No. 284: Not Just For Publishers

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A frame from: Fullsterkur (full strength), a Rogue film debut on Youtube – August 26

Between the months of May and July, 5.75 million consumers visited an online retailer that strength and conditioning enthusiasts know as Rogue (No. 11 DNVB). And that’s just the Ohio company’s American site; the company also operates out of Canada, Europe, and Australia. Every SKU sold has been through their native eCommerce channels. They’ve quietly and successfully competed with the old guard of strength and conditioning while holding off well-known retailers like Sports Authority (RIP), Dick’s, and Academy Sports.

It’s quite the operation with an astounding number of online visitors for a company that you’ll rarely hear about. And from what I know about Bill and Caity Henniger, that’s fine by them. The company is eleven years old now, operating out of a single 650,000 square foot installation. Rogue employs over 500 people: from front end development to welding. And, anecdotally at least, the company seems stronger than ever.

There’s very little tech media and pop business notoriety for Rogue but, it suits the company just fine. They’re a well-oiled machine, from what I know. And machines don’t really need the affirmation of public relations mentions. They’re so quiet that, if you want a list of venture capitalists that track them (out of admiration), it’s GGV’s Jeff Richards and Indie.vc‘s Bryce Roberts. And, for the record, Rogue is where I cut my teeth in the sophisticated world of online customer acquisition. Back then, it was just Google SEM, Facebook spend, and daily ROI audits.

Today, for retailers, that’s not enough to efficiently grow a business. CAC is rising, knock offs are abound. And Amazon, Alibaba, and the industry seem to alter the battlefield quarterly,

There’s a point of diminishing return in brand-first eCommerce. At some point, you have to begin to think outside of the box or sales begin to slow, awareness tanks, and the old guard regains their footing against your early years’ momentum. This is the story facing numerous brands across consumer packaged goods (CPG), digitally vertical native brands (DNVB), and marketplaces. But there aren’t many companies in America operating at the level of complexity that Rogue seems to be.

For brands looking at how to navigate Porter’s Five Forces, look no further. It’s the basic understanding of positioning, competition, and other market forces that influence the best and brightest leaders throughout the eCommerce landscape. Not only is the company forward-thinking in manufacturing IP, tech development (in-app, one-click purchasing), and marketing (Youtube is now 21% of all organic social traffic). They seem to understand that for many consumers, there is an important question: “Will a brand be around in ten years?” The answer lies here: “Well, are they respected? Is their product an institution?” The last two questions will determine the answer of the first.

Rogue is quickly becoming an institution. This latest production, live streamed on a Sunday night, was a great introduction to a project that they’ve been working on for years: The Index. For the casual industry observer, it’s a content x commerce play. And it is. But deeper than that, it’s a bridge. You can watch, through the evolution of their videos and academic archives, as Rogue became more and more respected by those at the top of their crafts.

Issue No. 267: On DNVB Branding

For heritage brands, presenting an aura of staying power means that the products and channels will present as forward-thinking for a millennial-driven, omni-channel age.

Meanwhile, vertical brands work to establish their products as an evolution of heritage products, while maintaining as many of their technological advantages as possible. For digitally vertical brands, longevity is projected by tethering to history and tradition.

The next wave in DNVB branding will be focused on developing history and tradition. Brands will deepen their roots by way of product collaborations, messaging, and unique origin stories of their own.

The film was impressive. Directed by a talented videographer named Todd Sansom, who’s been there forever, the film was executive produced by the owners of the company, and influenced by their closest peers. It was a passion project as much as it was a way to address how buyers decide and consume on the internet today.

Content and commerce isn’t just for publishers anymore. And quiet old Rogue, is at the leading edge. The ability to reach new consumers by becoming a destination for their enrichment is often theorized but rarely executed by eCommerce brands. While some go for virality, this is not the intent here. The latest film is part of a collection that draws you in. And while I may be biased here, it works. Rogue’s equipment isn’t exactly inexpensive compared to foreign manufacturers or bargain options, stateside. But for tens of thousands of people who run, jump, and lift – Rogue is their source. Not only for products but for inspiration, education, and the great examples of strength’s golden era. By the time that visitors conclude their rabbit hole viewing of content, they’re reminded that there are tools, apparel, and heavy equipment available to them by freight or overnight mail, depending on the tonnage sold.

Update: Rogue’s Fullsterkur film has garnered critical praise. It is being screened at the Austin Film Festival as a Marquee feature. Per Rogue’s online store:

The Austin Film Festival & Writers Conference (AFF) is the premier film festival recognizing the writers’ contributions to film, television, and new media. The festival is marking its 25th Anniversary in 2018, with a packed schedule of screenings, panels and other events taking place from October 25 through November 1. Among the other Marquee Features joining Fullsterkur on the schedule will be Gillian Flynn and Steve McQueen’s new thriller Widows, Mike Leigh’s period piece Peterloo, the Mickey Rourke-starring boxing drama Tiger, and Paul Dano’s Wildlife, starring Jake Gyllenhaal and Carey Mulligan.

