Ep.1: Beauty Brands-Reimagine Hyper-Growth
Early-stage beauty founder: Have you wondered, “Your fans love your products”, then, why aren’t you a $100 million beauty brand?
Or do you feel you have tried almost everything, but nothing has worked? And you have started thinking that maybe money is the only solution for growth.
My name is Rohit Banota. I’m the founder of Jump Accelerator, formerly known as Story Saves, which was an agency, and now it’s an accelerator. It’s the only accountable Hyper-Growth solution for early-stage beauty brands using the science and emotion of hyper-growth.
Now, getting back to the questions I asked you, let’s start with & employ, what Elon Musk calls, or he popularized, the “first principles thinking”. I have a physics background myself and I like simplifying any phenomenon down to its core fundamentals. So, let’s first distinguish between growth and hyper-growth.
A typical growth equation is: You acquire new consumers, then you cross-sell and upsell to them, meaning you make them consume your brand on different occasions, or you make them consume your brand in higher volumes, per occasion.
The typical hyper-growth equation is: You acquire new consumers, + you cross-sell and upsell + you get a referral via advocacy buzz or word of mouth so that the funnel feeds itself back.
Hyper-growth equation is a virtuous cycle that spirals upwards. The third step is the critical step in distinguishing between a growth equation and a hypergrowth equation. And, advocacy has to do with much more than just high loyalty, which could also be because of inertia and habit.
If the third step and the critical step of advocacy are happening, likely, the preceding steps in the funnel are also happening to the max. It’s a critical check for your entire funnel.
Now, why is there a difference between growth and hypergrowth? It comes down to the focus of big CPG beauty brands, the brands that kind of developed these principles of advertising, marketing, branding, etc., developed and employed, and they still do, and the big agencies work for these big beauty brands or big CPG brands. Advocacy, for them, comes right at the end, that’s why it’s the missing link between growth and hyper-growth.
For them, the funnel starts from awareness, goes to trial, then purchase, repeat purchase, loyalty, and then, in the end, advocacy. Why is that? Why do they focus on advocacy in the end? Because these big brands play the market share game, they already are being bought by the masses. So, they use heavy advertising to influence their daily, weekly, monthly, and quarterly sales by trying to be top of mind for a consumer, and advocacy for them, with their base, can be a slightly slower process.
Unlike for an early-stage beauty brand, where advocacy is not just a critical step, it’s a test of whether your brand is going to be in hypergrowth or not. Because it is the most persuasive and direct route to sales, especially for brands that do not have the resources, and even beyond that, an early-stage beauty brand that lacks awareness in the early stage market leave alone the mainstream market.
How can I prove that the conventional strategy, branding, marketing & advertising strategies do not quite apply to early-stage beauty brands?
Let’s start with beauty brands that started as early-stage beauty brands and in the span of a few years reached 100 million dollars. Glossier, Vegamour, and Drunk Elephant are brands that reached revenues of close to 100 million dollars or more than 100 million dollars in a maximum of four years. And, their self-declared loyalty, within that period of hyper-growth, was close to 60%.
Now, I speak to a lot of beauty founders every month and when I check their numbers, the ones that are growing between 20% and 30% annually or even 15%-20%, their loyalty is usually again between 20% and 30%. So, there is a gap that I’ve observed. Beauty founders listening to this podcast or watching this podcast would agree that it makes sense.
The second premise has to do with an exhaustive study, done by Everett Rogers, who wrote a book called Diffusion of Innovations, the most fundamental book written or the first breakthrough book written on the concept of how an innovative idea, initiative, and even product diffuses through the market, through the consumers into the mainstream consumers, and is adopted, makes a point very, very clearly that advertising is only a very, very small part of that whole process.
Summarizing: For the big beauty brands, their funnel is top-down, starting from awareness to trials to purchase to repeat purchase, loyalty, and then in the end advocacy. For an early-stage beauty brand, you do not have the luxury of waiting for advocacy until the end. It’ll be the wrong strategy. You must start with advocacy right at the beginning. It’s the yardstick, which will predict how likely are you to achieve hyper-growth.
Now, let’s evaluate the number one reason that founders give for lack of hyper-growth: Money. Let’s take the hyper-growth equation with all its three steps, even though the third step distinguishes hyper-growth from growth, but, I will talk about all three steps involved, and let’s see what money can do for your brand:
Let’s start with the first step, you try to acquire consumers by spending money and buying media, the only thing that the media platform can do is bring you face to face with those consumers. You will get reach, but even then, your cost of reach is going to be high because you will have to outbid other competitors. And there’s something called Media inflation, meaning, if the media is really attractive for your brand, then other brands are coming on it and they all are coming onto the platform because the consumers are there. And, if these two things are happening, the media platform will jack up their prices. So, you will have diminishing returns on your ad spend. Second, advertising works on a threshold principle: Below a certain level of expenditure, and below a certain level of hits, you are not likely to get a lot of sales. And third, the media platform can only bring you face to face with the consumer, the conversion to sales is still your lookout.
