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Olivia Hnatyshin Professor Erin Cho Strategic Design and Management in New Economies October 27, 2015
The Honest Company: A Trifecta of Celebrity, Corporate Social Responsibility and Millennial Awareness
Currently valued at $1.7 billion (Macmillan), The Honest Company has disrupted the household products industry, redefining what it means to embody a trusted lifestyle brand. It is not just the valuation of Honest that has sparked an endless media frenzy around their offerings, but the fact that its’ Founder and President is “A-list” celebrity, Jessica Alba. While celebrity endorsement has been historically deployed as a recognizable marketing strategy to generate brand awareness and loyalty (Pepsi’s 1997 Generation Next Spice Girls campaign (Elliot), Carl’s Jr. 2007 Paris Hilton Campaign (“Sexy Paris Hilton Ads Boost Burger Sales”), there has been a noticeable increase in powerful female celebrity founders (Goop, Gwyneth Paltrow, Jessica Simpson, Jessica Simpson and Draper James, Reese Witherspoon). One could argue that at face value, this celebrity backing is the inherent reason for the wild success of The Honest Company; However, I propose an alternate reasoning for the brand’s success, namely the company’s user-centered model and its accurate engagement of their target consumer, the Millennial mother.
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The first part of this paper will give a brief overview of The Honest Company’s origins, funding, product and social initiatives. The latter section will explore the Millennial mother as their target consumer, identify key behavioral trends of this demographic and provide evidence of how Honest has thoughtfully captivated this audience, thereby ensuring brand success and sustainability. I will conclude with a summation of my findings, analyzing whether or not celebrity status gives significant clout to an over billion dollar privately held venture.
PART 1: COMPANY HISTORY Founded in 2012, Jessica Alba (Dark Angel, The Fantastic Four) along with cofounders Brian Lee (founder of Shoedazzle), Sean Kane and Christopher Gavigan (author, Healthy Child, Healthy World) launched Honest as a non-toxic, ecofriendly, and affordable source of family household products. Alba identified the beginnings of her start up as recognizing flaws in her own consumer experience when trying to shop for household items with her two children. As a new mother, she wasn’t satisfied with the existing options of chemical-free household products, specifically geared towards children. In an interview with Rahim Kanani, Alba expanded, “The more I looked into eco-friendly family products, the more “greenwashing” I discovered: packaging and promises implied they were non-toxic and natural, but they used fragrance and ingredients that were anything but.” After teaming up with Gavigan, they drew insights on two clear opportunities in this particular sector of the market. This was distilled into
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the need for a trusted brand that offered affordable, non-toxic home and baby products that were also readily available via an online platform.
Not only were they both passionate about this visible gap in the market, but the cofounders also had a shared vision of engraining a corporate social and ecological responsibility program into the brand’s core DNA. Alba explains, “Consumers are not only more informed but also more conscious than ever. We want to know where our money goes and we want to know that companies pursue purpose as much as profit. We believe that as members of the community, we’re here to make it better together (Kahani).” With a clear sustainable strategy, they had created the framework for a triple bottom line start-up. To solidify their beliefs, and to add credibility to their cause, The Honest Company applied for B Corp status and has been certified since June 2012 with a rating of 107 (B Corporation).
Funding After raising $6 million in seed money and $27 million in a round of Series-A financing led by General Catalyst, Lightspeed Venture Partners and Institutional Venture Partners (IVP), The Honest Company’s initial site launch included two product bundles with the option of subscription; A “family essentials” pack containing five core familyfriendly cleaning products ($35.95), and a “diaper bundle,” containing a month’s supply of biodegradable diapers ($79.95). Keeping true to their social initiative, they also stated a portion of the company’s sales would go towards Baby2Baby, a non-profit that donates
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baby necessities to families in need (Childers, “Jessica Alba’s Latest Role: Business Owner).
