B (3:13)

I love that you say that because you don't create a product seen without knowing who is your audience.

A (3:20)

100%. The cultural connection is absolutely critical and.

B (3:27)

It comes from the, even from the ingredients. That's when I love it, when clients come to me, when they're working with the manufacturer too. Because we can do a lot of, with the data information that we have today, we can see what ingredients are trending in certain areas.

A (3:44)

Demographics 100%. I mean, we could go back in time and look at the issue of hydroquinone versus versus non hydroquinone and how that affected the skin. And everything in those early days was about the before and after effects and showing what that product can do. However side effects, I.e. redness, irritation, toxicity, et cetera, obviously was detrimental to the results and certainly to the effect of the product. So I go back to that understanding the customer, understanding what that customer needs. Who are those people? Where do they use the product? How often will they use the product? Is it a continuity type program? In other words, is it a product that requires a regimen, a system, a daily or weekly use and therefore you develop a relationship? And simply, in my opinion, based on the work that I have personally done, the connection with the, with your consumer is absolutely paramount. The relationship with the consumer is paramount. Having a story is probably more important than anything else. And then keeping in contact with these people, talk to them, listen to them.

B (4:57)

Yes, but let's talk about cost for a second, please. Of course, because cost, when you create in any brand is really important.

A (5:06)

Correct.

B (5:07)

You know who you're going for. You need to understand at what segment of the market you're going to correct on your price point.

A (5:15)

Correct.

B (5:15)

So when you recommend to price your product like after the formulation, before the formulation, what, what's your rule of pricing?

A (5:25)

My rule of pricing is to understand again who that audience is first and foremost, understanding what their financial propensity is. So know what kinds of products they typically buy and what they are most susceptible to. Obviously we could break it down to mass drug, we could look at masstige, we could look at prestige and we could look at luxury. But they're all based on different price points historically. The rule of thumb for me, and again other people might argue with me is I like to understand how I can reduce my cost of goods to the most reasonable level but also make sure that I have at least a 5, 6, 7 time multiple to what I'm eventually going to sell my product for I. E. Msrp.

B (6:07)

Now let me tell you a story of someone that I talked not that long ago, please. They came to me that they want to market the product one skill.

A (6:16)

Right.

B (6:17)

For me, one skill is risky.

A (6:19)

It's very risky.

B (6:20)

100% very difficult. So they will have to sell this at MSRP. $200 for one tube.

A (6:28)

Yep.

B (6:28)

Of very amazing ingredients product. But the branding wasn't there to sell it for $200. However, they will never be able to go retail to have margins.

A (6:39)

No.

B (6:40)

The only way that they can make a margin because their march the numbers weren't there. If it will sell D2C not even Amazon, they wouldn't make market genes.

A (6:51)

No. But understand something. You make a very good point and you talked. You kind of briefly touched on this earlier. Although the industry is still very fragmented. What's most interesting, and you hit on a very interesting point with products with AOVs, transaction cost 150, let's even go lower. 100, 125, 150 etc. What's most interesting is that you can actually make it work now in retail, particularly at the Neiman Nordstrom level of business because the audience has become so hyper focused on those particular venues. They are susceptible. They are used to. Susceptible is not the right word. They are used to that level of transaction. That level of price action is there.

B (7:37)

But if their cost was $150.

A (7:40)

Oh they can. Well, you can never get any money.

B (7:43)

That was an issue.

A (7:44)

Oh no, you're 100% correct. 100% correct. Can't make any money. No margin. And by the way, it's probably not even worth even, even starting the exercise because you're already, you're already upside down to begin with.

B (7:55)

Exactly. And I mean and those ingredients there was no way to be in a business. No, no, not at all. So you really need to know who you and the target audience that this product was intended for.

A (8:07)

Right.

B (8:08)

Will never pay that that price or the branding wasn't a luxury brand.

A (8:13)

Absolutely. 100%. You could have the fanciest secondary packaging, the fanciest primary packaging. You, you can have the best ingredients, the best communication. At the end of the day, if the consumer is not believing it and they don't see the value in the product. It'll never go anywhere.

