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Can A Crowdsourcing Invention Company Become ‘The Best Retailer In The World?’

J.J. Colao, Forbes Staff

All of the blood, sweat and tears of entrepreneurship.

Quirky

Every Thursday night Quirky ‘s Manhattan headquarters turns into a television studio. On a recent April evening the airy Chelsea loft is host to a buzzing mix of beer-sipping twentysomethings, businessmen in dark suits and a dozen 10-year-olds from the Concord, N.H. Young Inventors Club. Facing the audience, at the center of a Last Supperish array of panelists, stands Ben Kaufman, Quirky’s CEO, dressed in his signature black T-shirt and jeans. “Ladies and gentlemen,” he booms, “welcome to Quirky product evaluation!”

“Eval,” as they call it, is the centerpiece of Quirky’s freewheeling brand of capitalist democracy. Tonight Kaufman, 26, runs through 15 ideas submitted by the company’s 405,000-member online community of would-be inventors. Among the items: a coin-counting, app-connected piggy bank; a plastic overlay to turn a staircase into a slide; and a device to extract Popsicle-shaped chunks of watermelon. After a few minutes of debate the room votes. A simple majority kicks off a process: Quirky will design, manufacture and sell the product. Inventors, along with community members who contribute to a product’s design and branding, get a small cut of sales.

This is what industrial production looks like, American Idolstyle. Quirky’s crowdsourcing process has already created such hits as Pivot Power (a flexible power strip that bends to fit large three-prong plugs in each outlet) and Crates (modular plastic milk crates used as shelving), as well as bombs like Silo (a dry-food container that pours premeasured amounts) and Travelstacks (mini-storage units that attach to car cupholders). Most of its items are kitchen gadgets, electronics accessories and home organizers.

Venture capitalists love the model. Since launching in June 2009 Quirky has raised $91 million, including a $68 million kick from Andreessen Horowitz at a reported $150 million-plus valuation last September. Last year Quirky launched 121 new products, selling 2.3 million units through retailers likeTarget TGT +1.51%Bed Bath & Beyond BBBY +0.62% and Best Buy BBY +3.86%. The company had revenue of $18 million in 2012, and, while it lost money, Kaufman insists that profits will be there whenever it chooses to rein in investment. Sales this year will reach $50 million, he predicts, without a hint of modesty, with “a huge chance of us crushing the s–t out of that number.”

That’s contingent, though, on Quirky solving its distribution problem. While retailers sell 95% of its inventory, the company’s idea machine is starting to churn out far more stuff than the pipeline can handle. “There’s no store big enough in the world,” says Kaufman, “that’s going to be able to launch three products a week.” So Quirky is moving quickly–and expensively–to build its own branded stores.

It’s an audacious move for someone who in school would’ve been voted least likely to succeed … at anything. With jet-black hair and a teddy-bear build, he grew up in Melville, N.Y., a terrible high school student (GPA: 1.7) who once scored a 4 out of 100 on a chemistry test.

But his cerebral cortex wasn’t dead. Struggling to listen to his iPod without tipping off his math teacher, Kaufman designed a hollow lanyard to conceal the headphone wires up to his neck. He demanded backing from his parents to mass-produce his furtive product. “They realized there was nothing they could do to stop me,” he recalls. “They knew I would’ve been calling up my dad’s friends asking for money if they didn’t give it to me.”

His mother, Mindy, a retail strategist, forced him to create a detailed business plan for the lanyard headphone startup, which he named mophie, a portmanteau based on the names of the family dogs. In return for $185,000, his parents took 90% of the equity, allowing Ben to regain ownership after he repaid the loan. “I’ve raised $100 million since then,” he says, “and that was the hardest money I ever got.”

A week before high school graduation he flew to China to meet with manufacturers, knowing nothing about production, packaging, merchandising, logistics or sales. His parents’ cash disappeared “on the backstreets of Shenzhen,” as the headphones went through five redesigns. Back in the States he expanded into iPod cases, having persuaded Vermont angel investors to invest $500,000. After winning a Best in Show award at MacWorld in 2006 for designs of iPod cases that were half-baked, mophie raised $1.5 million from a Vermont venture fund.

But Kaufman lost control of his company. Investors, smelling promise, hired an experienced CEO, and the 20-year-old founder left. Mophie, meanwhile, now based in Kalamazoo, Mich., sold $150 million in iPhone and iPad accessories last year.

The experience wasn’t a total loss: Kaufman took enough money out of the company to sow the seeds of Quirky. For a year and a half a team consisting of Kaufman and three others worked out of his apartment in Manhattan’s East Village, slogging through the details of building an online community for devising new products. They launched Web pages for contributors to pitch ideas, tested feedback tools, devised voting systems and selection criteria, and established rules for divvying up credit among the community.

