Who is Honest?

The Honest Company (www.honest.com) was cofounded in 2012 by Jessica Alba and sells eco-friendly lifestyle and cleaning products including baby diapers, wipes, bath and body care products, and non-toxic cleaning products. It’s annual revenue is tracking to exceed $150 million in 2014, three times the revenue of 2013. Investors love Honest and have pumped $122 million into the company to date, with the most recent $70 million Series C in August 2014. Now, it is preparing for an IPO. Honest is the epitome of fast-track, sustainable startup success in Silicon Valley. It’s success is built upon a very deliberate marketing and branding strategy.

eCommerce Success = Design + Targeted Marketing

With so many startups popping up nowadays, it is more important than ever to stand out. One can do this by bringing in design early on and making it part of the core of a product, not simply an add-on. Honest entered a tough market. Launching a new, branded company in a crowded category is one thing, but launching an online, subscription-based brand in a crowded category is entirely another.  Successful e-commerce startups in today’s tech and consumer-savvy world, like Honest, exhibit a crucial similar characteristic: design is tied to targeted marketing and they are mutually reinforcing.

Let’s take a look at their email marketing strategy. All of Honest’s emails have colorful, dynamic images. This increases the ‘open rate’ for their emails by over 20%.

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Their email marketing campaign is also triggered by consumer browsing and purchase behavior. I signed up to receive Honest emails as two different people: H and Patti. As H, I spent 20 minutes only browsing through the website. After 2 days, I received an email inviting me to follow Honest on every social media channel. So I did, flipping through launch pics on instagram and watching Jessica Alba’s interviews on facebook.  After 3 days, I received another email offering a free trial of either baby products or personal care essentials. This targeted, proactive marketing strategy increases the conversion rate for Honest by 3x.

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As Patti, I placed several items in my shopping basket but never completed the purchase. The marketing campaign that ensued was frighteningly effective. After 1 day, I received an email saying I ‘honestly’ forgot something in my shopping cart. After 2 weeks, I received an email with a 35% discount off the entire purchase and 3 days to use the promo code. When I still didn’t make a purchase, I received another email in 7 days giving me 40% off. By this discount, I actually made my first purchase because it was all too tempting. Honest’s lapsed marketing campaign for abandoned cart consumers is one of their most effective, increasing conversion rate by 6x.

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Sure, all e-commerce startups can adopt this targeted email marketing strategy, but that is not enough to build a sustainable business model in today’s world (assuming you don’t want your business to be based on one-off sales hits or flash sales).  A strong web platform is undoubtedly important, with targeted and personalized emailing which encourages trial and prevents opt-out. However, this platform must be reinforced by an appealing and intuitive UX in order to brand-build.  With Honest, Jessica Alba’s celebrity appeal makes deploying its social-media strategy and getting followers easier. For the rest of us considering starting an e-commerce company, it’ll be more important than ever to budget for and lay out the groundwork for a comprehensive, personalized marketing strategy before starting.

Sources:

  1. Interview with Sloan MBA ‘15 who interned at The Honest Company in marketing.
  2. Honest emails

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Maybe we should learn design instead

Upon so much as uttering the phrase “I’m thinking of doing a startup”, everyone from professors to the random person sitting next to you at [insert hipster coffee shop] will tell you that the first thing you need is a technical co-founder.  The next thing they’ll tell you, is that if you can’t find one, or are looking to attract one, then you’ll need to learn how to code so that you can hack together a proof of concept that will get investors excited. 

 With the recent rise of streamlined, easy-to-access tools for learning code, such as Code Academy, it would seem ridiculous not to follow this advice.   However, while I don’t disagree with the merits of learning code for anyone who is serious about pursuing their tech startup, I keep wondering if it’s code we should be spending our time learning, or if it could actually be design.

 There are two points that have led me to consider if learning design principles over basic coding skills might prove to be more valuable for non-technical co-founders.

 The first point lies in the fundamental difficulty and time investment needed to actually write and ship code that is of some value.  I don’t mean basic HTML and CSS for tweaking websites.  I mean proper, functional, this-is-what-makes-the-product-work, back-end code.  Sure, you could take introductory CS classes, or follow online tutorials, but the core problem remains – good developers have been coding for many, many years.  Far more years than the days or weeks that the average non-technical founder has to prove their idea and gain investor attention.  The coding skills needed to build even a rough MVP are beyond what can be learned in a few weeks or even months.

 The second, and perhaps most important, point has to do with emerging trends that are driving much of the innovation and success in the tech world.  One of the biggest trends is the rise of designer co-founders that have used their mindsets and skills to create innovative, differentiated products and services.  As the already mature consumer web startup world becomes more and more crowded, most ideas have already been thought of, built, and iterated on many times.  The ability to succeed will likely not come from the ability to solve a problem nobody has thought of yet, but rather, from designing a product that creates value through a unique, differentiated customer experience.

 These designer co-founders have built very strong design-centric cultures within their startups, which have driven both the look and feel of their products, as well as the way in which they’ve approached solutions to solving customer problems.  Companies such as Pinterest, Airbnb, Path, and Gumroad have taken already crowded product areas and rethought them from the ground up through strong design-led thinking and execution.

 As we think about where to allocate our time to create maximum impact for any venture we start or join, design principles may be an attractive alternative to the now standard prescription of learning how to code. 

