"Pets.com:
Branding Goes to the Dogs."
By Daniel Janal
The recent demise of Pets.com offers important
points about building a brand on the Internet for businesses of
all sizes.
Let's recap their story.
Pet.com entered a crowded playing field of startups that wanted
to sell pet food, supplies and toys to price-conscious pet owners.
The field also included bricks and mortar stores, like Petsmart.
Pets.com needed to stand out from the crowd. They did an admirable
job by creating a lovable character, the sock puppet and a catchy
slogan to answer the question of why shop at an online pet store:
"Because pets can't drive."
They spun a good PR story about the creation of the sock puppet.
They said their marketing team created a six-page bio of the character
that included gender, age, personality and other traits.
They spent a fortune on TV ads that featured the sock puppet,
whose sassy style did a great job in differentiating the company
from others.
That's good branding.
As a result, pets.com was:
-The leader in the online pet category
-An award winning site, as rated by Gomez.com
-Highest number of unique visitors in the category according to Media
Metrix, Nielsen/Net Ratings and PC Data Online
-Counted 570,000 people as customers
Yet, as the company noted in its press release "we are unable
to continue operations."
But it obviously wasn't enough.
What went wrong?
You can't build a brand on a bad business plan. Sure, a lot of
people own pets and they want to spend less money on pet food.
But can any market support dozens of companies with the same business
plan? The story of Pets.com tells us a resounding, "no!"
Pets.com lost because they failed to learn an important rule:
In a product area where the retailer adds no extra value, Pets.com
was doomed to disaster the day the first wave of competitors came
along.
That's because if you plan to build a company by offering discounts,
you will lose to the next company that comes along and offers
a bigger discount. If the field is crowded, go elsewhere! Your
chances of winning are slim.
The cost per customer acquisition by companies like Pets.com is
about $80. There's no way you make that back when you sell a product
with a paper-thin margin - and have 10 other competitors doing
the same.
It's no wonder why Wall Street has punished dot-com look-alikes
this year.
Pets.com teaches us that strong brand assets can help a company
gain visibility and awareness in a crowded field. But Pets.com
also teaches us that if you build a brand on a shaky foundation
(i.e. business plan), you are doomed. That's why I predict that
some toy company will buy the sock puppet assets and turn him
into a major cartoon character. Move over Barney!
The real lesson: You can only win if you add real value that customers
can't get anywhere else.
That's the essence of building a good brand on the Internet. The
clever logo, the sassy character, the cute slogan are merely brand
assets that help to build the brand. But so are the business plan,
the competition and the realities of the marketplace. |
