BabbaCo – Case Solution

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BabbaCo Case Answers

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1a) Which of the two strategies would you recommend to the board of BabbaCo at the upcoming board meeting? Scale the business or refine the product?

I would recommend to the board of BabbaCo that it go with scaling the business.

1b)Support your chosen strategy with three pieces of evidence from the case.

#1: Product replicability

BabbaBox is in the education subscription service box category. While this category is new to consumers and may seem complex, the product offering itself is straightforward and highly replicable.

Although BabbaCo has the first-mover advantage and has taken the time to develop and refine the core offering with the data available to them, another player may take advantage of their learnings to enter the market and create the same or an enhanced product with less iteration.

Furthermore, as the creator of a new category, BabbaCo needs to explain to prospective customers what a monthly subscription box is and the benefits of its offering, while a new entrant needs only to explain why their box is better than BabbaBox.

This is a simpler and clearer marketing message and will likely be more effective with consumers.

Therefore, for BabbaBox to achieve sustainable long-term success, they should scale their business first and quickly and gain a large customer base and brand recognition. These assets can be used as a barrier to entry for potential new entrants and give BabbaCo the space to work on refining the offering and the content.

#2: Complexity of category

With the launch of BabbaBox in 2011, BabbaCo created a new category – educational activity subscription boxes.

In 2012, monthly subscription boxes were a newer concept for customers, and no brands offered the service in the education or child play space. Therefore, to drive customers to purchase, BabbaCo needs to invest in category education marketing as well as acquisition marketing.

From their historical marketing behavior, BabbaCo has learned that passive channels, like search marketing, are ineffective at bringing in new customers due to the infancy of the category and the complexity of the product offering.

This dynamic means that BabbaCo is likely to find limited organic growth – while some people may buy the brand on their own, many will need to be prompted multiple times to look at the offering before considering it.

Therefore, if they are looking to grow and show customer traction, they need to invest in active acquisition efforts to bring new prospects to BabbaBox.

#3: Immediate competitive threat

Kiwi Crate is a strong entrant who threatens BabbaBox’s position. While their offerings are technically in adjacent spaces – BabbaBox in education and Kiwi Crate in play – customers will likely see them as substitutes and choose one monthly activity subscription box to invest in for their child.

Although BabbaBox was first to market, Kiwi Crate is a strong competitor. They have significant expertise, with the ex-executive of PayPal and eBay joining the company. Given the trust in Sandra Oh Lin as a leader, Kiwi Crate also has more funding ($2M). These internal assets make Kiwi Crate a notable competitor.

And while Kiwi Crate and BabbaBox provide a similar offering, they are differentiated in two core ways. First, Kiwi Crate offers their product at a $10 discount to BabbaBox, financially incentivizing those debating between the products to choose Kiwi Crate.

Second, Kiwi Crate is focused on play, and BabbaBox is on education. Because moms take the education of their children seriously, they will likely spend their time doing comprehensive research about BabbaBox before purchasing.

For play, since it’s a lower-risk activity, moms would be more willing to try out a product with less information. This dynamic creates an environment where Kiwi Crate can thrive more easily than BabbaBox.

Given this competitive dynamic, if BabbaBox takes a more conservative growth approach and focuses on content, Kiwi Crate will likely gain a share against BabbaBox and become the market leader.

While this would transfer educational responsibility to Kiwi Crate, they would be able to lean on both their greater amounts of funding and a large and growing customer base to support their growth.

Therefore, in order to prevent Kiwi Crate from becoming the dominant brand in the market, BabbaCo needs to invest in scaling.

1c) List two objections that you might hear from board members for your chosen strategy.

#1: Channel Effectiveness

Currently, the active acquisition channels operate less effectively than the content channels. This is particularly evident in search, where there are limited queries for the category and product, but also on deal sites, where BabbaCo…