Hi there,
Welcome to the 98th edition of Heartcore Consumer Insights. Curated with 🖤 every two weeks by the Heartcore Team.
If you missed the past newsletters, you can catch up here. Now, let’s dive in!
The Consumer's Hierarchy of Preferences: The Other Side of the Consumer Value Prop
As consumers, we buy all sorts of things that get a job done for us, but that we don’t love. That’s because these items hit a sufficient number of desires on the Consumer’s Hierarchy of Preferences to elicit a sale, but not enough to address all of our preferences.
Conversely, when a consumer is totally satisfied with a purchase and raves about the company or product, it is because they have more preferences filled beyond the point that they would have already satisfactorily purchased the item. In such cases, the company is creating consumer surplus.
Costco is routinely probed by investment analysts on whether they can take prices up ~3% to double their profit margin. The reason why Jim Sinegal has been steadfast in refusing to take prices up is that it would deteriorate the consumer surplus that their value prop creates.
When the consumer surplus deteriorates, customers stop saying they “love shopping at Costco”, and eventually you start seeing that show up in higher shopper defections. To put it in financial terms, consumer surplus shows up in lower churn and thus higher customer lifetime value. Costco could raise prices by 3% and enjoy a windfall, but its competitive position would be greatly reduced. In the intermediate term, you will see higher profits, but that comes at the cost of eroding Costco’s grip on the consumer, and eventually, purchasing habits start to move elsewhere.
Whenever you value a company, you are discounting the sum of future cash flows. If Costco erodes the consumer surplus, they are effectively shortening their lifetime cash flows and thus would merit a lower valuation. Of course, financial analysts only count what is countable, and thus might believe it is creating “shareholder value” when what is really happening is Costco is mortgaging its future and paying it to existing shareholders - they are not creating value; they are temporarily redistributing it.
To Start Building a Community, Master These Two Concepts - a16z
Increasingly, building a successful startup involves not only building a product that people can’t get enough of, but also building an engaged, loyal community around that product. One common misconception is the idea that “community” and “customers” are synonymous terms. They aren’t.
The people who interact with your product generally fall into one of four buckets:
Customers/users buy and/or use your product.
Evangelists tell everyone they know to buy/use your product because they love it.
Community is the group of people who’ve found belonging/utility through your product.
Ambassadors are incentivized, through payments or rewards, to promote your product.
The ideal time to launch a community varies, but you should wait until you have confirmed evangelists. If self-professed evangelists haven’t announced themselves yet, email a group of your earliest customers to find out if they love your product. Those who respond enthusiastically are your first evangelists.
Next, start a conversation with this founding group in a private space designed for that purpose (Discord, Slack, Telegram). The early days of community-building should feel like user research. You’re not trying to build an audience. You’re experimenting with different offerings to figure out what your evangelists want. Ask them directly.
But new community members don’t magically turn into devotees. You need to set the stage for that to happen - both by letting early members play a role in shaping and growing the community and also by creating an environment compelling enough to reel in anyone who enters.
The community funnel charts a prospective member’s path from receiving an invitation to becoming an invested, active member. It’s important to think about your role in moving members through the funnel.
6 Things I Love About Zapier’s SEO Strategy
How to Support Your Remaining Employees After a Layoff
The ABCs of health tech: key metrics to know and grow your business
How to use community to grow organically
Vertical Marketplaces in Underserved Industries
The next big trend in consumer tech: subscriptions and paid memberships
The Dangerous Seduction of the Lifetime Value (LTV) Formula
🇪🇺 Notable European early-stage Consumer rounds
SigmaOS, a UK-based new type of browser designed for productivity nerds, raises $4M with LocalGlobe/YC - link
Julienne Bruno, a UK-based foodtech working on dairy-free plant-based cheese, raises $5M with Cherry/Seedcamp - link
Landmark, a UK-based mobile game development studio, raises $4.6M with Project A/InReach - link
Virgil, a France-based financial solution assisting individuals in purchasing a home, raises $15.5M with GFC/Alven/Evolem - link
PhotoRoom, a France-based AI-enabled studio-quality image-capturing app, raises $19M with Balderton - link
Ukio, a Spain-based proptech offering a network of high-quality apartments available for monthly stays across Europe, raises $28M with Felix/ Partech/Breega/Heartcore 🖤 - link
🇺🇸 Notable US early-stage Consumer rounds
Circle Labs, a US-based platform enabling anyone to create their own virtual characters, raises $4.2M with Lightspeed - link
Anode Labs, a US-based web3 platform for tokenizing energy storage assets, raises $4.2M with Lerer Hippeau - link
Courtyard, a US-based platform that provides liquidity to collectible assets via physically backed NFTs, raises $7M with NEA/YC/Cherry - link
WellTheory, a US-based virtual care platform reversing the autoimmune epidemic, raises $7.2M with Accel/Lux - link
Savvy Wealth, a US-based technology-driven wealth management firm, raises $11M with Index - link
Atmos, a US-based custom home building platform, raises $12.5M with Khosla/YC - link
Haven, a US-based platform unlocking homeowner engagement for mortgage servicers, raises $13.5M with Fifth Wall/BoxGroup - link
Impulse, a US-based company supercharging home appliances, raises $20M with Lux/Fifth Wall - link
Mem, a US-based AI-powered notetaking app, raises $23.5M with OpenAI - link
Ernesta, a US-based D2C custom rug company, raises $25M with Addition/True - link
Speak, a US-based platform helping you get better at speaking English, raises $27M with OpenAI Startup Fund/Founders Fund - link
🔭 Notable later-stage Consumer rounds
Ramp, a Poland-based crypto payment starup, raises $70M with Korelya /Mubadala - link
Maven Clinic, a US-based health tech taking care of women and families, raises $90M with General Catalyst/Sequoia/Lux - link
Arta Finance, a US-based wealth management startup, raises $90M with Sequoia/Coatue - link
DispatchHealth, a US-based at-home care startup, raises $330M with Optum Ventures/Silicon Valley Bank - link
Heartcore Consumer Insights is a weekly newsletter covering notable consumer rounds and exits and top content in the B2C space.
