2. Bailot 1
Part One
1) Birchbox vs. Ipsy and Glossybox: Competitive SWOT Analysis
Birchbox Ipsy Glossybox
Strengths Beauty box subscription
pioneer
Subscription price of $10
Over 800,000 subscribers
Brick-and-mortar location
E-commerce platform
Points system in place to
buy full-sized product
Has growing subscriber
base of over 1 million
Includes full-sized and
“delux” product
Over 100,000 new Glam
Bag users every month
New production facility
Makeup bag every month
High-end products
Seen as more exclusive
service
Located in over 10
countries
Brand loyalty program.
Offer 6 month
subscription package
Weaknesses Mostly sample-sized
products
Repetitive product
Doesn’t use some big-name
brands that other
companies include
Seen as imitation of
Birchbox by some
No comparable brick-
and-mortar location
No comparable online
shop
More expensive than
other beauty box
subscriptions
Seen as a copycat
startup
About 200 brands
Opportunities One of the largest
subscriber bases – creates
loyalty
Recently received $60
million in funding for
expansion plan
Has offices located in other
countries
Received $1 million in
funding
Works with over 500
YouTubers and
Instagrammers
Annual “Generation
Beauty” convention
International nature of
the company allows
wider brand expansion
“Glossydots” program
increases customer
retention and aids in
expansion
Threats Other companies include
full-sized product
Consumers also subscribing
to competition
Other companies use
contests or giveaways to
retain subscribers
Ipsy uses personal stylists
Birchbox has e-commerce
platform that draws
customers away from Ipsy
People get tired of
makeup bags and drop
subscription or switch to a
different box company
Loses customers to
cheaper subscription
services
Lose customers due to
the fact that there is less
brand variety
Birchbox e-commerce
platform
2) Customer Analysis
Out of all segments of the beauty market, beauty box subscriptions only make up 5% of
beauty purchases, making it a competitive sector (Beauty Retailing, 2015, pg. 1). Of that 5%,
over 90% of subscribers will buy product from their subscription, so it is crucial that Birchbox
can make itself stand out among its competitors to retain the most customers (Cyk, 2014, pg. 1).
3. Bailot 2
Birchbox has one of the largest consumer bases of over 800,000 subscribers worldwide, but with
Ipsy attracting a younger subscriber base of over 1 million, the competition has become more
intense (Birchbox Press Room, pg. 1). Glossybox, despite its lower customer base, draws in
customers with its elite “Luxe” products, which heightens competition as well. The average
Birchbox customer’s median age is 30, who is living in an urban area with a higher household
income. The customer also has high social media usage (Cyk, 2015, pg. 3). According to Cyk
2015, Birchbox’s online shop is something that 50% of Birchbox subscribers make use of, and
this gives Birchbox a look into consumer shopping trends and habits. Knowing this, Birchbox
has a better grasp on who is utilizing the subscription and can narrow in on those consumers, and
has opportunities to broaden the beauty subscription segment to something larger than 5%.
Based on my research:
Figure 1 – Graph based on research
After using a survey to conduct research, which was completed by women aged 18-32 years
old, the findings show that 18% of them either currently use or have previously used a
subscription service. The biggest portion of the graph represents the 44% that aren’t currently
subscribed to a beauty box, but have expressed interest, and displays the large potential new
customer base. Most of the responses were from women residing in the Mid-West. When asked
4. Bailot 3
what aspects of a beauty subscription would influence their buying decisions, the top three
answers were: specific products that fit their wants and needs, full-sized products, and new
products to expand their collection. Keeping those preferences in mind, the main thing that
Birchbox lacks is the fact that full-sized products are not regularly offered, compared to Ipsy,
which has more consistent full-sized product appearances. Ipsy has the same monthly rate, with
seemingly better product options, which is an aspect that makes it Birchbox’s top competitor.
3) Creative Approach: Unlock the Box
A new idea to convert casual
shoppers into loyal customers is to create the
“Unlock the Box” program. Subscribers
would spend a minimum amount of money to
unlock these new boxes, and after they reach the
specific amount, a new themed box will be
revealed and unlocked. This new program would
work as follows:
1. Subscribers can reach a
minimum spending amount of
$150 by spending money on
their monthly subscription fee and by buying products from the online Birchbox Shop.