B (8:29)

Yeah. So another part that I really found very interesting in the process of creating product is the supply chain. It's really complicated. If you really want to do it well, I feel like there are a lot of people out there that they're trying to make it simple, but is the product there or we just creating more of the same?

A (8:52)

I think you have to be. It's a very good question and it's a difficult question to answer because every, obviously every brand and every. Every supply chain, if you will, is going to be a bit unique and a bit different. However, what I like to look at is what's called lowest common denominator. So I like to go to the lowest point, the easiest point of entry. And, and most importantly, in terms of, you know, we talk about the supply chain as a general rule, which is so generic anyway at this point because it encompasses so many different steps in the process. But most importantly, what you want to make sure of is that you have a good configuration of your product in terms of how you're going to sell it and what that's going to present to the consumer, how they're going to see it. And then most importantly, you have to look at the economies of scale, simply put, centralizing as much as possible increasing your volume and making sure that you have outlets that are going to support your MOQs. That's the way I look at things. If you can do that and you can convince buyers to buy into your concept and they have enough product that they can create consistent replenishment points. Now you have a business.

B (9:54)

There is a question there. Because I see a lot of young businesses trying to go too fast into retail.

A (10:01)

Stupid, stupid, stupid, stupid, stupid. And no offense to retail. No offense.

B (10:05)

No, not at all.

A (10:06)

That's the last place I go.

B (10:08)

I need to know when you're ready. Everyone wants to be in Sephora. Everyone wants. But is that the right place for your brand?

A (10:16)

I'm going to tell you right up front, I don't think so. And I'm going to tell you. People ignore things like Blue Mercury, for instance. They. They ignore the. The more boutiquey, more. Okay, need I say bougie environments, I. E. I know you do. And I'm going to tell you right now. The old Fred Siegels, for instance, the.

B (10:35)

Whites, the Zitterman, how I miss old Franz Siegel.

A (10:38)

You understand? See, there you go. So my point is, those are the venues that should come back to support your Exact question or comment about going to retail. Going to retail in a. Whites going to retail, obviously back in the day in a. Fred Siegel was a. Was a very productive opportunity for a brand because it got eyes on it. It was a personal sell. The people that work within the environment understood they were educated on the product. They did a good job. Now you have, you have groups like Walgreens that have ambassador programs that are the biggest failures in the world. Because the reality is the underlying reason for you to be there is to sell product. Yes. Not to educate the consumer.

B (11:22)

No. And also. Yeah, exactly. And also, I mean I feel like it's. A lot of the brands need to do a huge heavy lift in order to create traction in a retailer 100%.

A (11:35)

And more and more retailers. Again, we could go on and talk about retail forever. The problem is trade marketing support is very expensive. Retailers don't want to spend the money to promote the brand. They want to claim that they want to be agnostic. The simple reality is just, they just don't want to spend the money. And most importantly, retail is getting very expensive. And again, I'm not against retail in the right environment, the right price with the right products, phenomenal selling environment. The problem is you better have the capital to support it because now you've got things like slotting fees perpetual across the industry, et cetera, et cetera, et cetera, it adds up. It gets very expensive. And again, unless you got the necessary capital to support it or you have a brand that has built enough equity to drive foot traffic and eyeballs. Fantastic. But that's about.

B (12:27)

Then it gives you also more power to negotiate with the retail.

A (12:30)

100%. But guess what that's about. That's about 7% of the audience.

B (12:34)

Yeah.

A (12:35)

7% of the brands have that cachet. The others are all struggling. And I go down the list. I'm not going to name names, but they're, they're all. And these are emerging brands that have done all kinds of things in social media and they get to retail and they fall flat.

B (12:48)

I know. And if you fail in retail, you're done.

A (12:52)

It's a kiss of death.

B (12:53)

Yeah. So we are trade shows buddies. We.

A (12:57)

Yes, we are.

B (12:58)

We walk trade shows together. So how do you see the world of innovation lately in trade shows? I see a lot of. And also I want to separate to talk to trade shows where brands need to be showing and we don't need to give names.