 It might also be helpful to point out that design skills and principles aren’t constrained to just influencing how end products look (i.e. a mobile app home screen).  Rather, it is just the starting point to a rich world of disciplines including interaction design and user research.  In fact, design thinking follows a very similar approach to the lean startup methodology, which is employed by many startups and incubators to achieve their most important goal – creating something people want.


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Changing Facebook – Pros and Cons

Last week, Facebook introduced the latest round of changes to its ever-popular social network site, including a reordering of the news feed and well as a reimagining of the user profile known as “Timeline”. As always, these changes were met with

much outcry, some positive but mostly negative, from the site’s vocal user base. So the question is, why does Facebook even bother to change its site experience when updates are constantly met with cynicism. I decided to take a look at some of the pros and cons for Facebook, as a dominant market power, to continue to proactively change.

Pros

Avoid Complacency

It’s easy to forget that less than 3 years ago, MySpace, not Facebook, was the market leader in social networking. While the cause of MySpace’s downfall is debatable, one prominent theory is that while sites like Facebook and Twitter continued to develop new features, MySpace failed to innovate. Now that the tables have turned and Facebook has snagged the #1 spot, they still need to innovate to avoid falling into the same trap as MySpace.

Ultimately, by improving their service, Facebook is trying to get users to spend more of their time on the site. This can be done by presenting the most relevant “news” to users (see news feed changes) or by expanding horizontally into new feature areas (see Facebook music). In the end, the more time the user spends on Facebook, the more advertising revenue Facebook is able to capture.

Any News is Good News

The same axiom from the entertainment industry can be applied to social networks. Changes to Facebook are front page news – not just on the tech blogs, but on CNN, and other forms of mainstream media. This drives traffic to the site, to see what the buzz is about. When Facebook is “trending” on Twitter, you know that you’re probably still in an alright position.

Really, What are you Going to Do About it?

Especially in the US, the market has tipped in social networks. There are 800 million users worldwide. All of your friends are on Facebook. The irony of situation is reflected in the choice of forum where users choose to voice their complaints about changes to Facebook – Facebook itself, of course.

Even if you truly hate the latest round of changes and want to quit, where are you going to go? Relocating to Google + only works if you can convince all of your friends to go with you. It doesn’t matter that your local TechCrunch blogger raves about it, or that Circles are better than Groups, in the end the effort to transfer all 750 of your friends to a new network is too powerful a force to overcome.

Cons

Alienate the Fan Base

Yes Facebook is huge, but they still risk alienating users by deviating from a winning formula. Admittedly, it seems unlikely that a rearrangement of the news feed is going to cause users to quit Facebook and spend all their time on Google +. However, users may decrease their total number of visits to Facebook or their average time spent per visit. This can affect Facebook’s business model in two important ways – less user clicks on advertising, and diminished capability to capture user data. Both of these have effects on the prices that Facebook can charge advertisers.

In the end, I come out on the “pro” side of this debate. I think Facebook is actually pretty brilliant, in that it recognizes that it has leeway to fail. This allows them the freedom to develop and introduce some radical changes, and some innovative new features, without much risk to its business. Worst case scenario the changes are undone. But more often than not they improve the Facebook experience, and sometimes can even revolutionize the social networking space. So next time Facebook updates the wall, or the news feed, or how you view your photos – just quit complaining!


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To update or not to update?

“With this new FB change, I might go CB…CB radio, that is”

This week, Facebook updated its format, a change which was met with an outpouring of user complaints. Facebook members loudly and frequently expressed their frustrations with the new system, likening it to a shift towards MySpace-style clutter, and lamenting anew the sacrifices Facebook had made to their privacy. These posts are nothing new: each time Facebook updates its user interface, many users express the frustration and suspicion that arises as a result of these changes. Many people spend hours a day on Facebook, and changes in the interface disrupt their habitual use, forcing them to adopt new behaviors, often limiting access to or doing away with entirely their favored features. And so, they vent. And where do they do it? Well, on Facebook, of course.

Contrast this to LinkedIn, which failed to substantively update its user interface for many years — one critic said it “looks like it should be accessible only to those using 486 processors.” When LinkedIn finally updated its user interface in 2010, users praised it for its improved usability, increased ease of accessing information, and more visually pleasing layout. Very few lamented the transition, perhaps because users had been waiting so long for its arrival.

To provide one more point of contrast, take Zynga, with its strong core of die-hard users. When it conducts A/B testing on new features or releases, as almost all social media companies do, its most avid users take to the fan pages to discuss these new features. When group A users receive the new features earlier than group B, though, many of the die-hard fans in group B become frustrated, feeling that Zynga is somehow favoring group A. This often takes the form of social media backlash: they post eagerly, and sometimes in a hostile fashion, about their frustrations NOT receiving the updates in a timely fashion, feeling that they have been marginalized by a selection process that is far more random than their comments imply they believe.

At what point, and for what types of businesses, does it make more sense to be update the user interface quickly and aggressively, to be on the bleeding edge of innovation; even when you risk alienating customers? When is A/B testing a liability, as it can decrease the perception of fairness? And in which businesses does it make the most sense to delay innovation, to reduce investment in user interface until the business has an in-depth understanding of user needs, and the passage of time has created strong latent demand, such that when the innovation occurs, users are unlikely to be disappointed?

By: Beth Huddleston


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