Peter Fisk tells the tale of Crocs, the slightly ugly, multi-coloured clog brand that has taken the footwear world by storm
In 2002, Lyndon Hanson, Scott Seamans and George Boedecker from Boulder, Colorado head for a sailing trip in the Caribbean. On arriving at their boat, they unpack their bags, including a pair of foam clogs that one of them found while in Canada.
They are inspired to build a business around the funky, foam-made shoes with the Swiss-cheese perforations. They are incredibly comfortable, non slip, lightweight, washable and never smell. The perfect boat shoe. They need a name. "Crocs" is chosen because crocodiles are equally good in the land and water and they live for a very long time.
One year on and the three friends are staggered by their astonishing success. $1.2 million sales and they are still treating the business like a part-time job. They launch their shoes at the Fort Lauderdale boat show - but soon everyone from doctors, gardeners to waiters wants them.
They lease a warehouse in Florida, but are struggling to cope with demand. Celebrities like Brad Pitt and Britney Spears adopt them. Kids adore them. Crocs are not just functional but suddenly the height of fashion too.
In 2004, Crocs are growing incredibly quickly with $13.5 million by end of the second year, although with a small loss. Ron Snyder, a former college friend has joined as CEO. He previously ran the global business of Flextronics and oversaw its growth from $3 billion to $16 billion in four years.
Snyder decides to buy the Canadian company, Foam Creations, who make Crocs from a special "closed-cell resin" called Croslite. In the past Crocs had basically distributed their products, now it had its own unique process, material, design and distribution.
In 2005, revenues leap to $108.6 million, and profits to $17 million. The rubbery clogs can be found in over 40 countries. The range and colours diversify too - and with prices ranging from $30 to $60 a pair, they are cheap enough for people to buy two, three or four pairs.
Strong branding and high profile sponsorships that link closely with target audiences help to raise curiosity, visibility and desire further - from baseball, football and motor-racing, to the latest kids movies from Disney.
"Think bigger than you are" is a lesson Snyder brought with him. He registers Crocs as a trademark in countries around the world, and establishes manufacturing capability from Mexico to China, to support still faster growth.
Now a global phenomenon, everybody wants Crocs, shops sell out before new supplies arrive. Sales are phenomenal too, selling 20 million pairs, and tripling revenues to $354.7 million and profit margins growing to 18%.
People love their Crocs. Jibbitz, for example, started as a tiny, home-made collection of clay and rhinestone that clipped onto the shoes to customise them. It grew even faster than the shoe company, so that Crocs snapped them up for $20 million.
Crocs goes public in 2006, with an IPO initially valuing the company at an eye-catching $1 billion. Some say it is an outrageous valuation, the company is riding on a fashion trend that cannot last, and investors have been seduced by a funky brand. Only time will tell.
Back in Colorado, sales continue to increase rapidly and profitably, and the market cap closes in on $5 billion in 2007. Not bad for a company less than five years old.
This is an edited preview from Peter Fisk's latest book, Business Genius, which is published on 15 May 2008. Peter Fisk is running The Marketing Fast Track, the Marketing Society's professional development programme. Reserve your place today for May's workshops on insight and customer champions.