Latest / The Marketing Funnel Podcast with Fexingo: Awareness, Interest, Decision, and Action Stages / How Allbirds Lost Its Marketing Funnel Magic
Transcript
- Lucas: So Allbirds. You remember the hype. 2016, a wool sneaker that was supposedly the most comfortable shoe ever, backed by Leonardo DiCaprio and a sustainability story that just clicked. By 2020, they were valued at over one point seven billion dollars. Luna: And now the stock is trading around a dollar. What happened? It's like the marketing funnel was a helium balloon and someone let the gas out. Lucas: Exactly. And I think the story here is actually a really clean lesson about what happens when your top of funnel is brilliant but your middle and bottom leak like a sieve. Allbirds built massive awareness. Celebrities wore them. Every tech CEO had a pair. But the repeat purchase rate never matched the hype. Luna: I remember reading that by 2023, something like 40 percent of their sales were still coming from first-time buyers. That's a red flag for a company that's been around almost a decade. Lucas: Forty percent is rough. For context, a healthy DTC brand usually sees repeat customers driving 60 to 70 percent of revenue. Allbirds was inverted. And the problem wasn't that people hated the shoes — it's that they didn't need another pair. The product was durable, which sounds great for the planet, but terrible for the business model. Luna: Right, because if your sneakers last three years and the design doesn't change much, there's no reason to buy again. So you're constantly spending to acquire new customers just to stay flat. Lucas: That's the middle of funnel gap. Allbirds was great at awareness — the 'shoes made from merino wool' hook was sticky. And they were okay at the decision stage: the website was clean, the return policy easy, the price point reasonable. But the interest stage? Once you owned a pair, what kept you interested? They tried launching apparel, but that didn't really take off. Luna: And the action stage was a one-and-done. So the funnel narrowed too fast. They spent enormous amounts on digital ads — I think their customer acquisition cost was something like fifty dollars per order — and the lifetime value never caught up. Lucas: Let's put a number on that. In their S-1 filing, they disclosed a lifetime value to customer acquisition cost ratio of about three to one. That sounds healthy, but it was based on projected repeat purchases that didn't materialize. When you strip out the assumptions, the real ratio was probably closer to one to one. Luna: Ouch. So they were basically spending a dollar to make a dollar. No wonder the stock cratered. Lucas: And here's the twist — they're now trying to fix it by moving from direct to consumer into wholesale. You can find Allbirds in Nordstrom, REI, even some department stores. It's a classic move to broaden the funnel's base, but it comes with margin pressure and brand dilution. Luna: Is that the right move? I mean, if your DTC funnel is broken, throwing wholesale into the mix might just add complexity without fixing the core repeat-purchase problem. Lucas: I think it's a bet that physical retail drives top of funnel awareness in a way digital ads can't. You walk past a display, you touch the wool, you buy your first pair. But it doesn't solve the 'why buy a second pair' question. That's a product problem, not a channel problem. Luna: So what should they have done differently? Could they have engineered more frequency — like limited-edition color drops, or a subscription for insoles? Lucas: They tried a few things. They launched a 'M0.0NSHOT' running shoe, they did some collaborations. But it was too little, too late. The lesson from other DTC brands like On Running or Hoka is that you need constant innovation and a clear performance narrative. Allbirds got stuck on 'sustainable and comfortable.' That's a commodity claim. Luna: Yeah, On Running has that cloud-technology story and they refresh models every season. Allbirds had one hit and then kind of went quiet. Lucas: And the sustainability angle, while authentic, actually worked against the funnel in a subtle way. If your brand promise is 'buy less, buy better,' you're literally telling customers not to repurchase. That's fine for a mission-driven company, but not for a venture-backed growth story. Luna: So the marketing funnel for Allbirds was really effective at the top, but the bottom was designed to fail. And now they're scrambling. Lucas: Exactly. And I think this is a cautionary tale for any brand that leads with a lifestyle or values story without a strong repeat-purchase mechanism. You can build massive awareness, but if your product doesn't create a habit, you're just renting customers. Luna: Allbirds is still around, and they have cash. But the stock price tells you the market has priced in a pretty tough turnaround. Lucas: Yeah. If these marketing conversations have sparked something you've actually used in your own work, a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Honestly, it makes a real difference. We don't run ads, so listener support is what keeps the podcast ad-free and focused on cases like this. Lucas: Right. So back to Allbirds — one thing I find interesting is how they're leaning into the wholesale strategy now. They announced partnerships with a bunch of retailers last year, hoping to get in front of people who never would have visited their website. But the question is whether that new traffic will convert into loyal customers. Luna: It's almost like they're starting the funnel over, but with lower margins. The cost of acquiring a wholesale customer is lower, but so is the revenue per pair. Lucas: Exactly. And the brand perception shifts. When you're in a department store, you're competing with Nike and Adidas on a shelf. That's a different battle than being a cult DTC brand. Luna: So what's the takeaway for marketers listening? I think it's that the middle of the funnel — the interest and preference stage — needs just as much creative energy as the top. Allbirds had a great hook, but they didn't give people a reason to stay. Lucas: Totally. And the product itself is part of the funnel. If your product doesn't naturally create repeat usage or desire for the next version, you have to build it into the marketing. Allbirds tried, but they were fighting the physics of their own business model. Luna: It's a reminder that the best marketing can't fix a leaky bucket. You have to patch the holes first. Lucas: And that's the real lesson from Allbirds: a brilliant top of funnel is only as good as the bottom. If the people who come in don't come back, you're just spinning your wheels.