2016 YMA Fashion Scholarship Fund

Birchbox Case Study: Business

Allison Chapple
Consumer Apparel and Retail Studies

1
Part One

SWOT Analysis
Birchbox made its initial mark on the beauty market in 2010 and has since developed into
the leading beauty subscription brand. In order to develop a marketing strategy that would help
Birchbox build customer loyalty, a SWOT analysis revealed that Birchbox has already
implemented many strategies to make itself visible to consumers in many different venues.
Birchbox could simply build on what it already has in place in order to make current customers
loyal shoppers.
One of Birchboxs strengths is that they have taken the opportunity to penetrate the
market in nearly every channel possible. Subscribers can find them on Facebook, Twitter,
Instagram, Pinterest, and their very own Birchbox app. Birchbox offers a number of promotions
to subscribers; women receive one free month if they sign up for a years subscription and men
receive two free months, a point and reward system for shopping the website, a box upgrade
option, featured boxes, and one pick each month. Likewise, the option to gift Birchbox or receive
points for referring friends is an easy, cost-effective way to promote and gain new customers
(Birchbox).
Birchboxs weakness lies in actually being discovered and understood in terms of their
brand awareness. What this means is that while Birchbox will be very visible after someone has
subscribed, initially finding Birchbox is less apparent. There is little advertising and educating
done by the company. In conducting a brief online survey, I found that 26% of people who had
previously heard of Birchbox were not familiar with the services offered. Furthermore, it is
difficult to find certain promotions and partnerships that Birchbox offers. Birchbox also has a
lack of physical stores. While it is an online retailer and focuses on the e-commerce arena for

beauty as a discovery platform, the company could find success in using brick and mortar as a
transition. Finally, there is a lack of penetration in the mens personal care market.
With the many strategies that Birchbox already has in place, it has a lot of opportunities.
Birchbox could become involved in the fashion and beauty blogging community. Forming more
partnerships could also benefit Birchbox along with utilizing the opportunity to gain more male
customers. All of these strategies could be implemented in a way that would better educate
customers about who Birchbox is and what it does, and with a better understanding of what they
are signing up for, consumers would be more likely to join. Finally, narrowing its target market
could help Birchbox gain the right customers, who in turn would become loyal customers.
Birchbox was the first true beauty box subscription, and since its launch it has been
threatened with copycats, such as Ipsy and FabFitFun, forming their own version of a monthly
box subscription. Furthermore, we now see brick and mortar stores, such as Sephora, creating a
sample box program as well (see more in appendices B, C, and D).
Customer Analysis
Birchbox has subscribers from all fifty states with the largest majority in New York,
California, and Chicago, ranging from ages 10 to 89. Its typical customers rely on friends for
beauty advice rather than professionals in stores. This means that they are more likely to shop
and make purchases based on what those that they trust can testify to. Birchbox says that its
customers are multifaceted in that 51% identify with more than one beauty style, 27% are
adventurous, and 39% are low maintenance (Birchbox).
Amanda Tolleson, director of brand marketing and strategy for Birchbox says, Were
looking at this large group of underserved women and their unique needs. This woman is not a
beauty buff. She enjoys beauty. She knows it has an important place in her life and serves her

needs. But its not her favorite hobby and for those who do not care for monthly samples we
still want to provide this overarching idea that there is a better way to experience beauty, and
were hoping this spot helps create a relationship on the brand level.
Creating Customer Loyalty
Birchbox could greatly benefit from merging into the blogging community by leveraging
its existing presence on Instagram. Mike Schoultz from Digital Spark Marketing says that:
Photo sharing platforms such as Instagram and Pinterest are increasingly leading the pack
in terms of native advertising. A study has shown that the retention rate for visual
information can reach 65% in comparison to 10% for text-based information, thus
making Instagram and Pinterest the ideal location for native ads.
This is why forming partnerships with bloggers would be so beneficial. There is such a large
blogging community on Instagram that these bloggers would provide trustworthy advertising for
Birchbox. The importance of this trust factor is that consumers tend to see bloggers as real life
people with real life advice.
LIKEtoKNOW.it (LTKI) is a blogging community that users sign up for via their
Instagram account. When they physically like an LTKI bloggers photo on Instagram, their
outfit details and make up products are sent directly to the users email address. If Birchbox
formed a partnership with LTKI by offering its beauty boxes to bloggers at no cost, bloggers in
turn would post their beauty box on Instagram each month. As LTKI users liked the photos, they
would be sent direct links to the beauty products on Birchboxs website. This would lead
customers to be even more influenced about a certain product, and with having yet another way
to be lead directly to the product, would be more likely to purchase it. In addition, users would
have the opportunity to view items that they may not have received in their own box as well as


