aura living’s B2B relationships with high-end wedding planners led to a windfall of press in prestige outlets.
In Saudi retail startup aura living, Ned Smith, an associate professor of management and organizations at the Kellogg School, found a perfect case study in growth strategy implementation. Soon after aura opened its first store in Saudi Arabia in 2011, the mid-market furniture and home-accessories company had a problem on its hands: one of its early sales strategies helped turn it into a prestige media darling.
“It’s a good problem to have,” Smith says.
But it is a problem nonetheless. Though aura founder and CEO Noura Abdullah had established the company to serve as an affordable and tasteful alternative to luxury Middle Eastern brands or the Western “beige” style of furniture sold by Ikea and Pottery Barn outlets in Saudi Arabia, one early win threatened to undermine the company’s initial market strategy.
“We had business-to-business relationships with the five main wedding planners for lavish Middle Eastern weddings—these are the kinds of events with 2500–3000 guests,” Abdullah says. “Because of our success furnishing these weddings and the attractive look and feel of our products, we got coverage in a string of publications like Harper’s Bazaar and Martha Stewart Weddings.”
Establishing Brand Identity
How has that affected the company’s efforts to attract mid-market customers to its showrooms in Riyadh and Dhahran? “You can argue both ways,” Abdullah says. “You can say these publications cannibalized us reaching our target audience, making it difficult for customers to look at us as attainable. On the other hand, you can look at the publicity as supporting our brand image and giving mid-market customers an opportunity to be proud of that image.
“We feel we can attract both high end and middle markets.”
aura did little initial marketing in paid media outlets, choosing instead to make sure its products were beautifully photographed for social media.
“We did very little marketing in the beginning, primarily because it is very expensive to put ads in newspapers and magazines,” Abdullah continues. Instead, “we put time and energy, rather than money, into approaching media outlets. We also made sure our products were beautifully photographed.”
Smith sees great opportunity in aura’s initial burst of good press, identifying status and brand identity as competitive assets the company can use to its advantage. “Being affiliated with high-status others can lower your costs and increase your perceived quality,” Smith says.
But while aura’s marketing growth strategy may have allowed aura greater flexibility in establishing a brand identity, Smith thinks aura’s viral marketing campaign might have been more targeted. “aura should have spent some time understanding social-media use in their core market,” he says. “More importantly, aura should have tracked its reception in the social-media-osphere from the get-go. They may have realized sooner rather than later that their reception was clustering at an end of the market that they did not intend to target and proceeded to purposefully and strategically ‘seed’ other ‘neighborhoods’ in the social-media network.”
Increasing Mid-Market Footfall
So far, it does not appear that mid-market customers are flocking to aura.
“Rich people are walking through the door and buying, because it is fashionable and not expensive,” Smith says. “But that’s hurting aura’s growth, because they know that if they could get the right people in the door, those people would buy aura’s products. They’re just not coming through.”
As a retailer, there are three main factors that aura is tracking: footfall, or how many people walk in the door; conversion rate, or how many of those people make a purchase; and ticket price, or how much each of them spends. The company’s conversion rate is very high—especially for a furniture retailer—and its ticket price is much higher than anticipated, but its footfall is lagging behind expectations.
“What this tells you is that people are afraid to walk into the store because they feel that it’s high-end,” Abdullah says. “Once they walk in and they see our price point, they are pleasantly surprised and they almost always make a purchase.”
Rather than abandon its initial target customers now that it has established itself as a status brand, aura has a window of opportunity to broaden its customer base.
How has the company responded? First, aura is emphasizing pricing by introducing in-store overhead signage that fits with the brand image without cheapening it, while targeting price-conscious consumers. Second, press releases for its primary products are promoting the company’s accessible “within reach” pricing. Third, aura is paying special attention to its pricing strategy to ensure that it attracts and maintains its target audience. Because much of the Middle Eastern design and fashion conversation happens on Instagram, aura is now monitoring social media closely to keep tabs on customer reaction to its current price points.
Attracting Two Market Segments
Rather than abandon its initial target customers now that it has established itself as a status brand, aura sees a window of opportunity to broaden its customer base. “We feel we can attract both high-end and middle markets,” Abdullah says.
Smith agrees. “In theory this is great. They stumbled upon a set of consumers they had devoted little to no resources to target,” he says.
But he sees risks at play in the strategy of targeting two market segments. “One is about resources,” says Smith. “Like any diversification strategy, engaging two markets requires more resources and diffuse attention than engaging in one. This is particularly relevant for small companies, which may not have the resources necessary to pursue multiple market segments successfully.”
Abdullah is aware of that resource-intensive decision. “For the future, we need scale: to cover head office costs, to get the benefits of discounts, logistics, and supply chain,” she notes.
The company is trying to scale up without going mindlessly into new markets. Its initial plan was to open five stores in Saudi Arabia. When sales and delivery data showed that the market would be saturated at three stores, aura shifted course—putting more resources into advertising and marketing, as well as perfecting its e-commerce business—as ways to increase sales before expanding to the greater Middle East region.
“The second risk,” Smith notes, “is about identity and consumer perception. Engaging in multiple markets can create ambiguity in the minds of consumers, which can lead to devaluation.”
aura living set out to establish itself as an affordable and tasteful alternative to luxury Middle Eastern brands and the “beige” style of furniture sold at Ikea and Pottery Barn.
The company is tackling the risk of brand confusion in subtle ways. For the opening of its store in Jeddah this year, aura is maintaining their “cool factor” by sponsoring a dinner event hosted by local fashion and design bloggers. The Jeddah store is also smaller and located in a less premium area in the mall to test whether location and store design can increase footfall. The shop is simpler while still embodying the brand, and it has been designed to attract Jeddah’s traditionally more cost-conscious customers.
“We’re trying to avoid the mistakes we made in Riyadh,” Abdullah says. “We want to convey that we’re attainable.”