In its second-largest acquisition, Amazon buys the company for $970 million.
A small manufacturer of an over-the-counter cold sore remedy goes online to create an offline market.
The strength of the current of bricks-and-mortar stores posting online offerings would rival the fiercest river. But PureLip.com, a small manufacturer of an over-the-counter cold sore remedy, is almost salmon-like in swimming against the current. PureLip’s goal is to go offline.
PureLip.com, the brainchild of a young entrepreneur, launched online with the goal of transforming online success to retail shelf space. By making some savvy marketing moves and closely watching its cash, the company now has its product on the shelves of 8,700 drugstores, including Walgreen, Osco and Sav-On. The company has taken its product from conception to wide distribution in less than 3 years on about $1 million it raised from family and friends. Since the company hit the drugstore shelves more than seven months ago, it has brought in more than $1.2 million in sales.
The 29-year-old Pure Lip Founder and CEO Robert Moffit is a chronic cold sore sufferer who has been developing the idea for Pure Lip for about 10 years. In 1998, the Georgetown University magna cum laude in finance with minor in economics and a concentration in biological science teamed up with his former college roommate, and now a pharmacist, Peter Koshland, to begin research and development. “He and I surrounded ourselves with experts,” Moffitt says. Moffitt had worked in investment banking, focusing on mergers and acquisitions of healthcare software companies and ISPs. He brought together those he knew from Georgetown; friends, like childhood pal Jeffrey Jarmakani, a medical consultant; and family members, like his father John Moffitt who serves as general counsel. He also sought experts in the field, such as Reginald Taylor, who invented Zinc Glycerolate, a key ingredient in Pure Lip.
Moffitt credits those experts with providing the direction Pure Lip needed to be successful; they now make up an advisory board of experts from medicine, dermatology, public relations, consumer health and chemistry, or work as hired consultants. Pure Lip outsources all advertising, fulfillment and manufacturing.
Pure Lip launched its prevention product in September 1999, then its remedy product in June 2000-just one year after Moffitt hired his first employee, President Nicholas Meyer. Meyer, a fellow Georgetown grad, brought retail experience to the company following a career in advertising where he developed domestic and international brand for Wendy’s International. By September 2000, the products had reached drugstore shelves.
Although Pure Lip started as a pure-play dot-com, Moffitt says he never intended for it to remain one. But, the new company did travel the same road as many pure-play online retailers-and it learned some hard lessons along the way about building dot-com brand.
After experimenting with marketing approaches, Pure Lip learned that search engines brought the most customers. Conversion rates of customers who came in through search engines are 7%. “Those using the search engines represent high-quality traffic,” Moffitt says. This is because search-engine traffic is made up of people actively looking for a cold sore solution. By contrast, conversion rates through affiliate programs were a mere 0.5%. “When you’re pushing the information to the masses through the affiliate programs the quality of the visitors goes down-as do the conversion rates,” Moffitt says.
Conversion rates from banner ads are no better. After spending 95% of its marketing budget on banner ads with little results, Pure Lip pulled in its spending. “By the first quarter of 2000, the search engine traffic started to kick in,” Meyer says. “We realized that it was a money-burning proposition to continue with the banner buys.”
Flooding the e-mail room
But Pure Lip’s biggest brand-building coup was not aimed at its online customers. Rather it was aimed at getting those customers to persuade bricks-and-mortar drugstores to carry the product. What Pure Lip calls its Drugstore E-mail Campaign works like this: Pure Lip placed a button on its site asking customers to write their favorite drugstore asking it to stock Pure Lip. Customers wrote whatever they wanted about the products and the e-mail went directly to the drugstore’s customer service department or product buyer.
“We couldn’t have scripted it better,” Meyer says. “These impassioned e-mails from consumers had an evangelical tone and were very compelling for the retail buyers.”
And part of what made them so compelling was their authenticity, Moffitt says. “These were not e-mails coming into Pure Lip and then we’d republish them,” he says. “These were direct correspondence between the customer and the drugstore retailer.
Will Ander, partner with Chicago-based consulting firm McMillan-Doolittle, says he has not heard of any other company taking this approach. “It’s an interesting approach,” he says. “What a wonderful way for retailers to get consumer research.” Ander cautions that the strength of such a campaign rests squarely on the quality of the product. “If it’s a good product, then this is a great model,” Ander says.
When Moffitt and Meyer meet with drugstore executives, they bring bound copies of the e-mails sent to that store. “Often, they have already seen them internally, but we still present them as evidence of what their customers want,” Moffitt says.
Flying the pure-play coop
Sitting in meetings with drugstore buyers armed with printouts of e-mails is exactly where Moffitt wants to be. In fact, he says there is no way the company would have lasted as a pure-play. “Greater than 95% of health products are purchased offline,” Moffitt says. “You just can’t fight that tide.”
Meyer agrees. “Thank God that was never the strategy,” he says. “If it had been, we would have been destined for failure. There’s been a paradigm switch in how we view the web site. First it was all about converting sales. Now it’s all about pushing traffic to the retailer and converting sales there.”
Pure Lip carried this strategy out by setting prices no less than in-store prices, placing store locators throughout the site and offering a $2 online rebate for purchases made at stores. “The online rebate is very attractive to the retailer,” Meyer says. “They don’t have to manage the rebates. A consumer fills out a form online, sends us the receipt and we cut them the check.”