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8/2/2019 Method Sia
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Method Products, Inc.
a leading developer and designer of home care products
Case Study
:: ::
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Method Products, Inc. University of California [2]
Case Study, May 2006 Haas School of Business
About This Case
The Haas executive committee for the 2006 Global Social Venture Competition (GSVC)
wished to create an innovative educational avenue for participants and others involved or
interested in future Competitions. To this end, the idea of a GSVC case study was born. It was
contemplated that a case study highlighting a successful social venture could help educate GSVC
participants about solid business fundamentals, provide ideas for how to think about business
planning, and indicate (to participants) the desired degree of relative focus on economic and
social value creation. Further, a case study could be used within a social entrepreneurship and/or
CSR curriculum at the undergraduate or MBA level within a business-school course of study.
Finally, a thoughtful initial case could provide the foundation for a macro-level write-up to be
used in a broader course such as Start-Up Marketing or Small Business Strategy.The following case highlighting Method Products is meant to be a helpful tool for anyone
interested in or associated with social entrepreneurship or GSVC at Haas and other business
schools. The content of the case serves to facilitate understanding and stimulate discussion not
just of doing well by doing good, but also of how an idea moves from concept to product to
customer through the execution of solid business fundamentals in a competitive marketplace.
Any comments or questions on the case study should be directed to Jamie Dean
), Jesse Purewal ([email protected]
), or Tamara Williamson
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]8/2/2019 Method Sia
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Method Products, Inc. University of California [3]
Case Study, May 2006 Haas School of Business
Method Products, Inc.
The buzz in the downtown San Francisco office of Method Products, Inc. was palatable. It was a
Monday in early May, and a long, rainy winter had given way to a beautiful and sunny spring
morning. The optimism of the Bay Area climate was reflected that morning in the demeanor of
Adam Lowry, Methods co-founder and Vice President of Product Development. Lowry and his
team were excitedly preparing to roll out the newest of Method Products line of home care
products, and could sense that the companys approach to the nearly-finalized designs of both
softening dryer sheets and disposable mopping technologies were going to have a significant
impact on the market. Were continuing to blend good design and function, remarked Lowry,
and we think its really going to be disruptive to these categories.
History
After attending high school together in suburban Detroit, Eric Ryan and Adam Lowry went their
separate ways. Ryan focused his post-graduate experiences on advertising and branding as a
member of Falloon and other agencies, serving clients such as Saturn, Gap and Colgate. Lowry,
a chemical engineer, worked with a green plastics company in Michigan to develop biodegradable
trash bags and paint that bonded to plastic. The two reunited as roommates in San Francisco in
the late 1990s, and during the course of a road trip in 1999, realized that their common ambitions
d b k d d b d b
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Method Products, Inc. University of California [4]
Case Study, May 2006 Haas School of Business
I knew as a chemical engineer that there was no reason we couldnt design products thatwere non-toxic and used natural ingredients. It would be more expensive to do it thatway. But that was okay as long as we created a brand that had a premiumness about it,where our margins would support our extra investments in product development andhigh quality ingredients.
The company set out to develop at least one product for every room in the home. Its first line of
products was a set of five spray cleaners (see Exhibit 1) designed by California photographer and
designer Michael Rutchik. The company made its first sale to a Mollie Stones store (a Bay Area
chain of upscale grocery stores) in Burlingame, California in February 2001. Surprised by the
volume of the retailers first order, the co-founders acted fast to get the products on shelves.
We wiped down half-used bottles, topped them off, and drove to the store, said Lowry.
Methods success at Mollie Stones allowed it to bring 20 additional stores on board in 2001,
which in turn gave the company an audience with national retailers.
In order to gain management expertise, private sector savvy, and brand start-up experience, the
company in 2001 hired as its CEO Alastair Dorward, an ex-Bain consultant who had launched a
soup brand in the U.S. several years prior.
Methods first win outside the Bay Area came with an agreement by Albertsons to stock the
companys products, and Method soon expanded to Safeway, Wegmans, and Ralphs. To control
its costs as it achieved national scale, the company contracted with local manufacturers and
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Method Products, Inc. University of California [5]
Case Study, May 2006 Haas School of Business
Methods Strategy
The company targeted sales of its products to the progressive domestic, a younger,
professionally-employed, female-skewed customer. This customer tends to view home as a
refuge, thus spending short periods of time cleaning different surfaces in the home on several
days during the week as needed. Method labeled this approach Hip Not Hippie, in order to
differentiate between the companys target market and the historically traditional customer whowas believed to engage in bi-monthly house-wide cleaning efforts.
