A Letter from the CEO
Andy Dunn — December 7, 2009 @ 4:45 pm
Bonobos learned some important lessons in 2009 from two mistakes we plan to make only once.
We over-advertised and over-promoted our product. We discovered that spending money and energy advertising and promoting to customers is a good way to scale a bad business. We offered discount and promotion codes that reward a behavior that we founded this company, in part, to eliminate: guys spending time shopping.
46% of you re-buy at least once within a year. 91% of you have said you intend to, but haven’t yet. The #1 reason why? Price.
Today, we take action on this data and the numerous emails begging for better prices. We are eliminating the lion’s share of our discounting, promoting, and advertising, and re-pricing our entire assortment to the prices you asked us for. Khakis and cords are now $88 to $100. Wools now open at $165. Polos and swim lock at $55 and $35, respectively.
So, does this mean business is bad? We hope not. We are on pace to do 2.7x sales year-on-year, we had positive cash flow from operations this past month, and we are working hard to build a sustainable enterprise.
We are taking the same money spent on promoting, discounting, and advertising and devoting it to new product development. Better-fitting gifts? Done. Better-fitting weddings? On the way. Better-fitting dress shirts? We’ll start eliminating the billowing muffin top (BMT) sister problem to khaki diaper butt (KDB) in 2010. Message me on Twitter to be added to the shirt beta.
Most importantly, we want you to know how honored we are to have your business. We believe you deserve better fitting clothes and a shopping experience that better fits your busy day. Recent surveys show a net promoter score of 74, which is not bad. But we are not impressed with ourselves yet. We will pat ourselves on the back when we hit 90, and then we’ll get right back to work to fit you and serve you better.
Happy Holidays,
Founder & CEO
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As a marketer, I think you are making the right decision. Customers get hooked on discounts/coupons/sales and wait until they happen rather than ever paying full price. But if your full price is the constant price, and the value of the product remains high, you’ll do better in the long run. That’s my two cents.
And, no, I haven’t bought yet but I want to once I got back on my feet financially after a year laid off. I’m getting stable again and will DEFINITELY my next pair of pants from you.
Your ad in this week’s T Magazine for the NYT was awesome. It’s about time someone marketed men’s butts in a normal way (a feature worth showing off), not in a CK perfect body way.
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Makes me think I overpaid for the 9 pairs of bonobos I currently own. I guess that makes me the idiot though.
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Marshall Roy Reply:
December 8th, 2009 at 12:06 am
Mark,
First of all—nine pairs!? Thank you for your business. We are privileged.
Secondly—why does anybody have to be an idiot? We didn’t lower our prices because our pants were overpriced—on the contrary, we have a much narrower profit margin than traditional apparel companies, and now it’s even narrower (that’s what European fabric and American construction gets you). But we did it because we realized it was the right thing to do. Why distribute discount codes in our ads, so that some customers get a better price than others? That’s not fair. Instead, we’re giving everyone a discount, permanently, and we’re not going to offer any more advertising discounts. So when you shop Bonobos.com, you know it’s the absolute best price you’re going to get, period.
Don’t worry. The ninjas have your back on this one.
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I know there is no simple solution but as someone from Canada the main thing stopping me from making a purchase is the uneasiness I have with buying clothes online.
Your return policy is great, for Americans, but paying to return pants that don’t fit properly is a tough mental hurdle for me to get over.
Maybe I’ll stop in to try them on in person next time I’m in NYC, you guys have a store right?
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Michael Butts Reply:
December 8th, 2009 at 2:02 am
Spencer,
I know it is a tough hurdle to get over at first, but trust me it is worth it. I can tell you from experience that the ninjas are second to none. And most importantly the pants are second to none, try one pair in your normal size and I would suggest one a size below, then return the one that does not fit utilizing the ninja’es expert prowess.
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Dan Reply:
December 8th, 2009 at 9:35 am
Spencer-
For what it’s worth, I wear the exact same waist size in Bonobos that I would wear at Banana Republic or Gap. In my experience, the fit is true-to-size and simply beyond compare.
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Start making shorter-rise pants, please!
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Is there any way to get in the shirts beta for those of us who aren’t on Twitter? I would love to try them out but don’t want to start a Twitter account just for that.
