Case Study: How TOMS Shoes made a cause the centre of its activities
Arezou Naeini, Auditee Dutt, James Angus, Sarkis Mardirossian, and Sebastian Bonfanti May 22, 2015
US-based TOMS Shoes created an out-of-the-box solution to its objective of helping people even while running a for-profit business. The company founded on the principle that it would give away one shoe to a poor child for free, for every shoe it sold. This case study looks at how TOMS Shoes made a cause the centre of its activities, even as the cause itself contributed to its revenues and profitability. And how it used social media for marketing.
Blake Mycoskie created what can arguably be called a unique business model that combines both for-profit and not-for-profit philosophies. A native of Texas in the US and a serial entrepreneur, Mycoskie was travelling in Argentina in 2006, when he noticed poor children having to grow up without shoes, and facing a lot of hardship in the process. Deeply moved, Mycoskie returned home and founded TOMS Shoes, a company that made and sold, um, shoes of course. But with a twist.
For every pair of TOMS shoes sold, the company would donate one pair to a child in need. This revolutionary concept was called "One for One", and Mycoskie ensured poor children in different parts of the world got the benefit of its business. What made it work even better is the fact that a buyer, typically a young adult looking for an affordable yet cool pair of shoes, would feel good in the knowledge that his purchase has actually helped a poor child get a much-needed shoe for free. The business model worked perfectly, because the cost of the free shoe was built into the price of the one that is sold, making a seemingly charitable effort also contribute to its profitability.
So far, the company's website states that it has provided more than 35 million pairs of shoes to children in 70 countries across the world, and this includes India as well. As long as people continue to purchase TOMS shoes, children in need will receive a pair in return. The shoes that the company designs and sells are based on the Argentine alpargata design.
In later years, Mycoskie expanded the One for One model to other products as well. In 2011, the company introduced eyewear. It followed a similar principle for eyewear as its shoes, but again with a twist. Instead of donating a pair of glasses for every pair sold, TOMS would use part of the profit from that sale to save or restore the eyesight of a person in developing countries. So far, the company website states, TOMS Eyewear has helped restore sight to more than 275,000 people. Further on, the concept was extended to other product categories as well.
Mycoskie followed the same principle for his book as well - Start Something That Matters. The cover of the book states: "With every book you purchase, a new book will be provided to a child in need."
While cause-related marketing is followed by many companies, at TOMS the philanthropic component is critical to the success of the for-profit business. The TOMS business model and its heavy focus on marketing and use of social media is innovative and unique.
Using Social Media to Tell the Story of TOMS
TOMS offers more than a comfortable and trendy pair of shoes. It is about status and a story to tell. Mycoskie realised the power of the TOMS story since the early days of the company and has focused on it ever since.
Mycoskie wrote in his book, acknowledging Kendall Haven, who authored Super Simple Storytelling: "Human minds rely on stories and story architecture as the primary road map for understanding, making sense of, remembering, and planning our lives - as well as the countless experiences and narratives we encounter along the way." He added that smart, future-oriented companies use this ancient impulse in new ways, by telling stories that people can watch on YouTube and share on Facebook.
He quickly realised the strength of social and digital media to convey his story by saying: "People are no longer all listening to or watching the same few radio or TV stations each week - they're following their own carefully curated Twitter feeds, commenting on and creating blogs, channel surfing among more than 500 TV stations, watching Hulu on laptops, clicking on YouTube, reading Kindles and Nooks, and surfing on iPads."
In 2009, Mycoskie partnered with AT&T by filming a commercial, which ran throughout 2009 and was an enormous success. The commercial profiled TOMS as a for-profit company that donates one pair of shoes to a child in need for every pair purchased, and founder Blake who uses his AT&T BlackBerry to conduct business from around the world. Lots of people tweeted about the commercial creating awareness about TOMS and AT&T, and support for the TOMS business model.
TOMS's Storytellers: Celebrities
TOMS didn't pay celebrities to advertise its products. However, due to the prevalence of photographs in social media of celebrities wearing the company's shoes, it received a great deal of "free" publicity and perceived celebrity endorsements. Many celebrities such as Keira Knightley, Scarlett Johansson, Liv Tyler, Anne Hathaway, Tom Felton, and Julia Roberts became TOMS storytellers by adopting the brand and spreading the story.
Celebrities having a penchant for charitable causes, TOMS Shoes allowed them to help others and look trendy. The photos of these celebrities wearing TOMS Shoes spread on social media sites, which created huge awareness for TOMS.
Tom Felton tweeted "the @toms shoes come with a bag that says TOMS. that is me all over. and a sticker that says TOMS. I stuck it to my head."
