Lessons in Online Marketing: Bonobos.com, a startup

I discovered Bonobos, an online men’s clothing startup, on Craigslist while perusing marketing jobs (I applied for a position for which I was grossly under-qualified, and subsequently rejected). Fortunately, I began to observe the company as they blossomed from their modest beginnings.

Bonobos is an an awesome case study. It’s a startup with product/market fit. That is, they have a viable business with a market for their products. Few startups have achieved this feat–but once they do, often the question is growth. That is, how to acquire customers and build loyalty. Bonobos offers plenty of examples, as the startup evolved and experimented with their marketing on numerous levels. It’s this observed journey, noting what resonated or failed, that I’ll describe.

Some Background

Bonobos manufactures and sells men’s clothing (primarily pants) Zappos-style. That is, it’s online-only, with awesome customer service. The clothing is upscale (~$100 per pants), positioning themselves on style, fit, and service.

2009 was a huge year for Bonobos, record sales and traffic with big-time PR in the New York Times and Forbes. They sold 40,000 pants in their first two years, with $1.6M in sales last year and $4M in sales this year. With this growth, Bonobos evolved from a bare-bones startup (i.e., minimal viable product) to a brand with a mature marketing mix.

Of all the possible marketing activities, where did Bonobos invest to grow their business? And what worked?

Word-of-mouth Marketing

How should startups acquire customers: advertising or organic growth? Bonobos, from an investment perspective, did not ignore the latter, integrating word-of-mouth directly into their customer experience.

Andy Dunn, Bonobos CEO, touted the company’s net promoter score of 74 (a great score) [1]. Customers loved the product. The logic likely went, “how can we incentivize customers to tell their friends about the company?”

Their solution sneaked up on me. At work, I received a strange email from my Director at American Express. He wrote with passion about his affinity for Bonobos pants and recommended that we use his “special” link to get 15% off our first order (such referral links earn him a $50 Bonobos credit) [2]. Such a large incentive for a recommendable product proved powerful. My director had sent this referral email to 20 of our colleagues (over $1000 in potential value!).

Bonobos also allowed users to create custom referral codes that they could post to Twitter or Facebook. When used at checkout, users get 15% off and referrers get a $25 credit. I noticed these codes popping up all over twitter, likely because of the sweet financial incentive.

The referral interface:

referral

This program worked, but only if you consider redemption a measure of success. Suppose I handed out $10 to each of my friends. I’d make quite a few happy people, but such a program is not viable. Bonobos’ financial cost, particularly from the referral codes, were significant. CEO Dunn admitted that the referral codes would be phased out soon, as funding big incentives on both sides of the transaction likely reduced margins. Regardless, the referral program was a great example to catalyze organic growth.

Banner and Facebook Ads

Early 2009, Bonobos began increasing their investments in advertising. I started noticing Facebook and Display ads. I don’t know their conversion rates (I’ve read about poor click-through rates for Facebook), but I imagine that it would require serious targeting for Bonobos’s product–niche, expensive men’s pants.

An example Facebook ad [3].

1

Was this increased investment in advertising a good idea? Bonobos’s advertising spend increased customer acquisition and awareness. But founder Andy Dunn, in an email/blog announcement, remarked the following recently:

We over-advertised and over-promoted our product. We discovered that spending money and energy advertising and promoting to customers is a good way to scale a bad business.

This echos popular advice that I’ve consistently read regarding startup advertising. Though ads play a pivotal role in a marketing mix, most startups have a laundry list of far more effective investments to make [4].

Loyalty Marketing: social media and blogging

As with most startups, Bonobos loaded up on Facebook and Twitter. Like their older sister Zappos, CEO Andy Dunn is active on Twitter, promotes social media as a valuable tool, and responds to tweets about the company. Similarly, Bonobos’s Facebok profile is active with updates on the company. Given Bonobos’s service-level to customers, personal interaction via Facebook and Twitter makes intuitive sense.

What’s unique is their innovative use of social media as a research and crowd-sourcing tool. Occasionally, I see a request from Bonobos to help them name a product. Or what should be on their t-shirts. It’s such an easy way to connect with customers that I’m stumped why more startups don’t do this.

Bonobos just sent me an email from their “Style Ninja,” asking for input on a new line of shirts. Firstly, this is a brilliant use of free product research by leveraging your existing customer base (with high response rates). Compare this to the generic email surveys that we all ignore from big box retailers. More importantly, these requests emphasize Bonobos’s personal service and act as an important relationship-building mechanism. In short, I’ll surely steal both of these ideas for my other projects.

Bonobos generates a stream of content via its blog. It mirrors 37signals’s or Mint.com’s blog, a mix of company updates and sector relevant (i.e., fashion and style) posts. I began to consistently read their blog because of the occasional Bananagram, a 24-hour discount on a particular pant via their blog and Twitter–nothing like a financial incentive to give Bonobos permission to my attention. I’ve been a consistent reader ever since. I have not seen a Bananagram for a few months, but I can’t imagine any other incentive that attracts more attention to their social media.

Something to think about

Bonobos had a couple road-bumps with their marketing investments. So went wrong? The below tweet from Dunn sums it up:

twitter

Sounds like a marketing effectiveness issue. Measurement and accountability cannot be ignored, especially for startups when funds are critical. And patience plays a role as well. After a startup achieves product/market fit, marketing spend grows the business and makes investors happy. But to get those sales, there’s something unnatural about saturating every prospect with marketing messages. In the grand scheme of things, the business is still in its infancy.

Overall, Bonobos has plenty of innovative examples to applaud. Can’t wait to see their strategy for 2010.

—

[1] Apple’s net promoter score is 77. That is, “83 percent of respondents would recommend the brand to a friend versus 6 percent who would not,” 83 – 6 = 77.

[2] – In retrospect, this makes perfect sense, as Bonobos’s core demographic segment–wealthy, late 20s-30s, fashion-forward–saturate Manhattan corporations.

[3] This ad, oddly, was mocked by Charlie Hoehn, “Thank you for presenting me with this picture of a man’s crotch. I will now buy a pair of your pants.” Moreover, I’d be curious about the targeting for this ad–Charlie, though male, is a recent college grad. He’s in a target segment for $100+ pants?