Dictator tots

Assignment 1

20, نوفمبر 2010

Toms Continued:

The Story:

Toms was founded in 2006 in Santa Monica, California by Blake Mycoskie. Mycoskie is a young entrepreneur aged 33 who has had several previous independent companies including a small driver’s education business and has also competed in the reality t.v show, “The Amazing Race”. This was what originally brought Mycoskie to Argentina. After losing “The Amazing Race”, he decided to take some time off spending time exploring the country which led to his discovery of the country’s desperate need for shoes. At this point, Mycoskie sold his previous business and self launched Toms shoes with the slogan of “Shoes for Tommorrow.”

Style:

During Mycokie’s stay in Argentina he took to wearing the native alpargatas which are a type of espadrilles which originated in Spain. These alpargatas are traditionally peasant shoes and are often worn by farmers. These shoes were the inspiration of the style for Toms. This was a smart choice for several reasons, first of all these kinds of shoes are lightweight and comfortable. They are made of simple canvas fabric with rubber soles. These shoes are cheaply produced and easily made from sustainable materials such as hemp or recycled rubber for extra eco-friendly advertising. Toms also has created many different kinds of shoes ranging from fleece-lined to boots in hundreds of different colors and styles. The new “Style Your Sole” initiative allows consumers to decorate shoes to their liking.

Business Model:

What makes Toms so unique is the One to One business model. The claim is for every pair of Toms shoes that is purchased, a pair is given to a child in need. This sounds simple, but the business behind it is actually quite complex. First of all Toms manufacturing plants are all located overseas in Argentina, Ethiopia, and China. This allows for the cost of production to be unusually low. The company claims that “We require that the factories operate under sound labor conditions, pay fair wages and follow local labor standards. A code of conduct is signed by all factories. Our production staff routinely visits these factories to make sure they are maintaining these working standards. We also have third parties audit the factories at least once a year to ensure they adhere to proper labor regulations.” However, even if the above statement is completely honest, the profit margin is raised significantly because of the manufacturing costs overseas. Although the company will not disclose sales figures or how much it annually donates, a sales rep from Toms explained that consumers cover the donation cost by paying twice as much for the shoes as they would normally cost. The average pair of Toms shoes sells for between $45-$85 a pair. This is also smart in that comparatively the $45 for a pair of Toms shoes is close in quality and price to a pair of Vans or Converse shoes. In a survey of 1057 US adults 80% responded that they favor a product that’s for a good cause if it’s of comparable price and quality of their product of choice, 19% said they would be willing to switch to a more expensive brand for this reason.Toms is sold at over 500 stores nation wide including Nordstrom, Neiman Marcus, and Whole Foods as well as online. A January 2009 Business Week article stated that, TOMS Shoes accumulated $4.6 million in revenue from its first 115,000 pairs of shoes sales are now over one million according to the official toms website which was updated in September of 2010.

Advertising

Toms has an extremely innovative advertising technique. The charitable connotations of the company lend it as marketable good press to other companies such as AT&T and even popular musicians such as Dave Matthews Band. Toms has been marketed as a movement and campaign rather than a company which gives it an innovative meaning to the American consumer. Toms has taken advantage of the free media young people use for advertisement such as Facebook, Twitter, and You Tube to promote its cause as well as launching physical campaigns such as the Vagabond tour in which Mycoskie traveled to college campuses all over the United States promoting his cause and showing the Toms documentary “Shoes for Tomorrow: The Toms Shoes Story.” As a response, clubs at college campuses have been started as well a general grass roots movement to advertise Toms shoes.

The shoes sell themselves with their easily visible brand name on the side of their product which mostly advertises by word of mouth. This brand is especially popular among young, college aged adults who find it easy to both promote Toms shoes and buy them. The “One Day Without Shoes” campaign is aimed at raising awareness of children in the third world without shoes but also promotes Toms as a company. Over 250,000 people across the globe went barefoot on April 8 , 2009 in support of TOMS One Day Without Shoes.

“surrender your shoes” One Day Without Shoes participants

The “shoe drops” Toms holds which distribute the donated shoes also double as advertisement for the company as it includes over 500 nonprofit organizations and the events are often filmed and advertised by the media or corporate companies looking for good press. For example  AT&T  filmed the Uruguay drop for a 2009 commercial.  As a result, Toms probably has to spend very little on advertising.