Here’s how it works. Once a product is out of the chute, Quirky sells it to retail partners at wholesale. Ten cents of every revenue dollar is held as a royalty for those who contributed to a product’s creation. The inventor gets 42% of royalties; the community that tweaked designs, voted on names and responded to market research surveys splits the rest. For sales from Quirky’s online store, the group divvies up a more generous portion: 30% of sales. Quirky, meanwhile, makes a 20% to 60% margin on each item sold to retailers, as well as a $10 fee from those who submit ideas.

Today the company employs 140 people, split among design, branding, engineering and sales teams. The offices hold $2 million worth of 3-D printing and prototyping equipment. Twenty employees in Hong Kong oversee manufacturing in China. Inventory sits there in company warehouses, as well as in Ontario, Calif. and Allentown, Pa. Each week the Quirky crew combs through 3,000 idea submissions, settling on 15 to discuss at Eval.

But does the world really need another smartphone-connected pet food dispenser or mousetrap? Scott Weiss, a partner at Andreessen Horowitz and Quirky board member, thinks Kaufman’s could easily be a $1 billion company. “He’s disaggregating the entire process of invention,” says Weiss. “Could this be the next Procter & Gamble?”

But there’s a wide stretch between here and there, especially given the grand plans to open up stores, starting with three–likely in New York, Los Angeles and Oklahoma City–perhaps next year. (Quirky originally planned to open up stores this year. During the writing of this story, the company decided that timeline was too ambitious. ) Kaufman does seem a whiz at packaging: Each product carries the Quirky logo, as well as a photo and bio of the inventor. But retail? “I will have this figured out by July 4,” boasts Kaufman. He envisions a hands-on Sharper Image, where customers can either come in to pitch inventions or buy others. ”From the very beginning we said we wanted to be the best product machine in the world so we could be the best retailer in the world.”

Even in the best of circumstances, opening stores will drain capital and distract from the core business of making stuff; in the worst case it could end up another backstreets-of-Shenzhen-like disaster. “I don’t know whether it’s the smartest thing for them to do,” says Sucharita Mulpuru, a retail analyst for Forrester. “One of the scariest things about opening a physical store is that you get one shot. It’s very difficult to pivot or change.”

If that happens Kaufman risks repeating his mophie experience. While he refuses to discuss his equity stake, all that venture funding almost surely means he’s ceded absolute control.

Not that he seems concerned. Back at Eval the clear winner is the large plastic overlay that folds over a staircase to create a slide. The Young Inventors whoop with excitement. “This is an insurance killer,” warns Charlie Kwalwasser, Quirky’s general counsel. Kaufman sides with the 10-year-olds. “The kids don’t care about how much our insurance costs,” he declares to laughter, “nor should they!”

Follow me @JJColao and on Facebook. Check out my blog here.

More On Forbes:

Midas List 2013: The Top 10

Courtesy of Accel PartnersJim Breyer

Jim Breyer

Rank: 1Jim Breyer takes the Midas crown again this year largely due to his firm’s early $12.7 million bet on Harvard drop-out Mark Zuckerberg. With an 11% stake at the IPO, Accel Partners was Facebook’s second largest shareholder after Zuck (Breyer is on Facebook’s board but recently announced he would be stepping down). To wit, he’s an investor in Legendary Pictures, the company behind “The Dark Knight,” as well as Spotify.

This originally appeared here.

Top Insights to Fully Leverage Facebook for Businesses

I’m going to share some of my top insights into how businesses can fully leverage the Facebook platform and turn it into one of your most valuable marketing channels.

Image representing Facebook as depicted in Cru...
Image via CrunchBase

First and foremost, advertising is a must on Facebook to reach your customers and prospects. The good news is that when done right, it is really cost effective.

I almost always recommend encouraging followers and those trafficking your page to voluntarily share their direct contact information, so that you can build lists of prospects and customers that you can re-market to when you see fit. This can be done a number of ways, but always involves creating a custom page to capture contact and lead qualifying information. The incentives can obviously vary – from monthly give aways, to discounts, to access to valuable information – like a white paper or research report. Even if you don’t have a new product or service to offer your lists each week or month, it is very beneficial to share relevant information that you think they would be interested in to keep you top-of-mind.

So now that you are attracting the right people to your page and building a remarking list, and generating good followers, how should you communicate with them? The lists can be emailed when you have something important to share, but you also need to remain very active in your Facebook news feed. Industry research shows that 96 percent of fans never revisit the fan pages once they’ve “liked” them and you can expect that only about 20 percent of your followers will see your posts at any given time, but you can increase that number by varying the types of posts you share and with targeted advertising.

Of course some of your posts may be self-promoting, like sharing new products or describing new services, but most should not. Did you know that posts that spark interactivity from your followers or content that goes viral – where followers share the link to their followers – jumps much higher in your followers’ news feeds, and thus is much more likely to be read by more people, including your followers? That metric is called “impressions” and Facebook relies heavily on this variable in an algorithm that hides content it thinks your followers probably aren’t interested in – posts with low impressions.