A (13:16)

No, no, no. Right.

B (13:17)

But I believe that many times for young brands or made us. You need to think a Little bit more outside the box, you think? And not on.

A (13:25)

I think, I think. I know. I agree.

B (13:28)

And I, I think that is, for example, not everyone should go to a beauty convention if you find that like, for example, you're an. We have the situation with the client that we find out that there was a surfers that were interested in this products. So we went to a surf community and a trade shows and we were so different.

A (13:50)

I. Well, you make a very good point. So on that note, there's another brand in the athletic market that was developed by a former women's professional tennis player who will be shell unnamed and they are promoting their brand at WTA events. Women's Tennis association events.

B (14:09)

Exactly.

A (14:10)

I don't, I think it's.

B (14:11)

But everyone is trying to be in the same places.

A (14:14)

They are, they are. They have genericized everything. The problem is, as I started out in the beginning of our conversation, you have to find your niche. You have to find your niche in. In my opinion and people in the audience could disagree with me all day long. In my opinion, scientifically formulated products, understanding who your audience is, niche orientation. Know exactly what the propensity to buy is and understand what your, what your economics are. You understand all those things together, you've.

B (14:44)

Got a fighting chance where your consumer is hanging out.

A (14:47)

Well, that's the other thing. And by the way, we don't know that because in today's world, now again, depending on the age group we're also talking to, that's another thing.

B (14:57)

There's. We have a lot of platforms and data and I can do a lot of research. I mean, you guys know that I talk about the blue ocean and the red. There is no reason to be competing and killing each other in a red ocean when there is this blue ocean. And you have to find this space where you can really shine. And it doesn't mean that it's going to be easier or faster. You're just not fighting for a spot. The difference is that you don't create a brand to fight for a sport. You create your brand for creating your own space.

A (15:31)

100%. The world of generic need I say laterally focused products, I wouldn't say is dead, but it's not desirable. Today's world is about intelligence. Today's beauty world is about active ingredients that do what they're supposed to do.

B (15:48)

Absolutely.

A (15:49)

Okay. And one step further. The brand itself, in terms of its, its presence, its story, its messaging has to all revolve around an emotional event.

B (16:02)

So let's go back at the trade shows we worked on, please.

A (16:06)

Sorry, we did that.

B (16:07)

There are be the trade shows, but also you have a trade trade shows like aesthetics shows, cosmetology shows, spas. Right. I mean there are a lot of different shows. I always say what direction you want to go as a brand. If you are a professional brands, you shouldn't be having the same brand as a consumer. So either you make a different packaging.

A (16:32)

Or something you are 100% correct selling.

B (16:36)

The same product because you're going to have problems with someone. Someone is not going to be happy there.

A (16:41)

Right. The problem that people run into is when they're manufacturing their products. Obviously the most, the most attractive way to manufacture product is at a higher volume. Therefore you get price breaks. So from an economic standpoint, the logic is there. However, to your point, if you're in the spa and the salon industry and you're also in the direct consumer industry and you're in the retail industry, your packaging, your delivery systems and your product may look a little different for each segment of those audiences because they're looking for different things.

B (17:14)

But also you need. There is a different communication that you have because we're talking, if you're talking about with a spot, but they know a little more maybe that the consumer is a different communication. You cannot approach to everyone exactly the same.

A (17:28)

That's exactly right. And by the way, it's a very different transaction too.

B (17:32)

Yes. And commissions and et.

A (17:34)

Correct, Correct, correct.

B (17:35)

So you need to be aware of that and have set up the architecture, set up for every space.

A (17:42)

Well, my suggestion always when you start laying out the architecture of your business, you need to, you need to think about these particular areas of focus and you need to set up separate corporate structures for those entities. I. E. Salon and spa would be a separate LLC versus your general direct to consumer omnichannel business, which is a separate environment. You can, you can co mingle, you can centralize your accounting. Again, I don't want to get too deep into the finances, but the simple truth is you have to understand how to attribute revenue to a certain.

