Casper Mattresses

Is there really "One Perfect Mattress for Everyone"?

2018.07

Casper Mattresses: Is there really "One Perfect Mattress for Everyone"?
Casper Mattresses
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I. Casper’s new paradigm for the mattress industry

The U.S. mattress industry is monopolized by a small number of companies, making it very difficult for new entries.

  • The U.S. mattress industry generates $14 billion in annual sales from extensive advertising and promotion through the collaboration between manufacturers and retailers.
  • On average, U.S. customers buy 35 million mattresses annually at $400 each, with a replacement interval of 7-8 years.
  • After continuous mergers and acquisitions, Serta-Simmons and Tempur Sealy International now maintain 40% and 30% of total shares, respectively.
  • Serta operates sub-brands at different price points, and each sub-brand offers a wide range of products to its customers.
  • Due to shipping and inventory issues, mattress businesses sell half their merchandise directly and half through specialty distribution stores such as Mattress Firm, Sleepy’s, and Sleep Train.
  • Mattress businesses maintain partnerships to increase sales, such as providing retailers with cooperative advertising allowances.
  • Despite unsatisfactory shopping experiences and high prices, customers without alternative options have been paying for products and services offered by the same mattress manufacturers and retailers for decades.

However, Casper is changing up the mattress industry with its simple products and convenient purchasing experience.

  • Under its slogan, “One Perfect Mattress for Everyone,” Casper introduced a new product and distribution structure to the market exclusively run by a handful of manufacturers and distributors.
    • Foam mattress: Existing businesses provide numerous products that combine various firmness levels and materials (spring, latex, memory foam, etc.). However, Casper observed that hotels satisfy their customers with uniform mattresses and concluded that what customers actually want is not variety. Casper created the optimal mattress after gathering long-term data on customer feedback and learning that simple products are actually preferred.
    • A new shopping experience: Casper simplified the decision-making process for customers by simplifying its products and making them available online. Customers can now conveniently buy optimally designed mattresses online through Casper without having to visit a store, listen to incomprehensible explanations for numerous products, and make (1)unsound decisions. Mattresses are delivered in a box that is manageable by one person, and can be returned for free within 100 days of use.
    • Lowered prices through reduced distribution costs: Casper mattresses are vacuum packed in a 20” x 21” x 41” box, shipped for free by UPS all throughout the U.S., and arrive within five days. This breaks away from the manufacturer-distributor partnership structure that was once unavoidable in selling products around the U.S. By lowering shipping and inventory costs, Casper can then provide mattresses of equal quality at 1/3 the price of the existing businesses.
  • Casper does not utilize the standard advertising tactics of listing product specifications and professional terminology, but conveys the emotional benefits of a good night’s sleep. Its ad showcasing a real couple’s experience before and after using a Casper mattress helped to build the brand of “Casper = a good night’s sleep.” Moreover, in the interests of unique and authentic branding, Casper refuses comparisons with competitors, instead focusing on delivering its message in an approachable manner to consumers.
  • Instead of promoting product specifications, Casper formulated newspaper and TV ads around word of mouth. Thanks to customers and opinion leaders, Casper’s features—such as its 100-day free trials, delivery box that is the size of a small refrigerator, and slogan “One Perfect Mattress for Everyone”—all became part of the company’s unique story and brand.
  • Though the company grew rapidly, achieving $100 million in sales only one year after its product launch in April 2014, Casper remains at only 0.7% of the total market. Its focus is on creating an emotional bond with customers; its vision is becoming the “Warby Parker of mattresses” or the “Nike of sleep.”


II. Casper’s marketing strategy

Casper looked at the market and implemented strategies from a startup’s perspective, not from a mattress business’s perspective.

  • Casper recognized that it is impossible to compete in the same manner as a traditional mattress company that spends over $500-$600 million per year on marketing. Instead, the company (2)played up its features and focused on media coverage in news, TV shows, etc. Casper also advertised the relationship between sleep, health, and productivity as well as its comfortable products, low prices, and distinct customer experience through various media such as an interview with “In the Loop” on Bloomberg TV. Through 158 print articles (678 press mentions total) on the New York Times, First Company, CNN, etc. explaining the strengths of its products and services, Casper attracted the explosive attention of early adopters and opinion leaders who actively promoted Casper through unboxing videos and other testimonials on their personal social media accounts.
  • Casper uses Search Engine Optimization (SEO) and Search Engine Marketing (SEM) to increase web traffic to Casper.com. To compensate for the low conversion rate from visitor to buyer, Casper uses visitors’ cookie files to disseminate continuous targeted advertising.
  • Additionally, it also utilizes podcasts. By providing a script where the host can naturally introduce the product’s features as their own experience, Casper has made customers view Casper in a positive light. It offers special promo codes to podcast listeners, as to track the sales increasing effect of a particular promotion. Radio ads are also run in the same way.
  • Casper advertises its products and services in a new way, instead of large-scale TV ads and sales like existing businesses, and continuously tracks the ad efficiency by placing distinct promo codes in each channel. Through this, it analyzed what kinds of customers were being drawn in how effectively through which channel, and with this data, continued to improve its business and brand.

