investors. However, the reality is that established players and startups tackling new markets typically fall into one of three distinct buckets: Market Entrants, Market Shifters, or Market Makers.

For founders, knowing which category applies to your company and product is a critical step towards executing successful product launch and growth strategies.

Market Entrant

Market entrants offer products or services in existing categories that solve well-known problems better or cheaper than current offerings. Market entrants don’t need to convince buyers that they should care about a new category or type of product and instead focus on capturing a share of a market that has largely been proven.

Example: Salesforce

A Gartner chart plotting the execution and vision of companies tacking lead management in the customer relationship management (CRM) space.

Cloud-based software companies like Workday and Salesforce enable customers to cut costs and increase flexibility over existing on-premise solutions. Many early software as a service (SaaS) companies sold into well-established categories focused on solving problems that were already widely recognized by enterprise customers such as customer relationship management (CRM) or human resources information systems (HRIS). In exchange for targeting a clearly defined market and established category with a better solution, pioneering SaaS companies battled fiercely with entrenched legacy players like Siebel Systems and PeopleSoft.

Opportunities

  • Capture share of large, proven markets.
  • Easily identify competitors and benchmark against established products.
  • Sell to clear, existing customer segments.

Challenges

  • Deeply ingrained, well-funded competitors.
  • Highly-informed customers who are skeptical of new solutions.
  • New product must be multiple times better than existing offerings.

Positioning Strategy

Is your product cheaper, easier to use, or more powerful than what’s currently on the market? Position your product as the antidote to customer pains with existing products in your space. Target the segments most likely to feel specific pain points with clear messaging that quantifies the difference your product makes.

Market Shifter

Market shifters focus on providing existing products and services to new customer segments. Shifters can move or expand markets in a variety of ways, from innovating to lower costs and increase access to a product category, to pioneering new distribution channels or geographies. In tech, market shifters often capitalize on the rise of foundational “enabling” technologies like cloud computing or mobile data to change the cost structure of existing product categories.

Example: Early Uber

A graphic from Uber’s early days touting the company as “Everyone’s Private Driver.”

In the days before peer-to-peer ridesharing, Uber focused on expanding the market for private driver “black car” services through its GPS-enabled app and mobile payments system. With the goal of becoming “Everyone’s private driver,” Uber gave new customers who weren’t wealthy executives or celebrities access to a chauffeured experience at a reasonable cost for the first time.

Opportunities

  • Focus on expanding proven markets and product categories.
  • Ride the wave of innovation and growth in foundational enabling technologies.
  • Target customers who aspire to previously inaccessible products or services.

Challenges

  • Existing players may be better positioned to expand their offerings than you are.
  • It’s hard to shift consumer perceptions (especially without a large brand or marketing machine).
  • Market windows close quickly. If you see a tech-enabled opening, others see it too.

Positioning Strategy

Target customer segments that want to use existing offerings but can’t due to cost, availability, location, etc. Aspirational branding (“Enterprise software capabilities for SMBs” or “A luxury experience for young professionals”) and awareness-focused campaigns are particularly useful here.

Market Maker

Market Makers develop solutions to previously unsolved problems and create new product categories. While many Market Entrants and Market Shifters claim to be “category creators,” true Market Makers typically launch products with no direct competitors (rather than better versions of existing product types) and solve problems that consumers may not be able to name or articulate initially. While making a market and defining a new product category can lead to massive rewards, Market Makers must be experts at surfacing latent pain and evangelizing for their product.

Example: Gong

Gong allows companies to find out how top performers structure their sales calls.

Gong.io and close competitor Chorus allow sales reps and managers to record, track, and analyze individual sales calls from a single natural language processing (NLP) driven platform. While basic sales training and development platforms aren’t new, Gong was early to market and created a novel product category (Revenue Intelligence) by leveraging new technology (AI/NLP) to give users powerful new capabilities (transcribing, analyzing, and sharing sales call data in real-time).

Opportunities

  • Define your product and category on your own terms, without having to benchmark off of existing products.
  • “Expand the pie” of customer spending and avoid fighting established competitors for market share.
  • Stand out as novel and innovative in competition for consumer attention and investor dollars.

Challenges

  • Consumers typically don’t look for product types they can’t name, much less buy them.
  • Market Makers have to convince customers to allocate budget they’re not already spending to a brand-new product.
  • Without existing players in a space, Market Makers take on all the risks (product-market fit, timing, etc.) of testing a market for the first time.

Positioning Strategy

As far as customers are concerned, your product is the result of game-changing innovation and previously undiscovered insights into their problems and pain points. Your product isn’t just a better widget; it’s a new way of thinking and a breath of fresh air for users who didn’t realize that a solution to their pain existed. Positioning your team and brand as a category thought leader and definitively naming your category (think “Inbound Marketing” from HubSpot or “Conversational Marketing” from Drift) are critical steps as you start to drive awareness.

Know Your Customer, Know Your Market, Know Yourself

The Entrant, Shifter, Maker framework is a tool, not a guarantee. Market Entrants can easily find themselves developing entirely new products. Market Shifters might figure out that the traditional demographics they’re pivoting away from exist for good reasons.

Whether you want to beat old incumbents at their own game or play a new game entirely, the best founders start by knowing their customers, knowing their market, and most importantly, knowing themselves.

Written by Alexander Becker, DRF Marketing Partner (HQ).

---

Get more Dorm Room Fund news and updates on Twitter and learn more on our website. Want more DRF content? Subscribe to our newsletter and podcast. Ready to take your startup to the next level? Apply here to be considered for an investment from Dorm Room Fund. Until next time! 🚀

Related Posts

Sign Up for Our Newsletter

Thanks!

Oops! Something went wrong while submitting the form