As with many sectors, beauty is in flux. Brands are exploring new ways to promote their products and engage directly with consumers (DTC), while being under scrutiny to be more environmentally conscious as they focus on community engagement to grow their consumer bases.
Beauty has and always will be big business, and for Coty that is most recently reflected by the acquisition of shares in Kylie Jenner’s cosmetics brand for $600m to the company in November, and highly competitive when it comes to the likes of L’Oreal, P&G and the many others vying for consumer attention. Not to mention rumours stirring about a potential buyout by a number of reported suitors including Unilever and Henkel, that have yet to be confirmed officially.
“The professional B2B market within beauty is probably the most traditional business within media,” says Chris Chesebro, SVP of e-commerce and digital transformation at Coty, who moved from its biggest rival L’Oreal, just over a year ago. “Make up and skin care have moved to a lot of the growth in those markets is coming from DTC brands.”
Speaking to The Drum while in London, spending a few days away from his base in Paris, Chesebro cites Anastasia Beverly Hills as one make-up brand that is successfully growing through DTC means, with online analytics platform SimilarWeb claiming that the global website received 816,500+ visits in October alone.
“They are a little bit more advanced in terms of the channel shift of consumer behavior and different consumption patterns because inherently the majority of the business is transacted through a salon. It's more of a traditional B2B business, especially when they're small business owners, there are not a lot of big multinational chains in there. They have been a little bit slower to adapt to the channel shift. So, I look at that and I say, here's this community of people who are business owners and, growing up, I worked at a small business in the States who could benefit from the power of data technology and digitalization to help them run their business in a more efficient way.”
Chesebro adds his view that there is a ‘big opportunity’ to help that community develop and serve its clientele and the industry better with a year-on-year decline taking place within beauty schools which brings people into the industry, and ‘a large number’ of salons closing every year too. He explains that the mission of Coty is to give those salon owners not just the products they need to be successful, but the tools and coaching they need as well.
“It's not just about being the most altruistic thing in the world because of course there's a business associated with it, but there's a way to help our business and help their business,” he admits too.
“Where all ships rise in a rising tide, that's really the objective of what I'm trying to do with technology, specifically technology with salon owners and with hairdressers, to help them manage their businesses in better ways and help them grow their businesses in better ways. And it must be innovative. The team is always coming up with new ways to use technology for engagement purposes and marketing.”
Influencers and community management
He admits that the community management strategy for Coty’s brands is not aimed to be as engaging at consumers as it is for salons, which is a place where hairdressers are able to discuss their craft, which is also a rich data source of data for the business on potential customers and upcoming orders.
“We have a couple of different things, just like many companies, we have dedicated community management for the big brands. And the two big brands are our Wella Professionals and OPI nail Polish. Those are the two places where we have very sizeable communities, so we have dedicated community management, but we try to take that into real life as well. With Wella especially, we have a number of different events throughout the year where the top hairdressers, top distributors are invited to come to those events and are opportunities to celebrate the industry and to have moments of connection because that personal connection is really important to a lot of the hairdressers.”
Coty’s sales representatives use the data insights that stem from the recently introduced ‘unified business intelligence approach’ which begins at global level down to the sales team working in individual markets and helping inform the approach of marketers also.
“We have one overall earned media metric that's a composite of several different metrics underneath it,” outlines Chesebro when asked what metrics are used to monitor success, working with platforms such as Tribe Dynamics to monitor engagement through individual influencers and how the Coty brands and their micro-influencers interact with hairdressers, as well as earned media coverage.
As well as recently reviewing the common language used within and externally by those associated with the company when it came to shared terminologies for sales and marketing, Coty is also looking at the profiles of the influencers that have interacted directly with it to decide who to develop one-to-one relationships with, reviewing the frequency of those interactions and the size of their audience and beginning a communication plan for each over the course of a year.
The use of data and regulation within digital marketing
With GDPR now established across Europe, and beginning to creep into the US, companies are having to pay closer attention to how they collect and use the data in order to engage with potential customers. Chesebro admits that it has been “a regulatory challenge” but adds that it has also provided “an opportunity to reframe” Coty’s interaction with consumers and the limits of how their information can be gathered legitimately. He also cites the growing realization by consumers that the data they are providing on themselves is valuable.
“So, rather than just having a one-size-fits-all tick box that says ‘share everything’, why not use that as an opportunity to say, ‘We want to share new information about X, Y, and Z with you on a regular basis? Are you interested in that?’ That reframes the conversation for the customer away from a regulatory one size fits all Trustpilot-type-of-thing, to a new way of having a conversation with a customer. But from a regulatory perspective, it's a very heavy process.”