Also, does the fact that you’re getting rid of promo codes mean that you’re eliminating referral discounts as well?
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Marshall Roy Reply:
December 8th, 2009 at 11:12 am
Aaron,
Sure, we’ll put you on the shirt beta list!
We’re not getting rid of referral discount entirely. You’ll still be able to send emails to your friends and associates recommending Bonobos, and those will still yield store credit rewards when you bring a new customer our way. But we are discontinuing the “public code” option, which we’ve found disproportionately rewards some people over others.
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Stanley Reply:
December 9th, 2009 at 9:57 pm
Me too about the Shirts Beta (I don’t have a need to be on Twitter). Love the pants. Hope you can do the same thing for shirts as you’ve done for pants. Count me in!
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Nicely played Mr. Dunn – I believe I read a story this week where the Supervalu CEO had trained customers through high and low pricing strategies to only buy items when on promotion – obviously at a huge hit to gross margin.
Every Day Low Pricing (or EDLP) as we call it in the business is clearly the way to go – and in the long term, customers appreciate this retail strategy more (think LL Bean, Target).
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You are oversharing with your customers way too much. Including Tweeting about how much in sales you do on certain days.
If you pander so much to customers who worry about price, you will never be able to please them. Never. And you will never be able to raise your prices. It’s much harder.
There is no need to go into such detail with your customers like this.
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Marshall Roy Reply:
December 8th, 2009 at 2:36 pm
Axel,
Thanks for the feedback. Many people are refreshed that we don’t just pay lip service to corporate transparency, but actually practice it. You make a good point—it was risky of us to lower our prices, but ultimately we believed it’s the right answer for our business. And we have a snore-fest of analytics to back up the decision. Like Troy said, when you build trust with your customers that you’re offering them the lowest price, always, they don’t have to stress about sales, promotions, discounting, and all that other annoying stuff. That yields a much better and easier experience. (Apple has done a good job of this, for instance.)
The communication thing is a two-way street, by the way. We hope you’ll always feel welcome to use this blog, Twitter, or ninjas@bonobos.com to send your feedback our way. We take it very seriously!
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Bravo on thinking of your customer first!
…But I wonder if your new pricing strategy might negatively affect your brand value. You make premium pants with great fit, from awesome materials; but by promoting/advertising less, a new customer might wrongly identify the quality of your product with its inexpensive price and just go to the Gap instead. The prestige of your brand might be at risk.
Also, with promotion codes, customers get that great feeling of buying a premium product on sale, of snagging a great deal… and who doesn’t love that feeling?
Sorry for blabbering, just playing devil’s advocate — I’m excited to continue to keep up to date! You guys rock!
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Marshall Roy Reply:
December 8th, 2009 at 5:24 pm
Helen,
Definitely a valid point; thanks for bringing that up. While there is definitely an excitement associated with getting a “deal,” it’s sort of artificially constructed, isn’t it? We don’t want to play head games with our customers. We want to offer them the best products possible at the best price possible. I think our value proposition will win the day—our hypothesis is that that’s all men want in the first place.
As for brand prestige, that’s another good point, but I’m not too worried. We’re always working on higher-end projects, whether it’s $1100 tuxedos or $195 holiday pants. We can sell $88 khakis and cashmere pants for your wedding party and still stay true to who we are. It’s like BMW—you can buy one for $30,000, or $130,000, and they’re both good.
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Eido Walny Reply:
December 9th, 2009 at 11:29 am
I disagree with the BMW analogy completely. BMW sold the grossly underpowered 318 for a few years. It was the affordable (read cheap) BMW. It certainly hurt the brand because it was a bad car and a new market of people bought it only to find it was bad. This led to the thinking that BMW’s were just bad cars. To this day, BMW still suffers from this brand hit. For $130,000, you get a great car. For $30,000, you get a VW with a BMW nameplate. A number of other car companies travelled this same road with similar results. See Porsche 914.
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Marshall Roy Reply:
December 9th, 2009 at 11:45 am
Eido,
OK, you got me. I know NOTHING about cars. Just trying to find an apt analogy. What I was trying to convey is that we feel we can be a brand that offers items priced competitively with mass-market items AND items priced competitively with high-end designer labels. We don’t feel it cheapens us in the least, it merely makes us more appealing to customers with different preferences.