Based on the notion of the home as a refuge, Ryan and Lowry believed that their customers
could be excited about the prospect of cleaning their homes. They further believed that it was
the onus of the product and brand to help create this excitement. As Ryan put it:
The category talks about cleaning as a chore. But there are a lot of people out there forwhom cleaning is an enjoyable act. I thought: What if Nike talked about jogging as achore, something you needed to get done with as quickly as possible?
Because the development of safer and more environmentally friendly products would take a good
deal of investment, the company knew it was taking a risk. To help mitigate this risk, Method
elected to price at a 15-20% premium relative to competitors. This premium reflected the
companys comparatively higher input costs and per-unit distribution charges.
The founders believed that Method would be successful if it could harness the operational
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Method Products, Inc. University of California [6]
Case Study, May 2006 Haas School of Business
Method believed that its true competitive advantage lie in its design and branding. Havingadopted the mantra People Against Dirty, the company pushed to link sustainable production
with attractive and functional packaging. Believing that it had the required expertise in-house to
execute on the former, Method called upon renowned designer Karim Rashid. We sent him an
email and said, Heres a great opportunity to reinvent this iconic shape that sits on every sink
across America, recalls Ryan. Rashid designed a 25-ounce bottle (see Exhibit 4 ) that the
Method team used to win the 2002 trial at Target, which was the first retailer outside the drug
and grocery channels to provide Method with placement. Consumers association with Rashid as
the purveyor of design to the masses1 and Rashids experience in designing other products on
Targets shelves were cited as reasons for the success associated with his involvement.
Sustainable Practices
According to Method, its commitment to sustainability is a notable, differentiating component of
the companys strategy. Ryan and Lowry recognized early on that they would only be able to
reach a small niche group of customers if they espoused only the products environmentally
beneficial qualities. By focusing on product design and quality to reach out to a broader customer
base (with sustainability in the background), Methods products can reach a larger audience.
Method has chosen to adopt the definition of sustainability set forth by the UNs Commission on
Sustainable Development:
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Method Products, Inc. University of California [7]
Case Study, May 2006 Haas School of Business
4) Close the loop
using biodegradable packaging,5) Inform and educate participating in a lecture circuit,
6) Redefine commerce developing laundry detergent 3 times as strong as others.
Method also recognized that its customers are a diverse group that will react differently to
marketing and available information. The company therefore developed a framework for talking
about its green activities to four different consumer groups that it has defined. This framework
aims to inspire believers through communicating a vision for sustainability, speak to skeptics by
conveying the value of pursuing a triple bottom line, educate information seekers about the
importance of being green, and inform the mass consumerwith its basic advertising campaign,
People Against Dirty.
Competitors
Broadly speaking, Methods competitors can be divided into three categories; traditional CPG
companies, environmentally friendly cleaning-supply companies, and niche companies with some
similar product offerings.
The traditional cleaning brands that historically offered largely undifferentiated products are
Methods most obvious competitors. These include P&G, Clorox, Colgate-Palmolive, SC
Johnson, American Home, and others that make few, if any, claims about environmental
t d hi M t f th tit d t ff i ifi t b f d t th t bl d
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Method Products, Inc. University of California [8]
Case Study, May 2006 Haas School of Business
Marketing
In order to communicate to progressive domestics, Method generally stayed clear of traditional
means of advertising, believing that 30-second television commercials and single-page magazine
advertisements would dilute brand value. Instead, the company has attempted to create an
experience around its product through strategic advertising placements, a pop-up store concept,
an informational website, and informational booklets placed in lifestyle magazines.
Print. Method has been sought by and featured in a diversity of niche print publications including
Food and Wine, In Style, the Los Angeles Times, the New York Times, Business 2.0, and Forbes.com.
Though these spots rarely expound upon the chemical details of Methods products, they do
highlight the brands ability to disrupt a category historically dominated by large, established
players with an extremely large minimum efficient scale. Method initiated contact with manypublications early in the companys life by sending targeted press releases, and fielded proactive
interest from others after placing product in an episode of NBC Televisions now-defunct
situation comedy Friends.