So to get to the top of each of your follower’s news feeds when they sign into their Facebook accounts, which many do at the beginning and end of each day, you should try to create content that will get the most impressions or interaction. Think about things that are related to the common interests of your followers – maybe its home improvement project ideas for a hardware company or best practices and success stories for software company. A good ratio to use is Pareto’s 80/20 principle when creating content. Keep 80 percent of your posts on common interest topics that are more likely to spark interactivity and 20 percent focused on your products, service or brand.

Feel free to ask your followers questions in posts too. And it always helps to get visual – share exciting images and videos. Be inspirational – share good stories. Try to mix it up and remember: the businesses with the best content on Facebook win.

Contact us today to learn more about how your business can leverage Facebook to grow or Tweet me at #Facebook4Business.

About the Author:
Jon Stotts of www.eXprtMedia.com has 14 years experience managing marketing and communication programs for various types of companies, including technology and financial services focused companies. He has spent much of his career managing multiple external agencies and has extensive experience working with all types of technology firms, international companies looking to increase business in the U.S., venture and private equity-backed companies, publicly traded companies and mergers & acquisitions. Stotts holds a degree in journalism from Georgia State University and an MBA from the Stern School of Business at New York University.

Best Marketing Advice Ever: Use Social Media to go to Your Customers

Some of the best advice ever for marketers and business owners is to use social media to go to your customers – don’t expect them to come to you.

Why do we as marketers spend so much money trying to get our customers to us? Yes, certainly there are core programs, lead generation, direct marketing, sales collateral, public relations and Websites that we have to maintain, and in-person shows may be integral to your business, but frankly social media has changed the way the world works. We can now target customers and prospects where they already spend a bulk of their time — on Facebook.

There are over 1 billion Facebook users and about 180 million LinkedIn users. Ninety percent of adults have an active Facebook

Facebook TouchGraph
Facebook TouchGraph (Photo credit: jurvetson)

account. How many of these people are your customers and prospects? A lot. The fact is, we as marketers have never had these types of channels before to reach our target audiences, and amazingly, when done correctly, simple social solutions can be the most cost effective way to communicate with your audiences directly.

Social media accounts for 18 percent of people’s time online and studies have found that many people start and end their day surfing Facebook. The average Facebook user spends almost 7 hours hours a month on the site. How much time do you think they spend a month on your site, or reading your emails? They probably don’t spend 7 hours in 12 months, let a lone one month! Why fight that battle, when you can win the war? Be smart – go to them, don’t expect your customers to come to you.

eXprtMedia can help you find your customers on Facebook and other social channels, turning these into viable, cost-effective marketing platforms.

Contact us today to see how we can help – jon@eXprtMedia.com or Tweet us at hashtag #SimpleSocial.

Simple Social Media for Businesses

 

Learn how www.eXprtMedia.com Simple Social media services can help you drive your business forward by using the most cost-effective communication channels to speak directly with your customers and prospects. We help all types of businesses with strategy, content creation, custom pages, monitoring and generating followers.

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We have a team of experts with decades of experience running social media, marketing and communication programs for all types of companies. We also have a dedicated staff of professional, US-based social media monitors and moderators that can respond to your followers immediately in a professional way – on message – to turn followers into customers.

 

What does a good social media program cost?

Marketers and business owners often ask how much they should allocate towards social media. It’s a great question and it totally depends on your type of business. Large companies with major brands already invest heavily — up to $10K or even $20K a month employing dozens of internal people and external agencies to leverage these channels, but what about the small to medium sized businesses or the cost constrained organizations? You don’t have to break your marketing budget to make social work.

In a BtoC model or promoting enthusiast brands, something like Facebook could be used as your primary marketing platform — to find and communicate directly with your customers and prospects. Twitter and Pintrestcould also be important. Restaurant owners know the value of Yelp and other online ratings sites. All types of businesses need to actively manage their images, generally, across multiple social platforms. The good news is that you can cross promote the various platforms and encourage your followers, once you’ve secured them on one to follow you on another, with the proper incentives.

Social Media Marketing Hub and Spoke Infographic
Social Media Marketing Hub and Spoke Infographic (Photo credit: DigitalRalph)

Social Media Marketing Hub and Spoke Infographic (Photo credit: DigitalRalph)

In some B2B scenarios, you may want to leverage LinkedIna bit more, but shouldn’t ignore Facebook. That’s the number one mistake I am seeing right now. LinkedIn has 180 million users while Facebook has well over a billion. Ninety percent of adults in the US have Facebook accounts. B2B marketers need to find their customers, and their customers’ customers where they are already spending time, and, empirically, that has been proven to be Facebook. With the right help, B2B companies can build targeted audiences, improve perception and brand value, and influence sales on the Facebook platform. You can do this by driving fans and followers to higher return assets, whether that be another social site or directly to content on your organization’s Website. Ideally you should capture contact information directly in this process, so that you can re-market to these people as you see fit.

