The We Company, previously known as WeWork, expects sales and marketing expenses associated with broker referral fees is expected to grow, in a IPO prospectus released yesterday. This is part of its plans to make use of third-party brokers to help attract new enterprise members.
The filing seen by Marketing said the co-working company is increasingly targeting enterprises who sign membership agreements with longer-term commitments. The We Company’s enterprise membership percentage has increased from 28% as of 31 December 2017 to 40% as of 30 June 2019. “We expect the use of discounts to help drive initial occupancy and longer-term commitments, which we expect will have a significant impact on our financial performance,” said the company.
Meanwhile, it also expects investment in sales and marketing to continue as it opens more spaces in existing and new markets. However, its sales and marketing efforts will be primarily focused on pre-opening locations and non-mature locations. It explained: “Once a location reaches maturity, occupancy at that location has historically tended to be self-sustaining, and we do not incur significant sales and marketing expenses related to those locations.”
The We Company further highlighted the importance of responding to economic and competitive conditions quickly and making the necessary adjustments to pricing and related promotional and marketing plans. The We Company said: “If our pricing and related promotional and marketing plans are not successful, or are not as successful as those of competitors, our revenue, membership base and market share could decrease – thereby adversely impacting our results of operations.”
In the IPO filing, the We Company also laid down the challenges ahead such as how its global re-branding effort in January may affect its ability to attract and retain members, and have a “material adverse effect” on its business or results of operations. To tackle this, the brand looks to provide a consistently high quality member experience as well as invest more in marketing and community-building efforts, said the company.
Its brand reputation, according to The We Company, has depended on word-of-mouth and other non-paid sources of opinion, including on the internet. While many of its members have signed up for memberships because of positive word-of-mouth referrals by existing members and reduced the firm’s need to rely on traditional marketing efforts, it may change.
“To the extent that we are unable to maintain a positive brand reputation organically, we may need to rely more heavily on traditional marketing efforts to attract new members, which would increase our sales and marketing expenses both in absolute terms and as a percentage of our revenue,” it added.