Pop-up Shop. In August of 2004, Method opened a temporary retail space in the high-fashion
Union Square shopping district of San Francisco. This pop-up shop served to introducecustomers to the product and brand in a setting otherwise unlikely to be sought for the purchase
of home care products. Said Ryan:
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Method Products, Inc. University of California [9]
Case Study, May 2006 Haas School of Business
Booklets. In 2004 and 2005, Method placed an informational 20-page booklet in magazines suchas Real Simple, Organic Style, and Lucky. The booklet explained Methods approach to doing
business and offered a starter kit for sale. Although the content is not necessarily revolutionary,
the idea of engaging a customer around a cleaning-supply company was. According to Ryan,
Everyone told us we were crazy to dedicate a 20-page book to the subject of cleaning. This
advertising campaign cost $2 million, a sizable investment for the company, but according to
Method, the move precipitated an immediate increase in sales of 10 15%.
Method believed that its methods of advertising were paying off. According to the company, in
2005, 45% of all customer communication fell into the compliment category, compared with
just 15% being considered complaints. Furthermore, many individual blogs and formal review
systems on retail websites such as Amazon.com rated the company highly for value for the
money, cleaning power, and enjoyable brand. In general, customers commented that
Methods products required the use of a bit more physical effort (elbow grease) than those
distributed by larger manufacturers, but that the aesthetics and non-toxicity of the product made
this tradeoff worthwhile.
Some customers, mostly younger buyers and students, commented that they could not afford to
buy the product in the face of a limited budget, but some of these potential buyers termed
Method an aspirational brand. Another phenomenon was the tendency of buyers to associate
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Method Products, Inc. University of California [10]
Case Study, May 2006 Haas School of Business
Looking Ahead
In 2005, Lowry said that Method had crafted a master brand in home care. Though the
companys success to date was undeniable, a number of challenges awaited Ryan, Lowry and the
rest of the team as they looked ahead. Among the questions that were being considered:
How will companies like Clorox, American Home and P&G respond in the longer-term, iftheir margins or market share are truly threatened by Method? What challenges and
opportunities would a reaction provoke?
How should Method react to imitators? Can the company adapt its approach to fit the needs and demands of large retailers in the
U.S. and beyond? Will it want to?
What will Method need to do in order to secure the best talent in product development,consumer marketing, and other functions? Will it recruit individual contributors from larger
CPG companies who want to move to a more entrepreneurial space, or will it focus on hiring
people with small-company experience?
What distribution channels remained untapped? How should they be opened? Can Method use its sustainability efforts to garner further price advantages? If so, how, and
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Exhibit 1: Method's First Spray Cleaners
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Method is a Hybrid: Operational Capabilities of a Mass Company + Creativityof a Premium Brand
Ability to service major
customers but cannot offer
differentiation
Ability to create unique & premium
brand experiences but do not scale at
the mass level
BEST OF BOTH WORLDS
Our company is a unique hybrid in its ability to service major customers and deliver on-trend
products & brands.
Skills:
- Mass marketing
- Innovation
- Scalability
- Operational depth
Limitations:
- Prime focus: Wal-Mart & Kroger
- Lack creativity
- Slow to stay on-trend
Skills:
- Creativity
- On-trend
- Design talent
- Speed & agility
Limitations:
- Dont scale
- Weak balance sheet
- Entrepreneur quirkiness
- Unable to invest
in custom tools
Exhibit 2: Method's Essential Differentiation
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Exhibit 3: The Orchestral Model of Product Development
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Like this one
Exhibit 4: Rashid's 25-oz Bottle Design
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Our Vision
V I S I O N
To be the first company in the home care industryto become fully sustainable in all its facets:
product, processes, people, & profits
And in so doing, becoming restorative through our
products and our power of influence
O U R M I S S I O N
Method will become the global leader in home care and personal care throughits commitment to its customers, people, product, and processes.
Method believes that environmental responsibility and economic viability are notopposing forces, but one in the same. We seek to reconcile trade offs
between what is environmentally sound and what is economically
advantageous using thoughtful and intelligent design as our tool.
We will create Economic, Social, and Environmental benefit by focusing on the
products we make and the processes we use. Well lead by example and
validate by results, including profits, and be restorative through our power of
influence. Well create an organization where people are afforded respect &
dignity, and the opportunity to learn and develop
Our Vision for Sustainability
Exhibit 5: Method's Vision for Sustainability