In both cases, the costs of running fully integrated social media programs is much less than most expect. Here at eXprtMedia we have monitoring and moderation solutions that start at $400 a month. We can fully manage your ad campaigns for a couple hundred dollars a month, plus a percentage of overall ad spend. And we can even help you create the right content for each platform, or manage that process fully for you.

Of course we customize each engagement, but in most cases, B2C or B2B, our most successful clients are spending between $1,200 to $2,000 a month and seeing stellar results — growing audiences by hundreds or thousands a month and, if lead capture is a priority, we can capture lead information to immediately impacts sales.

Of course when compared to other marketing programs, like trade shows, direct marketing and PR, social media is cheap, but don’t underestimate the value it can provide for your brand and business — cost is certainly not an indicator of quality in this case. Social just happens to be the best value for now, if you know what you’re doing.

Contact us today to see how we can help – jon@eXprtMedia.com or Tweet us at hashtag #SimpleSocial.

Accelerate Your Social Media Presence

Are you ready to step into social media, but not sure where to start? It can be challenging enough just to set up accounts, let alone project the right image. And simply having social media accounts doesn’t mean anyone will know you’re there…

Small to medium sized organizations are disadvantaged when it comes to competing in today’s marketplace — most don’t have the resources to hire fulltime social media and public relations staff. Large companies have teams of people dedicated to new media channels. Wouldn’t you like to level the playing field?

And companies aren’t the only ones interested in growing their online presence — individuals need to build their own brands too. From personalities to artists, writers, technical and business consultants and more — all want to expand their perception and reach. Aggressive social media strategies can help.

eXprtMedia & Marketing

can help you determine the right channels — from FacebookTwitterYoutubeGoogle+LinkedInPinterest,Foursquare and more

Webtreats Matte Black Social Media Icons
Webtreats Matte Black Social Media Icons (Photo credit: webtreats)

Webtreats Matte Black Social Media Icons (Photo credit: webtreats)

– and we can help you generate the right followers with intelligent, targeted campaigns.

We combine proven publicity and advertising tactics to get your message in front of the right people — your customers and prospects. The media and advertising world has changed. Isn’t it about time you figured out how to leverage new social media platforms?

Start today with an accelerator package to get the ball rolling, then continue with ongoing interactive support. Contact us today to get started. Packages start as low as $400 a month.

www.eXprtMedia.com
646-961-3497

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Why is Facebook important to your business?

Facebook is by far the most popular and highly used social media channel today. Ninety percent of adults have active Facebook

Facebook logo Español: Logotipo de Facebook Fr...
(Photo credit: Wikipedia)

accounts. People use it more than any other site and spend a lot of time each day sharing content, reviewing posts and contributing to conversations. Facebook is a $100 billion company that knows everything about its users. As a business, you can tap into their knowledge to attract extremely qualified and inexpensive followers — your primary customers and prospects.

Once you attract the right followers, you then have a direct communication channel to the audience that can most positively affect your business. And while any one of your posts or promotions may only be read by 20 percent of your followers at any given time, with the right campaigns you can capture direct contact information to build your own lists that can be emailed directly — for promotional and other purposes. Also, with the right content, you have the ability to go viral — reaching not only your direct audience, but each of your follower’s followers as well.

Facebook is a constant, 24 hour a day, seven day a week conversation. To do it right, you have to be there to answer questions and participate in those conversations in a timely manner. You will gather valuable insight into how your customers perceive your brand, and often they will offer suggestions on how you can improve your business. But you’ve got to be an active participant to really benefit from this communication channel.

Targeting ads also takes a daily effort to tune and produce the best results. It’s not easy to do alone. There are many variables that affect results — from the type of content to share and the limitless ad options to hone in on the right audiences — the ones most important to you and your business.

At eXprtMedia, we have experts with years of experience managing all types of accounts and enterprise-class tools to run your ad campaigns and moderate your conversations. We have a dedicated and qualified staff that will watch your site and respond quickly to conversations. We also have dozens of proven models that can be applied to your business today, reducing your overall ad spend to attract the right followers quickly. We can also create custom pages to capture follower information and offer this 24/7 monitoring and moderation at extremely reasonable rates.

Facebook is probably the most important marketing platform for your business today. With expert assistance, you can use it as a primary communication platform to converse directly with your customers and prospects. It can also be leveraged to drive followers to any other social channel that is important to you, like TwitterYelpPinterest and more.

Contact us today to see how we can help – jon@eXprtMedia.com or Tweet us at hashtag #SimpleSocial.

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