Launching a business in a new market category is a challenging yet rewarding endeavour that requires careful planning and strategic thinking.
While there are many essential elements involved in this process, one stands out as absolutely crucial: consumer education.
I spoke to Agave Lux co-founder Justin Kosmina about why educating consumers is the linchpin to success when entering a new market category, and how it has ensured the success of his agave spirits distribution company.
Bridging the knowledge gap
One of the primary reasons consumer education is vital when entering a new market category is that it helps bridge the knowledge gap. In a new and unfamiliar market, consumers may not be aware of the products or services you offer, let alone their benefits. By providing educational content, you can empower consumers with the information they need to make informed decisions.
Because the Australian market is relatively inexperienced with agave spirits, with the exception of commercially produced Tequila, when Kosmina started Agave Lux, the number one priority needed to be education about the different spirits available in the space, including the increasingly popular, but often unknown, Mezcal.
“We’ve always led with education but pre-COVID, we were an on-premise business. Ninety-nine per cent of our revenue came from venues, and then it shut down,” says Kosmina.
“We then set up a D2C platform, which was a big education play. And that turned out to be a big step for us in regards to just building our brand awareness in the market.”
Building trust and credibility
Consumer trust is the cornerstone of any successful business. When entering a new market category, you often start with no reputation or credibility. Consumer education plays a pivotal role in building trust. By offering transparent and informative content, you demonstrate your commitment to providing value and fostering trust with your audience.
Trust is especially crucial when introducing innovative or unfamiliar products or services. Consumers are more likely to engage with your business when they understand how your offering works, its benefits, and how it addresses their needs. Through education, you establish yourself as an authority in the market, making consumers more likely to choose your brand over competitors.
“Our biggest challenge initially was just not having a Tequila brand,” says Kosmina, whose company focuses on the lesser-known agave spirits: Mezcal, Sotol, Raicilla and Bacanora.
“If you have a big Tequila brand, that gets you in more doors because people know what you’re talking about. So not having a Tequila has probably slowed down our business.
“If we’d had a Tequila brand earlier, we would have gained the trust more easily and maybe grown at a faster pace. So the long-term play of truly growing a category sometimes can slow down your business.”
Overcoming resistance to change
In a new market category, consumers may exhibit resistance to change. They may be accustomed to existing solutions or sceptical of something new. Consumer education is a potent tool for overcoming this resistance. By addressing common misconceptions, doubts, and objections through informative content, you can ease consumers’ concerns and encourage them to embrace innovation.
“If you taste a Raicilla with a consumer they love the product but they don’t know what to do with it because it’s such an unknown category,” says Kosmina.
“They already know what to do with Tequila, so our goal is to educate consumers of, first, how to drink better Tequila, which then lets us lead into the fact that there’s more to the space than just Tequila.
“So the aha moment for Agave Lux was the need to create a broader platform through which we could share the beauty and the history behind agave spirits because there’s a lot more to it once you peel back the layers.”
Encouraging informed decision-making
Informed consumers are empowered consumers. Education equips consumers with the knowledge they need to make informed decisions. When consumers understand the features, benefits, and potential drawbacks of your product or service, they are more likely to make choices that align with their preferences and needs.
This aspect is particularly crucial when your business offers complex or technical solutions. For instance, in the software industry, educating consumers about the functionality and capabilities of a new software product helps them assess whether it meets their specific requirements. The result is more satisfied customers who are less likely to encounter post-purchase dissatisfaction.
However, it also applies to newcomers to the food and beverage industry. Agave Lux has a whole section on their website dedicated to “Agave School”, with educational content around the agave plant and drinking Mexican spirits, as well as the individual spirit categories. This lets consumers explore more about the spirits sold on the site before they make a decision.
Adapting to market feedback
Entering a new market category can be a learning experience for both you and your consumers. Consumer education facilitates feedback loops that allow you to adapt and refine your offerings based on consumer insights and preferences. By actively seeking and listening to consumer feedback, you can tailor your products or services to better meet their needs.
“We bought into Estancia Raicilla, a Raicilla distillery in Mexico, and set up a distributor in London to bring it to bars, but we were hearing from the venues we were supplying that it just wasn’t landing with the market because no one know what Raicilla was,” says Kosmina.
“So instead we just partnered with a distributor so we could rather focus on educating the end consumer. We became the conduit between distributor and consumer, educating people on agave spirits and that was much more successful for us.”
In the ever-evolving landscape of business, consumer education is not just a valuable asset –it is the most important element when launching a business in a new market category. It serves as the bridge between unfamiliarity and understanding, building trust, overcoming resistance and empowering consumers to make informed decisions.
Ultimately, an educated consumer is more likely to become a loyal customer and an advocate for your brand. By prioritising consumer education in your market entry strategy, you pave the way for sustainable success and growth in uncharted territory.