Pets.Com, Omar Merlo, Assistant Marketing Manager discussed on The Indicator from Planet Money
The sock. Puppet is everywhere. People love that little buddy so much that they're dying to get their hands on a sock puppet of their own. Oscar yuan was an assistant marketing manager at pets.com. I'm the customer service was fielding inquiries. All the time. I can get a puppet. Can i get a puppet. What is going on sale. So they started turning out sock puppets and selling them for twenty bucks a pop and honestly they couldn't keep them in stock. They were so popular but lots of people were just buying the puppet and nothing else question rose like are we moving stuff away from what our core business should be so number check pets all come at this point had spent twenty million dollars on the marketing campaign. That created the sock puppet. But the problem is they weren't making enough money. Omar merlo is a professor of marketing at imperial college. London and he did a case study on the marketing strategy used by pets.com and other retail companies in one thousand nine hundred nine and two thousand expensive to create something like the sock puppet an ingrained head of every single american deaths caused a lotta then eventually. The customer acquisition cost was about four hundred dollars per customer. So he takes you four hundred bucks to get your customer in. Look if you're selling helicopters or yachts four hundred dollars to get your customer in the door is worth. You'll make that back on your first sale. But when we're talking about christmas hats for your a guana it means that the company is spending a ton of money on you in the hopes that you'll spend even more over the long haul. I gotta say those numbers don't really add up especially because pets.com wasn't necessarily connecting with customers. So one thing is to be known needs to be aware of customers that are aware of your brand. That is familiar. Another essentially to connect in a meaningful way. And the way you do. I by building a proposition that is meaningful and then advertising comes later to reinforce what you've done but i think in this case there was really a rush to grow very quickly turns out. Pets was fighting to be the number one pet website but people were still buying pet supplies the same way that they always had at the store and this was one of the many big problems that pets could never solve. They spent a lot of money making people aware of the company but they couldn't convince them to buy enough stuff to be profitable in nineteen ninety nine. There just weren't enough people buying things online..