In 2014, Birchbox conducted a comprehensive market segmentation research study to help define its customer base. Cosmetics companies often use this data to identify the top 20% of their consumers, and then tailor the entire experience of their product to entice those people to spend even more money.
But Birchbox had noticed some unusual spending habits among its subscribers. They identified eight distinct customer types, based on how they relate to the beauty products, and it turned out that over half of Birchbox's consumers landed in an unexpected category: The "discerning multitasker." The women in this segments share a particular trait: they feel underserved by other beauty product purveyors, and as a result they "aren't spending to their full potential in the category," says Beauchamp. They tended to be overwhelmed by the sheer volume of beauty products on the market and how expensive makeup and skincare products can be. When they came across Birchbox, which works hard to curate and simplify beauty, they became loyal customers.
That's when Birchbox cofounder Katia Beauchamp had the a-ha moment: "We are actually competing with non-consumption." The data also showed that their customers—who Birchbox calls the "beauty majority" because they represent such a large part of the market—doubled spending on beauty products within six months of signing up for the service. So the company used this knowledge to understand and cater carefully to the needs of these customers, rather than focusing on what other beauty retailers were doing.
Providing a sample set of beauty products for women and men to try before they buy is an easy idea to copy. And once Birchbox became successful, competitors with more efficient supply chains jumped into the space—as in 2011, when the women's magazine Allure partnered with Amazon-owned Quidsi to sell and give away beauty products. Yet Birchbox's business is still thriving. Why? Because while it's easy to replicate the superficial aspects of the business, says Beauchamp, "Nobody can copy vision."
In a pre-interview for our Fast Company Innovation Festival panel, "Building a Business That Matters," Beauchamp opened up on how she overcame her anxiety about competitors, but also on the key insights that have refocused the entire company.
The company is now unveiling a new mission and vision around the results of its customer data. Beauchamp says they've identified a new kind of consumer, one that the rest of the industry has been ignoring. And that's one reason Birchbox launched a line of branded lipstick and eyeshadows this past October. More branded products are coming next year, and Beauchamp says the company is exploring a move into brick-and-mortar retail beyond the pop-up shops it currently runs.
"I plan for Birchbox to displace the companies in beauty that everyone thinks of," says Beauchamp. "I’m crazy, but I have to be—that’s my job, I guess."