Casper actively utilized the company’s investment attraction news to promote its business, and continued to analyze customers’ decision-making process to modify and supplement its marketing strategy.

  • Casper’s $55 million Series B funding and $550 million valuation drew even more customers, while the investments of Hollywood celebrities such as Leonardo DiCaprio, Tobey Maguire, and Adam Levine attracted incredible amounts of customer interest.
  • Through continuous communication with customers, Casper learned that mattress purchases require multiple (3)touchpoints. Realizing that customers make the purchase only after various positive exposures such as a friend’s recommendation, radio ads, company website, Google reviews, etc., Casper decided to expand its advertising realms and increase its touchpoints.
  • The optimal medium for Casper to differentiate itself from other businesses, to be easily seen, and to not (4)break the bank as an early-stage startup company was the New York subway ad. The company focused on delivering its simple message, “One Perfect Mattress for Everyone” (including variations such as “The Perfect Mattress for Startups” and “The Perfect Mattress for Political Animals”). Casper eventually expanded its ad locations to New York taxis, billboards, and more, while tracking advertising efficiency by placing different promo codes for each location.

Casper was not only able to make a clear impression on customers about its products by employing a simple message, but also used an “experience”-based marketing tactic through 100-day free trials, showrooms, and its Nap Tour.

  • By operating showrooms in New York and California as well as pop-up stores in major cities, Casper offers an opportunity to experience its products to customers who are not certain about ordering a mattress online. Additionally, its 15-city mobile “Nap Tour” (with Casper mattresses set up in pods) helps the company reach its two goals of customer experience and increased media exposure.


III. Casper’s strategy for growth?

Casper’s initial strategy of focusing on media coverage and word of mouth was very successful, but has reached a point where change is needed for further growth.

  • Casper has succeeded in changing the market by embracing its startup status, instead of going by mattress businesses’ standard tactics. Though its net promoter score (one measure of customer satisfaction) is the best in the industry, most consumers still have not heard of Casper, and all its current promotion channels are niche. Its $100 million in sales are impressive for a new startup, but its market shares are only 0.7%.
  • There’s a limitation to organic growth through the current promotion tactic. Other businesses are spending $1 billion annually on ads, half of which are on TV.

The emergence of competitors with similar concepts and strategies are threatening Casper.

  • Competitors are constantly emerging with similar business models of making smaller mattresses to sell online.
  • The entrance of existing large mattress manufacturers into the online market is also a big threat to new businesses like Casper. They are facing a situation where they have to simultaneously compete with existing competitors above them and competitors of similar concepts below.

Casper is contemplating whether to follow the marketing practices of existing companies or continue its own success strategy.

  • Option #1: Run TV ads of an interview with a couple who have used the real product, explaining the benefits of Casper products.
  • Option #2: Run TV ads in Casper’s unique style, like the New York subway commercials.
  • Option #3: Keep the current advertising strategy and expand its regions.


IV. Implications

There are three lessons we can learn from Casper:

Lesson #1: If you approach problems from the customer’s perspective and not from the market’s perspective, you can create a new paradigm even for a monopolistic/oligopolistic market.

  • The mattress market is a market with high entry barriers, where large companies with strong brand power have dominated everything from manufacturing to distribution. Casper created a new paradigm by redefining mattresses and distribution from the customer’s perspective.
  • The reason why Casper was able to discover opportunities in the mattress market monopolized by large corporations was because it reexamined mattress products from the perspective of customers who had uncomfortable shopping experiences.

Lesson #2: Even in markets where larger companies compete, smaller startups have relative advantages.

  • With poor funds compared to large mattress businesses, Casper carried out a creative low-cost/high-efficiency marketing strategy. Casper offers different promotion codes for individual channels to continuously manage and improve the effectiveness of each channel.
  • Casper continues its efforts to understand customers by continually communicating with them without settling for its initial performance. By accurately understanding the customer’s decision-making process, it finds the best marketing solution for each situation.

Lesson #3: Growth requires constant change.

  • Casper has reached a point where it must make a decision in order to grow to the next level. Depending on what strategy it chooses, Casper’s uniqueness may be blurred and it may experience the loss of its loyal customers.
  • Casper must consider how to overcome the emergence of competitors with similar concepts and the now fully fledged competition of existing companies.

Talk to your Ringle tutor about Casper, and also receive a feedback on your English usage.

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