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5 Stages of Market Sophistication – Eugene Schwartz’s Breakthrough Advertising

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Transcript

Dan Lok: Welcome to another episode of Dan Lok show. Today we are in actually New York City, and I’m with John Henry. Now John not only is an entrepreneur, but also a real estate investor as well as owns a venture capital company.

John Henry: That’s right.

Dan Lok: Now before we even talk about John’s story, I want to talk a little bit about this space.

John Henry: Let’s talk about it.

Dan Lok: Let’s talk about this space. Like what makes this space, co-working space, so special?

John Henry: First things first, thank you for having me on.

Dan Lok: Welcome man, welcome.

John Henry: Appreciate you. And look, what makes this space special is this is the proof right here. Like you’re on a one day trip, you came, you interviewed with Faiza, this content, that content lined up. We connected and it’s central in the city, a lotta energy here, there’s six floors.

Dan Lok: You can feel the entrepreneurial spirit.

John Henry: That’s right.

Dan Lok: The minute you walk in you can feel the hustling.

EPISODE 203

5 Stages of Market Sophistication - Eugene Schwartz's Breakthrough Advertising - Dan Lok

How do you make a final decision when you have many choices? For example, which restaurant to have lunch at? Or which hotel to stay at in a major city?

Imagine this type of decision is on your customer’s mind when you craft your marketing message. One of the biggest challenges that most entrepreneurs have is they don’t understand how to adjust their marketing to customers. For example, a customer who has never used a smartphone will be less skeptical about the phone market than a customer who has owned many of them.

Entrepreneurs tend to communicate exactly the same way with their customers, no matter their experience level, which is why the typical marketing message doesn’t work. They need to be aware of the five stages of market sophistication when they create their message, and adjust their message depending on the stage.

What Does Market Sophistication Mean?

This concept came from one of the greatest copywriters, Eugene Schwartz. He wrote a book called Breakthrough Advertising, which is now out of print and difficult to find.

Here is the idea. You must market your product or service depending on what stage of sophistication your market is currently in. Ask yourself the following questions: How long has that type of product or service has been around? How many competitors do you have? Are your customers jaded? Have they seen a lot of this type of marketing message before?

You’ll notice in any category, in any industry, the top one or top two companies make 90 percent of the money. So if you can create your own category, you could be number one or number two.

Let me give you an example. So let’s say for real estate agent, instead of calling yourself the number one realtor in the universe, or the number one realtor in Vancouver, become the number one expert just in your neighborhood.

Being first has a huge advantage. Pepsi is always promoting the message that “Seven out of 10 say our cola tastes better than Coca Cola.” Yet it doesn’t matter. Pepsi will never beat Coca Cola because Coca Cola was there first.

So how do you determine what to say in your marketing message? It depends on the stage of market sophistication, starting with stage one.

Stage 1: What do you do?

Stage one is simply saying, “Hello market, I’m here!” It’s simple and direct, like saying, “I’m a mortgage broker. I’m a real estate agent. I am a grand master. I’m an accountant.” There’s no need to be lengthy since you have very little competition. Your innovation is enough to capture the market.

Here is an example of a stage one marketing ad. Many, many years ago, you saw these full page ads in print publication about taking a pill and losing weight. It’s very simple and direct.

Here’s another example. “Personal computer for under $200.” Many years ago, a computer (not a tablet) for $200 was a big selling feature.

Stage 2: Why are you better?

At stage two, if the direct claim is still working, you’re saying, “Here’s what we do.” You need to outbid your competition with features because now at stage two you’re getting a bit more competition. This requires you to take your original claims and elaborate on them.

For example, “Take this pill and you will lose weight in seven days or less.” Or, every kid should have an Apple computer because it has 128K internal memory and built in hard drive. That was a huge deal back then.

Stage 3: How do you do it?

At this stage, the market gets even more sophisticated. The market at this stage has become jaded and skeptical with all these exaggerated claims made by the growing group of companies, your competitors, selling pretty much the same thing.

 

Now you got to go into how does it do it. Not just, “Here’s what we have and why we’re better.” Now it’s, “Exactly how does this thing work?” You want to tell them one piece of information that they might not know about what you do, and tie it back to your claim. Let me give you an example.

