This week’s theme for the Startup chronicles, aka “Why some Nigerian businesses fail,” is consumer biases. We hope that you are both entertained and educated by this story.
There was a founder who had the ambition to compete with a thirty-year-old market leader. He had good intentions and wanted to offer more competitive products at cheaper prices. He headhunted the most brilliant talents in the industry, but there was one problem – he did not listen to them!
Against his team’s advice, he rented a large plush office space on the same street as the market leader’s office. He also set an ambitious plan to launch the business with four products to compete with the market leader from day one. His team also kicked against this strategy reminding him that his competitor built their brands over time. They said that the competition had only one product for 10 years.
He argued that the competitor needed that long incubation period because they were pioneers. The team agreed but insisted that testing market acceptance with just one product was important, but he didn’t listen. He said he had to make a LOUD statement from the word go! The competition had to know that it was no longer business as usual.
And so, after pumping millions of dollars into the business, none of the sales targets were met in the first year. By year two, brand awareness had improved but the sales were still a far cry from investors’ expectations. Soon, the startup began to owe suppliers and distributors.
The Head of Marketing did a portfolio analysis and advised the founder to discontinue three products, but he refused. How could he? Those were the premium brands that he loved. In year three, there was high staff attrition, service quality was at an all-time low and the company began to lose the few customers it had acquired. The company had to file for bankruptcy at the end of that financial year.
Takeaway
Start small or as they say, walk before you can run.
Starting small does not mean that you are unambitious. Taking small, intentional steps towards your goals helps you build a strong foundation for an enduring business.
Originally posted on LinkedIn.
