N.B. Oliver is speaking on the customer experience stage at Festival of Marketing 2016. View the agenda and get your tickets here.
What’s more important, the product or the marketing?
At Cornerstone we spent lots of time on the product, invested tens of thousands of pounds creating a cool razor handle, nice packaging, obsessing over the colour of the varnish on the tubes, all that kind of stuff.
We also make sure our customer service tone of voice is spot on.
Obsession with product is a common factor for subscription models. When you boil it down, all you’re asking customers to do is buy your product again and again – so if the product and the service isn’t good, you’re dead on day one.
That said, I don’t think that product on its own is enough to succeed.
These days social and word-of-mouth is cheaper and easier than it ever has been, but viral growth is still very hard to do.
Growth hacks and being able to smartly invest money into digital marketing is a key skill as well.
What does your marketing mix look like?
We’re overwhelmingly digital. We use a lot of direct response and we do a lot of conversion analysis, bounce rate analysis, A/B testing etc.
We really work out the relative value of our advertising and marketing channels, and spend money accordingly to get the most ROI.
Obviously, within that we have our own brand standards – we’re careful about where our advertising appears. It’s a balance between ROI and brand.
Our aspiration in the longer term is to move up the funnel, so doing broader stuff, such as TV or OOH or sponsoring events.
But that has to be supported by the direct response in order to make it effective.
What is preventing the incumbents from creating their own subscription businesses?
It’s really interesting because there’s almost a controlled experiment here.
In the US, Gillette has a subscription business (Gillette Shave Club) – its website looks similar to a Cornerstone or a Dollar Shave.
But in the UK, if you go on Gillette Club, you can’t buy from Gillette, you have to buy from one of their retailers such as Superdrug etc.
One of the big strategic problems they’ve got is that the large majority of their business is done through third parties. Their model is to get a factory to make something, then a retailer to sell it.
If big FMCGs try to go direct to consumer, those retailers may feel they are being undercut. I’m not privy to those conversations, but I can’t imagine they are easy conversations to have.
But in the US, the situation is different, because Dollar Shave Club has already hit 15% cartridge market share in five years.
So, the urgency of that situation means US retailers understand that unless Gillette goes direct, both parties may lose.
In Europe, and I’m not sure why, they haven’t resolved that yet, so the online experience for Gillette Club in the UK is a microsite which then sends you to a third party retailer online.
Gillette Club – consumers must buy from retail partners, not direct.
So for me, strategically, big FMCGs have got this whole issue of cannibalisation of retail sales.
Solving that is still an issue. But even with this problem solved, there are still others.
Firstly, big traditional shaving brands don’t emotionally connect with the consumer. For years they have been in broadcast mode, with high pricing and good products but also what some think of as pointless innovations.
That alienates customers – so taking a legacy brand and pushing it into this new business model is difficult to do.
Then, the obvious issue is the size of a P&G compared to a startup. At Cornerstone, we are launching a new product at the moment and it will go from conception to subscription in about nine months.
I used to work in the innovation industry for big companies like Unilever, where that can be a four-year process.
Lots of what we do at Cornerstone is tech layered and data layered so we get insights quickly, we can deploy code to fix things by morning.
We see ourselves as speed boats navigating around these oil tankers.
What explains Dollar Shave Club’s success in the US market?
That viral video was amazing – it’s very rarely you laugh out loud at a video advert. The PR from that was unbelievable.
Also, they raised a lot of money and spent a lot on marketing, being extremely aggressive on Facebook and podcasts, TV, Twitter.
Personally, I don’t actually rate their physical product that highly.
Dollar Shave Club’s presentation isn’t up there with Harry’s or Cornerstone, I would say. But they spent a lot of time on marketing and biz dev.
They’ve raised hundreds of millions, and lots of it is in customer acquisition. Part of the challenge for us, not being Silicon Valley based and not with the same potential market for investors, is raising the capital to do the same thing.
Growing quickly is often about raising money and spending it.
Amazon Dash – do you see that style of convenience as a potential disruption for subs models?
On Dash specifically, I don’t think it’s a great product.
If I think of my own usage habits on toiletries alone, I probably use 10-12 different brands of stuff, between shampoo, shower gel, face wash etc.
I’m not going to have 15 Dash buttons around the house because they’ll end up in a drawer somewhere.
I might as well just get out my phone and go on Amazon Prime and order it from there. The process of having all these buttons lying around doesn’t work.
In some cases it might do – some of the PR was around washing powder, and I think that’s quite clever when it’s integrated on the appliance and you have one product you stick to.
But in the personal care category where we are, or in food, it’s a terrible idea. One button for ketchup, one for mayonnaise, one for mustard, it becomes absurd.
The angle they’re going after, which is the same for us at Cornerstone, is reducing the friction of the shopping process.
With some things, you might enjoy buying them (e.g. a fine wine, a nice watch, or a nice shirt) and you don’t want a frictionless experience, you want to soak it in and feel like you’re getting bang for buck and that the purchasing experience is almost part of the product/prize.
But we sell necessities that are often inconvenient to buy for busy people.
So one click is better, but the Dash button isn’t the best execution.
Oliver Bridge, Cornerstone founder, is speaking on the customer experience stage at Festival of Marketing 2016. View the agenda and get your tickets here.