receive a more personalized experience as their likes would help to further personalize their
Birchbox profile. With a more personalized profile, Birchbox is better able to satisfy their
customer with samples that are relevant and therefore more likely to be purchased full-sized.
Brand Positioning Statement
For women who enjoy and value beauty but do not feel comfortable with new products and
styles, Birchbox is the original beauty box that delivers a variety of high-end beauty product
samples and a personalized experience to give women options and leave them feeling confident
and in control of their beauty routine.

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Part Two

Expansion Strategy and Partnerships

Birchbox has an opportunity to acquire new customers in the mens market.
Because Birchbox has already established a solid base of female subscribers and because women
tend to be buyers of personal care products more often than men, I believe that targeting women
as the subscribers for mens boxes is a viable opportunity for Birchbox. By targeting women who
purchase personal care products for their significant other, brother, or son, Birchbox could
expand its target market for men to women as well.
Birchbox could do this by leveraging its partnership with Womens Health as a way to
build a partnership with its counterpart, Mens Health. This partnership would work similarly to
that with Womens Health, the only difference being that it would also be offered as an
additional subscription or perk. At the time of the Womens Health Birchbox launch, women
subscribed to Birchbox with a Womens Health code and received a Womens Health Birchbox
along with a free, year-long subscription to Womens Health Magazine. Birchbox could take this
campaign one step further and offer a discount to add a matching special for men onto their
subscription.
There are two reasons that this partnership would be beneficial for Birchbox. First, it
would enforce their brand positioning by giving women more control. Birchboxs positioning
involves making women feel confident and in control. By giving them mens personal care as
one more area that they can take control of, these women will be empowered and motivated to be
a part of this special promotion. It will also give these women and the important men in their
lives something to connect over.

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Expanding on the idea of a partnership with LIKEtoKNOW.it, Birchbox could leverage

this partnership as a way to not only create loyalty, but also gain new customers. First, LTKI
would simply help Birchbox become more visible. Next, when an LTKI user with no Birchbox
account liked a photo that was linked to Birchbox, Birchbox could add a promotional code to the
email that is already being sent to that user. Likewise, LTKI could send out special promotional
emails to all of its users with a promotional code offering a discount if they sign up for Birchbox
through LTKI.
A partnership with LTKI would acquire new customers for Birchbox because the type of
women who are subscribed to LTKI are already interested in the types of products that Birchbox
has to offer, otherwise they would not be using LTKI. Additionally, this partnership would help
Birchbox hone in on a narrower target market, helping them gain the right type of subscribers
who would be more likely to become loyal customers.
Marketing Campaign
The Mens Health marketing campaign will be done in two ways. The first way that this
offer will be promoted is as an add-on to the Womens Health subscription. It will be offered
during the subscription process, which will be slightly different for the purpose of this campaign.
The new subscriber will begin by building their Birchbox profile. The purpose of this is so that
she will be confident in the subscription process and does not mistake the coming advertisement
as an error or misguided link. After building her profile, she will be lead to a page that introduces
the Mens Health Birchbox subscription. The top of the page will read: Dont forget about the
important man in your life! Get Birchbox Man + Mens Health too! This simple tag line will be
accompanied by a photograph of a man in the bathroom shaving his face while a woman dries
her hair beside of him. Beneath the picture will be a brief description of the campaign, which

