Get Full Access to this Case Solution NowUnlock Case Solution
This case study focuses on BabbaCo, which just received Series B funding. The company's board will be having a meeting to decide whether to scale the company's business or refine its product (BabbaBox), an education subscription service box category.
Jeffrey J. Bussgang and Gaurav Jain
Harvard Business Review (813107-PDF-ENG)
December 13, 2012
Case questions answered:
- 1a) Which of the two strategies would you recommend to the board at the upcoming board meeting? Scale the business or refine the product? 1b)Support your chosen strategy with three pieces of evidence from the case. 1c) List two objections that you might hear from board members for your chosen strategy. 1d) How would you respond to these objections?
- Identify additional customer acquisition strategies and tests that Kim should try in order to learn and drive new user subscriptions and improve retention.
- Create and upload a one-page dashboard in Excel that shows marketing effectiveness/cost per order by each customer acquisition channel. Include any other metrics/analyses you think are worth using to evaluate the case.
Not the questions you were looking for? Submit your own questions & get answers.
Case answers for BabbaCo
This case solution includes an Excel file with calculations.
1a) Which of the two strategies would you recommend to the board of BabbaCo at the upcoming board meeting? Scale the business or refine the product?
I would recommend to the board of BabbaCo that it go with scaling the business.
1b)Support your chosen strategy with three pieces of evidence from the case.
#1: Product replicability
BabbaBox is in the education subscription service box category. While this category is new to consumers and may seem complex, the product offering itself is straightforward and highly replicable.
Although BabbaCo has the first-mover advantage and has taken the time to develop and refine the core offering with the data available to them, another player may take advantage of their learnings to more quickly enter the market and create the same or an enhanced product with less iteration.
Furthermore, as the creator of a new category, BabbaCo needs to explain to prospective customers what a monthly subscription box is and the benefits of their offering, while a new entrant need only explain why their box is better than BabbaBox.
This is a simpler and clearer marketing message and will likely be more effective with consumers.
Therefore, for BabbaBox to achieve sustainable long-term success, they should scale their business first and quickly and gain a large customer base and brand recognition. These assets can be used as a barrier to entry for potential new entrants and give BabbaCo the space to work on refining the offering and the content.
#2: Complexity of category
With the launch of BabbaBox in 2011, BabbaCo created a new category – educational activity subscription boxes.
In 2012, monthly subscription boxes were a newer concept for customers, and no brands offered the service in the education or child play space. Therefore, to drive customers to purchase, BabbaCo needs to invest in category education marketing as well as acquisition marketing.
From their historical marketing behavior, BabbaCo has learned that passive channels, like search marketing, are ineffective at bringing in new customers due to the infancy of the category and the complexity of the product offering.
This dynamic means that BabbaCo is likely to find limited organic growth – while some people may happen upon the brand on their own, many will need to be prompted multiple times to look at the offering before considering it.
Therefore, if they are looking to grow and show customer traction, they need to invest in active acquisition efforts to bring new prospects to BabbaBox.
#3: Immediate competitive threat
Kiwi Crate is a strong entrant who threatens BabbaBox’s position. While their offerings are technically in adjacent spaces – BabbaBox in education and Kiwi Crate in play – customers will likely see them as substitutes and choose one monthly activity subscription box to invest in for their child.
Although BabbaBox was first to market, Kiwi Crate is a strong competitor. They have significant expertise, with the ex-executive of PayPal and eBay joining the company. Given the trust in Sandra Oh Lin as a leader. Kiwi Crate also has more funding ($2M). These internal assets make Kiwi Crate a notable competitor.
And, while Kiwi Crate and BabbaBox provide a similar offering, they are differentiated in two core ways. First, Kiwi Crate offers their product at a $10 discount to BabbaBox, financially incentivizing those debating between the products to choose Kiwi Crate. Second, Kiwi Crate is focused on play and BabbaBox on education. Because moms take the education of their child seriously, they will likely spend their time doing comprehensive research about BabbaBox before purchasing.
For play, since it’s a lower risk activity, moms would be more willing to try out a product with less information. This dynamic creates an environment where Kiwi Crate can thrive more easily than BabbaBox.
Given this competitive dynamic, if BabbaBox takes a more conservative growth approach and focuses on content, Kiwi Crate will likely gain share against BabbaBox and become the market leader.
While this would transfer educational responsibility to Kiwi Crate, they would be able to lean on both their greater amounts of funding and a large and growing customer base to support their growth. Therefore, in order to prevent Kiwi Crate from becoming the dominant brand in the market, BabbaCo needs to invest in scaling.
1c) List two objections that you might hear from board members for your chosen strategy.
#1: Channel Effectiveness
Currently, the active acquisition channels operate less effectively than the content channels. This is particularly evident in search, where there are limited queries for the category and product, but also on deal sites, where BabbaCo…
Unlock Case Solution Now!
Get instant access to this case solution with a simple, one-time payment ($24.90).
- You'll be redirected to the full case solution.
- You will receive an access link to the solution via email.