Hidrate, a start-up founded in mid-2015, is nearing the $1 million mark in revenue, a success that would not have occurred if the founder had bothered to drink enough water.
Nadya Nguyen, the 23-year-old Hidrate founder and CEO, became so dehydrated after a 10-hour stint volunteering at a walkathon event last year, she nearly passed out on a bus ride home.
That 10-hour walk turned into a 54-hour sprint with Nguyen and a team using a plastic bottle, a circuit board and hair scrunchie to assemble the prototype of a smart water bottle that tracks water intake and hydration. Called HidrateSpark, the water bottle comes with a smartphone app that's compatible with Android, iOS and Apple Watch. (The app also connects to the most popular fitness apps, such as Fitbit, Apple Health Kit, MyFitnessPal, Jawbone and Misfit.)
Using a combination of data points — including height, weight, age and level of activity — the Hidrate app alerts a user when it's time to drink more water by sending a notification to their phone and making the bottle glow.
But it's another data-usage pattern uncovered in the Hidrate story that should be of interest to entrepreneurs in search of a million-dollar idea.
Before Hidrate was conceived, Nguyen was consulting at Deloitte on a data analytics project. Studying and working with data sets and behavioral market analysis helped Nguyen launch Hidrate with confidence that a market existed for it beyond start-up founders who forget to drink water on long walks.
"Data by itself is great, but when you combine it with a field, that's when the magic happens," Nguyen said.
Nguyen said her background in data analytics allowed her to devise a systematic way to identify the market fit for Hidrate. Marketing intuition helped her come up with a number of potential markets, but it was the hard analytical skills that helped her set up tests to validate the markets.
"It's important for there to be a balance between data and intuition," she said.
Wilson Raj, global director of customer intelligence at SAS Institute, said for small businesses like Hidrate, data analytics needs to be a tool used with a narrow goal in mind. "The first thing any small business needs is a very tight goal in terms of what it wants to use analytics for. For example, they can use it to validate their customer strategy or product strategy and then collect data and figure out what they know about those people and see what it says about their market," Raj said.
Nguyen and her team at Hidrate did just that. With a list of all possible markets spanning close to 30 different demographics, they set up a model to validate each market. The process involved a combination of focus group interviews, surveys, observation of the lifestyles of people within a certain group, and advertising on Facebook to target different demographics and see which ones performed best or got the most click-through.
"We were able to analyze the sentiment of the comments posted on our ads," Nguyen said. "It was great to see unfiltered comments about the product, because we got a range of responses. People either couldn't wait to get their hands on the product or they downright hated it. We took those comments as a sign to double down on some markets and eliminate others."
The data ultimately showed that Hidrate's primary market opportunities were geared toward weight loss, fitness and health care. For instance, those who suffered from chronic diseases of the kidneys are a key demographic for the company. Hidrate also realized its markets were particularly skewed toward women, which is evident in Hidrate's branding.
Nguyen and other co-founders and Hidrate team members — Coleman Iverson, Alex Hambrock and Jeremiah Harris — have received attention from the press for accumulating more than 8,000 backers in a Kickstarter campaign, but the data-based marketing work behind that success gets less attention.
"The tricky thing about finding your market is that people you think would be early adopters turn out to be the exact opposite — athletes, for example, aren't a big part of the marketing strategy," Nguyen said. "Finding these early adopters ... was critical in launching Hidrate. ... It was the early adopters who helped build the product and shared it with others."
"Social media has changed marketing and analytics," Raj said. "Progressive brands are not just concerned with vanity metrics such as 'likes' and 'shares. Instead, the data they collect from a social media perspective speaks to the sentiment and lets them find what topics resonate with the business and what topics don't. ... Businesses no longer use social media as a popularity contest."
Leo Sadovy, an expert in industry marketing at SAS Institute, said start-ups like Hidrate can draw tremendous value from analyzing social media usage as a particularly cost-efficient way to gain market insight.
Once Nguyen and her co-founders identified their key markets, they reached out to social media "influencers," as she dubs them, within that market.
After pinpointing Facebook and Instagram as their main social media channels, Nguyen said "the secret to discovering the right Instagram influencers lies in the fact that people follow similar popular users within an industry."
To see how users kept up with news, they asked, for instance, how many went to Popsugar for fitness-related news and tips and whom they followed on social media. Hidrate also hired a virtual assistant to go into different users' profiles and note who they followed on Instagram. The company then made a list of potential Instagram influencers to reach out to. So far, they have 2,000 on board and 4,000 "in the pipeline," she said.
The influencers the company spoke to were crucial in giving the Hidrate team insight into who exactly their audience was and what they wanted. "You have to really dig into the why — why they're interested or why they're not interested. It's not about the who or what as much as it is about the why," Nguyen said.
Once she and her colleagues collected that data, they put together a list of hundreds of early adopters who they knew would support the product.
By doing so, they had built some momentum, starting off their crowdfunding campaign with a slew of backers that massed into more than 8,000 total backers and $627,000.
"By the time we launched the product, [the backers] weren't just supporting Hidrate, they were actually part of the process itself."
Once HidrateSpark is in mass use — the smart water bottle will begin shipping March 21 — the start-up can expect to have more than the average amount of data to use for marketing research, and that's an advantage to developing a "smart" product.
"They should take full advantage, not only of social media but also of all the data they're bringing in on the app that goes with the water bottle. They'll have so much demographic data here to work with as far as developing their marketing strategy, and it really doesn't get any better than that for a start-up," Sadovy said.
Start-ups can also use social media to track customer complaints about products and address them. "They can track those complaints and mine for specific topic threads and then combine that with data they already have — purchase history, third-party data, etc. — and apply that to an aggregated view to really uncover new insights," Raj said.
In fact, the "Don't Leave Me Behind" feature of the water bottle, which tracks the location of the bottle if a user forgets it somewhere, was suggested primarily by the early adopters Nguyen and her team spoke to before launching their Kickstarter campaign.
— By Sonam Sheth, special to CNBC.com