will read as follows: Trying to get your hubby, dad, or son to step up their personal grooming?
We can help! Get 25% off a matching Birchbox Man + Mens Health subscription if you add it
on today! Youll get Birchbox Man and a years subscription to Mens Health Magazine for just
$15! Thats a $39.90 value! Beneath the description will be two links. One will say Yes, sign
us both up! and the other will say No thanks.
The second way that this campaign will be promoted is by putting a flyer in Birchbox
boxes each month and through a full-page advertisement in Womens Health in August and
October. The flyer and advertisement will be almost identical to the previous advertisement with
only a few slight changes to verbiage. The discount will not be offered on the flyers since it will
only lead to one new subscription. The flyer and advertisement will also begin with the tagline,
but this tagline will say Got an important man in your life? Get Birchbox Man + Mens
Health! The same photograph will follow the tagline, and preceding the photograph will be a
slightly different description: Think your hubby, dad, or son could revamp their grooming
routine? We can help! Subscribe for Birchbox Man and get a years subscription to Mens Health
Magazine for free! Sign up at www.birchbox.com and use code MENSHEALTHBOX.
The marketing campaign for LTKI will begin with a simple promotional email and social
media campaign. LTKI will send an email to all of its users, once in August and once in
November, that reads: Have you seen how much our bloggers are loving their monthly
Birchbox full of the hottest beauty samples? We guarantee youll love it just as much! For
awesome beauty and health samples (and even the occasional sweet treat) go subscribe for
Birchbox today! Get your first month FREE with code LTKI! Birchbox will also regularly
promote their new relationship with LTKI on Instagram, Facebook, birchbox.com, and the
Birchbox app.

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The second part of this campaign will involve Birchbox personally reaching out to LTKI

users. When a Birchbox product is emailed to an LTKI user who is not already subscribed to
Birchbox, they will offer the same promotion. When the user clicks on the link to the product,
instead of being taken directly to the product page, they will be lead to an advertisement. On the
left half of the page the LTKI logo will be flashing. To the right of the logo will say: Want to
get the hottest beauty samples every month just like your favorite bloggers? Sign up today with
code LTKI and get your first month completely FREE! Beneath the offer will be two links,
one that says Sign me up! and another that says, Continue to shop.
Financial Plan
Between the two marketing campaigns, I predict that the number of subscribers will grow
10% over the six-month period between August 2016 and January 2017, gaining Birchbox
80,000 new subscribers. I also believe that 2% of subscribers will add on the mens box special,
taking the average subscription revenue per subscriber from $10.00 to $10.30 by January 2017.
According to numbers found on Fortune, the average amount of money per subscriber
spent on full-sized products is $3.02 per month. With the LTKI campaign pushing product
directly to customers emails, I predict that customers will be spending 20% more on full-sized
products by the end of the six-month campaign, bringing that average up to $3.62. Based on this
analysis, by the end of 2017, Birchbox could see an 18% growth in revenue at $147 million.
Birchbox will pay LTKI $1 million for their partnership and the two promotional emails
and spend $2,500 each month on the costs of boxes sent to bloggers. Content creation to
advertise the new partnership with LTKI on social media will cost Birchbox $25,000 per month.
Birchbox will spend $5,000 each month for the flyers to be sent out in boxes advertising the
Mens Health campaign. Birchbox will advertise on a full page spread in Womens Health

Magazine two times for a total cost of $410,000 (Womens Health). Last, the Mens Health
Magazine subscriptions will cost Birchbox $27,000 a month (Mens Health). Birchboxs entire
expenses come to $1.773 million, making their revenue less expenses for the six-month
campaign $67 million.
Number of Subscribers
Subscribtion Revenue per Subscriber
Product Revenue per Subscriber
Total Revenue
Total Expenses

Prior to Campaign
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
800,000 813,333 826,666 839,999 853,332 866,666 880,000
$10.00
$10.05
$10.10
$10.15
$10.20
$10.25
$10.30
$3.02
$3.12
$3.22
$3.32
$3.42
$3.52
$3.62
$10,416,000
$10,711,596
$11,011,191
$11,314,787
$11,622,382
$11,933,991
$12,249,600
$ (764,500) $ (59,500) $ (264,500) $ (559,500) $ (59,500) $ (59,500)

