Hot take: Why product isn’t everything
A Marketer’s Perspective on the LULU x MIRROR Acquisition and Key Takeaways for Businesses Everywhere
There’s no question that Lululemon’s recent acquisition of MIRROR was an exciting day for both companies, but after reading about the deal on social media, I was surprised to find that not everyone felt it was as brilliant as the market seemed to think. In this post, I’ll discuss why I agree and disagree with some of the comments I read online, explain why I believe the omnichannel marketing potential is the biggest benefit of the acquisition, and lend some advice to Lulu and MIRROR as they continue doing business in a post-pandemic world.
First, let’s address the naysayers.
Aside from the fact that this person used anecdotal evidence about his social circle’s purchasing behavior to determine the future of a company, he is neglecting to see the exciting opportunities this partnership brings to both sides. Not only does Lulu have a wealth of information on MIRROR’s target demographic that is invaluable for the company, but the added revenue-potential MIRROR can offer Lulu will likely supersede the $500M they paid for the acquisition in just a few years.
That said, I do see some truth behind the Tweet’s qualitative assessment of MIRROR’s popularity (or lack thereof). MIRROR’s product is tricky to market because it’s financially irresponsible to dedicate an entire brick and mortar fleet to a product people only purchase after extensive research, while at the same time, it’s difficult to sell a product that expensive without first allowing people to use or experience it in-person (like they can with Peloton in-studio or on the app). This is precisely why the LULU x MIRROR acquisition is so exciting — because it allows MIRROR to show up in a place where its target demographic is organically, and to capture this audience when they’re already in the mindset of investing in their health and wellness (i.e. buying expensive athleticwear).
Now, let’s discuss why this acquisition rocks.
Assume there will be one or two MIRROR devices in every Lulu retailer in 17 countries across the globe (that’s already a 491x increase of MIRROR’s global footprint). Now imagine casually walking out of the dressing room at your local Lulu store and selecting a MIRROR workout to test your sports bra, then thinking hmm… this thing is pretty cool, and damn, I’m looking good in it! Caveat: I’m not sure if Lulu plans to put MIRRORs in each of its retail locations, but if they do, I can easily see each store’s average transaction value increasing as retail dwell time (time spent in-store) peaks due to the added foot traffic generated from the sheer novelty of MIRROR (i.e. people who visit Lulu just to play with it, then find themselves buying leggings or vice versa). Add to this the brand reputation, store aesthetic, and expert sales associates Lulu lends to MIRROR and you have a winning equation.
Just as Lulu’s global footprint can increase reach for MIRROR, MIRROR’s digital footprint can increase reach for Lulu by helping Lulu deepen its relationships with its customers. Aside from leveraging MIRROR’s colorful roster of fitness instructors as Lulu brand ambassadors, Lulu would be wise to experiment with immersive digital marketing tactics such as AR try-on, touch-to-purchase apparel (as worn by your favorite instructors, of course), and product recommendations based on users’ workout habits.
But what’s wrong with such a narrow focus on product?
In a recent blog post, Primary Venture Partners GP and Co-Founder Ben Sun seems to credit the success of MIRROR to its founder’s relentless dedication to the product. While I agree MIRROR would not be what it is today without the incredible vision and persistence of Brynn Putnam, a product without a clever Go-to-Market strategy is useless.
Basic business math tells us that the total net profit you earn on average over the course of a relationship with a customer (Customer Lifetime Value, CLV) must exceed the amount you spend on average to acquire a customer (Customer Acquisition Cost, CAC) in order to make a profit. Therefore, the higher the price of your product, the more you have to spend to make a sale and the greater justification you have for doing so. This concept is called distribution — and it’s essential to any successful business, which is why Lulu and MIRROR bring so much value to each other. With this acquisition, both companies just significantly lowered their CAC by using each other’s shared channels and customer data to make each other smarter over time.
