OurBeginning.com’s marketing bomb
August 2007 (The New Business Road Test)
This case study looks at how insufficient understanding of their target market led OurBeginning.com to rash advertising decisions, and ultimately to the collapse and sale of the company.
Choose the correct answer to this question:
A company that shells out over $5 million on four television ads in one day:
(a) is large and very profitable
(b) has a consistent revenue stream
(c) has a marketing budget the size of Coca-Cola’s
(d) has a significant amount of cash on hand
(e) has almost no other cash on hand.
If you chose (e), you would be correct, referencing ourbeginning.com’s audacious marketing endeavour during Super Bowl XXXIV in early 2000. The story was not uncommon in the dot.com era, when many companies spent inordinate amounts of investors’ money on poorly targeted marketing campaigns. The results of such campaigns were typically mediocre results and a waste of crucial cash.
It’s the story of a company that failed to focus its efforts on a clearly identified market segment. In this section, we consider ourbeginning.com’s offering, we identify who its target market was, we examine its decision to advertise during the Super Bowl, which enjoys the single largest television audience each year in the USA, and we discuss its results.
The offeringLaunched in early 1999 by Michael and Susan Budowski, OurBeginning.com took its first order in March 1999. Susan was a wedding planner. Michael had started several successful businesses of his own. Based on Susan’s experience with wedding planning, the site was originally designed to meet couples’ needs for wedding invitations. ‘We launched the original OurBeginning.com site with a focus on weddings – providing the Internet’s largest selection of invitations, as well as a focus on convenience and personalized service.’
Once the customer decided on the style, design, paper and wording, he or she could place an order. OurBeginning sent the orders to outside printers, who printed and shipped to customers under the OurBeginning label. Boasting that its invitations were 10–30 per cent cheaper than those from retail stores, the company was, according to an early press release, the ‘first Internet resource for selecting and purchasing high-quality wedding invitations online’. OurBeginning.com also included a number of other services, providing suggestions about invitation wording, advising on invitation content, and allowing friends and family to look at the invitations before placing an order.
Target marketBy focusing on weddings, OurBeginning had a very specific target market. Customarily in the USA, women and their mothers plan the wedding, including choosing the wedding invitations. In order to use OurBeginning’s site, customers needed access to the Internet. Thus, the company’s target market was quite specific – women planning a wedding who had access to the Internet. In 1999, there were approximately 2.4 million weddings in the USA, a rate of 8.3 weddings per 1000 adults. At the same time, approximately 55 per cent of the US population of marrying age had access to the Internet. Thus, the size of OurBeginning’s target market was approximately 1.3 million women in 1999.
The marketing planTo increase brand awareness and generate sales, OurBeginning.com developed a marketing strategy. The key element would be three pre-game advertisements and a fourth one during the Super Bowl football game on 30 January, 2000. The total cost of this effort, including $1 million to create the ads and another $1 million to beef up the site to handle the planned increase in Web traffic, would be $5 million. In Michael Budowski’s view, these ads would ‘put a turbocharger in the company’, and would create a database of some 5 million customers. ‘It’s the largest captive audience of the year’, said Budowski.
This statement, of course, was true. In 2000, approximately 130 million people would tune in to watch Super Bowl XXXIV. But, how many of those 130 million viewers were interested in purchasing wedding invitations? Of those 130 million, 45 million were women. What percentage of these 45 million was planning a wedding? If there are 8.3 weddings per 1000 adults, then of the 130 million viewers (assuming conservatively that they are all adults, a significant overstatement), then there were about a million weddings in the works among this audience. With an interested audience of 1 million women, how effective was this $5 million marketing decision?
ResultsIn January, the company reported 284,049 unique visitors to its site, an average of about 10,000 per day. What kind of response did its Super Bowl advertising generate?
• Traffic on the company’s site jumped by 82 per cent on the Monday following the Super Bowl.
• In February, after the ads aired, the site had 510,730 unique visitors, more than a 50 per cent increase to be sure, but far less than the 5 million-strong customer list Budowski had hoped to build.
• By March, however, the number of visitors plummeted to 92,292. One of the reasons for this sharp drop-off was that there is no consistent relationship between advertising spending and lasting brand awareness for dot.com companies, according to a study by Greenfield Online, an Internet marketing research company.
How much did the increased traffic spend with OurBeginning.com? In the first quarter of 2000, visitors to its site spent a total of $510,000.46 While this was a 350 per cent increase in revenues from the previous quarter, the figure pales in comparison to the $5 million it took to generate the increased sales. If an average OurBeginning customer spent, say, 20 per cent less than the reported industry norm of $350 on invitations, i.e. $280, then there were approximately 1800 customers in the first quarter of 2000. Thus, put another way, the company spent about $2800 to acquire each customer, or ten times what the customer spent, and probably 20 times the gross margin achieved on each sale. Suddenly, these results don’t look as impressive. Perhaps the Super Bowl wasn’t the most efficient way to reach OurBeginning’s target market.
To be fair, its Super Bowl advertising netted OurBeginning additional press coverage, including 450 press mentions and more than 100 broadcast hits. These side benefits enabled OurBeginning and its agencies to put a brave face on its results. But awareness and business results are two different things.
By June 2000, OurBeginning had a watchful eye on its dwindling six-month cash reserve and was reducing its marketing expenses. By the beginning of 2001, the company was still not profitable and had revised its marketing strategy significantly. The marketing budget for 2001 would be $1 million, a small share of its budget the previous year. When asked about advertising in the 2001 Super Bowl, Budowski said he would ‘merely be a spectator’. By 2002, however, the Budowskis had become spectators not just of the Super Bowl but of the wedding invitation business per se, with their site having been quietly taken over by an already established, traditional printer of wedding invitations. Details of the transaction were not publicly disclosed.
Why did OurBeginning.com fail?There were probably several reasons, including the fact that the business model Budowski conceived simply was not viable. But the crucial flaw appears to have been a lack of understanding of who its target market really was and the unfocused marketing effort that ensued.
Lessons learned from OurBeginning.comIt is one thing to identify a target market; it is another thing to market effectively to this segment. OurBeginning.com may have had a good sense for who its target market was, but the company made decisions about how to reach this segment that reflected a lack of understanding about target marketing. And when men placed a whopping 35 per cent of its early orders (do men buy most wedding invitations?), it might have given careful thought to the implications of this figure. Was the marketing reaching the real target market?
While the target segment was comprised of women about to get married, the company spent much of its marketing budget on ads during the Super Bowl. As the Monday morning quarterbacks noted and more savvy marketers would have foreseen, ‘You’re a stationery company, focusing on etiquette and customer service – not exactly the market that watches the Super Bowl’.
Thus, understanding one’s target market is a good start, but it requires effective execution, as we’ll explore further in Chapter 7. Without clearly articulating one’s target market up front, that execution is very likely to miss the mark. And, of more immediate concern to entrepreneurs about to prepare a business plan, without a clear definition of the target market and compelling evidence to show why its customers will buy – Will the fish bite? – no investor will invest.