Pressroom - Pannning for Gold

In the rugged world of dot-competition, Dan's Chocolates stands out. It has a soft center. The Watertown, Mass., chocolatier donates 5 percent of its sales to charity. But it also knows how to play hardball. In fact, Dan's has targeted a formidable contender right out of the box: mall megaretailer Godiva Chocolates.

Call it Robin Hood marketing, stealing market share from the big guy and giving it to 18 charity partners, including the Make-A-Wish Foundation and Teach for America.

"There's so much focus on money in the Internet world - this is like going in the opposite direction," says Dan Cunningham, the company's namesake and self-described "chief chokolada."

Of course, Dan's, which was spun off from BlueMountainArts.com when ExciteAtHome acquired the online greeting-card company last year, isn't banking solely on goodwill. You'd better make good candy if you want a bite of the estimated $2.5 billion gourmet chocolate market, especially if you want to take on Godiva, which owns the market's biggest piece.

Dan's strategy starts with its chocolate. "Our biggest converter is going to be getting chocolate in people's mouths," says Ted Richardson, Dan's chief marketing officer. Thus this spring's $3 million "Great Chocolate Challenge," which was designed to raise money for charity - and spread the word about Dan's Chocolates. Fifty thousand visitors to the Dan's Web site each donated $1 to charity and got a six-piece sampler in return. Altogether the campaign quadrupled orders and site traffic, which peaked at 60,000 visitors per day.

Beyond such promotions, Dan's is relying heavily on, ahem, word of mouth. "We're not the kind of dot-com who has $20 million to throw against the wall and see what sticks," Richardson says.

So far the company has lured almost 2.5 million unique visitors to its site and projects revenues of $5 million for 2000. But can Dan's low-altitude marketing pay off in the long run? Maybe, maybe not, says Erik Gordon, director of the Center for Retailing at the University of Florida College of Business. "I don't know how much buzz you can get off [a charity drive]."

Gordon is more enthusiastic about features like "lifestyle packaging," a concept borrowed from Dan's greeting-card roots that offers hundreds of custom options. Gordon also lauds the surprise thank-you minibox of chocolates that all first-time customers receive. "That's very smart marketing," he says. "That will get a smile."

In this David-vs.-Godiva battle for customers, it may take more than a great charity program and a superior product to gain lasting attention. "The battle for mindshare is going to be tough, tough, tough," Gordon says. Dan's hopes that to win, it won't hurt to be a little soft.