Eido Walny Reply:
December 9th, 2009 at 11:33 am
Furthermore, isn’t EVERY deal artificially constructed? Someone sets a price, which is in itself artificial, and then some mechanism, be it negotiation or a coupon, lowers that price. Aside from theft or mistake, I cannot think of any other way a “deal” works. Any way you cut it, though, Helen’s point about the deal buzz is absolutely true. I am always happier to buy a $120 item for $90 than a $90 item for $90.
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Marshall Roy Reply:
December 9th, 2009 at 11:49 am
Eido,
Not exactly. The sense of excitement one gets from a “deal” is artificial. I agree, it’s fun—I get excited about deals, too—but at the end of the day, we’re banking on consistency, value, and fairness, rather than traditional retail machinations. We think that’s what men really want when buying clothes.
I have followed you guys for some time and love your promise for quality, customer service and transparency.
I read Andy’s letter yesterday and felt like it was a letter to the stockholders rather than a letter to your fans and customer base.
I agree with Axel above and feel like his comment wasn’t take to heart. I’m less excited hearing about your revenue percentages, growth and current successes of the company. I’m always excited hearing more about your brand.
I wish you guys the best of luck and continued great revenues. But as a consumer, (and fan) all I care about is your brand and product!
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Marshall Roy Reply:
December 8th, 2009 at 5:17 pm
Luke,
I hadn’t thought about it that way. Thanks for the eloquent counterpoint.
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What an embaressing letter to have to write basically indicating that your pants are overpriced and that you have been shelling out tons of money on advertising never really thinking how that would ultimately effect your bottom line. Definitely tells all your customers, I used to be one, that you have no idea how to run a business. Why do customers care about how much you advertise or how that effects your bottom line. I agree with Axel that you guys are telling us info that we could really care less about and if anything realize that we’ve purchased clothing who know nothing about the clothing industry…go back to school!
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Marshall Roy Reply:
December 8th, 2009 at 9:33 pm
Brian,
Thanks for the candor and vigor of your feedback. I’m sorry that you’ve lost esteem for us, but I must strongly disagree with your assessment (as would the dozens of customers who wrote to us thanking us for our honesty and openness). If you read my reply to Mark earlier, you’ll know that our products are not overpriced—we source expensive fabric and have the pants sewn here in New York (how many other popular menswear companies can say that?). Our costs of production are very high, and that’s why our products are priced the way they are. Our decision had nothing to do with the value of our product, it had to do with our practice of offering discount codes in advertisements. We realized that offering a lower price to some, but not to all, was unfair, so we decided to offer EVERYONE the lower price. If we stopped discounting entirely, but kept our prices the same, would you be angry? Do you disagree that we’re doing what’s best for our customers, even if it makes our jobs a little bit harder? Do you think that’s a bad way to run a business?
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Dan Reply:
December 9th, 2009 at 12:54 am
For what it’s worth, I appreciate knowing how a company I’m interested in is doing. Obviously, I don’t care about the bottom line of a company like Nike, Banana Republic, or Lacoste. But when I find a smaller company that I like (such as Bonobos or Ian Poulter Design), I am interested in the company’s success and it’s dealings. I feel invested in a company’s success when a company is smaller.
Is it possible that at some point Bonobos will become large enough that I lose interest in the minutiae of their operations and success? Sure. But I’ll never begrudge someone that sense of involvement and the feeling that they are doing something right by supporting a company with a great product that is manufactured in the United States (and for what it’s worth, I’m very much a free market supporter so it’s rare that I’m particularly swayed by the “Made in the USA” ideal). If I ever lose interest in the inner workings of Bonobos, I’ll simply stop paying close attention to their day-to-day information and shop their website when I’m looking for a new article of clothing. But to claim you have lost enthusiasm for a company because they operate in a somewhat transparent manner sort of smacks of a “take my ball and go home” mentality. How does it negatively impact the average customer if Bonobos chooses to reveal a little extra information?
