Diapers are a critical element of a new baby’s upbringing. According to a USDA report, child-related expenses total up to $15,000 per year. For newborns, the cost can be as high as $50,000 depending on location and household income. Within this budget, diapers account for approximately 10% of a newborn baby’s essential expenses.
While parenting could be a rewarding and satisfying experience, new parents face equally great challenges beyond the financial constraints. According to studies by the University of California – Berkley, scientists consider parenthood to be one of the most massive reorganizations in a lifespan – changing parents’ brains, endocrine systems, behaviors, identities, and relationships. To face the challenges of parenting, scientists have found, support parent networks are critically important.
In 2017, Pampers, the leading brand for baby diapers in the world, launched a digital solution to help parents manage these issues. Pampers Club is a digital platform that gives parents cash rewards for their baby’s dirty diapers, in addition to membership to a community of new and experienced parents to aid the physical, emotional, and psychological challenges involved with parenthood.
Diapers and Rewards
Pampers Club’s user experience involves scanning the Pampers code that comes inside a new package of diapers, in exchange for cash back offers and other rewards such as coupons, gift cards, and other baby products. For every 3 packages of diapers scanned (with an average cost of approximately $30), the user can earn up to $5 in cash back. The platform is shown below:
Parenting Tips for New Moms & Dads
In addition to cost savings, Pampers Club offers access to a wealth of trusted pregnancy and baby tips for new moms and dads. The content has a broad scope: from hospital bag checklists, childbirth education, baby development and diapering, baby sleep training, and more. In addition, users can access Pamper’s website for additional parenting tools:
The platform also allows outside vendors of baby-related products to advertise on the platform. Ergobaby, a vendor of ergonomic baby carriers, as an example, participates in the platform. Users can redeem points for Ergobaby products. This provides a direct channel for vendors to advertise to new parents, thus increasing their sales and creating marketing opportunities.
Platform’s Growth Strategy
Pampers Club’s value proposition respond to two issues: parents need to cut on diaper-related expenses and need advice to meet their baby’s needs. The cash-back rewards through the platform translate into savings of over 15%. The parenting tips and access to baby-related products also add value to the platform, as those are serving essential needs for the care of newborns.
The value captured by the app comes from two sources: 1) increased sales of Pamper products and 2) advertising opportunities for outside vendors. The platform benefits from network effects and a virtuous cycle. Users earn points as friends join the platform: the more friends join, the more savings they make, and this translates into more sales for Pampers. As the number of users increases, the platform becomes more attractive to outside vendors like Ergobaby that are willing to pay a premium to advertise their products on the platform. This translates into increased marketing revenue for Pampers. Consequently, as more vendors and products become available, the more attractive the platform becomes to potential users.
Scalability and Sustainability
Since its inception, Pampers Club has built a network of over 1.5 million users. The growth has been enabled by focusing on increasing functionality and usability in response to users’ feedback. Last year, as an example, Pampers Club automated the scanning feature of the app, as users complained about the difficulty of manually entering codes. In addition, the platform broaden its rewards program to outside participants and vendors such as Ergobaby.
About 3.7 million babies are born in the U.S. every year. Pampers could leverage its position as a market leader (its parent company P&G leads the market with over 45% market share) to continue scaling the platform. This would require a more aggressive marketing strategy to bring the customers that are already buying their diapers into the platform, and continuous improvement to increase value to users and improve network effects.