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Emerald Tcj Tcj625966 109..130 Startup on a budget: winning new customers without breaking the bank Heidi M.J. Bertels It was the 26th of June, 2015. It had been a few days since Lammily’s® first direct response TV Heidi M.J. Bertels is based at commercial to promote its realistically-looking fashion doll had aired. The performance report for the School of Business, CUNY June 22–June 25 had just come in, and the results were not good. College of Staten Island, Staten Island, New York, USA. Lammily, founded by Nickolay Lamm in 2014, had started with a bang. Using crowdfunding[1], Nickolay had raised over half a million dollars in 30 days to manufacture a fashion doll with the average proportions of a 19-year-old American woman. Given existing controversy around Barbie’s® body proportions, the crowdfunding campaign had enjoyed a lot of online media attention[2]. This free and positive online publicity generated considerable digital word-of-mouth and resulted in the crowdfunding campaign gaining significant traction. The startup started shipping out manufactured dolls on November 19th of 2014. Lammily’s first doll was named Traveler doll, because she loved to travel. Total sales for 2014 grossed $1.4m. However, after the 2014 holiday season, the effects of the media coverage started to fade. Sales decreased and remained flat. Lammily was not acquiring new customers at the pace Nickolay deemed necessary for his business to be sustainable. To address this issue, Nickolay and his advisory board set out to try new ways to gain traction. In line with best practice in the fashion doll industry, they decided to start with a test-run for a direct response TV commercial to advertise the doll. The idea was that if the commercial would convert to immediate sales, it would be worth investing more money in it. The direct response TV commercial (web link included in Exhibit 1) featured girls playing with the Traveler doll and then asked interested customers to respond directly to the company, either by calling a toll-free telephone number or by visiting a website, to buy the doll. It had been a few days since the direct response TV commercial had launched on CNN® The author wishes to thank and several kids’ TV channels. A website separate from Lammily’s regular company website Nickolay Lamm for his openness (www.buylammily.com) had been set up to track sales that resulted directly from the commercial, to sharing information and Dr Michael Lehman (Professor of making it very easy to evaluate the commercial’s effectiveness in boosting sales. The latest Pratice, Lehigh University) for numbers showing the ratio of advertising expenditure to instantaneous sales were bad. It had cost providing a platform to test-teach the case study. The author is also $1,900 to run the commercials so far, but that had only resulted in seven orders. That meant that the thankful for the valuable comments total CPO (Cost Per Order), i.e., the cost to acquire one new customer, was $271.43 ($1,900/7). and suggestions received from anonymous reviewers. Earlier Nickolay looked at the e-mail from one of his advisory board members: versions of the case were presented at the 2017 Eastern Very little media has cleared, but the results are not good. I don’t expect the results to improve Academy of Management Meeting ’ ’ × in Baltimore, MD and the 2018 dramatically. We should need a $30 CPO to break even, and right now it s $300! We won t see a 10 Eastern Academy of Management improvement over the weekend. Meeting in Providence, RI. Nickolay wondered why the direct response TV commercial failed to break even. And knowing that direct response TV advertising did not seem effective in creating immediate sales for his realistic fashion doll, what should he try next? Disclaimer. This case is written Lammily’s mission, value proposition and brand positioning solely for educational purposes and is not intended to represent “ ” successful or unsuccessful By June of 2015, Lammily had three products: Traveler doll, fashion outfits and Marks (Figure 1). managerial decision making. The Lammily’s Traveler doll was positioned as a doll that was fundamentally different from others in that authors may have disguised everything about the doll was as real as possible. Her body proportions were based on the average names; financial, and other recognizable information to protect dimensions of a 19-year-old American woman, according to data from the Centers for Disease confidentiality. DOI 10.1108/TCJ-08-2018-0097 VOL. 15 NO. 2 2019, pp. 109-130, © Emerald Publishing Limited, ISSN 1544-9106 j THE CASE JOURNAL j PAGE 109 Figure 1 Traveler doll, Marks and Lammily Fashions Control and Prevention (CDC). The Traveler doll also had detailed feet and toes, hands which could hold objects and realistic hips. The Lammily company was family-owned