Making Waves in the Market

When starting a business, you need to understand your target audience.

All too often, that means looking at your competitor’s customer base. What could you do to siphon off a bit of their success? Maybe you improve quality, better address user needs, or simply design a more appealing logo.

After all, sometimes big, old companies get comfortable and take their eye off the ball.

But if you’re in a really competitive space—one where customers pledge allegiance to brands or innovation is measured in billions of dollars—it can be very difficult to butt in.

So maybe you shouldn’t try to steal customers but instead, look at the rest of the population.

If you make wine, it can be tempting to chase wine drinkers. You’ll purchase the most expensive grapes, design a sophisticated label that will look nice in restaurants, and encourage drinkers to swish their glasses and measure the tannin levels. I’m sure you’ll impress some sommeliers.

But far more people don’t drink wine than do. How do you get them to purchase your product?

That was the question asked by the Casella family, owners of an Australian winery and the creators of Yellow Tail.

Launched in 2001, Yellow Tail targeted beer and spirit drinkers—this market is three times larger than the wine market. To attract them, Yellow Tail kept prices low, descriptors simplistic, and branding friendly. It turns out, inexperienced wine drinkers were being scared off by the industry’s pretentiousness.

By 2005, Yellow Tail was selling 25 million cases, making it the best-selling red wine in the United States.

The Casellas had found a blue ocean, and the same strategy has shaped some of our most beloved brands.

The Blue Ocean Strategy was developed by W. Chan Kim and Renée Mauborgne in their 2005 book of the same name. The core idea? Instead of competing in a "red ocean" filled with cutthroat competition, companies should create uncontested market space—a "blue ocean"—by offering something completely different.

Rather than trying to steal market share in an already saturated industry, successful businesses look for untapped demand. Yellow Tail did this by simplifying wine for non-wine drinkers. Cirque du Soleil did this by merging circus and theater, attracting people who wouldn't normally attend either. Nintendo's Wii targeted casual gamers rather than hardcore gamers.

Now, how do we apply the Blue Ocean Strategy to investing?

Most investing services within MyWallSt’s niche target long-term, buy-and-hold investors with a variety of strategies. Maybe you want to own breakthrough technologies that could 10X or go gently into the good night. Maybe you’re more of a Warren Buffett type, on the lookout for a beloved brand trading at a discount. Or maybe you want your investing to align with your morals.

Whatever your strategy, you’ve committed yourself to understanding companies, industries, and the market. You love a 10-K, a quarterly update, and you probably have a favorite CEO. You want to know what you buy and why you buy it so you can feel good going to sleep at night.

I know all this because I am one of those people. You can see my process in Horizon, the exact process that informed my decision to buy Netflix in 2004, Tesla in 2012, and Chipotle in 2008, beating the market along the way.

But last year, I started thinking about all the reasons a person with some spare funds at the end of the month might not invest.

And I came up with two: time and effort.

I invest because I love learning about founders, businesses, and emerging tech. But maybe you don’t. Maybe you just want to grow your savings into a safety net for retirement. You don’t need to recognize the names you invest in, and you’re happy to follow a purely analytical strategy.

For those people, we’ve developed Prophet.