Dollar Shave Club – An Inspiring Action Case Study
This was written after Dollar Shave Club launched and at least a year before they sold for a cool billion dollars to Unilever. We said that Inspiring Action brands build value faster, that they drive up brand value while driving down cost-per-acquisition. We pointed to Dollar Shave Club as a prime example. Now Unilever gives us the data point for the end of our case – and a nice round number it is! Here’s what we wrote back then:
1) DEFINE the alternative future you exist to prevent.
In a world without Dollar Shave Club, giants of shaving Gillette and Schick might continue the trend of ever more expensive shaving, driving more and more men to cheap, inferior, painful shaving technology. In a world without Dollar Shave Club, smart young men with potential won’t have the grooming to match.
2) DISCOVER what the people you serve aspire to be and do.
Dollar Shave Club views itself as a men’s lifestyle company that helps men live smarter and more successful lives. Note that not being able to afford to shave with Gillette’s multi-bladed razors and having to go with the supermarket basic instead doesn’t make men feel successful; it makes them feel poor.
3) LEARN what your devotees love about themselves with you.
Members of the Dollar Shave Club feel they are part of something new, different and smart. They are part of a club with a distinct and witty personality. Dollar Shave Club claims a culture that is “original, creative, and cool.” Creative and cool may be two of the most overused words in marketing, but Dollar Shave Club has more than proved them through their marketing.
4) DEVELOP an “inspiring idea” above commercial intent.
Dollar Shave Club is clearly a for-profit business and the CEO even asks you for your business through his powerful viral videos that have now become effective TV commercials as well. However, making money isn’t the “inspiring idea” behind Dollar Shave Club. Solving the problem of getting a reliably good shave without paying a fortune for razors and blades is the “inspiring idea” of Dollar Shave Club.
6) UNDERSTAND what actions drive the creation of organizational value.
Crucial to Dollar Shave Club’s success has been its inventive strategy for building business value. No doubt thousands of companies have had the idea of producing quality men’s grooming products, including razors, and selling them along-side Gillette and Schick in retail stores. Dollar Shave Club has succeeded in part because they realized there was more value to be created in developing direct relationships with the men they would serve. Because Dollar Shave Club fully appreciated the value of these direct relationships, they kept the cost of entry-level membership very low. Their basic package, including razor and blades is still just one dollar per month! Clearly, they realized that their business value isn’t driven by the money they make on each new membership. They understand that the lifetime value of a member can be worth much, much more. They also knew that the “automatic revenue” of a subscription model would increase their business value and thus their ability to raise money for marketing and other purposes.
7) Map the pattern of behavior that you wish to change.
Mapping the customer journey of the young man on the way up, Dollar Shave Club discovered its prospects spending a great deal of time in social networks, playing games and consuming videos online. The journey also led them away from these digital channels into retail stores where they experienced difficult and unsatisfying choices.
8) HELP people interrupt and redirect behavior in inspiring ways.
Dollar Shave Club realized they could interrupt and redirect that journey in a pleasing and profitable way by meeting their prospect online, first through brand direct videos that were so entertaining they gained a viral following.
Dollar Shave Club’s subscription model adds more business value because it taps into persistent behavioral biases. People will pay more – a lot more – if they do so on an automatic and regular basis, as invisibly as possible. To understand just how powerful this bias can be, consider the U.S. Income Tax. Before the tax was made a payroll deduction – in other words removed from paychecks ahead of time – people had to pay a portion of their income to the government at the end of each year. The fact is that very few people actually did it, and the people who did paid only a portion of the tax due. Collecting the tax was an expensive failure, and raising taxes was political suicide.
Many experiments have shown that people value a dollar they already have much more highly than a dollar they stand to earn. Therefore, it’s much harder for us to pay out money we already have than it is to give up money we haven’t yet received.
When the government changed the income tax system and started collecting from employers who deducted taxes from pay before it was distributed in paychecks to employees, not only was much more tax collected, but the political support for higher taxes increased dramatically. People just didn’t care as much about money they never got to hold. At its peak, the highest federal tax bracket was 90%!
Similarly, when American Express prints “Member Since” on our cards, we wear it as a badge of pride rather than a giant price tag.
Understanding behavioral economics and using behavior design to build business models that make it easier for people to pay you more and longer can dramatically increase the lifetime value of a customer.
That’s how Dollar Shave Club is building an Inspiring Action brand!
We’ve identified ten signs of inspiring action companies, which you can find here. Each case study typically focuses on a few of the signs, so please do read more than one!