From November 2013 to August 2014, the company went through two more rounds of financing, combining $25 million and $70 million in Series B and C rounds respectively (IVP). In mid-August of 2015, the Honest Company closed $100 million in Series D financing. With $222 million raised, Honest was given a $1.7 billion valuation, and Alba secured the coveted cover of Forbes’ “Richest Self Made Women” in June 2015 (Figure 1). According to the article, her stake currently sits at about 20% of the company.
Figure 1, Forbes Magazine
Current Product Since the first bundle offering, the e-commerce site has grown to four pre-selected bundles available through subscription as well a configure-to-order service that helps consumers save up to 40% when shopping for items in bulk. Beyond this, the product line breadth has grown to more than 150 individual products, excluding the recently launched (September 2015) spinoff beauty line, Honest Beauty (The Honest Company). The company’s products are available through their website as well as 4,000 retail partners across the United States and Canada, including Target, Whole Foods, Nordstrom and
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Costco. Current long-term plans apart from the listed product expansion include using their new capital to, “support global expansion plans and bolster online and wholesale distribution (Harris-Maines)”.
Company CSR Mandates Corporate social responsibility is a buzz worthy topic that is undoubtedly difficult to quantify, however it is clear that The Honest Company seems to be making every effort possible in keeping true to their brand’s vision and core values. In February 2015, a new platform launched off of their parent website, simply yet appropriately named “Social Goodness,” along with a new Medical Advisory Panel to convene thought leaders from a variety of fields, including child development, pediatrics, nutrition, environmental impact, education, child care, and public policy (“Honest Company Reveals New Social Goodness Platform”). As users scroll through the platform, they can access up-to-date company posts and news articles about everything from community initiatives to conscious supply chain standards.
In the same press release, co-founder Brian Lee announced a new social undertaking with actual dollar value attached, "We passionately operate a mission-driven business at The Honest Company, and we are proud to make a $3 million commitment in 2015 through the social goodness platform embedded in our business model.” To date, Honest has listed the following partnerships and programs they are currently developing:
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“ Honest Ultra-Clean Room at Mt. Sinai Hospital: program focusing on studies of how environmental exposures impact neurodevelopment and respiratory development.
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Building Healthier, Safer Families Curriculum: In partnership with the Center for Environmental Health and the Children's Environmental Health Network, Honest will develop a national curriculum for child care center directors and the families they serve.
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Farm to Preschool Network Grant Program: In an effort to provide nutrition education and healthy food access to early education settings, Honest will provide grants to daycare and child care centers in CA and NY who wish to bring a tailored nutrition education program to their center.
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Early Education Partnership with FoodCorps: In an effort to encourage the development of a healthy relationship with food for thousands of children nationwide, Honest invested in five national AmeriCorps leaders who are serving in 18 early education centers and elementary schools nationwide.
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Partnership for a Healthier America: Recognizing the importance of ensuring the health of our nation by ending the childhood obesity crisis, Honest will support efforts to promote healthier food options with creativity, innovation, and collaboration.
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Partnership with Code.org: Honest is supporting the creation of an all-new advanced computer science curriculum aimed at increasing technology literacy among females in high schools. To date, 75 school districts across the nation are enrolled to introduce the new curriculum in September of 2015.
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Sponsorship of Girls Who Code's Summer Immersion Program: In an effort to support after-school engagement in computer science, Honest is bringing this popular national program to Los Angeles for the first time in Summer 2015. Honest will host 20 high school juniors and seniors for seven weeks to learn coding, create final projects, and gain insight into real-world working and learning environments (The Honest Company).”
The Honest Company has communicated a clear initiative in creating a sense of awareness around their impact as a company, socially, medically and ecologically, strategically positioning itself with thoughtful external partnerships and brands. In the next section, we will discover how Corporate Social Responsibility has become a factor in the success of The Honest Company and how it relates to their targeted millennial audience.
PART 2: APPEALING TO MILLENNIALS The Honest Company has identified their target demographic as Millennial mothers, like Alba, who they have internally named “Melissas” (“#YouGotThis Case Study”). According to statistics collected by CEB, Millennials – young adults currently between ages 18 and 34 – wield $1.68 trillion in annual buying power. With this, 85% of children born in 2013 were to millennial mothers between the ages of 15 and 34 (Dua). The opportunity to sell to the largest generational population to date since the influx of Baby Boomers has been a key source of economic interest, with countless articles and statistics on what makes this cohort tick.
