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HUBBLE CONTACT LENSES: Data Driven Direct to Consumer Marketing
Product Overview Hubble Contacts is an online prescription contact lens provider that offers daily contacts at an affordable price. The company sells FDA-approved contact lenses made with high quality ingredients that help maximize comfort and visibility. Hubble has made a commitment to sustainability by making both the lens packs and boxes recyclable. The colourful add on Facebook and Instagram promise a fantastic bargain: “Stop overpaying for contact lenses. Get 30 contacts delivered to your door for ONLY $1.” Captions like “wow” and “what a steal” splash across images of teal containers and lenses perched on fingertips, urging consumers to act fast. This social media marketing has been integral to the growth of the online contact lens start-up Hubble since its founding in 2016. It has raised more than $70 million from venture firms and companies like Colgate-Palmolive, which are attracted to its plan to disrupt the contact lens
2 industry by providing a line of low-cost daily lenses through monthly $39 subscriptions. It’s like Dollar Shave Club — for eyeballs. But Hubble’s early success has been criticized by numerous optometrists and ophthalmologists, who say that its direct-to-consumer model bypasses eye care professionals, that it does not properly vet prescriptions and that it takes advantage of federal regulations to sell customers its own brand of contact lenses. The company, they say, switches people out of their prescribed lens brands and into Hubble’s lenses, sometimes to the detriment of consumers. Those lenses, they say, use a material that some consider to be outdated and can sometimes not fit properly. The company says its sales are legal. And plenty of customers seem happy with the product. But others have developed eye issues after using the lenses. It’s a bit complicated, but in short the company is only selling one type of contact shape and size. This means that most subscribers are wearing the wrong type of contacts, which could cause bigger issues down the line if used for too long.
The Truth Behind Hubble Contacts Hubble contacts are made with a material called Methafilcon A by Shine Optical Co. Essentially, the lenses only come in one shape and size and the material they’re made from is outdated. Very few contacts are still made with Methafilcon A and most optometrists won’t recommend products made from the material. It’s considered a bad material because it impacts how much oxygen is able to get into your cornea when in use. This is important, and if your eye can’t get enough oxygen it can lead to deeper issues such as swelling and permanent damage.
SWOT analysis Strength: Among the considerable strength of the company is regular purchases and high consumer commitment amongst existing customer base. Hubble contact lenses have become a prominent brand for online streaming content all around the world.
Weakness: Company is only selling one type of contact shape and size. This means that most subscribers are wearing the wrong type of contacts, which could cause bigger issues down the line if used for too long.
Opportunities:
3 With the existing consumer base; the company can exploit the marketplace opportunities by expanding business operations in worldwide markets. Partnership with other companies like LensCart etc.
Threats: Competitors are also using the social media platform to market their products. The F.T.C. has received 279 complaints about Hubble and Vision Path, its parent company, since 2016, according to a Freedom of Information Act request. Strict Government regulation will create problems for Hubble. Q1. Evaluate Hubble’s current business model. Would you invest in their current fundraising round? Why or why not? What excites you and what worries you about the company at this point in its development? Current business model: Hubble’s current business model currently uses a direct-to-consumer (DTC) social media-based subscription that provides consumers with daily use lenses at lower prices. The Hubble model, through a mostly digital platform, offers a more personable and simpler conversation with the consumer. Hubble’s current model has been extremely effective in establishing some form of traction within the marketplace, focusing more so on new consumer acquisition and less on customer retention Investment: Recommended to invest in the current fundraising round for Hubble. In the US market alone, 75% of Americans required vision correction, with 12% of the population using contact lenses. Globally, contact lenses are a $9 billion industry, which is expected to grow to $13.5 billion by 2020. So there is massive market potential within the industry. Daily disposables has been an 18% increase in preference of disposables since 2012. Hubble has recognised a Year-on-Year (YoY) growth of fourteen times the cumulative number of customers, seven times the number of orders and ten times monthly revenue. With the current boom of the contact lens industry, in combination with the exponential growth of Hubble, it would be recommended to invest in the current round of fundraising to allow the company to scale. Excitements/worries: Hubble at this point: The previous system before the DTC business model can be considered slow, pedantic and fragmented. The category, dominated by larger corporations included high costs, inconvenient access and over complicated packaging. Hubble’s success is culminated through its simplicity and ease for the consumer, which in turn, creates brand preference. Company satisfaction seems to be very high for Hubble users, with post-purchase surveys outlining that 77% of customers say they would likely purchase through Hubble in the future. Such brand preference, in conjunction with the impression business growth