Fl yer Adverti s i ng Men's B ox

$ (5,000) $ (5,000) $ (5,000) $ (5,000) $ (5,000) $ (5,000)

Cos t o f B l ogger B oxes

$ (2,500) $ (2,500) $ (2,500) $ (2,500) $ (2,500) $ (2,500)

LTKI Content Crea ti on

$ (25,000) $ (25,000) $ (25,000) $ (25,000) $ (25,000) $ (25,000)

CoPromoti on w i th LTKI (Ema i l )

(500,000) -

Cos t to p urcha s e Men's Health s ubs cri pti on

$ (27,000) $ (27,000) $ (27,000) $ (27,000) $ (27,000) $ (27,000)

Women's Health F ul l Pa ge Ad

New Revenue less New Expenses

$ (205,000) -

(500,000) -

$ (205,000) -

-
-

$ (468,904) $ 535,691 $ 634,287 $ 646,882 $ 1,458,491 $ 1,774,100

Market Size Analysis

Although no studies could be found that look at women aged 10-89 as one group of
beauty product users, 64% is an average number of women who use beauty products based on
several points from Huffington Post and Beauty Style ranging from 44%-85%. According to the
US Census, there were 122.7 million women over the age of 18 in the US in 2014. Based on
these numbers, that would mean that 78.5 million of these women would be regular beauty
product users. A Nielsen report says that 25% of millennials are willing to try subscription
services. This would mean that Birchbox has a potential 19.6 million subscribers. This is a
modest number, though, since women under the age of 18 are not accounted for, the last
calculation only included millennials, and occasional beauty product users are not accounted for.
Customer Lifetime Value Analysis
512,000 of Birchboxs 800,000 subscribers are regular beauty product users according to
the 64% assumption. Fortune says that Birchbox brings in a minimum total of $125 million in

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revenue annually, 30% of that being in sales of full sized products. There is no formal data, but
there are numbers that show consumers stay subscribed to monthly box subscriptions between 6
months and 3 years (Quora), making an average of 1 year and 9 months. Based on this
assumption, the average customer would spend $210 in subscription fees and $63 on products
during the course of their relationship with Birchbox, making the customers lifetime value $273,
or $156 annually.
My marketing campaigns will potentially increase the CLV in several ways. First, as
women and men begin receiving boxes and magazine subscriptions together, they will be
bonding over their personal care, health, and overall lifestyle. This will offer incentive for them
to remain subscribed to Birchbox for longer as it contributes to their relationship. Second, LTKI
users will be more likely to purchase product from Birchbox due to the fact that they will be
directly exposed to the products more than the typical subscriber. Purchasing product through
Birchbox will make subscribers reliant on Birchbox and therefore more likely to maintain their
subscription for longer. According to my financial assumptions, by January of 2017 the average
customers lifetime value could be $167 annually, a 7% increase from the current CLV.

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References

Barna, Hayley. (2011.) Behind the Box: Birthday Thoughts. [Web log entry]. Retrieved from
http://blog.birchbox.com/post/10202608110/behind-the-box-birthday-thoughts
The Editors of Womens Health. (2014, July 2). Womens Health and Birchbox Teamed Up:
Get the Womens Health Birchbox Today! Womens Health. Retrieved from
http://www.womenshealthmag.com/beauty/womens-health-birchbox-partnership
Huff Post Style. (2013, August 8). Study: Young Women Arent Actually Using That Many
Beauty Products. The Huffington Post. Retrieved from http://www.huffingtonpost.
com/2013/08/28/young-women-beauty-products_n_3828990.html
Global. (2015, July 20). How Shoppers Look, Watch and Listen for New Products. Nielsen.
Retrieved from http://www.nielsen.com/us/en/insights/news/2015/how shoppers-lookwatch-and-listen-for-new-products.html
Griffith, Erin. (2014, April 21). Exclusive: Birchbox banks $60 million. Fortune. Retrieved
from http://fortune.com/2014/04/21/exclusive-birchbox-banks-60-million/
Mahoney, Sarah. (2015, June 2). Birchbox Kicks Off TV Campaign, Opens In Gap Stores.
MediaPost. Retrieved from http://www.mediapost.com/publications/article/2511
01/birchbox-kicks-off-tv-campaign-opens-in-gap-store.html
Quora. (2014, March 20). On average, how long does a member maintain a subscription to a
service like Birchbox? Retrieved October 29, 2015 from https://www.quora.com/Onaverage-how-long-does-a-member-maintain-a-subscription-to-a-service-like-Birchbox
Schoultz, Mike. Innovation and Advertising The Birchbox Business Model.(n.d.) Retrieved
October 9, 2015 from http://www.digitalsparkmarketing.com/innovation/innova
tioninnovation/birchbox-business-model-2/

