I love Rihanna. She has incredible music, great style, and inspirational hair. And if that wasn’t enough, Rihanna has shown the world that catering to racially diverse needs makes bank. Rihanna is now worth $1.7B primarily through her beauty brand Fenty (her lingerie brand Savage x Fenty and an internationally renowned music career helped too). Fenty’s target consumers are black and brown individuals, who previously couldn’t find makeup in their shade of skin. By launching products specifically catering to black and brown needs, Rihanna is giving Oprah a run for her money as the richest female entertainer. Of course, Rihanna’s stardom and influential social media following also helped make Fenty successful…but she’s beaten out beauty brands launched by female entertainers with similar clout.
Fenty is special. Their competitive advantage lies in a focus on black and brown consumer needs and the launch of inclusive products. Every single company (and venture capitalist) can learn from this. We’re all looking for underserved consumers, but seldom think of women, racial minorities, LGBTQ+ individuals, immigrants, those with disabilities, etc. as underserved consumers. As it turns out, these groups have more spending power than you’d think…
- American women have $6.4 trillion in spending power (source)
- Underrepresented minorities (Black, LatinX, and Native Americans) have $2.8 trillion in spending power (source)
- The LGBTQ+ population has $1 trillion in spending power (source)
- People with disabilities have $8 trillion in spending power (source)
Now, while the majority groups have $10s of trillions of dollars in spending power, we can’t deny that these spending power numbers are significant (e.g. with 1% of the URM spending power, you’re at $28B net worth and have beaten out Rihanna as well as Oprah).
Given that…
- The US’s population increasingly skewing to multiracial diversity,
- LGBTQ+ identification is on the rise,
- There is an impending $30 trillion wealth transfer to women, and
- The US has more immigrants than any other country in the world
…why aren’t more startups or companies targeting these consumer groups?
In her book Invisible Women, Caroline Criado Perez says, “seeing men as the human default is fundamental to the structure of human society”. I’d add on and say the human default is an able-bodied, heterosexual, white male. This is a mouthful so for brevity purposes, let’s dub this default as “Average Joe”.
When we, as leaders or venture capitalists, think of a consumer’s needs we inherently think of Average Joe’s needs. He is the subconscious consumer we think of and build for. But why do we always cater to Average Joe? Today’s underserved consumers are going to become the majority US population. It’s time we started creating products specifically for them.
Note: I discuss some segments of underserved populations in this article but they are not comprehensive. See here for additional segments and more information.
Case Study: Inclusive Financial Products
There is no better space to explore inherently biased products than within financial services (also an area of personal passion). Let’s start with one of my favorite companies: Ellevest. Founder Sallie Krawcheck observed that men and women invest with very different goals (men focus on alpha and beating the market while women focus on stable returns), and yet nothing existed in the 2014 market for how women liked to invest. Further, financial products like target-date funds didn’t consider unique life experiences women faced: time spent out of the workforce for childcare or an average longer lifespan. So, all other things equal, if Average Joe and I (a woman) followed the same financial advice, we wouldn’t have equal wealth upon retirement.
Pause. Isn’t this wild? As a woman who is in control of her personal finances, confidently makes stock investments, and actively puts money into retirement products annually, I was totally stunned to think that systemically I would never land the same wealth as Average Joe.
As a result of this observation, Ellevest designed products and services for how women engage in the financial system. And this idea works. Ellevest recently reached $1B in AUM purely by banking on women’s needs (pun intended).
Within fintech, companies are applying the same line of thinking to Black Americans (First Boulevard), the LatinX population (Suma Wealth), the LGBTQ+ population (Daylight), immigrants (Cheese), and those with disabilities (True Link Financial). There’s even a way to think about this from a B2B lens (Camino Financial). Today, these ideas are neobanks or credit products, but can they expand into additional financial products like mortgages, loans, insurance, and beyond? Focusing on underserved consumer needs will manifest into new, innovative, and profitable financial products.
It doesn’t need to just be these affinity-focused fintech companies that provide inclusive financial products. Any fintech company (or bank) can, and should, create products tailored to underserved consumers.
An Inclusive Build Process
All of this boils down to what I like to call an “inclusive build process”. I previously worked with Sequin Financial, a company designing credit products for women, and this mentality was key in how we thought about our products and decisions (PS Sequin just launched a debit card that builds credit and raised a seed round!).
The purpose of an inclusive build is to think critically about underserved populations and whether your product addresses their specific needs. As you do, you may find quick and simple ways to make your product more inclusive (and thereby appeal to a broader set of consumers) or identify product hooks that will draw in these consumers (making a stickier product).
An inclusive build does not only apply to companies specifically targeting underserved consumers (like the ones I mentioned above) — any company can do it! I’ll reiterate that an inclusive build means more than social justice. It means more profit, increased customer loyalty, and the ability to create and tap into new markets.
My 2 Cents on How to Facilitate an Inclusive Build
- Be inclusive in your qualitative data gathering: ensure you are talking to women, racial minorities, those of varying socio-economic statuses, LGBTQ+ identifiers, etc. Make sure you pay attention to what those specific individuals say and if they are vocalizing something different than the masses.
- Check the data: slice and dice the data by various identities and see if it tells a different story. For example (totally making this up), let’s say Advil has a 90% success rate when you look at the aggregate data set but only a 50% success rate when you look at the LatinX-specific data set. Why is this and does it show a potential market opportunity?
- Design for more than Average Joe: create inclusive customer personas, think about specific life experiences different groups have, and create product features accordingly. How would a pregnant woman use your product? What about a divorced one? What about a trans-identifying man? Or an undocumented immigrant?
- Reporting is key: look critically at your customer data and analyze if you see equal adoption and usage across all consumer groups. Are you only reaching Average Joes? How can you have a broader reach?
- Hold yourself accountable: incorporate inclusive build goals into your roadmap, report out on these to your investors, and find investors who care (hint: Concrete Rose Capital is pretty great). Without accountability, your inclusive build intentions will fall through the cracks.
The sooner you think about this, the higher probability you will hit Rihanna status. And after all, isn’t that what we all want? We bow to you, Rihanna.
Questions? Thoughts? I’d love to hear them — please comment!
