Birchbox, and Why Even the Best Products Still Fail
By Kelly Sarabyn
Today, there’s a monthly subscription “box” for every niche market. From menswear to beauty products to spices, carefully curated packages mailed direct to the consumer exist in every vertical imaginable. For these monthly deliveries, consumers have one company to thank: Birchbox. In 2010, it kicked off the trend by offering a box of beauty samples to women — a simple idea that attracted 80 million dollars in investment, and over a million subscribers.
Yet, seven years later, its massive debt is almost due, it had two rounds of layoffs in 2016, and, with its growth plateauing, it’s not clear it will survive as an independent company.
Contrast that to fellow subscription service, Ipsy, a company that launched two years after Birchbox, and has since acquired more than twice as many customers as Birchbox. Just like Birchbox, Ipsy sends subscribers five beauty samples a month for ten dollars. Yet as Birchbox is facing the chopping block, Ipsy has flourished.
Birchbox won’t be the first innovative idea to be cast aside in favor a new competitor, or evolving tastes. New products fail at a rate of up to 90 percent. But many of these products look like Birchbox: failing despite being innovative and having a real customer base.
No matter how great a product is, it will disappoint if it’s sold with the wrong brand story. Accenture determined that a company who breaks a promise (even implied!) about their product quickly loses 38 percent of their customers. Even worse, they become in jeopardy of losing an additional 52 percent as those customers begin searching for a substitute product. This has costly ripple effects, as those fleeing customers post bad reviews, badmouth the brand to their personal networks, and fail to make referrals.
In order for a good product to succeed in the marketplace, it has to connect not just with any customers, but the right customers with the right expectations. The only way to deliver that entire package? A well-crafted brand story aligning the entire customer experience into a satisfying emotional journey. This alignment creates the customer trust and engagement that is vital to a company’s financial sustainability: almost 80 percent of customers choosing between two products of the same quality and price will choose the product sold by the company they trust.
Birchbox’s Rise and Fall
Back to Birchbox. Why was Ipsy able to so thoroughly overtake them, even though Birchbox was there first, and Ipsy offered a largely indistinguishable product? Ipsy developed a better understanding of why people were buying the product, and pivoted away from the contents of the boxes and towards the emotional story behind them.
Ipsy knew from the beginning that it wasn’t just selling monthly makeup samples. Ipsy co-founder and CEO Marcelo Camberos explained, “The Glam Bags were never the point … these days, beauty brands don’t decide what products are cool: Instead, it’s beauty bloggers and other creators that are controlling the conversation … we wanted to be at the forefront of the new way that consumers would interact with beauty brands.”
Ipsy developed a brand story of empowering a beauty community formed around women’s self-expression. Rather than seeing women’s beauty choices as subject to the verdicts of large makeup companies, well-known magazines, and large retail stores, Ipsy saw women as being able to make those choices themselves, in the context of a thriving digital community of makeup aficionados. With Ipsy’s assistance, every woman could participate in this community, deciding the merit of different makeup products for themselves. Ipsy knew who their hero was from the beginning, and was able to figure out how to make sure their product delivered on its core emotional promise.
In order to execute this brand story, Ipsy facilitated relationships between its product, individual women, and beauty content creators by carefully matching popular influencers with suitable brands, paying influencers a salary and providing them with the resources needed to produce quality content. As a result, women were able to see more content from the beauty influencers they were already watching, receive feedback and advice on the samples, and chime in with their own opinions in the multiple digital communities that Ipsy curated.
This sent a clear signal: the voice of Ipsy users matters. Unlike traditional media outlets, beauty influencers, online forums, and social media platforms provide a space for self-expression from all members. On their homepage, Ipsy writes, “Once you’re an ipster, you’re part of something big — a community that’s leaving the rules behind and making unique beauty a real thing. And we’ll be with you all the way.”
In contrast, Birchbox lacked a coherent vision for who they were trying to empower with their product and their brand. The Birchbox CEOs told Fast Company, in 2015, that the monthly beauty subscriptions were a “tactical play,” a “Trojan horse that lets Birchbox slip into its customers’ medicine cabinets and bedside vanities.” Such a comment reflects Birchbox’s cynicism and deep disconnect from their core customers, as well as their failure to develop a brand identity that could guide their product development.
This lack of brand vision led Birchbox to a fragmented pursuit of various products. Birchbox opened a retail store, and an ecommerce store, selling full-size versions of its makeup samples. It advertised itself to makeup companies as providing data on monthly subscribers, to help the companies better target customers. Then Birchbox started selling a men’s beauty subscription box. More recently, it launched a more expensive, more customized women’s beauty subscription box, to sell alongside its ten-dollar box. These various product attempts sent a clear message: Birchbox was more concerned with generating revenue — whether it be from beauty manufactures, men, or higher income women — than with understanding and empowering their core customers (who remain their primary source of revenue).
In addition, without a brand story to build around, Birchbox fell into internal discord. In 2015, one of the two cofounders and co-CEOs left, and in 2016, the remaining CEO’s approval rating sunk to 27 percent on Glassdoor. One of the common complaints in the negative employee reviews reflects deep dissatisfaction with this lack of a coherent company vision, stating, “Upper management definitely needs to work on being more aligned.”
Despite flailing, Birchbox continues to push its e-commerce store, leaving open the question of whether Birchbox will find a coherent brand story that can not only guide its product development, but inspire and empower its core customers.
In the end, the well-defined Ipsy brand story and its execution through the entire customer experience and product development, has resulted in Ipsy acquiring over 2.5 million monthly subscribers — more than double Birchbox.
Good Products Need Good Brand Stories
More than four million women have purchased beauty subscription boxes. But having an in-demand product, and being the first to market, isn’t enough. Just ask Birchbox. Ipsy’s emotionally evocative brand story enabled it to forge powerful connections with its customers, remain focused on the right product opportunities, and overtake Birchbox’s market share, despite selling a largely indistinguishable core product.
Companies understandably feel passionately about the products they spend years developing. But connecting with the right customers, and building customer loyalty and lasting customer relationships, requires more than releasing an amazing product. In fact, the more amazing the product is, the more likely other companies — like Ipsy after Birchbox, or Lyft after Uber, or Groupon after LivingSocial, or Instacart and Peapod after Webvan — will soon sprout up with similar products to compete for customers. In order to stay ahead of the competition, a company must comprehend the emotional impact behind their product, as this not only creates powerful emotional connections with customers, it ensures product development continues to track the true emotional needs of customers.
Gallup has found that today’s consumers are “more inclined to spend [money] only with businesses they feel good about … consumers will give more money to the businesses they feel emotionally connected to.” This emotional connection can’t be created through an amazing product alone. Instead, it requires developing a compelling and consistent narrative that transforms customers into the heroes of an emotionally satisfying journey every time they use the product. Only by forging these powerful, story-driven relationships with customers can a company ensure that their amazing product will translate into lasting sales.
Kelly Sarabyn is a manager at Woden. Whatever your storytelling needs may be, Woden can help. Read our extensive guide on how to craft your organization’s narrative, or send us an email at firstname.lastname@example.org to discuss how we can help tell your story.