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U.S. Census Bureau. (2015). USA 2014. Retrieved from

http://quickfacts.census.gov/qfd/states/00000.html
What is Birchbox? (n.d.) Retrieved October 9, 2015 from
https://www.birchbox.com/about/birchbox
Womens Health. Media Kit. Retrieved November 4, 2015 from
http://www.womenshealthmag.com/mediakit
Zipp, Michelle. (2012, May 5). Surprising Poll Reveals How Much Makeup Women Really
Wear. [Web log entry]. Retrieved from http://thestir.cafemom.com/beauty_style
/136560/surprising_poll_reveals_how_much

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Appendices

Appendix A: Birchbox SWOT Analysis

Strengths
-
-
-
-
-
-
-
-
-
-
-
-

Weaknesses

High market penetration

Shopper-reward system
Box upgrade options
Featured boxes
Birchbox app
Birchbox can be gifted
Gap store pop-ups
Opportunities

-
-
-
-

Enter the blogging community

Better educating consumers
Forming more partnerships
Narrowing the target market
Private labels

Lack of brick and mortar

Lack of penetration in mens market
Lack of advertising
Lack of brand awareness

Threats

Copycat competition such as Ipsy

and FabFitFun
Brick and mortar such as Sephora and
Ulta

Appendix B: Ipsy SWOT Analysis

Strengths
-
-
-
-
-

Weaknesses

Defined niche (solely

beauty/cosmetics)
Social media presence
Opportunities

-
-
-

No store/online shop
No brick and mortar
No mens market
Threats

Brick and mortar

Selling full-sized product
Offering mens bag/products

Direct competition such as Birchbox

and FabFitFun
Brick and mortar such as Sephora and
Ulta

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Appendix C: FabFitFun SWOT Analysis

Strengths
-
-
-
-
-
-

Weaknesses

Unique and well defined niche (fitness

and health)
Magazine
Discounts
VIP Box of full-sized products
Opportunities

-
-
-

Mens market
Creating a store/shop

Boxes sent only once every 3 months

No brick and mortar
No mens market
Threats

Direct competition such as Birchbox

and Ipsy
Brick and mortar such as Sephora and
Ulta

Appendix D: Sephora SWOT Analysis

Strengths
-
-
-
-
-
-
-

Weaknesses

Brick and mortar

Face to face communications
Shopper/reward system
Upcoming subscription
Private labels
Opportunities

-
-

Mens products
Promotions and discounts

Prices
Shipping costs for online ordering

Threats

Direct competition such as Ulta and

beauty counters in department stores
Indirect competition such as Birchbox
and Ipsy

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Appendix E: Survey
In conducting a brief survey through Qualtrics, I learned that 66% of people had heard of
Birchbox before taking the survey but 26% of them were not familiar with the services and
products that Birchbox offered. 26% of the participants have had or currently have a Birchbox
subscription and 43% of those who do not are interested in subscribing. 60% of the participants
said that they would be more likely to purchase full-sized products from Birchbox if they could
do so in a physical store location and 48% would be interested in paying a slightly larger
monthly fee to be able to build their own Birchbox each month.