B (18:16)

Yeah, yeah, you need to understand. I mean, I don't know about separating companies all that, but I see, I do know that you need to understand what's bringing the revenue and not one part is paying for.

A (18:27)

You do. But you have to also manage your expenses based on the audience that you're catering to. And therefore again, the accounting will be easier if you segment it. But there are certain things as you know as a marketer that you're going to roll up as a centralized expense.

B (18:44)

Absolutely.

A (18:45)

Which you can then. Yeah, continue. Sorry.

B (18:48)

Absolutely. No, I was just thinking about brands and how sometimes I try to do it all and they get completely diluted in the messaging because oh, 100%.

A (19:00)

All the time. All the time. I tell founders every single conversation I have and I'm sure you do the same thing. You know, first thing you do, if you're going to get into this business, you better have a great story, you better have an emotional element to it, you better have a problem solution and you better have a product that people really want to see and they want.

B (19:18)

And a product that works well, it.

A (19:20)

Works, I would say. But the problem solution, because I'm never.

B (19:23)

Going to get tired of saying this because when you have a collection of products is not a brand. The brand is a longevity is how many times it's not a roas. It's how many times people are willing to buy that product again and again.

A (19:39)

There you go. And that goes back to my continuity comment about consistent use. 30, 60, 90 day cycles where the consumer is looking forward to getting the product on an ongoing basis, et cetera, et cetera. And that's where profitability comes in a lot faster. But again it's not for every product but for some products makes a lot of sense.

B (20:00)

Yes. So one of the things that I do all the time is social listening because that's part of being a marketer. And I go and I do my fly in the wall in certain communities and I see that still there is certain knowledge in medical industries and spy industries. Sh. Label products.

A (20:23)

Sure they do.

B (20:24)

What's your take on that? And the white labeling solutions, I think.

A (20:28)

They'Re giving another option to the consumer. I think that's the bottom line.

B (20:31)

But those options, I mean you're basically going and getting the same, you are.

A (20:37)

Getting the same 100.

B (20:39)

There's no innovation. And I have to say one of the things that they really disappoint me in the last couple years, I would say that I'm not seeing a lot of innovation. I've seen a lot of repeat formulas, 100 with different packaging.

A (20:53)

Sure you are. And that has to do with the, you know, the bigger houses, the you know, that have not have then really resting on their brand laurels. They're not getting innovative, they're not bringing out products that are interesting. You know, for instance, there was a whole segment a number of years ago where powder formulation became very popular. Notice how quickly that faded. It faded because the companies that are at the top of the list, they couldn't sell it to A mass audience. They're not. Again, they are not as in tune with very specific, again, niche orientation. Now you take a product like a, and I hate to bring it up like a fetch, for instance, okay, knows its audience, number seven, knows its audience. They can do that. The Estee Lauders, the Lancomes, the l', Oreals, the Neutrogena of the world. Flat. There's no innovation. They like to say they have innovation. Their advertising site cites innovation and science. But the end of the day, they're selling to a very, forgive me for saying this, vanilla audience or not educated, but I don't mean, I don't think so. I think they've, I think they've read. That's my opinion. I, I, you know, I agree with you. I probably chased me with a machete.

B (22:02)

But I was talking to someone in the beauty industry, was telling me I love a very blonde product. And that is how they are for years and years and years. And I was really. But I mean, if you like, I mean, obviously there is people that are loyal to that and 100%, and I'm.

A (22:20)

Not going to disagree with that because everybody has their own preference. And obviously that's why you develop a rapport. That's why you develop a relationship, you know, with, with the brand and with the consumer. But to your point, in order for the industry, as a general rule to advance and to grow, there has to be some disruption. So that's really.

B (22:39)

So if you have to wearing back to the future right now, imagine even five years or ten years from now, what are we going to be in this industry? What's going to happen?

