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Coming Undone

Erica Falkner
June 30, 2008

Can a company built on customers’ loyalty survive mainstream success?

If you could build a business model where customers design, market and sell your product you’d be considered a genius right? Well that’s exactly what a lot of people are calling Jack Nickell and Jacob DeHart, the founders and creators of Threadless.com. A shining example of how pure creative innovation can breed fiscal success, today Threadless.com is attracting a lot of attention. But can a company, who was created by and relies solely on the participation of its characteristically unconventional customers, survive the glare of success?

It’s the American dream - we love stories of normal everyday people who make it big. Yet, when faced with financial success, some once beloved companies experience a backlash from those they value most – their customers. Take Ben & Jerry’s. Friends since the age of seven, Ben Cohen & Jerry Greenfield went on to found the socially-conscious label that captured the hearts of idealistic ice cream lovers. However, in 2000, when the two decided to sell their company for $326 million to Netherlands-based Unilever, they were quickly labeled sellouts and have never been able to fully restore their good name or win back many once loyal customers.

Another example is formerly Maine-based Burt’s Bees. In 1984, Burt Shavitz picked up a hitchhiking 33-year old named Roxanne Quimby and the two soon became life and business partners. Shavitz, a beekeeper, and Quimby used beeswax to make Burt’s Bees products and the company quickly gained a loyal eco-friendly customer base. But last year when Burt’s Bees was purchased by Clorox for $913 million, many customers quickly turned their backs on the one time farmers market wielders.

While going mainstream has increased their customer and revenue base, these companies have alienated many of the very customers who helped build their brands. This is why Threadless is especially in great danger of peril, as its whole business model centers around customers and their willingness to collaborate online. Think of Threadless as a community of 1960s “hippees” co-existing and collaborating peacefully, albeit in a virtual community; sharing ideas, making art and expressing their creativity. What do you think will happen if that community feels threatened or infringed upon by corporate America? That’s right, they’ll scatter and the company will no longer exist or at least not in the same capacity.

With 2007 profits estimated at $30 million, Threadless is well on its way to becoming a successful franchise. But its founders maintain they plan to preserve and protect the brand and will not accept offers from big name vendors like Target or Urban Outfitters. Some customers, however, are skeptical as the company has already opened one retail store in Chicago and recently announced plans to expand and build stores in additional mid-size markets and to launch the accessories brand Naked & Angry.

The lesson, there’s no doubt that connecting with customers on an emotional level is the most effective way to build a successful brand. But companies must be aware that while emotionally-connected customers can be your biggest advocates, they can also be your fiercest advisories if they feel their loyalty is breached.

Erica Falkner is Marketing Manager at Vox, Inc., a customer experience research and consulting firm. Contact her through the feedback form on our Contact Us page. Copyright 2008 Vox, Inc. All rights reserved.