The film will show at the Austin Film Festival on October 30 at 4:30 PM Central. The 90 minute film was broadcast live, where it was viewed 4.1 million times on Facebook and has been watched over 270,000 times on Youtube.

Read more of Issue 284 here.

वेब स्मिथ द्वारा | मेघन टेरविलिगर द्वारा संपादित | लगभग 2 बजे

No. 283: Navigating DNVB Growth Dependency

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With very few exceptions, a digitally vertical native brand (DNVB) that succeeds over the long term will have command over three core components. To CMO-level operators, these core components develop a virtuous sales cycle. The top brands: foster organic (word of mouth) community, convert social following into revenue, and optimize performance marketing spend.

But there are hazards to consider, especially when balance isn’t a priority for a brand. When a DNVB depends too heavily on one of the three components, growth will stall. In an upcoming report commissioned by 2PM and Common Thread Collective, the firm’s Managing Partner Taylor Holiday and I discuss the limits of a DNVB’s proverbial adolescent years.

The teenage years: from start to the end of a brand’s natural growth.

It’s how brands position themselves for the next phase of growth that separates them from their competitors. For brands, the teenage years can look different. Here are three cases:

  1. Dependency: grassroots community. An online kitchenware brand has a coveted, quarterly brochure. The production of the brochure is 60% of all marketing spend. Historically, it has converted well. Sales have begun to stall as fresh entrants eat away at their grassroots awareness by spending heavily on performance marketing. Rather than competing to amplify their sales through social channels and performance marketing, they spend more on the next quarter’s brochure. This exacerbates the problem and opens them to more of an issue once brochure sales falter.
  2. Dependency: performance marketing. An online dress shirt brand builds a strategy around Facebook marketing. They hyper target potential customers and reach them again and again. But the cost per thousand (CPM) for DNVB advertising has risen 50% per year over the last three years. It’s not sustainable and as such, the brand begins to lose to competing brands with word-of-mouth influence and great social capital.
  3. Dependency: social. A CPG beauty brand is backed by a high-powered celebrity. Each instagram post generates 100,000 clicks to the brand’s site and sales are nearly automatic to the tune of a 7% conversion rate. But Instagram’s algorithm changes to deemphasize promotional posts that aren’t run through Facebook’s ad server. Traffic decreases and there is no performance marketing system in place.

For DNVBs, it’s often easier to stick with what works at the expense of missing out on efficient, long term growth. In a recent article on eCommerce innovation and DNVBs, Internet Retailer’s James Risley got something completely wrong.

DNVBs’ ability to create unique products and connect with niche audiences insulates them from some competition with Amazon.com Inc. (No. 1) and other big retailers. And the direct-to-consumer model keeps prices down as well, making their unique wears more affordable to the niche or mass-market audience they want to draw.

Brands are not at all insulated. In fact, you’re beginning to see well-funded startups and brand conglomerates go after early-stage retailers even earlier, these days. When direct to consumer shoe brand Atoms launched, Allbirds immediately went on the offensive. And fashion retailers, including Stitch Fix, were met with opposition very early on.

Amazon has launched their version of nearly every product offering on the market. Brands don’t win by insulating themselves. Quite the opposite, they succeed by branching into new channels and reaching the customers that are adjacent to their most passionate advocates. Eventually every DNVB faces the incumbent, but first they have to get out of their own way.

To leave adolescence behind, diversification is often a necessity. There are several brands who’ve successfully navigated brand adolescence:

Originally (and passionately) online-only, Warby Parker began opening up retail locations to influence customers who were hesitant to purchase without touching the product.

Though Harry’s was competing with Gillette by marketing directly to consumers and getting to customers before they made it to stores, the razor brand eventually partnered with Target stores to compete with Gillette head to head.

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Sunset Plaza on January 5, 2018.

Rihanna’s Fenty Beauty is driven by the superstar’s social following. However, to reach new potential customers, she began paying for traditional advertising in major cities. This allowed her to back off promoting the product so often through her primary channel – Instagram.

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Facebook’s % growth in CPM (Cost Per Mille)

For C-Suite level marketers, there is a three-part operational exercise that can go a long way in identifying best practices for a DNVB’s demand generation program.

  1. Identify the most important variables that drive your brand’s success.
  2. Collect and interpret data from a range of market research materials to better evaluate marketing mix strategies.
  3. Develop marketing recommendations that are fact-based and free of inference.

Diversification, within reason, is often the outcome of this exercise. To move beyond the early days of a brand’s growth, it is necessary to meet potential customers half way. This means reinvesting in new marketing verticals is a worthwhile strategy. Advantage goes to the brands that see this and act on it before the market makes the decision for them.

