Read the following case study and then answer the questions in a Microsoft Word document.
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Casper: Big Dreams
Casper is a direct-to-consumer mattress start-up founded in 2014. The founders have been quietly acknowledging that selling foam slabs online may not be enough to build a profitable business. The start-up squeezed compressed mattresses into cardboard boxes that were sent straight to the buyer’s home for less money than mattress stores charged for their wares. Casper’s niche was an alternative to cluttered mattress store chains that mystified customers with verbiage, and the 100-night trial period was reassuring. Casper’s strategic value proposition was that going to a mattress store is not fun and no one should have to do it. Simply order a reliable mattress online, and Casper would disrupt the established mattress industry. This proposition made sense for some other retail start-ups such as Warby Parker, which cut out the intermediary stores by selling eyeglass frames online.
In the years since Casper’s founding, lots of mattress-in-a-box imitators have entered the market, including Tuft & Needle, Saatva, Leesa, Purple, and Avocado. Additional competition came from the wellness industry, with companies attaching mattresses to a sense of healthful purpose. Without stores, Casper’s product line was limited. Therefore, Casper opened storefronts to sell complementary products like pillows and sheets. Casper said its online sales grew faster in cities with retail stores. Yet no company has established itself as the dominant market leader in the sleep space.
Buying a mattress is usually an infrequent purchase, so finding opportunities to bring the customer back into the Casper ecosystem might be a key to growth. Casper decided to recast itself as “the Nike of sleep.” It established a sleep advisory board that included credentialed academics from reputable universities. The board will advise Casper’s 500 employees on how to sleep better so they can advise customers at the company’s stores. The stores will help shoppers develop a more intimate affection for Casper. One founder commented, “Consumers are investing in things that mean something bigger,” just as a Nike customer may feel connected to the Olympic athletes who wear Nike shoes. “When people pick a Casper, they are buying into something a lot bigger than just the slab of memory foam.”
Something bigger includes new products and sleep wellness offerings. Casper introduced Glow, a cordless bedside light to help people wind down gradually as it dims to off over 45 minutes. The CEO said he wanted Casper to be a destination for all things sleep. Customers can start with the Glow, or the pillows or sheets, or bed frames, or duvets, or dog beds from a store, and then think maybe they need a new bed. The goal is for Casper to diversify beyond mattresses and to help more people realize Casper is the destination for all things sleep.
One approach to getting the word out is to advertise more on the Internet (e.g., Google, Facebook). Another approach is to publicize the company’s new mission statement, “Awakening the potential of a well-rested world.” Yet another approach is to be willing to lose tons of money long enough for Casper to surge ahead of multiple imitators. Right now, Casper is the best known of the online mattress sellers because it spends approximately $100 million a year on advertising. Casper has a $1.1 billion valuation despite never having earned a profit. Casper’s head of HR is working with the new advisory board to develop a sleep training program for every worker. A future ideal is that every store will have a black belt–level genuine sleep expert to consult with customers as a sleep coach.
Casper says that the spending on marketing its brand is setting it up well to dominate a growing product category that it calls the “global sleep economy,” which includes everything from pillows and sheets to sleep-tracking devices.
Questions
Have you heard of Casper, purchased a Casper mattress, or visited a Casper store? What is your impression? What do you value most and what do you want to avoid when buying a mattress?
With respect to competitive strategy, identify and evaluate Casper’s target customers, its core competence, and how it builds synergy and delivers value.
Would you rate Casper’s competitive strategy as pursuing differentiation, cost leadership, focus, or a combination of these? Explain. Do you think Casper will grow successfully and turn a profit? Why?