4 of Hubble are what should be considered the most exciting about the company at this point in its development. Q2. How efficiently does Hubble acquire and retain customers? What do they do well and what needs improvement? Hubble’s primary track: Customer’s retention average monthly churn rate of 4% which is not very high; Hubble had an annual churn rate of 16%, with almost 1 in 5 customers churning each year. Lincoln (2013), states that about 5-7% of churn rates each year is acceptable. Majority of the customers who churned was because they did not wear contact lenses every day and felt that a subscription was not needed. Hence, Hubble could broaden their subscription services and include quarterly subscription services, where customers could receive 30 contact lenses every 3 months. They do well: Hubble’s success in acquiring customers was due to the fact that they looked at all aspects of their online webstore especially streamlining their check out process. By supporting the best user experience, both on desktop and mobile, meant that Hubble’s website was easy to read and use; this is important as online shopping should be a convenient process. If Hubble is able to keep true to their value proposition, by providing cheap, good quality contact lenses, then customers are more likely to remain loyal. Need improvement: If the company has a better reputation, then consumers are more likely to stay longer (loyalty) within the brand, which leads to lower churn rates, and perhaps greater acquisition (Smithson 2015). If the product does not have good value, and you don’t have a great brand image, then it can lead to failure of the company. Q3. Assess how Hubble has used owned, earned, and paid media. What needs to change as the company scales? Why? Hubble has used all three types of media (paid, owned and earned) simultaneously. It is a comprehensive strategy that propels sharing and raises brand awareness, engagement and exposure. It is important to note that, majority of the sales came from earned media & Facebook/Instagram advertising. Hubble is quite meticulous in tracking their online metrics. PAID MEDIA: In total, Hubble allocated 78% of its paid media to online ads and 22% to traditional channels. Hubble started with paid media on Facebook, but also ran digital ads on other social media channels, including Instagram, Pinterest and Snapchat. Hubble found that in its early stages (six months after the company had launched), Hubble stated that 95% of their sales came from Facebook advertising, however overtime, Facebook advertising has become less effective as in April 2018, Hubble discovered that 50% of their new customers were attributed to Facebook’s ad delivery (based on Facebook Analytics). Contrastingly, 33% of customers stated that they heard
5 about Hubble through Facebook. In addition, Hubble also invested in some PR advertising and influencer marketing. OWNED MEDIA: Facebook is not only a good platform to promote and display ads, but Facebook also allows its users to share their reviews, and upload images such as Hubble’s contacts lenses online. This process can lead to high levels of word of mouth (WOM), thus further spreading brand awareness. This is evident because Hubble earned a net promoter score of 60, where 60% of customers rated Hubble a 5 (on a scale of 1-5, with 5 being the highest), and 33% rated it a 4. Hubble also can use its social media accounts (owned media) to engage with customers and their website, where their website is user-friendly with icons, which guides user through their experience. EARNED MEDIA: Hubble found that the bulk of earned media was brand search driven Facebook impressions. With enough ‘hype’ of the product, large publications publish articles based on their product, and links from these articles were more effective for driving engagement than straight product ads. Q4. As Hubble prepares to scale its business following its upcoming fundraise, how should they allocate capital across the following decisions? Which, if any, would you prioritize in the short term? a. Should Hubble expand its product line?
As Hubble has always focused on providing customers with disposable contact lenses, the possibility of expanding its "product offerings" could prove to be beneficial to the company. Hubble is considered to be a "consumer-friendly brand" where they are more open to other opportunities in extending their product line in comparison to other brands such as Bausch & Lomb who experience more restrictions as to where their brand can go. Cogan mentions in the case study that Hubble "currently have coverage for 55% to 60% of the market" suggesting that Hubble has opportunities to open up more of the market. They can also include products such as mascara or makeup as a majority of the customer base are women. If Hubble were to expand its product line, they need to ensure that users are experiencing a “simple, clean shopping experience” to ensure they do not get driven away from cross-selling. Therefore, Hubble should definitely consider expanding its product b. Should Hubble move beyond DTC? If so, should it open its own flagship stores, sell via a
wholesale model through retailers, or create a reseller option for opticians?
6 Hubble should keep DTC as the main focus, however, expanding on other channels of distribution such as opening their own flagship stores, partnerships with retailers, testing a reseller option. Hubble has managed to establish itself within the competitive market, they are now able to focus on other opportunities expanding marketing channels as this has been the next stage in their business model. Hubble is definitely looking forward to opening up more opportunities to see where the company can grow within the market. There have also been a few concerns about whether DTC has reached its limits which have caused Hubble to question whether they should continue to have a large focus on DTC. Hubble should thus, continue to stay as a DTC organisation as it has worked so well for them in the beginning however, other opportunities that arise such as opening flagship stores should definitely be a consideration. It is certainly a high priority for Hubble when it comes to scaling the business, however, it should be considered as a long-term goal to ensure that the expansion of its channels of distribution is done effectively. c.
Should Hubble expand internationally or focus on its business at home in the U.S.?