He highlights the benefit of having overlapping similarities in some of what has been cited between the proposed Californian legislation and GDPR.
“From an operational perspective, it's not a simple process, but there are things that you can share and reapply across the different territories. One of the things that's really important is that a company needs to have dedicated staff associated with it. It should not be someone's part-time job. In our current experience, we have one person who is managing a shared team, but she is 100% dedicated to the implementation of GDPR and making sure that we have the right controls from an external perspective, but also from an internal perspective, this is a big component of it. That's consumer-facing. It is also a big component of how to manage incoming and outgoing employees and the data that they have that's associated with them through their human resources data if they've decided to leave the company.
“It's really important to have someone dedicated to it who has a direct line of sight to senior management because the penalties are significant. So, it's not a simple thing, but you know, regulations in many cases are put in place to protect consumers - so we have to comply with them.”
As to what that has meant for the marketing within the business, he refers back to the introduction of Big Data where there was more data than any company really knew what to do with it.
“For a while, there was an excitement around ‘let's just capture it all and figure out what to do with it later,” he explains around the need for the introduction of GDPR. “What people need to do is decide what specifically they want to communicate with their customers? Not just, ‘I want to send you coupons’ that's too transactional. It's ‘What specifically is the conversation I want to have with them?’”
Having a specific audience outlined to target when asking such questions allows companies to be more objective and create better products for their most loyal consumer-base, he claims of being more measured.
“In that objective, there's a very specific of data that is important for me to collect. And that's a high touch relationship because I want to talk to particular people and I want to have a conversation with them. I want them to come to our studio so they have a consultation with someone. So that's a specific piece of data you want to collect. But then there's also information just from a search perspective. We have a brand called Nioxin that's for thinning hair and it's a very efficacious product for increasing the fullness of hair. It's tailor-made for search. People are looking for thinning hair products, especially when it’s very hot. So, depending on the market you're going into, I don't need the same level of data on a consumer who's just searching very low funnel as I need on someone where it's very high funnel.”
He adds that the ‘unintended spirit’ around the introduction of stricter data collection regulation is that it means companies are being forced to be more specific in their marketing objectives while being more transparent with customers.
“It’s not just collecting everything because I can, and maybe in five years, I want to send you a coupon because you're next to Boots. I can understand from a business perspective why that's attractive, but I would prefer to have a specific relationship with specific consumers versus having a very, very broad base.”
Inhousing and digital media
With talk that Coty is set to overhaul its inhouse digital marketing division Beamly, Chesebro agrees that the trend to inhouse data management as it has done itself, allowing it to serve around 250,000 salons globally and feed first-party data to sale representatives who develop a relationship with these businesses as a result of a high-level service.
“We have that benefit and that's something that's existed basically for the entirety of our business.”
He continues: “One way we were almost kind of uniquely prepared [for GDPR]… was getting customers to say, ‘I'm okay with you using my data store.’ And a lot of big advertisers had to go and do a recontact process reaching out to everyone in their databases to ask ‘Do you still want to receive information from me?’ Because the majority of the people in our databases are actual customers. It’s a little bit simpler if it's Tom from a sales territory talking to the salon owner in his territory, he calls up and says, ‘Do you still want to do this?’ And they're able to say ‘yes’ versus sending out an email to 250,000 people and hoping that they were caught. But on agencies, for us specifically, I wouldn't say it's changed our landscape other than we've taken more ownership of the process and we've taken more ownership of the actual contracts. That's a thing that's an issue.”
Continuing discussion around digital marketing in-housing trends, with the likes of Nestle another major corporation currently working on incorporating specific marketing capabilities in-house, Chesebro says that it is “absolutely critical” that clients understand the contract they negotiate when it comes to media in order to avoid brand safety issues.
“It doesn't mean that the client should be negotiating the pricing for a specific activation or the costs of activating specific audiences. The client should own the contract because at the end of the day if things go south, the agency is in the recipient of the bad blowout. But the client is the recipient of the public bad blow out. So if you just want to take it and make it about addressing the negative, I don't ever want to be in a situation where our name is on the front page of a news magazine or anything where we did something we shouldn't have done.
