How to save a brand (without spending $1bn)
When The Estée Lauder Companies paid $1.45bn for indie makeup brand Too Faced, Wall Street sat up and took notice. With additional investments worth hundreds of millions of dollars in other beauty startups, this conglomerate is one of several that is betting its future on the power of a new kind of brand.
These brands are independent, with compelling stories, and catering to under-served, emerging consumer niches. They aren’t always found in traditional retail establishments, and getting one’s hands on them can be a badge of honor for a consumer who considers herself discerning and sophisticated. These brands often trade on a growing consumer interest – especially among millennials – in purchasing from “ethical” brands using natural ingredients, responsibly sourced.
Sound familiar? It should. This very much mirrors the same shifts that other verticals have had to weather – most notably, consumer packaged goods (CPG). As consumer concerns about health, natural ingredients, and 'ethical' sourcing have increased, CPG brands have been hit hard. Many brands that had enjoyed near-domination of their categories for years can no longer coast on that success. Consequently, there has been a lot of grappling to appeal to this new kind of customer, with new product introductions, rebranding of legacy products, and acquisitions.
Success has been mixed. Simply revamping the packaging or running campaigns that pander to this new generation of consumers can't deliver long-term brand success.
This is even more true in the beauty industry, where a completely new type of consumer has rocked established players.
The emerging global market of millennial skincare geeks take beauty seriously. Many have become amateur researchers, buying lab equipment to test the pH of their skincare products and poring over peer-reviewed studies on ingredients. Social media lets them connect to other such obsessives, sharing YouTube tutorials, detailed reviews of products, and ‘beauty hacks’ to get more out of them.
It also lets these passionate consumers connect directly with the founders of the brands they love. These consumers feel a real bond to the people behind the products they love, and enjoy handing them their money. This is a level of accessibility and relatability no multinational can match.
The Estée Lauder Companies and L’Oreal – who paid $1.2bn for niche indie brand IT Beauty in 2016 – know that today’s beauty geeks are having a big impact on their businesses. They also recognize that their old way of doing business won’t work with these consumers, who buy online and almost never step foot in a department store.
The traditional order was built around scalability and applying one best practice across the board. Now, beauty conglomerates need a more diverse portfolio to reach the same number of consumers. And those consumers are very well-educated professionals with advanced degrees, in management roles, who don't like being subjected to marketing-speak in ad campaigns.
But these consumers do like learning (or feeling like they are learning) about the skincare and cosmetics they’re using. Almost as importantly, they need to know how the brand’s values align with theirs. For example, the “clean beauty” segment is by far the largest growing niche in beauty. Consumers want to spend money with brands that include ingredients from quality sources, who do business in an “ethical” way, and that are devoid of so-called “toxins.” Whether it’s true or not, the perception consumers get is that these indie brands that produce in smaller batches than mass market companies are more capable of delivering higher quality products.
So what’s an established beauty brand to do – give up? They’ll never be mistaken for artisans, man-made ingredients are often the best quality, and their CEO can’t be on Instagram all day, responding to user reviews.
But there are things these companies can do to rescue brands in which they’ve invested hundreds of millions of dollars.
1. Demonstrate how your legacy’s brand rich history brings a trust and expertise no upstart can compete with. Instead trying to mimic what’s shiny and new, see that heritage as a feature worth polishing and leveraging.
2. Resist the urge to ditch distinctive brand assets that have accrued significant value in the minds of consumers. Revitalizing a brand doesn’t mean starting over from scratch. Keep the baby, even if the bath water has to go.
3. Surface examples of how your brand is made by people like them, for consumers like them. Your executives don’t have to be turned into spokesmodels for the company. But in a case like Estée Lauder’s, where the founder was one of America’s earliest and most successful female entrepreneurs, there is a lot of room to connect with ambitious consumers and inculcate the believe that “This is a brand for people like me.”
4. Identify ways in which your classic products can become appealing to the growing base of beauty geeks. If your existing moisturizer’s formulation has always been rich in peptides, point out that you were ahead of the curve on scientifically sound ingredients. If a cleanser has always been made with mineral oil, ditch the petroleum and shout from the rooftops about how it’s now made with only the best plant oils.
5. Measure how your advertising is staving off losses you’d otherwise be suffering in the absence of advertising. Sounds impossible? It’s not.
One thing is for sure: staying abreast of consumer trends is only part of the challenge facing established brands. It’s incumbent upon marketers to doggedly pursue insights into shifts in consumer perceptions about their brands, and where they reside in the minds of their target markets. Failure to measure and track such movements leaves brands far too vulnerable to disruption – and, eventually, extinction.
Jeri Smith is chief executive of advertising research consultancy Communicus