2. Once subscribers reach the $150 minimum, a new page will be available for them to open
and unlock their first new box.
3. An example of a box would be “Berried Treasure” and this would include a variety of
“berry” themed items (figure 3).
Figure 2 – “Unlock the Box” Logo
$0 $150
$38 spent
Figure 4 –“Unlock the Box” spending progression bar
BERRIED
TREASURE
Figure 3 – “Berried Treasure” Logo
5. Bailot 4
4. After they have unlocked this new box, their spending progression will be updated and their
new spending goal will be revealed (figure 4).
5. Each time a new box is unlocked, their new spending goal will decrease slightly, which will
make them feel like their extra spending is being noted and appreciated.
6. 10 unlocking opportunities would be available, and after the new boxes have been unlocked,
each month subscribers can choose to receive their normal monthly curated Birchbox, or they
can choose to receive another box from any of the themes they’ve unlocked. This allows the
subscribers to have more say in what they are receiving.
The $150 minimum ensures that “Unlock the Box” would still be a profitable endeavor
due to the fact that it is $40 above the yearly subscription fee. By encouraging expenditures
through the online shop, long-term spending from consumers who participate in this program
will be achieved. Product loyalties will also form and will keep customers coming back for more.
One potential entry barrier would include customer resistance to spend the minimum
amount of $150. Because they won’t know exactly what type of products they would receive
from this extra spending, they might not think it is worth it to spend more. To prevent this,
Birchbox would send occasional emails reminding them of what unlocking opportunities are in
store for them, and would offer chances to look at brands or products that will be featured in new
boxes. By doing this, customers will be excited to see what they’re getting out of the program
and will continue spending. No cost-related barriers should arise due to the fact that $2 million
will be used for implementation over a 6 month period. These funds will cover any unforeseen
obstacles or errors, and will provide room for creativity within the program.
4) New Brand Positioning Statement
Discover the new you – Birchbox opens the doors to a unique beauty experience by
providing specialized items tailored to your individual character.
6. Bailot 5
Part Two
1) Expansion Strategies: Two Partnerships
Nordstrom – Nordstrom is one of the leading department store retailers. Out of all other
high-end retailers, Nordstrom has the largest geological footprint, with 117 full-line stores
throughout the U.S. Keeping this footprint in mind, a partnership with Nordstrom would reach
the broadest audience of potential new customers compared to other department stores such as
Saks Fifth, Neiman Marcus, or Bloomingdales (Beauty Retailing, 2015, pg. 2). Nordstrom states
that the company knows that customers “increasingly desire an experience that is both
personalized and convenient”, and they “respond to fresh, relevant brands”, so having Birchbox
as a partner will tap into those customer’s desires (Nordstrom Annual Report, 2014, pg. 2, 8).
The fresh Birchbox brand is the definition of personalized convenience, meaning Nordstrom
customers will appreciate and buy into the brand.
The partnership would benefit both parties and would work as follows:
1. Birchbox would choose 20 of the most successful brick-and-mortar locations to begin the
partnership
2. Birchbox would then send these 20 stores their monthly boxes, along with extra samples of
one product from each box, to showcase in the store.
Figure 5 – Interior of Nordstrom4Birchbox Figure 6 – Exterior of Nordstrom4Birchbox
7. Bailot 6
3. In return, Birchbox will feature 24 Nordstrom products of their choosing, in boxes
throughout the year, which translates to two products per month.
4. The boxes would be placed on display at registers all throughout the store, and customers of
Nordstrom would be able to subscribe to Birchbox right at the register.
To give customers instant gratification and satisfaction with their choice to subscribe, new in-
store subscribers could utilize Instagram or Twitter by using the hashtag #Nordstrom4Birchbox,
and in doing so would receive one free sample from that months Birchbox. Not only will this
satisfy the new Birchbox customer, but serve as a form of advertising for the new partnership
and will draw in even more potential customers.