Read more of Issue No. 283.

वेब स्मिथ द्वारा | मेघन टेरविलिगर द्वारा संपादित | लगभग 2 बजे

No. 282: Instagram’s CPG Problem

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Pictured: Cannuka, a CBD-based beauty brand from Ohio

Imagine launching a CPG brand. You spend your life savings on developing the product. You nail your branding and packaging. You setup distribution and hire a marketing agency to drive your message. Except, the strategy leans heavily on the types of media buys and influencer marketing typically employed by others in the DNVB / CPG space – and Facebook won’t cooperate.

CBD, short for cannabidiol, is growing in popularity among beauty and health consumers. It’s a THC-free substance known for treating everything from muscle relief to insomnia. In June, the first CBD-based drug won FDA approval for epilepsy treatment. And as it relates to this article, CBD has been popping up in high-end skincare products. But Facebook and Instagram’s rules have been uneven at best and it’s causing quite an issue in the CPG space. It falls under Facebook’s prohibited content category.

So when I met Michael Bumgarner, cofounder of Cannuka, I was surprised to hear that he was clashing with Facebook’s prohibited content policy. This, even though he sells a THC-free product that could be sold through sites like Popsugar. “They’ll acknowledge we have a 100 percent legal product, but they’re still not allowing us to post ads,” he said in a recent interview with Carrie Ghose of Business Journals.

While fairness is an altogether different issue, there is actually a valid reason why Facebook has positioned the platform to prohibit CBD-based products as a category: lack of regulation. While Facebook is perpetually targeted for how little they police the validity of news and gossip, they have maintained an opposition to unregulated products (supplements, etc).

CBD in consumer skin care is still a bit like the Wild West. A study published in the Journal of the American Medical Association found widespread mislabeling of CBD products sold online. “The problem is that there’s no study which indicates the proper dose,” says Bíró. Jacknin also cautions that “at this moment, CBD and marijuana products are totally unregulated and the ingredients in the jar don’t have to be the same as on the packaging because no one is checking.”

Karen Adelson | The Strategist 

However, it’s Cannuka’s quality among an industry of mislabeled products and shady sellers that have allowed them to achieve national traction and an early seed investment of $750,000. Despite a nation-wide, progressive push around cannabis’ 100% legal derivatives, Facebook (and Instagram) lag behind here. Will they reconsider how it influences the fates of CPG companies?

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Photo: Courtesy of Dirty Lemon

CPG drink brand “Dirty Lemon” has had quite the opposite experience despite similar product-dynamics and origins. With over 101,000 Instagram followers and droves of influencer backing, the drink brand has seen success by using Facebook and Instagram as an acquisition channel.

The potion—which is fit to tackle anxiety, diffuse stress, decrease muscle and joint pain, calm acne, and improve sleep quality—includes 20 milligrams of full-spectrum cannabidiol, sourced from luxury cannabis brand BEBOE; pure hemp oil; and a blend of pineapple, blood orange, and tangerine juices (cheekily called the “pineapple express blend”). Of course, the usual Dirty Lemon suspects are also included: filtered water, pure lemon juice, ocean minerals, Himalayan pink sea salt, Luo Han Guo, and L-theanine.

Kells McPhillips | Well and Good

While the brands have numerous similarities, its the approach to marketing that seems to be making the difference in the relationship between brand and Facebook. Priya Rao of Glossy reports:

In late June, Dirty Lemon first floated a new beverage drop on Instagram Stories and asked its community to guess the company’s latest ingredient in exchange for a free case of drinks. […] To date, [Dirty Lemon’s] +CBD launch in July has been the company’s strongest. Dirty Lemon sold out of its first production run, which is roughly 20,000 bottles, in two days, and a waitlist existed until last week. All Dirty Lemon beverages are sold in six-bottle cases and shipped to customers’ homes for $65.

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A whopping 66% of their referral traffic in July was through Yahoo.com’s paid channels, while, Facebook chatter generated nearly 8% of referral traffic via FB Messenger. While Dirty Lemon has avoided traditional Instagram advertising, their Instagram Stories have driven the most “direct” traffic: 27%. IG’s story platform seems to be where they most often blend organic promotion with influencer (paid) promotion. The ambiguity is serving them well. And the payoff could be worth billions.

The Data

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Estimated Growth of CBD products
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Estimated Revenue of CBD-based products (in millions)

The cannabis-driven CPG industry is an important one to track. Not only because of the estimated growth over the next four years but because it’s one of the few remaining product-based companies that seem to be navigating the last of Facebook’s archaic advertising rules. Facebook’s advertising system is lacking objectivity and consistency here. It’s accelerating some CPG startups while leaving others in its wake.

Read more of Issue 282 here.

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