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Insights on millennial consumer behavior have surfaced through various studies with clear commonalities across the board. Figure 2 illustrates a summation of value propositions that resonate with Millennials’ brand ideals (CEB).
Figure 2 CEB
By combining these findings with Goldman Sachs’ data story on Millennial behavior, plus other supplementary substantiation, I have identified four impactful ways in which The Honest Company has successfully reached their target demographic. These key trends include crowd sourcing, connective marketing, authentic value propositions and
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cross-platform digital consumerism. I will investigate each of these developments in the following section with examples from Honest’s tenure thus far.
Crowd Sourcing There has been a noted differentiation in how Millennials are introduced to a new product or service compared to their predecessors. According to a survey of 227 Millennials published in the Harvard Business Review by Mangold and Smith, “this generation is undeniably posting reviews online and being influenced by these reviews. Respondents show a definite preference for two online venues, Facebook and company websites, when voicing their opinions.” Facilitating a forum for consumers to post feedback is now crucial to brand awareness and strategic marketing. Millennials no longer look to brands to guide them on their spending decisions, but rather what their peers are recommending to them. With the above mentioned study’s findings of both Facebook and company websites as the leading digital environments for product guidance, we can also reference Weber Shandwick’s “Millenial Moms,” in which their research revealed that the Millenial mother spends 17.5 hours a week on social media, which is 4 hours more than the average mother. They also are more likely to “like” or recommend products online as well as “re-tweet” or “re-pin” products and services. In a recent interview, Jessica Alba notes, “nothing works as well as word of mouth from friends and peers when marketing to Millennial moms. If a product doesn’t work, they won’t buy it, and they certainly won’t recommend it (O’Connor).” The Millennial mom has been identified as a digital influencer in this regard, and The Honest Company has tapped into these insights.
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Honest is at the forefront of this trend with 1.5 million followers on Facebook and a thorough, comprehensive blog dedicated to an “Honest” life. Their Facebook page allows you to consult with customer service immediately through Facebook chat or private messaging and partake in active communal posting while gaining around 6000 followers a week (Social Bakers). Meanwhile, honest.com generates 600, 000 views a month, with about 7% of those views redirected from social media (SimilarWeb). To put this into perspective, despite Honest’s fewer number of followers (Dove has about 25 million in comparison), these statistics significantly supersede all of Honest’s main competitor websites including Proctor and Gamble, Johnson and Johnson, Huggies, Tide, Dove and Giggles (SimilarWeb). Clearly understanding their target consumer’s need to voice opinions and partake in a constant digital connection, The Honest Company uses both their Facebook and website blog to connect with their user and keep them abreast to the company’s activities regarding product and social responsibility acts.
Authentic Value Propositions As noted in the company’s origins, Honest’s mission was to create a culture of holistic transparency with their brand, creating an offering of unquestionably safe, convenient, affordable and eco friendly products. Their website has a thorough account of their social responsibility program, health and sustainability standards, including their formal ratings (such as B Corp and Green America Certified Business – Gold). If that wasn’t enough, they also list realistic company goals, including
Figure 3, Bustos, Linda. Marketing to Millennial Moms
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future LEED and Cradle to Cradle certification (The Honest Company). These value propositions parallel brand characteristics Millennial mothers have deemed of utmost importance (Figure 3). Millennial mothers specifically appreciate brands that are socially responsible and give back to their communities, something that The Honest Company has embedded into their mission. Referencing the partnerships and programs listed in the breakdown of Honest’s CSR Mandates, one could draw a correlation between the company’s highly active social involvement and their financial success. Connective Marketing With a brand that is so transparent, any proposed marketing strategy would have to present itself in an organic, thoughtful and genuine way. Rather than embark on a sales driven marketing strategy, The Honest Company again tapped into a user-centered approach, implementing their #YouGotThis campaign. “Millenials respond to marketing campaigns that target broad lifestyle goals of happiness and success. Brands that cleverly acknowledge shifting social norms around life stages – or better yet dare to celebrate them – can forge an even more solid connection (CEB).” Shifting social norms around life stages is exactly the underlying mandate of #YouGotThis.
