February 01, 2012

Oh Jasmine, You're Fickle: Gilt Groupe

By now, you've probably had the opportunity to read this article about layoffs at Gilt Groupe (click here for the article).

Gilt is the quintessential "Jasmine" brand (click here to see the demographic composition of the website).  It is heavily skewed to the 18-34 audience, with some crossover into the younger "Jennifer" demographic.

The article talks about all of the discounting/full-price issues that everybody is forced to think about.

The article does not talk about the core customer.  In fact, these articles almost never talk about the core customer, focusing instead on channels and tactics that are the outcome of a relationship with the core customer.

Jasmine, of course, is loyal to "brands" ... but Jasmine is more loyal to price.  She can't afford what Jennifer can afford.  When Jasmine is given a lot of choices, Jasmine will spread her dollars out across choices.  This can only hurt a business like Gilt.  One can imagine the Powerpoints with lofty sales growth expectations, forecast not built on actual customer behavior.

Study Questions:

  1. If you were an Executive at Gilt, how would you have forecast sales growth over the next five years?  Describe the methodology you would have used to avoid over-forecasting the future of the business.  How would you have protected the business from having to lay off employees?
  2. Describe the marketing strategy that converts Jasmine from discount/promotion purchases to full price purchases.  Under what circumstances can you convince Jasmine to pay more, given you've invested considerable marketing effort in encouraging Jasmine to spend less, historically?
  3. Is there a business model that might appeal to Jennifer, or Judy, and if so, how would you convince Management of the opportunity?
  4. What role does social media and mobile play in a low price point business vs. a high price point business?

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