“Sex and the City” had a hand in transforming Magnolia Bakery into a profitable tourist destination for those of us visiting New York City. It was the precursor to imitators and competitors that then popped up in throngs throughout the United States to get a piece of the pie. Cupcake businesses are now a dime a dozen - there’s a low barrier to entry and it doesn’t require much more investment than a solid business plan to get started. So it’s easy to see why the cupcake business is among the most competitive businesses out there and at the same time, an industry that you can garner far-reaching insights from. In particular, Foiled Cupcakes has been among the best performing cupcake companies in Chicago and will be presenting at ad:tech New York’s panel, "Social Marketing Crash Course: Innovative Ways to Listen, Engage & Add Value for Your Brand."
We caught up with Mari Luangrath, owner and social media director of Foiled Cupcakes, to discuss how she’s distinguished her business from the plethora of competitors out there even without ever setting foot in the bakery.
What’s crucial about her success is that she found the perfect target demographic and business model after the realization that “there was nobody to deliver cupcakes to me for less than $150 per box” three years ago when she started the business. She found an affordable way to undercut her competitors’ prices which seems obvious enough, but getting to that simple conclusion was a challenge.
Foiled Cupcake’s business model
What wasn’t necessarily traditional about her business model at the time was that she wasn’t just another B2C business with a storefront retail shop nestled between cafes and clothing boutiques. From the start Foiled Cupcakes has been an online-only “wholesale” business and has never paid for online advertising. Even for a food product, there are particular advantages with Foiled Cupcake’s business model that have grown the company to profitability.
1. Knowing the customers - Foiled Cupcakes is able to track the demographics of customers, including location, by using a back-end traffic analytics platform.
2. Selling in larger quantities - Foiled Cupcakes allows orders in bulk and at a minimum cost of $38 per dozen, avoiding the pitfalls of having to sell individual units. Consequently, Foiled Cupcakes has become a destination for customers looking to send cupcakes as a gift item, as well as for companies celebrating birthdays, baby showers and bridal showers.
“Narrowing it down to just those customers, we’ve been able to figure out what the needs are,” Luangrath explained to Allvoices. Surprisingly at the time, there weren’t any other bakeries or cupcake businesses around Chicago using this seemingly peculiar business model.
Even if you’re not in the cupcake business, Foiled Cupcakes could prove to inspire other startups with the realization that business-to-business business models can be a competitive advantage.
How Luangrath found the perfect business model
At the birth of her business, selling her cupcakes was the most crucial factor in a successful business model. She conducted some research and learned a few pointers that could also prove helpful in growing other businesses as well. Luangrath explains that there’s a “gatekeeper” at every company who makes decisions for the entire company. For example, a corporation’s human resources employees may be the decision makers regarding the company’s food orders.
After finding the right people, there are different strategies available. Luangrath chose to approach these gatekeepers directly and ask “what can we do to make you purchase from us?” What she learned was invaluable and she fashioned her business model and customer experience around the following three points.
1. Employees want to look good – Luangrath learned that the human resource employees that she was interacting with wanted to look good in the eyes of their bosses so the quality of the cupcakes would have to meet expectations.
2. Orders must be less than $500 – Corporations require approval and auditing by the higher ups for orders over $500. Keeping the cupcake orders under that price point would be in the human resource employee’s best interest. Luangrath created corporate cupcake packages that were $450.
3. Reliability – One crucial element to getting a company’s business was the reliability of the service provider. A company needed to know that the cupcake orders from Foiled Cupcakes would arrive as specified. Luangrath made sure to keep communication open and made phone calls to the HR contact before the delivery was made, as the delivery was being routed, and after the cupcakes were delivered to make sure it was to the client’s satisfaction.
How Foiled Cupcakes targeted key influencers with social media
Social media came into play for Foiled Cupcakes through the targeting of certain individuals that would be critical to the success of Luangrath’s cupcake business. She made a list of influencers in three different verticals and targeted these individuals using Twitter and LinkedIn. One of these verticals included employees at staffing agencies.
Twitter has been the most successful social media tool in her arsenal so far. “That’s been the easiest way to talk to people you’ve never met before and engage in conversations,” Luangrath explained. She responds to tweets or find out their interests. “It was really easy to become friends with those people really quickly.” Second, it’s a platform to receive new ideas or comments. For example, the recent presidential debate resulted in customers asking Foiled to provide politics-themed cupcakes.
LinkedIn was also a critical social network platform, particularly for a primarily B2B cupcake business. “We would create these open groups and invite specific people to join them and then close the group and have that be a conversation platform for anyone who had a particular interest. We would then host events with cupcakes.”
Facebook, on the other hand, isn’t exactly a platform that benefits Foiled Cupcakes and Luangrath stressed that they haven’t focused too much on the platform for that reason. Foiled Cupcake’s target demographic, Luangrath learned, isn’t on Facebook. Instead, Luangrath uses the platform as a venue to learn about ideas for new flavors that customers might be interested in or other ideas, which are then relayed to the corporate community of Foiled Cupcake customers.
Luangrath explains that Foiled Cupcake’s Pinterest presence is to be “information consumers.” Foiled pins ideas for new cupcakes, packaging or even marketing ideas and gauges the idea based on its community’s feedback.
Luangrath hasn’t had a specific strategy for social media and her experiences have boiled down to trial and error but she likes to keep one thing in mind when it comes to social media. “Everything is going a hundred times faster on social media and that means a hundred times fewer people are seeing what you do. The one thing with all these platforms is that in 10 years it’ll be something different, so the most important thing is to make sure your strategy is scalable in all directions and adaptable to the different platforms out there.”