A (22:49)

Oh, I think that there's going to be a lot of new innovation with delivery systems. The things like airless pumps are going to get thrown out the window into the garbage because they're all horrible. Generally speaking, they're not good. I think they're going to be, I mean, delivery systems are going to be simplified. They're going to be, they're going to be much easier to use and, and less education and less instruction to what needs to be done. I think it's going to go, I think the, I think the products, again, if I had my choice and if I had my prediction in terms of again, back to the future, I want those products to align with lifestyle. I want those products to align with the type of people that are using them. And most importantly, I want the industry to start getting a lot better at teaching people how to share that information because I think that's still a big problem I, I think the industry is so fragmented, there are almost too many choices. And because there are too many choices, nobody really talks to each other about the product.

B (23:48)

So this is what happened to me. And that at some point nothing was working for me. What I was putting on my face and I started reading the instructions on ingredients and they were basically all the same.

A (24:02)

Correct.

B (24:02)

I really, I would love to see in this industry that brands are going less mass and more really based on it, because I, as a white Ashkenazi woman, I have different skin issues.

A (24:17)

Correct. Correct. Which is ironic, isn't it? Because if you go back five, six, seven, eight years, there was a lot of technology that was being built to be able to allow you to put those profile elements into the system which would then simulate or actually provide you with the support of the product and how it's going to look and how it's going to feel.

B (24:40)

I mean, there's so many.

A (24:41)

And it failed.

B (24:42)

But there are so many AI technologies right now that not only put the information, but also scan your face 100%.

A (24:50)

100%.

B (24:52)

The results and what you get is the same products that they can work for everyone.

A (24:57)

That's right. That's the problem.

B (24:59)

Technology wise, we grew so much, but the products are not segmentated to the audience, the niche audience.

A (25:07)

They're not aligned with what you're, what the results are. So they're genericizing the product itself and saying, okay, we know that there are 12 different skin types. Just for, just for example, whatever it is, 10, 12, let's say 10, 10 different skin types. But guess what? We're only going to manufacture three products for three different skin types and those three are going to cover those 10, which is nonsense because it's not true.

B (25:31)

It's not true.

A (25:32)

But the problem is that the economics, again, the cost of doing that is excessive. So let's go back to your question about Back to the Future. All right. What's going to happen as we move forward is technology and hardware, things that output that produce are going to become so much less expensive to be able to cater to, to very specific skin type, eye color, lip color, etc.

B (26:00)

How do you feel like this is going to affect the margins on the products?

A (26:04)

I think it's going to actually be, I think it's going to be well for. I think it's going to be positive effect. I think it's going to increase margin because you're going to be. Remember, most of what goes on in this business and in business in general is all labor intensive. The reason why Things cost money or more money than they should is because labor costs are too high.

B (26:24)

Yeah.

A (26:24)

If you reduce.

B (26:26)

No, no, no, that. I'm always comparing this with, you know, Groupon. People think they spend a lot of money in Groupon and say, I going to acquire a customer. But the Groupon customer is a hopper. It's not something.

A (26:40)

Of course it is because it's a discount person. It's somebody trying to save money.

B (26:44)

So basically, I feel like that's the same thing we're doing with the industry right now. People are trying different products all the time and they are not building loyalty because there is nothing catered really to.

A (26:55)

Them because they're not telling the story effectively. They're not building continuity programs that promote cost savings and usage. They're not educating the consumer on how the value and how the product is going to change their lives. Again, remember I told you earlier, most products that do well in market have an emotional opportunity.

B (27:20)

Absolutely. Okay, so, Stephen, before we go, I have one more question.

A (27:25)

Go ahead, bring it on.

B (27:26)

Maybe the most important.

A (27:27)

I don't know.

B (27:27)

How do you drink your coffee?

A (27:29)

It's very interesting. I drink my coffee with either light with milk. Sometimes I use half and half, no sugar.

B (27:36)

Well, thank you for sharing that.

A (27:37)

You're very welcome.

B (27:38)

It was great to have you and thank you so much for sharing all this knowledge I enjoy. And to you guys, I will see you next week with more coffee number five. Find everything you need at larashmoisman. Com or in the episode notes right below. Don't forget to subscribe. Was so good to have you here today. See you next time. Catch you on the flip side. Ciao, ciao.