Brand Failures
Brand Failures Brand Failures
230 Brand failures ‘Pets.com has a leading market position, and its proven management team is dedicated to a great customer experience, whether it’s making a product like a ferret hammock easy to find, or help in locating a pet-friendly hotel.’ Julie Wainwright, Pets.com’s CEO and negotiator of the deal, was equally happy. ‘This is a marriage made in heaven and clearly positions us as the online category leader. The successful investment track record represented by Amazon.com and Hummer Winblad really makes this a CEO’s dream team.’ The press statement also included a statistic from the Pet Industry Joint Advisory Council which stated that in 1998, the US pet category was valued at US $23 billion. As the online leader of this sector, Pets.com was clearly set for success. After all, the Web users had already proved themselves willing to pay for books, CDs and software via the net, so why not pet products However, it soon became clear that Pets.com was not going to be the only major online player within the industry. Petopia.com, another San Franciscobased company, had managed to secure US $9 million from another highprofile venture capital firm, Technology Crossovers, who believed strongly in the pet market’s online potential. It also gained investment from one of the leading ‘real world’ pet companies, Petco. Petco’s longstanding rival PetsMart was equally keen to gain a piece of the action, and launched PetsMart.com. In addition, there was Petstore.com, backed by the Animal Planet cable network. However, throughout 1999 Pets.com managed to keep a nose ahead of its three main competitors, securing a further US $50 million from investors. To gain further advantage it decided to cut its prices almost in half. Competing on price would never be enough though. If Pets.com was to stay in front of its rivals into the long term it would need to create a strong brand identity. It therefore enlisted the help of one of the largest advertising agencies in the US, TBWA/Chiat Day, to come up with a nationwide advertising campaign. The campaign centred around a lovable sock puppet, designed to be a ‘spokesdog’ for the Pets.com brand. There was a great PR story about the creation of the sock puppet, which apparently involved putting together a sixpage biography for the character. The adverts featured the puppet in a variety of different situations, such as flirting with housecats and protesting against socks being used as Christmas stockings. They also featured Pets.com’s new strap line: ‘Because Pets can’t drive’. (No-one pointed out that most pets can’t use computers either.) To ensure a maximum level of public awareness, the
Internet and new technology failures 231 ads were aired during the Superbowl, the most contested and expensive of all advertising slots, as well as other commercial breaks with high audience figures. The sock puppet became an overnight success. He appeared on Good Morning America and was interviewed by People magazine. He was floated down the streets of New York in Macy’s Thanksgiving Day Parade and starred in his own line of licensed merchandise. By now he was more than a brand mascot, he was an A-list celebrity. However, while the sock puppet had successfully caught the public’s imagination, his popularity did not translate into sales. By the beginning of 2000, Pets.com was attracting fewer than a million visitors a month to its Web site. The strategy of offering extreme discounts clearly wasn’t working. According to Dan Janal, author of Branding the Net, the cost per customer acquisition for Pets.com was about US $80. ‘There’s no way you make that back when you sell a product with a paper-thin margin – and have ten other competitors doing the same.’ But its discount policy wasn’t Pets.com’s only problem. It had also introduced free shipping – which was proving increasingly expensive for the company to sustain, especially when customers were ordering heavy bags of cat litter. As with many other ill-fated dot.coms, Pets.com spent too much money on building awareness, and too little time questioning whether its Web site was a viable business in the long term. As a result, the company was spending over US $3.50 on marketing and sales expenses for every dollar it made in sales. According to its many critics, Pets.com was too focused on ‘going public’ on the stock market, so that it could issue stock to investors in an initial public offering or IPO. As John Cassidy explains in Dot.con, Pets.com provides a classic example of how the Internet boom had inverted the traditional order of business: Instead of using the stock market to build companies, venture capitalists and entrepreneurs were now using companies to create stocks. Costly marketing campaigns were launched not only to attract customers but, more importantly, to grab the attention of potential shareholders. The task of building the company was secondary – a chore that had to be performed before the IPO.
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230 <strong>Brand</strong> failures<br />
‘Pets.com has a leading market position, and its proven management team is<br />
dedicated to a great customer experience, whether it’s making a product like<br />
a ferret hammock easy to find, or help in locating a pet-friendly hotel.’<br />
Julie Wainwright, Pets.com’s CEO and negotiator of the deal, was equally<br />
happy. ‘This is a marriage made in heaven and clearly positions us as the<br />
online category leader. The successful investment track record represented by<br />
Amazon.com and Hummer Winblad really makes this a CEO’s dream team.’<br />
The press statement also included a statistic from the Pet Industry Joint<br />
Advisory Council which stated that in 1998, the US pet category was valued<br />
at US $23 billion. As the online leader of this sector, Pets.com was clearly set<br />
for success. After all, the Web users had already proved themselves willing to<br />
pay for books, CDs and software via the net, so why not pet products<br />
However, it soon became clear that Pets.com was not going to be the only<br />
major online player within the industry. Petopia.com, another San Franciscobased<br />
company, had managed to secure US $9 million from another highprofile<br />
venture capital firm, Technology Crossovers, who believed strongly<br />
in the pet market’s online potential. It also gained investment from one of<br />
the leading ‘real world’ pet companies, Petco. Petco’s longstanding rival<br />
PetsMart was equally keen to gain a piece of the action, and launched<br />
PetsMart.com. In addition, there was Petstore.com, backed by the Animal<br />
Planet cable network.<br />
However, throughout 1999 Pets.com managed to keep a nose ahead of its<br />
three main competitors, securing a further US $50 million from investors.<br />
To gain further advantage it decided to cut its prices almost in half. Competing<br />
on price would never be enough though. If Pets.com was to stay in front<br />
of its rivals into the long term it would need to create a strong brand identity.<br />
It therefore enlisted the help of one of the largest advertising agencies in<br />
the US, TBWA/Chiat Day, to come up with a nationwide advertising<br />
campaign.<br />
The campaign centred around a lovable sock puppet, designed to be a<br />
‘spokesdog’ for the Pets.com brand. There was a great PR story about the creation<br />
of the sock puppet, which apparently involved putting together a sixpage<br />
biography for the character. The adverts featured the puppet in a variety<br />
of different situations, such as flirting with housecats and protesting against<br />
socks being used as Christmas stockings. They also featured Pets.com’s new<br />
strap line: ‘Because Pets can’t drive’. (No-one pointed out that most pets can’t<br />
use computers either.) To ensure a maximum level of public awareness, the