Now, the second step in the hybrid growth equation, cross-selling and upselling: The only reason a consumer is going to buy more from you is if your brand lived up to the core promise it made to the consumer at every touch point during the consumption of the brand and after the consumption of the brand. That is the only reason. Money cannot do anything there & the third step, the critical distinction between growth and hyper-growth, the only thing that will make a brand worthy of word of mouth or Buzz, or will be contagious, or the consumers will become your advocates, is either if you’re adding some meaning into their lives, or your brand is worthy of a conversation.
Or/and you strategically follow the process of diffusion of innovation.
This again has nothing to do with the money that you’re going to spend. So, if you see, steps two and step three have nothing to do with money. Cross-selling and upselling & getting advocacy have almost zero co-relation with you having a lot of money to spend on your brand in marketing, advertising & shows, buying media or spending with retailers, etc. Even in step one, only one out of the three sub-steps in step one: the three sub-steps were-
1. You getting reach by outbidding other competitors
2. You manage to cross the threshold value for advertising to result in some end results.
3. You converting that awareness into sales.
-Only the first two sub-steps have something to do with money but the last sub-step, which is the most critical, converting awareness into sales, money, again, has very, very little role to play.
Money cannot buy word of mouth. Money cannot buy buzz, and advocacy, which is the critical distinguishing step between hyper-growth and growth, meaning Money cannot buy you hyper-growth.
How can I be so sure?
Let’s start with this fact:
Why do 75% of venture capitalist-funded brands even fail to make their money back, leave alone scale up and hyper-grow as quoted in a Harvard Business Review article?
Now, for beauty brands, I do not expect the number to change by much. But here’s another statistic, only 1% of brands that get pitched to VCs get funding in the end, meaning you have a 0.25% chance of success if you start counting on the money, as the be-all and end-all of helping you achieve hyper-growth for your beauty brand.
I do not have a lot of data on this. But I do speak to, again, a lot of beauty founders every month. And, quite a few of them have had some kind of a friend, family, or even an angel round, varying between $100,000 to even $1M. Some of these brands have gone beyond seven figures, and then, were not able to sustain, are now either close to the seven-figure mark or slightly over or slightly under, and some of the others made it to seven figures, but could never sustain it & have not gone anywhere past those seven figures. It proves that money again is not the be-all and end-all of hyper-growth.
Clearly, the adage, if money is not a problem then you do not have a problem, is not entirely true. Let me give you a morphed adage. I’m guilty of morphing it a little bit but here it is, “nothing kills a brand faster than advertising a mediocre brand.”
Feeding the funnel at the top is important for sure for new consumers. But, equally important is reducing or minimizing the leak at every stage of the funnel. And the most costly leak is, especially for an early-stage beauty brand, when the funnel does not feed itself back.
I have worked with big CPG companies like P&G: I worked with their beauty and grooming brands: and now, I’m working with early-stage beauty brands. Like I said before, big beauty brands focus on top-down funnels because they are in the game of instant results. Considering the base they have & the already existing awareness, they focus on advocacy in the end.
But for you, for an early-stage beauty brand, you need to focus on advocacy right at the start for the funnel to feed itself back.
There are two things advocacy will do for an early-stage beauty brand, which money cannot help you on its own.
It will get you acceptance in both the early-stage and the early mainstream market because you’re a new player, unlike the big guys. So, not only is it a cost-effective solution, advocacy, to feed the funnel back, but it also gets you acceptance and that’s why the virtuous cycle is so important for an early-stage beauty brand.
The fundamental truth for early-stage stage beauty brand’s hyper-growth, that will help you get advocacy for the funnel, to feed itself back, and for you to get acceptance plus a virtuous cycle of the funnel is: “Your Core Promise.” The core promise that you make to your consumers, and, when you deliver it, will get you super fans, who will then advocate your brand forward creating the loop of feeding your funnel back, plus, you will also get awareness from all the other consumers, who might not be your advocates, but, who, you will touch at every stage of the funnel because your brand will be worthy of a conversation, worthy of a buzz based on certain rules, which I’m not going to cover in this podcast.
That’s it, there is no new shiny object, there is no advertising riffraff, there is no social media razzmatazz. The core simple, fundamental truth is the core promise you make to your consumers, and, whether that is worthy of being advocated, once they experience it, to the people who matter and the funnel feeds itself.
Instead of trying to get into more retailers or get more consumers by going to trade shows or consumer shows or spending money on digital marketing, SEO, any marketing initiative and not falling for the illusion that “oh” the consumer is there or the client- the retail buyers- are there & that is where I need to spend the money, instead of that, first go back to your core fundamental promise and see if it is worthy of advocacy.
If you do this and build your brand right from there, all else will follow. VCs will come to you, buyers will come to you and influencers will come to you. But most importantly, you will get brand advocates who will feed your funnel back and your early-stage beauty brand will truly be on the path to hyper-growth.
This is Rohit banota, founder of Jump Accelerator, the only accountable Hyper-Growth solution for early-stage beauty brands using the science and emotion of hyper-growth. Our “Why Not”, other brands or organizations have why we have our “why not” is to create a more humane, conscious, and beautiful planet: “A Woman’s World.”
We endeavor to accelerate 1000 women-led beauty brands in the next five years, taking them to at least $100 million to create a $100 billion economy. Thank you and I’ll see you in the next episode.