The campaign is comprised of a twelve-part video series (available on YouTube and through the company website) in which thirty women sit in groups of five in a blank room (Figure 4). They are introduced as having only two things in common: they have never met, and they are all mothers. Story telling ensues, and they touch on aspects of being a mother in the current socioeconomic landscape. What they never blatantly say is
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that they do have one more thing in common: they are all Millennial mothers, and the issues they are sharing paint them as exactly that. Directly below the video is a highly visible comment forum of positive feedback. Mothers outside of the thirty participants engage in the conversation with their own stories and encourage each other with the hashtag, #yougotthis (yougothis.honest.com). The Honest Company created a supportive, connective and on-brand marketing strategy without a single mention of their products. In my opinion, this is what a successful advertising venture looks like when targeting Millenial mothers.
Cross-Platform Digital Consumerism As previously noted, millennial mothers spend a substantial amount of time online shopping, researching and reviewing the latest consumer goods. Figure 4, #YouGotThis. The Honest Company
Omni-channel shopping is not so much recognized as it is expected among the target
demographic. The Honest Company launched as an e-commerce platform, creating a onestop shop for household and baby products where product was shipped directly to their homes. “With product information, reviews and price comparisons at their fingertips, Millennials are turning to brands that can offer the greatest convenience at the lowest cost.� Honest’s subscription bundles with free shipping offers cost effective convenience for product with high turnover.
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In an advanced digital age, brands that integrate mobile accessibility and added lifestyle value through omni-channel development are more likely to attract a millennial audience (See Figure 5). In a recent study by Weber Shandwick, recorded insights encourage businesses to “develop products – including digital ones like apps – that help make Millennial Moms’ lives simpler. They are looking for less complexity in their lives. Findings suggest that Millennial Moms see value in life-managing resources.” Once more, The Honest Company was in tune with their customers’
Figure 5, Get Elastic, “Why Mobile Matters To Most Millennials”
needs and launched their app, HonestBaby, to Android and Apple stores in February 2013. Aside from the ability to manage and track previous and current orders, the app also acts as an interface to do the same with your baby. Diaper changes, feedings, growth, doctor appointments, photos and special moments can be holistically recorded in an organized cloud system that is available across laptops, tablets and phones (as personally accessed through Apple’s App Store). Figure 6, Apple, “HonestBaby”
CONCLUSION
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Over a three-year period, The Honest Company has reached what any like-minded start-up would identify as financial success. With a $1.7 billion valuation, they have sky rocketed their story into every business journal and media outlet imaginable and have the beginnings of household name status, if not already. Financial success only gives them more power to accomplish what they first intended to achieve with their brand; That is, an unquestionably reputable offering of products that families can trust, with scientific, medically and ecologically sound research behind them.
While Jessica Alba’s face brings a sparkling smile and a Hollywood force to the name, The Honest Company has proven itself a success in its own right. This is due to their ability to tap into their customer segment in a dynamic, well-versed and thoughtful cross section of key trends. User centered design for the Millennial mother has been materialized through Honest’s connective forums, corporate social responsibility programs, interactive marketing campaigns, and cross platform digital applications. Thorough understanding of a customer segment along with development of product based on customer experience has been proven to be invaluable to the success of this brand, celebrity endorsed or not.
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Works Cited “#YouGotThis.” The Honest Company. The Honest Company, 2015. Web. 21 Oct. 2015. “B Corporation.” The Honest Company. B Lab. Web. 25 Oct. 2015. “Digital women Influencers: Milliennial Moms.” Weber Shandwick. KRC Research, 18 June 2013. Web. 22 Oct. 2015. “Inside The Millennial Mind.” Iconoculture Consumer Insights. CEB, 2015. Web. 21 Oct. 2015. “Honest.com.” Similar Web. Similar Web Analytics, 21 Oct. 2015. Web. 21 Oct. 2015.