Peter Thiel and Blake Masters describe the importance of marketing distribution perfectly in their novel Zero to One:
“If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business… Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true. No matter how strong your product — even if it easily fits into already established habits and anybody who tries it likes it immediately — you must still support it with a strong distribution plan.”
The point is: founders can easily lose sight of reality when they have a brilliant idea; but it’s important to remember that customers will not buy your product just because it exists, even if it’s amazing. They first have to become aware of your product, consider it (i.e. research it), trust it, and oftentimes, try it before you get to that point. And the more expensive your product is, the longer this journey takes. As a business, you have to reach your customers at each of those touchpoints to get them to convert and it’s rarely as easy as it seems. So while it’s important to be laser-focused on product, it’s even more important to have a clear marketing strategy. Success cannot be possible without it.
What should LULU x MIRROR do to secure long-term success in a post-pandemic world?
According to Edelman’s recent Trust Barometer Special Report “Brand Trust in 2020”, consumers rank “whether you trust the company that makes the product” 10 ppts higher than “whether you trust the product to perform well” (49% vs. 39%, respectively). Further, the statistics overwhelmingly support the notion that consumers want the companies responsible for the products in their homes to do more with the money and power they afford them. 80 percent of respondents say they want brands to solve society’s problems, and more than 1 in 3 respondents say they actively buy and boycott brands (or have convinced others to start or stop using products) based on the company’s response to societal issues such as the global pandemic, economic crisis, or protests against systemic racism and centuries of injustice.
Given the rise in popularity of connected fitness products (Peloton, Hydrow, FightCamp) and increasing competition from Mirror-like incumbents such as Tonal, Tempo, and FORME Life it’s now more important than ever for MIRROR to earn trust and make lasting connections with its customers. To do this, there are a few things the connected fitness company should keep in mind.
First, MIRROR should make clearer its mission, vision, and purpose across its digital properties so people can get to know the brand behind the product. Right now, MIRROR’s values are nowhere to be found on its website, which makes it hard for potential customers to understand what the company stands for or how to differentiate it from competitors on the market. This is a problem as more and more people fall into the category of “belief-driven buyers” (60% as of 2019, according to Edelman).
Second, MIRROR would be wise to be more vocal about a societal issue it cares about, then act on that with company initiatives. While both MIRROR and Lulu have shown support of the Black Lives Matter movement on social media and are now actively implementing diversity and inclusion initiatives in their respective companies, Lulu currently does a better job at showcasing this ethos across its digital properties than MIRROR, whose site is exclusively dedicated to product use cases, accessories, and selling points. If you want to see an exemplary company demonstrate their values masterfully, take a look at Barry’s and everything CEO Joey Gonzales has done to create a shared purpose for its employees and customers with inclusivity and equality top of mind. Gonzales has been fighting for LGBTQ rights for years and talks about his commitment to spreading a company culture of acceptance, togetherness, and fun in a recent “Leave Your Mark” podcast (~17:00).
Finally, in a world where people are scared to leave their homes, struggling to make ends meet, and fighting for basic human freedoms, MIRROR should proceed with caution when marketing their expensive product on the basis of functionality, price or celebrity endorsements. Today, celebrities are being looked at under a microscope for tone-deaf comments and insensitive responses to situations being experienced by the masses, and consumers are taking notice. According to Edelman’s Trust Barometer, celebrities rank last on the list of credible voices of authority behind virtually every other category of individual (including micro-influencers with small followings) unless a celebrity shares their hardships.
If MIRROR wants to turn around its reputation as “The Most Narcissistic Exercise Equipment Ever”, it would be wise to focus on clearly defining its values and putting them at the forefront of everything they do while keeping its customers— and their hardships — top of mind in its marketing, pricing, company culture, and everything in between. With these considerations, I believe LULU x MIRROR have great potential to succeed together, and I look forward to seeing how their relationship evolves over time. Kudos on an amazing deal!