and personable. The Traveler doll was priced at $25 per doll compared to the average price of Mattel’s Barbie® of $10. Fashion outfits (priced $25) included sets of clothes for the Traveler doll inspired by certain geographic locations such as Barcelona, New York, or Scotland. Marks (priced $7) was a set of stickers that could be placed on a doll to make her look more like a real person by giving her freckles, acne, cellulite, scratches, grass stains, moles, blushing or booboos. Promoting a positive body image by bringing realistic toys to kids was a core value of Nickolay as a person and Lammily as a brand. Lammily’s mission was to encourage girls to follow their dreams, without focusing on what they should look like, so they would grow up to be confident, strong and powerful women (Lammily, 2015b). The Lammily doll represented a four-pronged value proposition: realistic body image, wholesome (suggestive of good health and physical well- being), high quality and affordable. The company’s mission and value proposition were reflected in Lammily’s Traveler doll and products like Marks, that allowed girls to make dolls look more like them or other people they knew. Nickolay also made a conscious choice not to give a name to his fashion doll, but to make her identifiable through a hobby. He said that this approach helped to reinforce that “Who you are is what you do, and not how you look.” Children could go online to the Lammily website and print a passport for their Traveler doll with a name of their choosing. The fashion doll market: product segmentation according to Nickolay Nickolay saw the fashion doll market as segmented along two dimensions: franchising and relatability (Table I). Traditional toy companies created strong brands for their fashion dolls Table I Product segmentation for fashion dolls according to Nickolay Doll Producer Franchise? Relatable? American girl Mattel x x Barbie Mattel x Bratz MGA entertainment x Disney princess Mattel x Monster high Mattel x Traveler Lammily x PAGE 110 j THE CASE JOURNAL j VOL. 15 NO. 2 2019 (weblinks to pictures of competitors’ dolls are available in Exhibit 2), supported by valuable, relevant and consistent content such as movies to attract and retain young kids and to drive sales of dolls and other merchandise. The intellectual property could then be licensed in exchange for payments. Barbie®, manufactured by Mattel®, was probably the most well-known fashion doll. Between her launch in 1959 and the death of her creator, Ruth Handler, in 2002, over a billion Barbie dolls had been sold (Kershaw, 2002). Starting in 1987, Mattel expanded Barbie into a media franchise, including animated films, television specials, video games and music. Barbie licenses existed in product categories such as, but not limited to, ornaments, bedding, make-up and pajamas. Disney Princess®, created in 2000, was a media franchise and toy line owned by The Walt Disney Company® that featured a line-up of fictional princesses who had appeared in a Disney franchise. Disney Princess included 11 characters: Snow White, Cinderella, Aurora, Ariel, Belle, Jasmine, Pocahontas, Mulan, Tiana, Rapunzel, and Merida. Disney was specialized in creating animated movies and then licensing its copyrighted characters to producers of dolls and other merchandise, collecting a percentage of income from sales by the licensee. Frozen® was another Disney media franchise, based on the 2013 animated feature film Frozen. The film was the highest-grossing animated film of all time, earning over $1bn in worldwide box office revenue. Mattel had been the go-to-dollmaker for Disney since 1996 and owned the license for the Disney Princess and Frozen franchises. However, Mattel’s rival Hasbro® had announced on Wednesday, September 24, 2014 that it would start to make Disney Princess and Frozen dolls in 2016 (Dulaney, 2014). This was problematic for Mattel who had seen weak performance of Barbie dolls in 2014, with Barbie sales being down for a third consecutive year (Kell, 2015), but had reported strong sales of Frozen dolls. One of the likely reasons why Disney had shopped for a new dollmaker was Mattel’s release of the “Ever After High®” franchise in July 2013 (Rahman, 2015). The “Ever After High” franchise featured dolls that were teenage children of fairy tale characters, which were license free. For example, Apple White was the daughter of Snow White and Ginger Breadhouse was the daughter of the Candy Witch from Hansel and Gretel. American Girl® was a line of dolls released in 1986 by Pleasant Company. The dolls portrayed 8- to 11-year-old girls of different ethnicities. Each doll was sold with an accompanying book featuring a story focused on a different period in American history. American Girl was acquired by Mattel in 1998 and was supported by movies and DVDs.
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