TOMS has certainly benefited from these celebrity endorsements, perhaps more so because of their unofficial nature (which fits well with their brand image), and social media has made the wide reach of this possible.
TOMS's Social Media Marketing Excellence
In an interview in July 2013, Mycoskie had said: "Our community could be 20 million people on Facebook, if we employed the tactics that a lot of companies do - add mass followers, bribe them with raffles, contests and gifts. But instead, we purposefully kept our community kind of small, around two million, because that allows us to have a more intimate connection."
It's very clear when you go to the TOMS website, that there is a strong presence of social media links, such as Facebook, Twitter, YouTube, Pinterest, Instagram and Google Plus. Also, it has created a blog to share stories and educate others about TOMS's activities. Mycoskie realised the power of social media, which is less costly in comparison to the traditional advertising and fits better with his business model.
On top of that, many TOMS fans and consumers create their own digital content about their experiences with TOMS products and TOMS initiatives, allowing them to do much of the marketing for the company and spread the story.
Content Creation and Audience Engagement
TOMS's "One day without shoes" campaign creates awareness on global children's health and education issues. Participants can share experiences and upload images on Flickr and Facebook. Also, TOMS partnered with major companies such as Google and AOL, and created a separate website for it.
One participant uploaded images on Flickr and commented, "I'm going most of the day without shoes since about 740 million people fight hookworm, can't go to school, etc., since they don't have shoes."
A student at Columbia University uploaded her image on Flickr and commented: "It gets people thinking about children in the world, and may be leads someone into a career of helping children. That's the event; it's a simple gesture of wearing no shoes and communicating to people the situations and leading to changing a child's life."
The Future of TOMS
TOMS is no longer just a shoe company, it has expanded into other areas using its "One for One" business model. A for-profit business with a philanthropic component. The company is also actively looking for people to help them do this by offering grants to people with like-minded ideas.
It is expanding into many categories, including apparels, accessories and tech as well as expanding geographically. To keep the business model sustainable, it is of paramount importance to keep innovating and designing new products that appeal to worldwide consumers. On top of that, TOMS should closely monitor compliance of its activities and keep the promise of One for One.
TOMS's success in using social media in spreading its story and reaching a vast audience could be equally risky to its reputation and the whole business model in case of compliance and ethical issues as well as improper management of social media.
Key Learnings and Conclusion
>> Fit between the valued customer and marketing mix (social media). The group that TOMS targets is very active on social media.
>> Fit between social cause marketing and using social media; active and socially aware consumers.
>> Having an active community that acted as brand storytellers - utilising peoples' people networks on social media.
>> Creating awareness, reaching to large audience and geographical coverage through social media with minimal marketing cost.
What Could Have Been Done Better?
>> Global expansion, better retail coverage and partnerships - they could do more in each of these areas and expand the business whilst remaining consistent with the 3Vs (valued customer, value proposition, and value network) that have made it successful.
>> Risk of competition - competitors such as Skechers are attempting to move in and replicate the One for One business model. Although TOMS is the first mover, it will need to be careful of other companies aggressively moving in on its key differentiator.
What Can Other Firms Learn from It?
>> Using social media more effectively by having an interactive and evangelistic community rather than having a large indiscriminate user base.
>> The power of the social cause and CSR activities being directly linked to the purchase of company products in the for-profit business. Customers feel they are directly driving higher investment in the CSR activities and this is key to the success of this model, and that aspect of it (the direct link from purchase to CSR) could be mirrored in many other business areas.
>> Making use of social testimonials, not as a sideline to traditional media but as a more effective way of growing and expanding brand presence through people's social network relationships.
TOMS Must Press Its First-mover Advantage
Toms, fuelled by the One for One programme, is a very successful brand that gets a lot right. But there are always opportunities for improvement.
One for One Programme: The programme is the unique selling proposition for TOMS products and is a core part of the TOMS brand promise. Unfortunately, there is nothing proprietary about the programme to offer TOMS a sustainable competitive advantage. Arguably, it would be unethical, or at the very least poor optics, for TOMS to try and prevent competitors from instituting a One for One programme.
As a result, TOMS must continuously press its first-mover advantage to stay ahead of potential competition. There are a number of opportunities to make the One for One programme work harder for TOMS.
Specifically, TOMS has a lot of great content about the people who have been helped by the programme and people that need help, photos of children happily wearing shoes, getting glasses, etc. But this impactful content is effectively segregated from the shopping experience. When you visit the TOMS website, the taxonomy of the site forces you to either "Shop" or learn "How We Give", but the two paths are essentially siloed from each other. If a visitor is reading about how much good the programme does under the "How We Give" link, there is no call to action to take you directly to a product you can buy. Instead, you have to leave this section and visit the "Shop" section. Conversely, if a visitor is shopping for a particular pair of shoes on the site, there are no images or story telling about the benefits of the programme.
