Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/62YW7P
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEOof Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 8, we examined the importance of managing investors. Today, we tackle customer acquisition.
NEW YORK, United States -- When our website went live, we all stood around a desk watching Lauren Santo Domingo, my co-founder and partner at Moda Operandi (M’O), and I ceremonially make the first two purchases. We held our breath. When the sales went through, our small team celebrated with a big cheer. But as the launch euphoria abated, we looked up at each other like the proverbial deer in headlights. We realised the hard part was just beginning. No sale would ever be that easy again. How were we going to keep the purchases coming? How were we going to find customers?
Today, nearly two years and millions of dollars in sales revenue later, M’O is often asked the same questions about customer acquisition that we asked ourselves during those early days. People tend to be interested in three things: (1) How did M’O first acquire customers with a very lean marketing budget? (2) How did M’O, a US-based company, acquire international customers? (3) Is offline marketing important for an online business like M’O?
As finding and retaining customers is critical to the success of any company, I want to address each of these important questions, one by one, with the hope that it can shed light on the process for others.
How we first acquired customers with a very lean budget
While every start-up is different, each one needs to identify its own target customer long before launch. There is little point putting together a customer acquisition plan until you have done this homework, as the plan will depend meaningfully upon whom you are going after. In the case of M’O, our target customer is a woman who loves fashion and is willing to pay full price for luxurious clothes and accessories. So our initial marketing efforts were focused on reaching and recruiting this customer in an elegant way that made her feel special. Since we had a tiny budget, we also had to be creative. Here is what we did in our first 6 months:
• Exclusivity: We built an aspirational site based upon an exclusive membership model. While the “members only” concept was a thorny issue for some our investors, we stuck to our guns, as we believed strongly that this would help us attract our target customer (which it did). Total cost: $0.
• Friends and family: We asked our initial members to refer their friends and family, which they generally loved doing, as they believed in the concept and it allowed them to offer access to ‘something cool’ to others. Total cost: $0.
• Influencers: We identified ambassadors in various cities and asked them to try the product. These tastemakers often liked the site and spread the word via their networks, helping our customer base to grow. Total cost: a few dresses here and there.
• Press: We had a small budget to retain a PR agency, who did a great job of landing us a few articles prior to launch about the company and our concept. Total cost: about $10,000 per month
• Editorial partnerships: We partnered with brands, sites and blogs such as Goop, Rachel Zoe and others where they integrated mention of M’O into their editorial in exchange for a special product sale to their fans on our site. Total cost: $0. The first time we partnered with Goop and Rachel Zoe, they simply wrote about us in their editorial, which drove traffic to us for which we did not pay. Later we have done specific paid advertisement programs with both.
• Original editorial: We created our own unique editorial content to drive traffic to our site, drive customer conversion and sales. Total cost: Editorial was not free, but employees were multi-tasking to take on this additional role.
• Affiliate relationships: We forged select partnerships with Vogue (where Lauren is a contributing editor) and others to generate traffic and sales from key third party sites. Total cost: a percentage of revenue on each sale, typically around 10 percent.
• Social media: We used social media sparingly, enough to learn what services and tools help acquire customers but without diluting the then-exclusive nature of our concept. Total cost: We had one junior employee creating editorial and content for the website, and managing social media.
And equally importantly, here’s what we didn’t do: No shopping credits for referring friends. This is a bad precedent to set and a great way to erode margins. No discounts on product. The entire premise of M’O is that product is full price. And no easy access to membership. In fact, we made it pretty difficult to become a member, with a long and cumbersome application form, which our staff would manually review. While this was inefficient, both for the customer and our team, the lengthy application created a feeling among prospective members that M’O was special and, therefore, worthy of receiving this kind of granular data. The data, in turn, helped us precisely understand the demographics of our customer, which was invaluable to our future marketing efforts.