Pocket Points – Pocket points is an application for mobile phones that is spreading like
wild fire. Students download the app onto their phone, and the app gives them rewards for not
using their phone in class. For every 30 minutes a student does not use their phone, they receive
a point, and when they accumulate enough points, they can redeem discount coupons and
freebies for restaurants and stores in their area, or online stores (Pocket Points-Rewarding, 2015,
pg. 2). Pocket Points is another fresh and relevant brand that has quickly gained massive
popularity and has already proved its power in the market. After being so successful at their first
campus, the two owners decided to expand in the spring of 2015. In just one year, the app “went
from a few thousand downloads on the campus of Chico State University in Chico, Cal., to more
than 200,000 downloads from students at more than 100 universities and colleges nationwide”
and is now currently at over 180 cities and over 200 college campuses across the U.S. (Daves,
2015, pg. 1). Although this company is very new, the brand has endless potential for success, and
will reach a wide range of college students.
8. Bailot 7
A partnership with Pocket Points will give Birchbox
a chance to expand their brand to a wider college-aged
market in a unique way. Birchbox would be able to choose
what type promotion or products they want to offer through
Pocket Points. An example of a deal would be; for 45
points a student can redeem a “50% off” coupon for their
first box, or for 60 points a student could receive two free
boxes. Another avenue Birchbox could take would be to
offer a product through Pocket Points as well. An example
of this would be, 35 points can be redeemed for one full-
sized Benefit mascara. This approach almost mirrors the
points system set in place for current Birchbox users
through the brand’s website, so this partnership will be an
easier type of transition with less trial and error.
Marketing Campaign
The goal for Birchbox is to expand the existing market into new territory and strengthen the
brand. The partnerships with Nordstrom and Pocket Points will support and broaden the market
in ways that are not currently achievable. To spread the Birchbox brand, the company will start
utilizing advertising networks such as Allure magazine, Marie Claire magazine, and various
social media channels. Social media and magazine outlets are currently the most powerful and
prevalent sources of advertising, so the majority of marketing efforts would benefit those areas.
Nordstrom’s biggest sale takes place in late July, and is when Birchbox would have its in-
store debut. Promotion for Birchbox will begin in late June and carry into mid-July. After the
debut, strong promotion will continue through September. Nordstrom has a high social media
Figure 7 - Mock Pocket Points app
9. Bailot 8
following, so the majority of advertising will take place through outlets like Twitter and
Instagram, and the hashtag #Nordstrom4Birchbox will be used. The partnership will utilize
advertising through magazines as well, which will appeal to consumers who do not have a high
social media presence. By utilizing both print and online marketing, multiple “potential new
consumer” groups will be targeted. The marketing strategy for Nordstrom will differ from that of
Pocket Points, and the timing will need to be slightly different as well.
Pocket Points is driven by college students, so the marketing strategies will revolve around
the school year. Marketing campaigns and advertisements will begin for Pocket Points in mid-
August when the school year is starting for colleges across the U.S. Because Pocket Points is a
mobile app, the bulk of advertising will take place through social media. College-aged students
are always willing to try the next-best-thing, so Birchbox’s position within the Pocket Points
brand is ideal for expansion. Students don’t usually have time to research an unfamiliar brand, so
the strategy of this marketing campaign will need to be attention-grabbing and will emphasize
the “personalized convenience” aspect of Birchbox. The nature of the Pocket Points app is
beneficial because students won’t typically spend much money on unnecessary products, so
redeeming points for free rewards will draw in more potential consumers.
Financial Plan: (figure 8)
Birchbox has reached $96 million in annual sales, and due to their success recently received
$60 million in funding for expansion (Griffith, 2014, pg.1). If Birchbox decided to distribute that
funding over the course of four years, $15 million in funding would be available each year. In
this financial plan, a large majority of the allocated money for 1 year will be used from August to
January. Because the bulk of advertising and partnership implementation will begin in these
months, $12 million of that $15 million is portioned for the 6 month period. Although the
“Unlock the Box” idea is part of the expansion plan, the program already falls within the
10. Bailot 9
Birchbox brand and is something that current subscribers will know about, therefore needs less
funding. An amount of $100,000 per month will be spent on new products for the themed beauty
boxes and amounts ranging from $200,000-$240,000 will be spent on implementation. The goal
of advertising and partnerships is to reach audiences that aren’t currently subscribed to Birchbox,
so more money and attention is allocated for the segments that will expand to those markets.
The estimated cost of advertising in Allure magazine is $67,445 (Allure - Gaebler, pg. 1).