Charity:

Over 500 non-profit organizations have signed on as affiliates of  Toms Shoe Company. The most notable of these being the Clinton Foundation. In addition Friend of Toms is a non-profit company whose sole mission is to promote and carry out the objective of Toms. The general public is welcomed to assist with shoes drops around the world which enable volunteers to personally place shoes on children’s feet.

Volunteer at a TOMS shoe drop

Toms gives shoes to currently 20 countries including the United States and has given away over one million pairs of shoes. Toms has also obtained several partnerships with companies such as Element Skateboards which have agreed to carry a line of Toms products. The Element company has agreed to carry skate shoes as well as longboards to donate to children at the Indigo Skate camp in the village Isithumba in Durban, South Africa.  Mycoskie says he would like to expand this model to include other products for children such as fresh water or school books. Toms won the People’s Design Award in 2007.

Why it works:

The advertising for Toms is done by viral videos, word of mouth, or by other companies. The  non profit organizations do the chartible end of their business like “Friends of Toms”. The shoes are made trendy due to the charitable foundations, and the comfort they offer wearers. The one to one ratio model makes the consumer feel as if they are personally donating a pair of shoes to a child. This is more intimate than donating “a percentage of the profits”. The volunteering is open to the public, including advertisement which makes it easy to become involved without going out of the way.  The product targets the college crowd who have the time to volunteer and the money to buy the products. The “Vagabond Tour” gives the young and faboulous feeling to the company, selling the  addictive concept of being a conscious and caring human being. Basically this model allows Americans to do what they love  doing  most: buying trendy things while making a difference and not moving off the couch.

Part 2:

So now our big negotiations are:

  • profitable business vs successful charity.

It is clear that TOMS is a business and not a charity, but it is new in that it is a business with charity as its main objective. When the founder, Blake Mycoskie, was asked why the company was a business instead of a charity, he responded that a business is more sustainable. He claims that in the long run a business will generate more revenue for the charity and has a greater staying power in  the community because it is rooted in the market. So where does TOMS draw the line between profit and philanthropy? It is difficult to determine exactly how successful TOMS is in terms of profit since the company itself will not release those figures however TOMS is rumored to rake in the profits reaching  over $40million. This of course is just a projection, real figures are not available. Given the business model, it appears that TOMS is successful in both these fields but the company limits its giving ability by  setting a “one to one” ratio. The expense of the shoes is well over what it costs to produce both the product the consumer is purchasing and the donated pair of shoes. TOMS could probably donate double of what it currently does if they were willing to cut profit margins. However the charitable record is still impressive with the long list of charities they have affiliated with, number of countries they have reached, and quantity of shoes that have been donated. Basically, TOMS uses the hook of a charitable effort to lure consumers into buying their over-priced shoes. Not to give this idea a bad name of course, the cause is worthy and TOMS benefits the problem in a more substantial and community-based way than companies who donate a percentage of their profit for a cause.

  • grassroots movement vs commercial campaign

As we can see by the above research, TOMS uses the community for most of its advertising. Again, TOMS is a company, so it is promoted by other companies such as Element Skateboards and AT&T. The Vagabond tour is the perfect example of how TOMS handles this negotiation. The company has an ad campaign pushing the cause and consequently the company. The campaign takes on a grass roots feel by assembling college-aged kids as volunteer teams and visiting campuses nation wide. At this point, TOMS pushes the responsibility of advertising onto the community by creating a movement. TOMS even has “movement” in their ad campaign: the “One -To -One Movement”. So in summary TOMS handles this issue by subtlety starting an ad campaign with a message and turning it into a grassroots movement that takes advantage of all the free media available to consumers (YouTube, Facebook, ect). In this way TOMS incorporates it’s advertisement into the community by giving the campaign a community-based problem(barefoot children) that the company solves. As a result, the community backs the company in effort to solve the problem.

Blake Mycoskie campaigning the TOMS movement

References:

http://www.time.com/time/magazine/article/0,9171,1582305,00.html

http://www.thefalcononline.com/article.php?id=6589

http://www.inc.com/magazine/20100601/the-way-i-work-blake-mycoskie-of-toms-shoes_pagen_2.html

http://online.wsj.com/article/SB10001424052748704116004575522251507063936.html

http://www.toms.com/corporate-info/


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