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Customers make great marketers

Customers aren't just a focus at KarmaLoop, an online apparel retailer; they market and sell the product as well.

KarmaLoop, an online seller of urban street wear, has found a way to save on its marketing expenses by letting customers do the work.

The company counts 750,000 unique visitors a year to its Web site and has just one paid marketer on staff. Yet it has established itself as a leader in urban clothing and the top online marketplace for young adults seeking unique apparel, according to its CEO, Greg Selkoe. The Boston-based company relies on its customers to market the site and the business.

"Without our customers' input, we wouldn't be around today," Selkoe said at a recent panel discussion. "All our marketing is done by customers. We started in 1999 with the idea that if you bought clothes from us you'd become part of a movement to liberate America from McFashion, a term we created [to describe popular apparel design from major vendors]."

KarmaLoop was able to create an active and loyal customer base by railing against the large and trendy clothing stores found in malls -- at times referring to them as the "Abercrombie Zombies," a mockery of the giant retailer Abercrombie & Fitch.

According to Selkoe, 60% of the traffic to the corporate Web site is direct load -- people type directly into the address bar on their browser. That's thanks to a highly successful – and unusual -- rep program the company has established. KarmaLoop encourages its customers to become sales reps for the company. Customers fill out an online questionnaire, entering information such as their musical tastes, where they live, and the nightclubs they frequent, and are given a promotional code. Reps then give out that promotional code at clubs, to friends, at parties, providing a 20% discount to first-time buyers at and 10% off subsequent orders. The reps then earn points for all purchases made using their code, which they can redeem for clothes or cash. @29174

KarmaLoop highlights the top-performing reps on the site and has created a forum for sharing best practices. For example, the forum featured one rep who put his promotional code inside fortune cookies. Reps can also upload their designs for flyers with promotional codes and share them with the rest of the KarmaLoop community.

"All of our creative [design] is operated by our reps," Selkoe said. "That is our marketing."

Selkoe presented his story at a recent panel discussion organized by the Boston-based Patricia Seybold Group, a customer experience consultancy, highlighting companies that have used customers to steer the direction of their business. Selkoe was joined by: Koko Fitness, a startup exercise equipment maker that used customers to design its product; GE Color Express, a division of the company's plastics business that has created a center for customers to test and select the colors for their plastic products; National Instruments, which worked with the Lego Group, a college professor and children to build robotics software for engineers and children alike; HeartMath, a company rolling out a portable stress reliever based on customer requests; and National Semiconductor, which has created a virtual environment for customers to build and test electrical components.

Each company is profiled in a new book from Patricia Seybold entitled Outside Innovation, How Your Customers Will Co-Design Your Company's Future and has pioneered innovative ways to make customers the center of their business.

"Everything about this business was purely inspired by customers," said Mary Obana, co-founder and chief marketing officer at Koko Fitness. "When you involve your customers from the beginning, you create a customer-centric organization."

But KarmaLoop has taken an extra step. Customers serve as sales and marketing reps, volunteer as models for apparel, and even provide supply and fulfillment in the company's latest venture -- the Kazbah. The Kazbah is a section of the site where KarmaLoop's customers offer clothes and accessories they've designed. They handle all the orders, and KarmaLoop provides the transaction engine. Currently, KarmaLoop decides which designers can post items to the Kazbah, but Selkoe plans to have the community vote on the best designs.

"We consider ourselves a community of style," Selkoe said. "What we did was grassroots promotion that theoretically could have been done before the Internet. It all goes back to word of mouth."

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