Companies that end up profiting from natural disasters walk a tightrope between profiteering and intelligent marketing. Here's how smart entrepreneurs do it.
EssentialPack's Basic Emergency Backpack Kit is can to provide four people with essential emergency supplies for three days. A disaster, such as Hurricane Sandy, can boost sales of such products for months.
There's no doubt that Hurricane Sandy has taken a devastating toll on people and businesses around the country.
But for a small cadre of entrepreneurs, weather events such as Sandy present unique--and occasionally uncomfortable-to-talk-about--opportunities for new streams of revenue.
In the days following a natural disaster, consumers and businesses will likely start imagining how they could be better-prepared for the next major weather event that could leave them without power, water, or even shelter. Should they have better supplies? Different insurance? A more detailed contingency plan? But after a few weeks, or even a month or two, interest wanes as life goes back to normal.
So now is precisely the time that James Shea, the founder EssentialPacks, really gets to work.
"Any time we have an event like this, we see a spike in business," Shea says.
EssentialPacks, founded in 2009, is a three-year-old online retailer that sells disaster relief kits to government agencies, first responders, businesses, and general consumers. The emergency kits include helpful, if not basic necessities like emergency food rations, extra batteries, and radios.
During last year's Japanese tsunami, for instance, EssentialPacks sold off its entire inventory. "Our business increased tenfold overnight," Shea says. "It's hard to prepare for that dramatic increase."
Like many small businesses, EssentialPacks's primary advertising vehicle is Google AdWords. Naturally, in preparation for an event such as Sandy, Shea increases the company's AdWords buys. But the cost-benefit rewards of the click-based model are not always that straightforward.
"We also see a huge spike in our Google click advertising costs," he says. "So while you have a huge opportunity, you will also have a lot of people who will go just to look, who aren't necessarily going to purchase. You have to respond pretty quickly to how you're bidding on clicks. You just lose your shirt if you're not careful."
Last week, Shea, who works with an advertising agency to help him make marketing-spend decisions, discussed with the agency representative how he should react.
"When something like Sandy happens it can be both a blessing and a curse if you're not up to speed on how those advertising and marketing channels work," he says. "It certainly creates a lot of awareness and depending on how you market, it could be great."
Debbie Coleman, the CEO of Relief Pod, a 20-person company based in Santa Ana, California, says her company, which also sells disaster-relief kits, uses weather events such as Sandy as a means to educate the public about being prepared.
"Our focus is education and preparedness," she says. "It's like having a seat belt. It doesn't help to put the seat belt on after the accident. We hear those words and we become immune to them. We feel it should be taken as seriously as a smoke alarm. It will help save lives."
Coleman says that after an event like Sandy, the company will work directly with aid organizations, including the American Red Cross and FEMA, to supply them with the necessary tools and equipment.
"When we see a disaster like this approaching, we start with our social media and blog and get as much info out as possible on what to do to get prepared," she says. "We continue through the storm, and then after, we try to get customers to be prepared."
Other entrepreneurs who operate non-emergency preparedness verticals but who nonetheless may see a windfall in sales are more cautious in handling weather events.
"Some customers are saying, 'I wasn't ready this time, but I'll be ready next time, and I'm buying your product,'" says Shayne McQuade, founder of Voltaic Systems, which manufactures portable solar chargers and solar bags.
From his office in Brooklyn, New York, McQuade--who was speaking on a cell phone charged by one of the solar devices the company manufactures--explains how the eight-person company has approached Sandy.
"We're conscious of demonstrating how the products might be used, but we're not going to launch a marketing campaign on the back of Sandy," he says. "I think what will happen is that we'll get more inquiries from individuals and wholesalers who are interested in emergency preparedness. Obviously people will wake up to the vulnerability of the power grid, and want to have backup power."
McQuade says there would be little value of a promotional campaign relating to Sandy. And that's not just for ethical reasons, either. Click-based campaigns, he says, are of little economic value to the company: One of the benefits of having founded the business back in 2005 (when there were few competitors in the market) is auspicious Google search rankings. Voltaic Systems ranks first for many searches, including "solar charging bag."
Currently, McQuade says that most his company's customers purchase bags because of convenience--say, to avoid running out of laptop power on the way to a presentation. Another segment of his market are avid backpackers. But weather events such as Hurricane Sandy may just create new customer segments, and new revenue streams.
"I expect to see the shift in demand from emergency preparedness on top of our regular market of travelers and backpackers," he says. "I think it's important that people have these products. And I think this situation does illustrate how a backup power supply could be useful."