Markets

In our latest episode of the SaaS Operators podcast, we had Jason Lemkin, a very popular voice in software, on as a guest. And while a lot of what he talked about was applicable to SaaS, he did say something that bridged the gap to consumer brands.

He was talking about AI and its impact on software, basically saying that a software company’s product is fairly indefensible now. The speed to reacting to a competitor’s new feature has been basically reduced to zero, so the last-standing piece of defensibility is brand.

Jason said that, roughly speaking, 95% of people who are good candidates to buy from a category are going to end up choosing a product based on brand. Interestingly, though, he feels everyone is back in the market right now. (Maybe for the first time ever?) AI is that disruptive.

My first thought here was … wow, that’s basically consumer. You never really own a customer and they are always in the market, even if they continue buying from you.

But the other thought, and the one I think worth spending a minute on, is how AI will both perpetuate that consumer reality and take it away.

In consumer, the number of brands a market can support is roughly equivalent to the distribution advantages created by media. Consider:

• Newspapers as the primary media source: few brands per category

• Radio as an emerging media source: more brands per category

• TV as the primary media source: dozens of brands per category

• Social as the primary media source: hundreds of brands per category

What happens when AI becomes the primary media source for consumers?

Pre-social/pre-algorithm, every consumer was aware of nearly all brands in a category, even if recall was just a few. Your goal as a consumer brand was to increase frequency such that you were recalled at the right moment.

That is impossible now. How do you beat the algorithm to do that?

The flip side of that, though, is that the algorithm allows for more brands to exist, because it segments the market for you. That may limit your upside, but it also increases the likelihood of some sort of success.

AI (at least where it appears to be going) sort of has the algorithm beat, in the same way the algorithm had TV beat. It knows (or will know) you incredibly well. Not just your content preferences, but your product preferences and aspects of your lifestyle that may create leading indicators around new product categories to explore.

All of that means room for more brands. Which means there will be more competition and a necessity to both more deeply understand why your customer buys your product specifically and how you can communicate that—both to the consumer and to the AI.

Markets, it seems, are going to continue getting bigger and continue getting more crowded. If that’s the case, the question will be how successful you can be in keeping your customer from going back to the market.