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I applaud you Andy. Always looking after the customer at Bonobos. I guess I’ll be buying more once some new styles come out. I think I am at 18 pairs of pants and then some polos, trunks, belts, and shorts as well.
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Michael Butts Reply:
December 9th, 2009 at 1:28 am
couldn’t agree more Scott, as usual. The open discourse that we as customers receive from Andy, Marshall and the gang is a reason I am invested in this company. And not just financially, (though I’m coming for you Scott 10 pairs, 6 polos, shorts and a pair of trunks…more to come after christmas, but I digress) but I feel a personal investment in the company. I’m proud of the owning clothes that fit great, and come from a company with a real face to it. I have a decent idea who is behind the scenes at Bonobos, I know some of the charities they support and even some of their socio-political views. And where does this come from? From Andy and the ninjas sharing with the customers on the blog. These are reasons Bonobos has my loyalty as a customer, I trust the product, I trust the brand, I trust the employees.
Frankly I support the price change. Yeah I was one of those guys who got a lot of discounts via e-mail or other sources and yes every time it was a pretty cool thing. But one of the hurdles I have come into trying to convince my friends to give the brand a try is the price. Frankly, I think this will help bring new customers in and since I want to see the brand do well I am all for it. And to be honest I benefit too, so that doesn’t hurt.
Keep rocking guys, you’re doing a great job
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Troy H Reply:
December 9th, 2009 at 10:40 am
The way I understand it the referral program is still in play no? Just no more public discount codes?
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Eido Walny Reply:
December 9th, 2009 at 12:09 pm
The referral program is still in effect but is much changed. $30 off instead of 30% off of first purchase and the buyer needs to spend $100 to get the $50 referral credit, but that’s much harder to do now that prices are lower (and once you add the $30 discount).
Marshall Roy Reply:
December 9th, 2009 at 12:39 pm
Eido,
I’m afraid you have some misconceptions about our referral policy, which I’m glad to clear up—it’s our fault for not messaging it effectively. The order minimum is taken BEFORE the discount. As to whether the $100 minimum will remain in effect, that’s actually something we’re figuring out right now. Personally, I’d like to see it go down to $88—that way, if you order any of our pants, your referrer earns the store credit. And you’re right—most new customers will buy one pair. Which means that if they order one of our cotton or corduroy styles (our most popular by far), they’re getting an as-good or BETTER deal than 30%: If they buy one of the $88 pants, the discount is 34%. If the new customer buys $100 pants, the discount is still 30%.
The gift packages are not, and were not, eligible for discounts, since they are essentially “bulk” pricing to begin with. Shoot me an email (marshall@bonobos.com) if I can answer any more questions—we’re sorry we aren’t more explicit on our site about how this all works.
Maybe I am just different, maybe it is just the B-School dork in me, but I love Bonobos not just for the product, but for the business model. I love that the Ninjas will bend over backwards to help a customer and I love the pants, because of that I am also interested in the day-to-day operations of the company. This isn’t Gap, this is Bonobos and it thrives on openness. Coming out in an open letter and admitting making a mistake and reworking the pricing strategy was the right thing to do and from what I have seen and heard during my time shopping with Bonobos it was the only way I could imagine Andy handling it. Thanks again Andy (and the rest of the team) for exceeding my expectations.
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Bonobos doesn’t (at the moment) make all the cuts of trousers (slim low rise) that I want but for what I have brought from bonobos has been awesome. Making quality clothes with quality fabric is expensive (proper quality selvedge jeans are like $200+ at least) and making stuff in US/ UK/ Europe is REALLY expensive. Even more so when you’ve got a smaller production run than the big clothing companies. Look at how much high end designer labels charge for their quality wares. Serious cash.
$18 less for the chords is nothing to be sniffed at (what’s that, 3 big mac meals? haha. That means if you brought them at the higher price your pants will fit better) but it’s not like the trousers are now half price. I’m not rich either, I’ve got gap jeans like everyone else, I have to save up when I want to get some quality sartorial clobber.
Seriously though, I’m sure everyone can sympathise if you’d brought a few trousers at a higher price. Every company has things it has to iron out, change things around now and then. At the end of the day bonobos makes really nice trousers at what I think is a realistic price for the quality you get and the customer service really is top notch, personable and friendly. I’ve exchanged trousers I wasn’t happy with the size of and there was no problems what so ever and I’m all the way in the UK. You can’t email gap or diesel and get any help on choosing size and talk about fits and colours etc etc.
