Pets.com was founded in 1998 with a simple name and mission: to sell pet supplies online. In February 2000, the company IPO’ed on the NASDAQ and managed to raise over $300 million in financing over the course of a two-year lifespan.
Its sock puppet mascot made appearances on “Good Morning America” and “Nightline” and was featured in Time magazine and Entertainment Weekly. At its peak, the company had over 500,000 customers and over 300 employees.
Pets.com had first-mover advantage, name recognition, intellectual property real estate (.coms were the only game in town back then), incredible reach, and a seemingly sound business model. But on Nov. 9, 2000, Pets.com ceased taking orders and laid off 255 of its 320 employees.
At one point, the company was spending an astronomical $400 to acquire each new customer. This turned people onto online retail in general. However, since there was no brand delight, people made their first order but went to other online retailers for subsequent purchases. Customers didn’t have a reason to return to them specifically, nor did they have a reason to recommend them to acquaintances.
The Pets.com lesson is relevant to the early days of the cannabis industry. With content marketing, native advertising, word of mouth, and social media at everyone’s disposal today, the barriers to reach are significantly less than they were in 1999. With all this noise, inbound strategies have to be accompanied by stronger -than-ever brand differentiation.
Eerie similarities to the dot-com era have already emerged in cannabis. A large percentage of the communications, branding and marketing is focused on raising capital, rather than identifying and delighting clearly understood and highly targeted market segments.
In stark contrast to Pets.com is a small storefront on Spring Street in New York (in Soho) housing an iconic restaurant called Rice to Riches. When a friend in the media business brought me there in 2007, a sign at the back of the store made a lifelong impression on me: “We sell rice pudding. If you don’t like rice pudding, you should go somewhere else.”
Despite targeting exclusively rice pudding fans, Rice to Riches’ success is derived from knowing its consumer and clearly demonstrating qualification to that audience.
Unfortunately, all too many cannabis companies and investors’ money follow the playbook of a Pets.com rather than a Rice to Riches. There are countless examples of companies in the cannabis space who want to be everything to everyone. Some cannabis companies understand the need for targeted market segmentation, but they are still stuck on categories that are still way too broad (for example, we are the cannabis company for modern women).
Instead, these companies should be delivering on a clear and — most important — communicable brand promise to a segment of potentially loyal consumers with a shared set of values and needs. If you can’t make it obvious to a consumer that they should purchase your company’s product again, and not just cannabis products in general, then your dollars will be wasted, going toward convincing consumers to eventually support your competition.
On the other hand, if you can create an experience that’s so delightful and un-generic that it could only be delivered by your company, then your customers will become your best advocates, inviting their friends to try it — even if they claim they don’t like the smell of rice pudding.