A live ticker with "35M pairs of new shoes donated to children in need" in the header of the site, including the shopping pages, could serve as a powerful form of social proof to help undecided buyers, who don't happen to drill down into the "How We Give" pages. Similarly, the programme could be much more prominently and consistently promoted in the visual merchandising provided to third-party retailers. Some partners, such as Nordstrom Rack, have no point-of-purchase information about the programme. Even when the store does have One for One signage, it's a simple statement with no imagery or social proof. It is especially important that the programme be emphasised on the TOMS brand pages and on their retail partners' sites, and not solely on product detail pages (as is the case now).
TOMS is very dependent on consumers already being familiar with and trusting in the One for One programme in most of their shopping experiences.
Social Marketing: TOMS was a clever user of social media to cost effectively get its message out. But the content marketing approach that TOMS depended upon to build its audience has been substantially depreciated. When social networks like Facebook were building their audience, they were happy to allow brands to publish great content and then have users organically spread that content on their own news feeds. But in recent months Facebook has dramatically curtailed the organic reach of a brand's content. In fact, less than six per cent of the three million users who have liked TOMS brand on Facebook will organically see TOMS content in their news feeds. Facebook now requires sponsored posts in order to reach a meaningful audience.
When consumers are exposed to a TOMS message via social media, there are not strong calls to actions to actually purchase products. Even when you click "Shop Now" from TOMS Facebook page, you are taken to TOMS website homepage rather than an actual shopping page on TOMS, so users will have to do at least three more clicks before they can add a product to their bag. This is simply too much friction.
TOMS Shouldn't Ignore the Lifecycle Aspect
TOMS has used the 3Vs effectively with little competition. Its Value Customer was relevant in the past, where uniqueness of approach via social media worked well. But there has been enough growth and awareness among brands that want to experiment with social media to reach out to socially aware people. The challenge now is to expand the base of the target group.
TOMS's Value Proposition of functional and emotional again works well, but people grow - the functional need becomes aspirational and emotions change when calamities strike. Take the recent Nepal earthquake that had brands coming out on social media asking customers to buy or contribute and promising to match that contribution. This led to a fair bit of questioning from the younger generation - "If the brand wants to contribute, it should do so, why ask for our help?" So, there is a need to revisit this proposition again.
Its Value Network is strong and there is no reason for it not to continue. However, why restrict it to donating shoes? Isn't it possible to create value in those South American countries by getting things made there, which can then become a self-sustaining for-profit/not-for-profit and help progression of and lend pride to the people who contribute and are a part of it? The strong family culture is good, the values are fine. But families grow, have different thoughts and the parent has to look at how they are allowed to spread their wings.
While TOMS has been successful in product additions - sunglasses, bags - its consideration of the lifecycle aspect of the customer seems to have been low. Ideally, a teen to 40+ should be covered via different approaches and content. A teen or collegegoer would be more prone to share content on a variety of platforms in an innovative manner. However, as you grow older, your offline reach becomes stronger and you create content that extends to disproportionate reach. Say, for example, a teen begins with buying a shoe twice a year, shares, engages, encourages five of his peer group to purchase shoes. As she/he grows, the possibility of drifting away remains (say half of the six) and this has to be brought back in via different platforms, products, engagement and sharing. A local offline ambassador programme could help generate content and awareness, in addition to the celebrity endorsements. Remember, on social media everybody is a celebrity in her own right and the influence extends in different directions.
TOMS's work on non-competing alliances also seems to have been slow. Here one does not mean selling of the product but more in terms of reach, engaging socially aware or, more importantly, aware but too-lazy-to-dosomething-about-it target groups. Similarly, with a substantial online reach and base, it becomes relevant to focus on offline, low-cost or zero-cost activities that translate into reach, engagement, creation of fresh relevant content from additional target group.
The use of social media for marketing is nice. However, from a like/love status the brand needs to move towards achieving cult status, thereby ensuring competition does not catch up. The cult status is a difficult proposition when only online space is used, given the fickle nature of the beast. The time has come when social media needs to become supportive, unique, testimonial with offline doing its aggressive bit. Competition may move in fast if there is a single differentiator - socially aware target group - but the need is to splice this group into regular, innovative engaging aspects, maybe even flip it around. For example, contribute monthly or weekly for a shoe donation and get your shoe when it is completed. And many more.
(This case study is from the Aditya Birla India Centre of London Business School)