How we acquired international customers
Finding and selling to international customers can be challenging for any business, particularly a start-up. This is why global expansion is often tucked away into the back of a budding company’s business plan as part of a later phase. Identifying and recruiting customers abroad is expensive and international fulfilment can be really expensive. So should a start-up even focus on this? And if so, how? Every start-up is different. Some businesses might be better served by focusing on their local market. The cost savings are meaningful and the headaches are fewer. But if you believe you need to go global, here are a few tips:
• Plan way ahead: Setting up an international customer base and fulfilment operation takes a lot longer than you might think. We knew that to succeed we needed to be an international company with a global customer base. We believed that one of our key advantages was our first mover pre-order model and that the only way to fend off imminent competition would be to set-up a presence at home and abroad. So we began planning for efficient and cost-effective worldwide fulfilment from the get-go.
• Learn on the cheap: Pre-launch, we didn’t really know where our international customers were going to come from. Europe? Sure. But where? Asia? Which specific countries? So we first did everything we could to amass data without committing to massive research and build-out plans. We jumped on pre-launch press opportunistically to learn about potential international markets, partners and customers. An introduction from an investor led us to a partnership in Kuwait, which has helped us grow our Middle East presence. An invitation from the fashion counsel of Brazil to attend São Paulo Fashion Week helps us tap a customer base throughout Latin America. The point: leverage international partners, press and local events to learn about selling abroad before you pull the trigger on a specific plan. The people on the ground in these markets are often your best allies.
• Execute on the data: After we had gotten our feet wet abroad by engaging with friends, press, affiliates and others, we started to review and make sense of the data to develop a plan. Customers in English speaking markets were low-hanging fruit, since little website localisation was required. Thus, the UK, Canada and Australia became near-term priorities. At the same time, customer response to our initial engagements in the Middle East and Latin America had been surprisingly strong, so we knew we needed to beef up in those markets, as well. Eventually the puzzle pieces fell into place where we were able to develop a clearer picture of our worldwide target customer base, both online and offline. We could now focus on the geographies where we had seen traction and well as those regions where we expected traction to soon increase (Asia, for example). Armed with all of this data, M’O developed a local presence in the UK to service customers abroad, translated the site into several languages and hired-in multilingual customer service managers. The key here: harvest your early foreign sales data and then build out a plan that targets fertile soil. You can’t do everything at once and less is definitely more, so pick one or two places to start, bring in partners and go deep.
Is offline marketing important to an online business?
The answer to this question, of course, depends on the business. Some online pure plays are proud to have never spent a dollar offline. But for us, in addition to the traditional online marketing we do (partnerships, SEO, etc), offline marketing efforts have been a important ingredient in our recipe for success. A few examples:
• Personal stylists: These are the experts who help M’O customers in times of need. Think of them less as “personal stylists” than “personal marketers.” They are not just answering phones and fielding questions, they are building relationships with customers, learning their tastes and helping them discover and purchase items they wouldn’t otherwise buy. Apple did an amazing job setting up its team of smart, personable “Geniuses,” not just to handle complaints, but recommend product. Remember, customer service managers can be your best sales people.
• Events: Whether it’s a physical trunk show (a private sale held for influencers and VIPs), a sponsorship (M’O’s sponsorship of the 2013 Metropolitan Museum Gala) or a trade event (Fashion Week), events have helped us cement our brand and product offering in the minds of customers. As noted above a meaningful percentage of our foreign customer base came from co-hosting events abroad. Meanwhile, during Fashion Week, our team makes sure M’O-branded iPads are visible in the hands of front-row celebrities. With attendees that include friends, tastemakers, partners and press, events can generate both formal and word of mouth buzz.
• Packaging: Packaging can be a powerful marketing tool. For M’O, our beautiful, luxury packaging is one of the things our customers look forward to receiving when making a purchase. We carefully design our packaging to be showcased at home, which helps promote the brand. However you ship, whatever you ship, make a statement.
• Customer outreach: The positive effects of picking up the phone and calling a customer to check up on her cannot be understated. And the ripple effects are meaningful. Customers really appreciate it and they tell their friends about it. So call your customers!
• PR: Of course, a great public relations agency can work wonders in the offline world. Whether it’s designing media kits, lining up interviews or coordinating events, the right agency can really help. Indeed, if there is anything that is worth spending your marketing budget on, it’s hiring a good agency.
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