Very extensive comment and great questions, Raffa!
Re: how the company scales their sales/customer service of studio partners as ClassPass grows, I believe the company scales relationships with studio growth by applying a “Good-Better-Best” segmenting model to its partners, offering its Best-level partners very extensive customer service (quarterly business reviews, in-person attention), with commensurate account servicing for its Better and Good-level partners (e-mail responses to questions).
Re: ClassPass’s performance as a thought leader in the space, the 95% studio retention metric referenced above indicates that overall, studio partners are quite satisfied with the value proposition CP provides them, including the thought leadership. Take a look at this content they created on how to retain first time customers, posted on the ClassPass blog by “a member of the Studio Happiness team at ClassPass in New York City.” http://afterclass.classpass.com/10-steps-to-retaining-first-time-clients/
Re: your suggestion to enter into the brick and mortar studios business by building new ClassPass brand studios, it’s an intriguing thought but I believe Clicks-to-Bricks will not work in this situation for two reasons, combined: 1.) It is not in the company’s core competency 2.) It (unnecessarily) threatens their relationship with partners studios (i.e. one entire half of their two-sided marketplace) by competing directly against them, which is a HUGE risk with unknown reward.
Rather, a more de-risked growth strategy that is also more aligned with their company mission to encourage women to take more risks, try more new things, and live more active lives, is extending their existing booking platform & tech stack to adjacent offerings, as I mentioned above, which they are currently experimenting with.
Great points, B.
I read your article linked in the comment, very informative – thanks. I think this line in the article is particularly telling: “As ClassPass has gotten so much bigger, I’ve basically stopped using it because it’s so hard to get into the classes,” Ms. Buckley said.
I agree that the balance between supply, demand, and convenience across both sides of the marketplace is a balance that CP will have to continue to optimize over time (I believe the dynamic pricing of classes on the partner side is one way to address this), with the continued risk of losing subscribers and studio partners.
Re: customers, they’ve built policies aimed at high month-to-month retention such as charging a reactivation fee for canceling and then re-activating a subscription.
Re: studios, notably, as of May, studio retention rate was 95% (http://www.businessinsider.com/how-classpass-wants-to-help-studio-owners-2015-5), which is incredibly high and is a very positive indicator of CP doing an excellent job of studio retention so far.
Hours?? Wow. That reminds me of Shake Shack in NYC for the first couple years it was in operation. However, this is no longer the case after significant expansion – just look at the one in Harvard Square.
Not sure how similar the two cases are. Just wanted to draw the parallel and put it out there. Maybe Ben can comment.
Thanks for your thoughtful response, Vitali!
Re: your first concern, you’re right that the model depends on having appropriate density and variety of class offerings per location. ClassPass considers having a pre-existing boutique fitness ecosphere to be a vital factor for a new market, which is why they haven’t expanded to a new city since March 2015. At the same time, the company is considering expanding the subscription booking model into adjacencies that make sense for their target user (concerts/music events, hair/beauty appointments, sports lessons, volunteer opportunities) to decouple their growth from being so 1:1 with growth of boutique fitness studios.
Your second concern is also spot-on in pointing out one of their greatest issues with assuring partner incentives. It’s something the company deals with on an ongoing basis. They are constantly working with studios to ensure that the partnership is net positive for the studios. As I mentioned above, they dedicate resources to providing analytics around customer retention and LTV for the studios. So far, they’ve found that over the course of a year, a person goes to a studio more with CP than on their own. They are also working on a more longitudinal study to affirm their belief that LTV per customer with CP is higher than LTV per customer without CP for a studio.
Very enlightening, Hilary! I grew up with a Trader Joe’s just a few blocks away and I’m one of these “cult followers” now. I even introduced Tariro to Trader Joe’s for the very first time and showed him all the best things to buy on his first trip.
I was wondering, does selling items under the Trader Joe’s brand [rather than ‘original label’ do more than just infer quality? I.e. do they save costs somehow by selling their ‘favorite olive oil’ under the Trader Joe’s label rather than the label of the supplier?
Thinking about it, it strikes me that Trader Joe’s is one of the originators of “curation” and “radical transparency” that millennials love so much today 🙂
Really well written, Janine!
Re: your line that “Everlane would do well to consider the effect of deliberately low inventory on missed sales and earnings opportunity,” I was thinking the same thing as I read about their deliberate under-production strategy. I noticed that mm la fleur does it too, and I understand the publicity value, but it seems annoying for the pot’l new consumer.
Do you wear/buy Everlane? I just looked at the Petra backpack you referenced, and it really is beautiful, but it doesn’t come close to “luxury essentials under $100” in terms of price. I have the Twill Snap Backpack, but I stopped wearing it.. the snap clip ring is separating from the fabric a bit. I’ll try email@example.com and let you know what happens.
One last note – I noticed that they have Everlane Now (1hr delivery in Manhattan). I’d love to know how that fits into their business and operating models.
Wow, I have never heard of this before! Fascinating, thanks for writing about it! I would love to go visit Dafen. I can’t believe that some painters are responsible for perfecting just one brushstroke. I wonder how similar, if at all, this is to “traditional” master-apprentice ways of learning how to paint – if in the “olden days”, this was the way to learn. I wonder if these artists are gaining skills as they work, and if this fact distinguishes it from the same “factory-style” work in manufacturing that we learned about in class. I also wonder what the distribution of men vs. women is in this role.
Interesting idea, Anthony. I would see that almost as more of a retention play for a company rather than a customer acquisition play, which I think is more of what BirchBox offers to its cosmetics partners.
I went to this Fireside Chat too, and I loved how open, honest, and modest Hayley was, and how the idea for BirchBox came about very organically for her & Katia.
Interesting post, Damjan!
My old company used SKYPE as our enterprise chat through 1800+ employees, LOL. Then when we finally switched, it was to HipChat, which I actually really disliked and I thought had terrible UX. I’ve used Slack a bit too, but not as extensively/professionally/on a daily basis enough to feel all the pain points.
What do you think sets Slack apart from its many competitors (business or operating model or feature-wise), including HipChat?
I love Blue Bottle too, it’s heavenly. Where is that Blue Bottle in the photo?
I’m curious to know who is on their Board of Directors (external board members) and how their opinions range on their main issues. I just looked it up and crunchbase says it’s Garrett Camp (Founder @ Expa, Co-founder @ Operator, Co-Founder & Chairman Uber), Tony Conrad (co-founder and CEO of about.me & VC), Ryan Freitas (co-founder and chief product officer of about.me), and Steve Jang (Founder and CEO @ Schematic Labs, angel). Notably, none of them deal in traditional supply-chain management in their own businesses. Operator comes closest (personal shopping type app), but I’m pretty sure they’re 100% drop-shipping, they don’t create any goods. I would love to know how they are influencing Blue Bottle’s strategy (if much at all, since Freeman seems to be very opinionated/’visionary’).
Do you think they (and management) see this as a “huge scale” opportunity ($88BN MCAP like SBUX?). I’m guessing with $70M in VC funding, that must be the general belief, but I wonder how they are planning to do it with their self-imposed restrictive operation model on retail stores. That leads me to belive that growth must be more predicated on Blue Bottle at Home / ready-to-drink… what do you think?