One of the biggest opportunities arising for Hubble when it comes to scaling their business is expanding Hubble geographically and therefore, a majority of the capital can be allocated to this opportunity. This definitely should be of high priority for Hubble in the short-term as other areas have proven to be interested in this market. In Canada, Hubble has already shown success in being able to expand their business beyond the US. Horwitz mentions in the case study that “the easiest thing for us to do is keep focused on selling one product. We could pretty easily expand internationally.” As Hubble is already so digitally focused, expanding internationally makes the process a lot easier. Europe, in particular, has always seemed to be an easier target for Hubble as they are so Facebook-driven and with Hubble’s aggressive marketing strategy with Facebook advertising, Europeans are more likely to be attracted to the business. Other areas such as Asia or Latin America, however, are faced with “very different market dynamics” making it a difficult process to expand Hubble in these areas. Expanding into different countries has a “unique set of challenges”. d. How do each of these scaling decisions impact Hubble’s integrated marketing
communications strategy? Hubbles “aggressive digital marketing-fueled customer acquisition strategy” has proven to be successful in brand awareness and can, therefore, be used to promote their new products if they choose to extend their product line.
7 Facebook is an effective way to promote products as it allows customers to access Hubble's "mobile optimised and streamlined e-commerce site" with just one click. Along with Facebook advertising, other sources of online advertising through other social media platforms such as Instagram and Pinterest can also be effective when promoting new products. Hubble has been able to "break through the increasing clutter of ads from DTC brands" they are now able to direct specific products to targeted segments. When it comes to distribution channel expansion there is an increasing need to focus on offline advertising. Hubble will need to reach out to a wider audience. Using more television campaigns would allow Hubble to gain more coverage and thus, raise awareness to as many audiences as possible. For geographical expansion, the current marketing communication strategy would not be impacted as much. As the focus is on expanding into Europe where a lot of the market is Facebook-driven, the use of Facebook advertisements will still be effective. Q5. What is the role of offline and online advertising in acquiring Hubble customers? Evaluate the following decisions facing Hubble regarding online versus offline media allocation: a. As of April 2018, Hubble is allocating 78% of its paid media spend to online advertising
and 22% to traditional channels (i.e., TV, radio, podcast, and direct mail). Is this budget allocation between online and offline appropriate and if not, how would you adjust it? In April 2018, $330,000 was spent towards traditional channels, and $1.17million was spent on online marketing. The budget allocation between online and offline is appropriate for the time being because with online advertising, it is beneficial to track online metrics. The budget allocated to Facebook and Instagram should be lower decreasing the budget from 61% down to 50%. Despite this, online advertising should still be allocated a majority of the spending because you can track the engagement and track your spending as well, in contrast to offline media. The media budget allocation should increase for Google/Bing Search and for Google Display, both increasing incrementally by 5% each (Google/Bing Search – 10% to 15% and for Google Display 1% to 5%). This is because the majority of Hubble users access their website through mobile phones, and through Google Display ads, it could be a re-marketing tool to aid customer acquisition. In traditional channels there is a lower chance that their target audience is watching TV these days, unless it is through a major sporting event such as the Major League Baseball World’s series. Hence, the 22% of marketing on traditional channels should remain the same, unless there is a major event that is televised on TV. b. Based on the results of the TV campaigns, would you recommend that Hubble switch
some of its spending to TV? Why or why not? How much? As displayed in Exhibit 11, when spending on TV campaigns decreased during mid-November 2017, sales also significantly dropped in the same time period. In Exhibit 12, sales after
8 advertisements on TVs showed a rise of around 12.5%. Additionally, Rosen stated that within the comparison prior to and immediately following the broadcast, new customer acquisitions from Facebook grew 25%. Using the assumptions in the case study, the CAC came out to be around $20 dollars ($200,000 / 10000) after TV advertisements, whereas prior to the broadcastings, the CAC was around $100. Therefore, due to the success of the TV campaigns, Hubble should definitely switch some of its spendings to TV. As Exhibit 9 displays that only 12% of the media budget is allocated to TV in comparison to Facebook/Instagram, Hubble should perhaps allocate at least 20% to TV and reduce some of it from Facebook/Instagram. c.
Should Hubble continue to spend the bulk of its budget on reaching new consumers or reallocate some of that spending to retarget those who have already been exposed to its ads? Why?
Hubble should definitely spend more time in retaining customers rather than continuously focusing on acquiring them. Results from a Facebook Campaign in Exhibit 10 of the case study displays two campaigns that Hubble posted in the month of April 2018. When releasing the first campaign to prospecting customers, conversion to purchase rate was only 0.02%. When Hubble released their retargeting campaign in order to target those who had seen Hubble’s ads but did not complete a purchase, conversion to purchase rate increased by 0.63%. This demonstrates that users were more likely to repurchase after having a campaign retargeted to them.