“I would rather take the steps necessary to avoid that potential negative and say ‘let's own it’. And then that gives us opportunities to manage it in a better way, in a more effective way. But it definitely adds complexity because a lot of that wherewithal and knowledge has been traditionally outsourced to agencies. So, it requires bringing people into organizations who are not necessarily core to what that organization does. So, making bottled water, making hair color, you bring in someone who grew up working at an ad exchange and you put them into a marketing organization. It can be a little bit like oil and water for a while. You've got to have the right management process to bring somebody like that into an organization. And it changes talent management too.”
Asked what he hoped to see change when buying digital media, a sector Cheesbro began his career in while at OMD before moving to L’Oreal, where he also managed media as part of his role, he laments the growing cost of digital advertising.
“Even Instagram costs now are comparable with ‘traditional’ means,” he states while pining for more of “an equal playing field” across media. “I hate situations where you're either traditional or you're digital because, in the absence of China, every consumer in the world is an Omnichannel consumer. And people, for a long time in the States, people were talking about radio like radio was dead. But even in New York, there are hundreds of thousands of people who drive their cars to the office every single day and more people listened to radio than ever before. So, I'm not a fan of the zero-sum game.
“I would rather see things be presented as this is the role that we play in this consumer's life and this is the role that we play in this consumer's day. And I like that as a positioning versus ‘this is our cost’ position. But that might be me being optimistic about the world.”
The benefits of being an Amazon partner
Finally, talk turns to the need for third-party e-commerce partners, not least Amazon, with Nike having only just announced its intentions to no longer sell through the monster online retail platform which continues to sell counterfeit versions of its products. Coty began its relationship with Amazon a year-and-a-half ago to make available products like OPI Nail Polish to reach consumers who don’t use its affiliated salons or attend it’s retail outlets in the US.
Of the success of Nioxin and how Amazon has factored in that, Chesebro says the value of the business reached over £10m “almost overnight” and has left the company wondering what other brands it should take onto the platform.
“Amazon is a real growth opportunity from a BTC perspective and capturing the fact that there are customers on Amazon looking for products every single day. It is the number one product search engine in the Western world. So there's a big opportunity to capture that audience and capture that demand,” he outlines, adding that from a B2B perspective the platform has become a ‘test-and-learn’ opportunity too, with two brands running through Amazon’s portal in the US, and a potential for more to be added beyond that.
“It's an opportunity for us to add volume on top of what we're already doing in one way and also to be able to serve a group of our B2B customers that are underserved. So in markets like the US and the UK, a very large percentage of our hairdressers are in those markets, while our freelancers are independent. So they go from salon to salon - they call them ‘chair renters’. They typically are not served by the big companies directly because they won't go through the process of getting an SAP credit check or setting things up and having to deal with payment terms and whatnot. So they tend to go into stores or they buy from Amazon. So, um, finding the right way to address the needs of those customers wherein markets like the U S and the UK, it's more than half of the hairdressers in the market.”
Making products available through Amazon allows Coty to engage and grow its user base, meaning the platform has become a growth partner, although Chesebro sounds caution as most of the business is still generated through salon transactions. Although he is of the belief that while there is some caution from independent companies around Amazon, major brands need to adopt it if they haven’t already.
“Amazon can be a fantastic partner, but they're very decentralized. It's very important to coordinate across your global markets where Amazon is present,” he advises, revealing that he has a member on his team who is fully responsible for Coty’s Amazon use globally.
“It's not revolutionary, it's just important to make sure you have those fundamentals in place and the way you manage your accounts and your customers.”
He also sees the value in start-up independent rivals adopting Amazon as their main e-commerce channel, but cites the likelihood that it will stunt their overall revenue-driving potential long-term, albeit while still being able to grow the business to a formidable size nevertheless.
On where digital spend it concentrated by Coty, Chesebro cites the ‘low spend’ on B2B as running through Salesforce, however, the media plan remains ‘brand-specific’, while most investment runs through Facebook and search through Amazon, with social spend used to amplify product awareness and content partnerships running in the US as well.
Asked about plans for 2020, he cites the plan to continue to grow community relationships as the big opportunity that will see acceleration.
“There's an opportunity for expansion for the business because we have the opportunity geographically; China is a big opportunity for us as our business there is still small. It should be one of our biggest contributors to growth… you will see that in the next couple of years,” he predicts, adding that there are plans for a brand launch in the country on 12 December, its first launch there, which will run in partnership with a local eCommerce platform.
And following the launch of a new brand in the Nordics recently that featured entirely recyclable plastic packaging, sustainability will be another factor to feature in Coty’s future too.