 

“Take this pill that blocks the absorption of fat in your intestines, and you lose weight in seven days or less.” You’re now backing up the claim. Here’s another example.

 

When personal computers became more competitive, Steve Jobs asked, What makes it tick and talk? That was the new mechanism for Apple. He only needed that one thing, a computer that talks, to put it right in the headlines.  

Stage 4: How do you crush your competition?

So now in stage four, now it even gets more competitive. Now you need to crush your competition because there’s so many choices, so many people out there doing similar things to what you’re doing.

 

People say now the internet is making it easier for entrepreneurs to start their business. But with that comes saturation, massive competition, and getting visibility. It’s actually now more difficult to succeed. The strong will survive, the weak will go away.

 

So at this stage, you promise more benefits and create a new mechanism. Here’s an example from Apple. They made themselves the cool bunch compared to PCs. They said last year (at the time) there were more than 114,000 viruses for PC’s but not for Macs. It’s a very direct claim.

Stage 5: How can you become iconic?

Stage five. Now you want to be iconic. You don’t want to be just one, you want to be the one in the marketplace. At this point, the marketplace is skeptical. This is where you sell on how your brand services specific types of people and encourages people to buy into the exclusivity.

 

For example, look at who buys PCs and who buys Macs. Artists and designers versus businesses. It’s two very distinct markets. You’ve got to be clear who you’re going after as your customer. Who do you actually serve?

 

Back when Steve Jobs introduced the first iPone, it was marketed as “It’s a phone, it’s an iPod, it has internet.” It was iconic. People didn’t know you could have all that in one device.

 

The next time you are creating an ad for your customers, think about how these five stages of market sophistication could impact how they perceive your product or service. You must adjust your message depending on the stage your customer is at if you want to crush your competitors and be the customers’ choice.

Transcript

Dan Lok: Welcome to another episode of Dan Lok show. Today we are in actually New York City, and I’m with John Henry. Now John not only is an entrepreneur, but also a real estate investor as well as owns a venture capital company.

John Henry: That’s right.

Dan Lok: Now before we even talk about John’s story, I want to talk a little bit about this space.

John Henry: Let’s talk about it.

Dan Lok: Let’s talk about this space. Like what makes this space, co-working space, so special?

John Henry: First things first, thank you for having me on.

Dan Lok: Welcome man, welcome.

John Henry: Appreciate you. And look, what makes this space special is this is the proof right here. Like you’re on a one day trip, you came, you interviewed with Faiza, this content, that content lined up. We connected and it’s central in the city, a lotta energy here, there’s six floors.

Dan Lok: You can feel the entrepreneurial spirit.

John Henry: That’s right.

Dan Lok: The minute you walk in you can feel the hustling.

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Dan Lok: Welcome to another episode of Dan Lok show. Today we are in actually New York City, and I’m with John Henry. Now John not only is an entrepreneur, but also a real estate investor as well as owns a venture capital company.

John Henry: That’s right.

Dan Lok: Now before we even talk about John’s story, I want to talk a little bit about this space.

John Henry: Let’s talk about it.

Dan Lok: Let’s talk about this space. Like what makes this space, co-working space, so special?

John Henry: First things first, thank you for having me on.

Dan Lok: Welcome man, welcome.

John Henry: Appreciate you. And look, what makes this space special is this is the proof right here. Like you’re on a one day trip, you came, you interviewed with Faiza, this content, that content lined up. We connected and it’s central in the city, a lotta energy here, there’s six floors.

Dan Lok: You can feel the entrepreneurial spirit.

John Henry: That’s right.

Dan Lok: The minute you walk in you can feel the hustling.

John Henry: That’s right, and there’s a lot at WeWork’s, obviously, and this is … this, though, is billed as like the OG space, and there are a lot of veteran New York entrepreneurs here. There are several accelerators and several funds and stuff, and so yeah, I’m fortunate to be part of this community.
So we’re in Alley right now. Yeah, and that’s where we find ourselves.

Dan Lok: That’s awesome.

John Henry: Welcome to New York, man.

Dan Lok: Thank you, I love New York. The cold, it takes a couple of days to get used to. The minute I arrived, the airport, like wow! This is cold. I know New York, it’s cold. But this is cold!

John Henry: This is very cold.

Dan Lok: This is very cold. So John, take us back. How did you get into entrepreneurship?