Candy Coating

Customized packaging helps Dan’s click with chocoholics online Everyone’s dental records are different, so it only follows that everyone’s sweet tooth is unique as well.

Watertown, MA-based Dan’s Chocolates (www.dans.com) is nibbling its way into the candy market by catering to individual tastes, allowing customers to choose from over 300 box designs ranging from birthdays and holidays to hobbies and occupations. (The journalist box, for instance, sports a typewriter.)

Dan Cunningham, “chief chokolada” of Dan’s, founded the company based on a “European model” of selling fresh chocolate.

For companies that succeed, the chocolate market can be sweet. According to the Chocolate Manufacturers Association, in 1999 Americans consumed 3.3 billion pounds of chocolate (an average 11.9 pounds per person), and sales were $8.4 billion.

Cunningham felt there was a definite opportunity in marketing one’s own fresh chocolate online because online chocolate companies were selling someone else’s brands. After two months of taste testing, a chocolatier was selected in Wisconsin, where Dan’s candy is manufactured and orders are fulfilled.

But to build a relationship with consumers, Dan’s knew it needed to build a strong brand. To do so the company had to educate people on the quality of the product. This isn’t as easy as one might think, because people get more discriminating as they get older. “Kids and teenagers will largely put anything in their mouths, as long as it’s cheap,” Cunningham says. Since Dan’s primary audience is adults, it competes on product, not price.

Getting people to taste the product was crucial, because consumer loyalty to favorite food products is very strong. Samples were handed out at train stations, while radio commercials offered a six-piece truffle box for $1 to send to anyone, with the proceeds going to charity.

Dan’s Chocolates, which sees Godiva as its main competition, began in early 1999 as a subsidiary of BlueMountain.com, where the chocolates were offered as an add-on to online greeting cards (recipients received an e-card, and then filled in the ship-to address for delivery). When Blue Mountain was acquired by Excite at Home, Dan’s spun off as a separate company. Following a May 1999 Mother’s Day test to experiment with different price points and product offerings, Dan’s officially launched in November 1999.

The company has more than 100,000 customers, and one-third of the orders in any given month are repeat business, says Cunningham, adding that Dan’s hasn’t researched how many customers started out as gift recipients. About a third of the overall sales come from corporate clients, business solicited mostly by a telephone sales force.

Direct mail postcard campaigns to previous customers, offering discounts or free add-ons like a teddy bear or a candle, have been successful, as have e-mail campaigns, sent both to the entire customer base as well as to targeted segments of the audience.

Returns haven’t been much of a problem, he says. Complaints have been primarily things like delivery problems, such as a package being damaged in transit or a customer supplying the wrong address. (On the day of this interview, for example, there were boxes of returns from a corporate client’s bad addresses piled in the Dan’s offices.)

Dan’s customer-service reps go through three weeks of training. They handle both telephone and e-mail inquiries; the company shoots for a response time of three hours.

The four biggest holidays for Dan’s so far have been Valentine’s Day, Mother’s Day, Christmas and Halloween. The company is debuting several new designs for this Valentine’s Day, which Cunningham describes as “more sophisticated” than the traditional heart-shaped box. Just about all the designs sell at least once a month, while some might sell 1,000 per month.

To continue to build the brand – and increase market presence – Dan’s is holding off upgrading its Web site technology, and instead putting its energy into expanding its wholesale channel, selling chocolates to retail gourmet stores and coffee shops.

Another way Dan’s has differentiated itself from other sites was to donate 1% of its profits to charity. About $100,000 was donated in the first year of operation to one of several charities selected by customers when they check out.

Dan’s went from concept to launch in only four months, but the only real problems incurred from ramping up so quickly were on the infrastructure side, with software glitches and the like. Cunningham says he also might have waited a little longer to try mass advertising efforts like the radio campaign, but in the end, that worked out well because it raised public awareness of the company.

Cunningham notes that while the company, which does an estimated $3 million in sales annually, isn’t yet profitable, it is getting close. Dan’s has no plans to go public, and has purposefully kept overhead costs and staffing levels low (only about 10 employees work full-time in the Watertown offices) to avoid the pitfalls that have closed the doors of many dot.coms.