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Gourmet coffee subscription service Kopi was recently acquired by Cafedirect, three years after its launch.
I've been talking to Kopi co-founder Philip Wilkinson about the deal and the challenges of building a subscription business...
Congratulations on the deal. Were you aiming to sell the company all along?
We had no plans at all and were actually talking to Cafedirect initially just about a business partnership style deal.
Sometimes these things just make sense and build momentum.
I interviewed you back in 2011 just after the launch of Kopi. You said then that the biggest challenges would be packaging and fulfilment. Has this proved to be the case?
It most definitely was and we spent a long time refining our partnerships, processes, coffee bag size, envelopes / boxes, postage, packing... You'll be amazed the amount of complexity we had to resolve to deliver a simple customer proposition.
We ended up with such a lean operation which was wonderful to see evolve.
What other challenges did you face in building the company?
It's fair to say that, as usual, when I'm pioneering a brand new market that people are a bit cautious about if it will work and people want it. Perils of the job!
It meant funding was pretty hard for me, especially as it wasn't classed as a pure tech play. Perhaps I should have made it a Bitcoin based, mobile app, or big data coffee club!
genieVentures were great at this stage and took a chance on us to provide all the operational support we needed and some marketing budget to build more subscribers.
Which marketing channels were most valuable for you?
The non-intent driven channels - i.e not Google. When people don't know your proposition or brand exists, then you use more traditional channels for marketing.
We've seen great success with some very select partnerships.
What are the unique challenges of setting up a subscription business?
Overcoming commitment issues. Even though you tell people they can cancel at any time, there is still concern you'll make it difficult for them or make mistakes.
People are more cautious of subscriptions here in the UK and like to be in control.
A lot more data analytics is needed to as you need to look at the cohorts and pay close attention to Lifetime Value.
I've seen other clubs doing massive discounts to acquire customers but that always results in poor LTV over time and makes you look cheap. Kopi never needed to discount as the right customers will always pay for the best quality and experience.
How did you convince people to commit to recurring payments?
By building confidence really in every interaction. How our brand and site looked, the wording, the satisfaction guarantee, how we dealt with customer delight, and reputation building.
Everything to help people see they could trust us.
You’ve founded a good number of business and seen them become successes. How have you seen marketing techniques change over the years?
Things have got a lot more competitive and marketeers get up to speed with new channels much quicker than before. Makes competitive advantage harder to keep.
It's still all about who uses the best technology and understands the data in order to stand out against the crowd.
This has become particular importance in ecommerce now and it’s why I’ve actually angel invested in Ometria (super retail analytics) and Driftrock (power tools for social ads marketing) as I firmly believe this is where real value is created.
The big challenge is still to also understand the fragmented customer journey now - across mobile, desktop, and offline and also how different marketing channels can contribute towards a sale without having been the last click - the old attribution chestnut again.
Whats the biggest thing you’ve learnt over the years when it comes to online marketing?
I would say I’ve learnt a lot more respect for it over the years in just how powerful it can be when done right, and how many different skill-sets it now encompasses.
Ultimately it comes down to taking some risks and measuring / tweaking everything.
What’s next for you? Will you be launching another online business?
Already planning it. Let’s just say it’s an ecommerce mobile app for clothing and I’m confident I have something pretty special, but time will tell.