Birchbox- revolutionizing customer’s reviews, a smart way of de-risking market adoption

Customer reviews are one of the most valuable inputs for companies to shape their future. Why is it then that consumers give away such an important tool to companies but yet don’t get rewarded for it? Birchbox, is one of the first companies to revolutionize what valuing the customer really means.

They created a business model where everybody wins: cosmetic producers, customers, and of course, Birchbox. They built a subscription model where for $10 a month, customers get five personalized beauty samples. They give customers the option of reviewing those items, and if they do, they get 50% off their monthly subscription. Cosmetic producers win, as they are able to reach a homogenous population across the US, and get instant feedback on their first release of their beauty samples. Their best sellers get as much as 60,000 customer reviews for each product! Customers win, as they not only get a great service, but also get truly rewarded for their important feedback.

Why is it that customers should be #1 on every company, but yet, very few use this type of business models to connect to customers? Will this be the new revolution for online customer interaction?

There is an “untapped” opportunity in the online-retailers today, where companies could leverage this business model to get feedback on their prototypes or products.  In the startup world, one of the biggest challenges we have is finding a large network of customers that are willing to review your prototypes or early stage products.

Companies like Birchbox, give access to a large amount of customers that are willing to help companies test and tailor their products on their early releases. Birchbox started with cosmetics, but imagine if we had these networks for other consumer products. Large-scale food producers could find this model extremely useful. They would be able to reach a large population across the US, and even globally, and have consumers taste and review their products before they mass-produce them.

There are endless possibilities to apply this business model into different industries, de-risking market adoption significantly. The constant interaction of customers and companies throughout the lifetime of the product or service is key to the success of any company. Customer reviews should be an integral part of companies’ day-to-day interaction with customers, and Birchbox has found a “sweet spot” to make this possible.

By: Maria Elena (Malena) Gonzalez Dabdoub


4 Comments

  1. George Gonzalez

    I would be curious to see what type of other businesses can succeed with a Birchbox type business model. One of the risks of these types of businesses would be the churn rate of product manufacturers. Let's say a beauty product manufacturer launches a product via Birchbox. If the product becomes successful, and the brand is strong enough to function standalone, they will most likely begin to sell their products through retail or directly to customers. This would leave Birchbox with the problem of keeping their product suppliers, even after they become successful.

  2. Jacquelin Sibears

    The Birchbox product review model has a lot of benefits, as you've pointed out, but it also comes with a lot of flaws that both they and anyone adopting their model need to consider. The biggest flaw is that the reviews lack quality. I'm an avid Birchbox user and I love that I get rewarded for reviews, but, in order to get those rewards, I admit that I write absolutely crap reviews. Once you receive a Birchbox, you have a month to earn points for reviewing the products in your box. I only try a handful of products in the month I actually receive the box, and there are a lot of products that I never try at all. But I still review those products that I've never tried. I.e., I completely make up reviews just to get the rewards points. I'm sure that there are loads of others who do the same. This example shows that there's an unanswered question of how one assures quality of reviews with a model that essential pays consumers to write them.

    I also wonder whether having tens of thousands of reviews is really a good thing. Wouldn't a company rather have a few hundred high quality reviews written by consumers who actually have something valuable to say than to have 50,000 reviews that mostly lack credibility? As a shopper, I certainly don't value the presence of thousands of reviews. I'll sift through maybe 10, 20 max when I'm considering buying a product. And because of my own behavior, I much prefer to read reviews about beauty products on Sephora.com rather than Birchbox. Birchbox (and its retailers) are undoubtedly getting some value from the overabundance, otherwise Birchbox wouldn't exchange rewards for reviews. Still, I think it's a fine line between when a plethora of reviews is valuable and when it's counterproductive.

    Finally, a quick comment on the mechanics of Birchbox's rewards. This article states that if subscribers review samples, they get 50% off their monthly subscription. That's not quite the case. Users get 10 Birchbox points for each reviewed product (so up to 50 points per box, which contains 5 products). 100 points translates to $10 that can be used to purchase full-sized products from Birchbox.com. You can only use points to purchase full-size products, not to get a discount off of your monthly subscription fee. This makes sense. If Birchbox allowed you to get 50% off your subscription fee by reviewing products, they are giving up 50% of a major revenue stream. By only allowing you to purchase full-size products with points, they are actually engendering loyalty and incentivizing shoppers to buy full-sized products from Birchbox rather than its competitors (I've bought from Birchbox rather than Sephora many times for this reason).

  3. Palo Cvik

    I like the idea how to decrease the cost of adoption through effective price discounts for reviews (which in turn increase the value for the company, which means more customer will come, …)

    But I am wondering whether this model could work in a different environment or whether there is something special about Birchbox and beauty industry. One relatively unique characteristic of beauty products industry is that margins for manufacturers are huge (variable cost for beauty products can be as low as 2% of the price for wholesaler). This enables the whole model of Birchbox – getting free samples and selling them to customers. And if you got something for free, it may be easier to offer high discounts for writing reviews. I am wondering whether copying this model can be economically feasible model for products with different unit economics and higher variable costs (therefore less room for providing products for free to Brichbox-clone and therefore less room for giving big discounts for reviews)

  4. Birchbox has created a very interesting B2B2C model that improves conversion rates for cosmetic companies. They have essentially created a low cost distribution network for new cosmetic products to reach their target users. As we have heard from the founder herself, Birchbox has managed to collect a significant amount of data from consumers and this has helped cosmetic companies significantly improve their products.

    This all sounds nice in theory – but is this review from customers really that effective for product improvements?

    I am generally very skeptical about the quality of feedback they actually receive. It would be interesting to find out more about how many of their consumers actually give detailed feedback, with enough information that can help companies improve their products. Since Birchbox targets young professional women who travel, realistically do these consumers even have time or sufficient incentive to give useful reviews?
    I doubt it.

    Generally, I think that if Birchbox wants to continue improving feedback quality for their clients, they need to create some sort of reward mechanism. For example, based on quality of feedback, top Birchbox reviewers are given perks – similar idea to a Yelp high status reviewer. Not sure this would work, but Birchbox needs to find ways to continue adding value to their clients. Otherwise, they risk losing recurring revenue in the long run.