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Brian – I’m sorry but your commentary is completely out of line – atune to common internet trolling. You lose all credibility with the close to your post – “go back to school”
I guess all the CEO’s of the publicly traded retail companies which in this economy have had to cut ad budgets in order to compete more on price to drive sales should all go back to school as well?
You have the right to disagree with the strategy the company is taking, but you could certainly be a little more adult about it.
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I can understand the desire to cut the public discount codes, but why was the referral program gutted in the process? The program used to be either 15% or 30% off for the referral and $50 to the referor if the referral spent $100 or more. Now the referral only gets $30, while the $100 minimum is still in effect. Since many of the pants are $100 or less, the new customer would need to buy 2 pairs to qualify the referor for the $50 bonus. But with no tax and no S&H, is it not more reasonable for that person to start with one pair to check things out? That’s on the low end. If they had the mindset of absolute value, you could have bought the $1000 gift pack (a $1500 value) for $700 (54% off) if you used a 30% referral code. Now you can knock that price down $30 to $970. I have a friend who is still kicking himself for not having jumped on the 30% off of the $1000 gift pack.
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Geez… people are pretty fired up about this! I don’t think I have ever seen so many people act upset about lower prices.
Thanks for the clarification about the referral program, even though I got to take advantage of a “referral or two,” I was always a bit confused about how it worked. From the customer standpoint, the $30 off is a great way to be introduced to the brand. Plus, $30 off of $100 ($70) is better than 30% off of $118 ($82.60).
I would say that the service I have gotten has been so good that I DO care about how much biz the company is doing – I know that means that people like Marshall and John Rote get to eat!
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I own a bunch of pairs of pants. They hold up to dry cleaning, a lot of wear and tear and late nights of partying and boozing. They continually look and feel great. They have proven time and time again they hold up against the elements that face the modern man who puts a lot of stress on their pants/clothing.
I have had multiple pants altered, tailors all over NYC have remarked on the quality of the stitching and materials used in my bonobos.
I appreciate the candor, honesty and “business snapshot” contained in the letter. As someone who has bought multiple pairs at full price, I do not feel slighted or manipulated. I thought the swimsuits at $75 bucks were completely mispriced, so i didn’t buy them. At $35, they make sense.
As long as the quality continues to be great, I will roll with the growing pains of the business. End of the day, the smart consumer knows they are saving $$$ anyway, they will replace their trousers less often when they buy bonobos.
Keep up the good work fellas.
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I wonder why you didn’t reward loyal customers like myself with an occasional discount? After awhile I became so disheartened that I simply stopped shopping with Bonobos.
I also own a business. We sell books. And we spend more time trying to figure out how to reward people who continue to shop with us than trying to drum up new business with continual discounts. We got burned doing discounts. Now we upsell.
Perhaps in a few years, I’ll buy another pair of pants from Bonobos, but not anytime soon.
The time that will have gained from not being in advertising meetings might be spent thinking about rewarding loyalty. Once you lose that, it is very difficult to get back.
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It seems the main jist here is you are looking to pass the savings to your customer. Can’t you do this by having these manufactured overseas? Having these pants made in America is something that is wonderful to hang your hat on, but is making that statement more important than cutting cost drastically and ultimately passing the savings to your customer? Do you avoid this as a matter of principle, or can they not execute your desired quality?
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Drew Snyder Reply:
December 29th, 2009 at 7:34 pm
Todd, in the clothing (and shoe) business, I think a company’s goods suffer a notable decline in quality when manufacturing is moved overseas (e.g. Johnston & Murphy). I’m glad Bonobos is avoiding this option. Besides, it’s not as if Bonobos has started charging next to nothing for their pants. Chinos from Bills Khakis – a very admired American pantmaker – retail for $97.50, so Bonobos is still comparable to higher-end American manufacturers.
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[...] Dunn, Bonobos CEO, touted the company’s net promoter score of 74 (a great score) [1]. Customers loved the product. The [...]
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