The estimated cost of placing an advertisement in Marie Claire magazine comes in right under
$80,000 (Marie Claire - Gaebler, pg. 1). Each magazine will have an $800,000 budget, and when
distributed throughout the 6 month period, advertisements for Allure and Marie Claire would
appear 1-2 times per month in each magazine, depending on the month. Spending would be more
conservative in the first and second months for these magazine advertisements. The funding and
costs associated with the partnerships is outlined in figure 8.
2) Potential New Customer Base
The partnerships with Nordstrom and Pocket Points are going to skyrocket the potential new
customer base. By partnering with Nordstrom, Birchbox has access to a wide range of potential
subscribers. If the implementation of Nordstrom4Birchbox goes well and is profitable at the first
20 locations, the opportunity to expand to all 117 stores across the U.S. would become a reality
and would present endless opportunities for the brand. Nordstrom has a combined total of about
10.5 million fans and followers on all of their social media accounts. Assuming that those 10.5
million fans are all customers of Nordstrom, that is the estimated number for the potential new
customer base for Birchbox’s partnership with Nordstrom. Because the partnership involves
social media presence as a form of advertising, this number is relevant to use in the customer
lifetime value as well. By partnering with Pocket Points, Birchbox will have access to students at
over 200 schools across the nation. The average number of college students at medium sized
11. Bailot 10
school is about 15,000, so the potential new customer base from Pocket Points is at least
3,000,000. (CollegeData, 2015, pg. 1).
Not only will the partnerships aid in expansion, but advertisements will provide another large
potential consumer base as well. Marie Claire has 997,000 readers and Allure has 1,062,000
readers, which is a combined total of 2,059,000 readers from the two magazines alone (Gaebler,
pg. 1). A simple advertisement can go a long way, and could influence a large amount of people.
Customer Lifetime Value
The formula used for calculating the CLV is as follows:
(Average value of sale per customer) x (# of repeat transactions per customer) x (Average
retention time of the one customer) X the number of potential customers (Sugars, 2012, pg. 1).
The subscription fee is $10 per month, but customers also spend money in the online shop, so the
average value of a Birchbox sale per customer is $120. That number comes from dividing the
$96 million in annual sales by the 800,000 Birchbox subscribers. Based on my own conducted
research, the average retention time of one customer is 14 months, or 1.16 years. The number of
repeat transactions per customer, based on an average retention time and not including sales from
the online shop, would be 1 per month, or 14 transactions per customer. The potential customer
base for Pocket Points is at least 3,000,000, as mentioned before. Also, the potential customer
base for Nordstrom was estimated to be around 10.5 million, based on their social media fans.
Pulling all of the numbers together, the customer lifetime value comes out to be 30,321,379,200.
This number is quite substantial, and proves that these partnerships and advertising endeavors
would reach a large audience and would bring in very considerable profits.
($120) x (14 transactions) x (1.16 years) = 1,948.8 x (997,000+1,062,000+ 10,500,000 +
3,000,000)
1,948.8 (15,559,000) = 30,321,379,200
12. Bailot 11
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13. Bailot 12
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14. Bailot 13
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15. Bailot 14
Appendix
Figure 8 – Six Month Financial Plan
August September October November Decemeber January Total
Advertising
Allure magazine $70,000 $146,000 $146,000 $146,000 $146,000 $146,000 $800,000
Marie Claire magazine $80,000 $80,000 $160,000 $160,000 $160,000 $160,000 $800,000
Social Media $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $2,400,000
Advertising Total $550,000 $626,000 $706,000 $706,000 $706,000 $706,000 $4,000,000
Partnerships
Nordstrom $500,000 $600,000 $400,000 $500,000 $500,000 $500,000 $3,000,000
Pocket Points $600,000 $650,000 $350,000 $350,000 $500,000 $550,000 $3,000,000
Partnerships Total $1,100,000 $1,250,000 $750,000 $850,000 $1,000,000 $1,050,000 $6,000,000
Unlock the Box
Implentation $200,000 $240,000 $240,000 $240,000 $240,000 $240,000 $1,400,000
New designs/ products $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $600,000
Product total $300,000 $340,000 $340,000 $340,000 $340,000 $340,000 $2,000,000
Total expenses $1,950,000 $2,216,000 $1,796,000 $1,896,000 $2,046,000 $2,096,000 $12,000,000