“Millennials Infographic.” Goldman Sachs. Goldman Sachs, 1 Feb. 2015. Web. 26 Oct. 2015. “The Honest Company Closes $70 Million Investment Round to Accelerate Growth: Press Release.” IVP. Institutional Venture Partners, 26 Aug 2014. Web, 22 Oct 2015.
“The Honest Company Facebook Statistics.” Social Bakers. Social Bakers, 22 Oct. 2015. Web 22 Oct. 2015. “The Honest Company Reveals New Social Goodness Platform and Commits $3 Million In 2015 To Build Healthy, Safe Families.” PR Newswire. UBM Plc, 12 Feb. 2015. Web. 22 Oct. 2015. “The Honest Company Secures $27 Million in Funding: Press Release.” IVP. Institutional Venture Partners, 23 March 2012. Web. 22 Oct. 2015. “Our Story.” The Honest Company. The Honest Company, 2012-2015. Web. 22 Oct. 2015. “Sexy Paris Hilton Ads Boost Burger Sales.” CNNMoney. Cable News Network, 1 June 2005. Web. 23 Oct. 2015. Bustos, Linda. “Marketing to Millennial Moms.” Get Elastic. Elastic Path, 20 Jul. 2015. Web. 22 Oct. 2015. Bustos, Linda, “Why Mobile Matters Most to Millennials.” Get Elastic. Elastic Path, 6 Jul. 2015. Web. 22 Oct. 2015.
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Childers, Linda. “Jessica Alba’s Latest Role: Business Owner.” CNN Money. Cable News Network, 17 Jan. 2012. Web. 25 Oct. 2015 Dua, Tanya. “5 Things Brands Should Know About Millennial Moms.” Digiday. Digiday, 13 May 2015. Web. 23 Oct. 2015. Elliot, Stuart. “As Pepsi Regroups, It Strikes a Generational Note Once Again.” The New York Times 21 Jan. 1997, Business sec. The New York Times Company. Web 23 Oct. 2015. Grant, Rebecca. “Jessica Alba Gets Her Hands Dirty (And Then Clean) As An ECommerce Entrepreneur.” Venture Beat. Venture Beat, 10 Sept. 2012. Web 22 Oct. 2015. Harris-Maines, Katie. “The Honest Company Closes $100 Million Series D Financing.” Business Wire. Berkshire Hathaway, 14 Aug. 2015. Web. 25 Oct. 2015. Kanani, Rahim. “An Inside Look at The Honest Company with Founder Jessica Alba.” Thomson Reuters Foundation. Thomson Reuters Foundation, 14 Sept. 2014. Web. 22 Oct 2015. Macmillan, Douglas, and Rolfe Winkler. “Jessica Alba’s Startup, Honest, Valued at $1.7 Billion.” Wall Street Journal 13 Aug. 2015, Tech sec. Dow Jones Products. Web 23 Oct. 2015. Mangold, W. Glynn and Katherin Taken Smith. “Selling To Millennials With online Reviews.” Harvard Business Review. Harvard Business Publishing, 15 Mar. 2012. Print. O’Connor, Clare. “New $100M Honest Co. Round Put Jessica Alba Among 40 Richest Self-Made Women.” Forbes Magazine. Forbes Media, 18 Jul. 2014. Web. 22 Oct. 2015. Porter, Michael E. and Mark R. Kramer. “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review. Harvard Business Publishing, Dec. 2006. Print. HonestBaby – Track Baby Activities, Groth & Milestones, Manage Bundles, and Shop for Honest Products. The Honest Company. Apple Inc, 20 Aug 2015. Application 23 Oct. 2015. The Honest Company: #YouGotThis Case Study. Persuade and Influence, 2015. Film. Web. 22 Oct. 2015.
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