A MOVEMBER CASE STUDY IN DIGITAL LEADERSHIP
I have been playing with the title of this post for some time.
One runner up title was "How Dollar Shave Club Held Unilever's Customers Hostage for $1 Billion." another was ""How To Ransom A Company For $1 Billion In Cash...Legally!"
Which one do you like better?
It's November, the month where everyone complains about whether Starbucks' new cup is destroying the meaning of Christmas. Where storefronts go through extreme makeovers from Halloween & Thanksgiving decor to more festive holiday colours. November, a.k.a. "Movember" is also a season where men attempt to sprout and flaunt their bro-staches.
My last Movember in 2010 ended with the grossest trucker lip brow you can imagine. Don't worry, this year I will spare everyone the suffering and stay clean shaven.
Instead, here's a little case study of how one startup took the industry standard for customer success and transformed it into a billion dollar company centred around a single concept...lifetime customer value.
In 2012 Dollar Shave Club closed their seed round for only $1 million USD based on a simple business hypothesis:
Men want their facial hair, or lack thereof, well groomed without feeling like they are breaking the bank or having to remember when to replace a razor.
Their solution was simple: a monthly subscription for all the products you need to keep your face metro-manly delivered right to your door.
Six months later they closed Series A for $9.8 million. A year later Series B for $10 million.
By 2016 the little startup with a powerhouse online video campaign sold for $1 Billion USD to Unilever. Fortune magazine covered this sale calling it a revolutionary direct-to-consumer business model. But direct-to-consumer was just the channel, what was their strategy for giving investors a 50X return in under 4 years?
Dollar Shave Club's innovation wasn't that they were the first company to think of selling razors online. They weren't. Nor was it that they were the first to try distributing directly to the consumer. The key to their success was that they built a business model around serving their customer with excellence.
One Unilever executive even praised the company after the announcement of the buyout saying, "this is one of the most innovative companies we have ever seen in our sector".
Pause for a moment and think over what happened here.
Dollar Shave Club founders Mark Levine and Michael Dubin met at a cocktail party. Somehow they got to the topic of shaving and the ridiculous cost of razor blades.
For me, conversation about the frustrations of shaving is not a new topic. I couldn't count the times guys talk about something associated with their facial hair.
Nothing about their idea is new or innovative. So what turned online razor sales into $1 billion USD?
What was innovative was the strategy these two put together on how they would serve their customers over a long term relationship.
The founders are just two customers who experienced pain points in cost and convenience. They mapped out solutions in a way that was fun, for them. It took them 4 years to build a billion dollar company. And, that's the story of the Dollar Shave Club strategy.
Think of how many other sectors these pain points apply to...take banking or cell phone providers for example. These are just two industries that are ripe for ransoming because they see customer success as closing the sale rather than creating raving fans. This "one-and-done" definition of customer success isn't found solely in the razor, banking or telecommunications industries.
It's a trend that is systemic to most modern businesses.
For example, Salesforce CRM, the world's leading contact relationship management platform, has an out of the box architecture designed for this interpretation of customer success with Campaigns turning to Leads that convert to Opportunities that close as Deals. That's it. Your customer relationship has been managed...we sold you the product.
It's like building a dating relationship around closing one night stands. Once the deal is closed, they see no reason to manage the relationship and focus on the next opportunity. Dollar Shave Club was looking for a long term relationship.
Manufacturers are not the only ones suffering from not listening to their customers. Service businesses are no different.
Much of my time is spent mapping out strategies for customers that often involve making the most of their CRM (contact relationship management) software. It amazes me how most Salesforce consulting agency my clients talk to don't see how this old school pipeline won't meet their clients expectations.
Instead they go into a discovery meeting to gather requirements and sell the client on what they feel is the solution. They focus on closing the deal not the client's long term needs, on making a sale rather than becoming a valued partner in the client's success. There is no time to define processes or train the team, instead they slap you with a statement of work and ask for a deposit.
This mindset is why brands like Unilever lose ownership of their customers. Their marketing focuses on big television commercial budgets to raise brand awareness. They give higher margins (at additional cost to the customer) to retailers for better placement and visibility on the store shelf.
Unilever's traditional marketing tactics are only becoming more costly and less effective. Not to mention less engaging. Dollar Shave Club took a different approach.
Rather than a traditional pipeline the startup designed scalable processes to continually give the customer value over a long term relationship. They moved away from the B2B distribution model Unilever was using to one where they could acquire and retain customers directly.
The key to success in their approach was to build a tribe. They used modern cloud technologies like Salesforce Communities or Google Firebase to serve an online customer community. This digitally managed community was capable of removing the pain of cost and inconvenience...in the moment the customer felt it most.
Unilever's mass market, brand awareness approach cost them more than the $20 Million it took for Dollar Shave Club to launch and seize ownership of the customer relationship.
Dollar Shave Club took control of the customer relationship.
I had a manufacturer ask me for help in building a strategy and a road map for their digital strategy. They had been running Salesforce as a standard CRM tool for several years. The system was designed around manual user data entry, no automation and zero customer engagement. Oddly enough the head of IT was the driver behind all of these trends for a variety of reasons. The result was bad data, low user adoption and thousands of angry customers.
Using the dollar shave club strategy we helped them build and implement a blueprint for digital leadership. We shifted their purpose from "one and done" closing the sale to a "let's go steady" long term relationship.
It took less than two months to see the results. CRM user adoption went from less than 30% active users to over 95%. Sales revenue and average sale size increased because the agents took the time to understand the customer's long term needs. This built more trust and created new sales opportunities.
Best of all, lifetime customer value doubled while service and support costs fell. Sales reps no longer chased the client for small ticket maintenance orders. Now, customers were opting in for the white glove experience, recurring monthly at-your-service maintenance subscriptions. Customers saw themselves as part of the tribe, they found a supplier who was listening and willing to solve their long term needs.
My client was luckier than Unilever who bled so much market share they were eager to dish out one billion dollars...yes, that's $1,000,000!...just to stop the bleeding. To regain ownership of their customers.
The business technology available on today's leading cloud computing platforms is more secure, governable and integrated than the hardware you can afford to manage. It's faster, cheaper and more reliable.
Best of all, enterprise platforms, such as Google and Salesforce, are there to support your customer 24/7/365. The critical factor is finding the pain points, not the product. The key to the Dollar Shave Club strategy is to be the first one in your market to listen to the customer and to connect with them digitally.
DSC Strategy Questions for your business
How are you making your business available to the client? I do not mean you or your staff, I am referring to your business technology. Is it set up to serve your community?
Is your company on the road to saying "this is one of the most innovative companies we have ever seen in our sector" while sheepishly paying to regain control of the customer experience?
Are there opportunities for you to seize the customers you and your competitors are not serving?
Are you selling a product, commodity, service or are you solving your customer's pain in the moment they feel it the strongest?
Do you have a customer ownership strategy?
If you can say yes to all of these points I'd love to hear your story and experience. Post your comments or shoot me an email.
If you see new threats or new opportunities in your market because of this article I'd love to help you. Contact me for a free 20 minute call to discuss how the Dollar Shave Club strategy could impact your business.