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May 19, 2022
Reporting for Beauty
The Innovation Your Brand Needs to Age Well
Spark No. 9 works with companies in industries that benefit from validating demand for new product or brand concepts before launching them–and sometimes before building them. If you are thinking—wait, that’s all industries, isn’t it?—yes, thank you, and here’s a big kiss 💋. But we think some industries need S9 more than others. Here’s one.
From time to time, we share a deep dive into an industry that appears to be stuck on old market research models that we think could benefit from some fresh air. This month we’re taking a look at the beauty industry. And if yours is a business that needs to attract younger demos (also all industries?), you should take a close look at the beauty industry, too.
The beauty industry has good bones for product innovation.
First, beauty is like fashion: there is always an appetite for the distinctively new. While there is product demand that seems sort of logical, like sustainable packaging, there is also room for Frog Prince Lipstick, which starts out green and changes shade, and face cream made from snail mucin. So we can have some fun here.
Second, new brands have a way to cash out. Seven behemoths generate about 30% of beauty revenue, and—good news for entrepreneurs—they are generally acquisitive. Because physical distribution still drives economies of scale in beauty, there is a benefit to bringing new brands into the empire so that armies of salespeople and warehouses can march them into brick-and-mortar stores.
Third, thanks to continued industry growth, there just might be room for up-and-comers. So-called challenger brands like Glossier and Prose, both of which blew through the $100M revenue mark, benefit from all-digital roots and visionary founders. Other medium-sized companies likeHuda Beauty have gained a big foothold by rejecting conventional beauty wisdom.
Does it ever seem like a new beauty brand launches every week? Honestly, the actual pace may be even faster. Why so many? Let’s thank millennials, and Gen Z, too. Younger demos’ interest in brands that are clean, BIPOC-led, authentic, and on Tiktok has created an opening for young brands to flourish. Retailers have taken note and are devoting shelf space to indies.
Which creates an innovation challenge for everyone.
Startups need to launch something brilliant and differentiated, ideally for an underserved market segment that will evangelize on social media and beyond.
Challengers need to shift from product-driven to brand-driven, often without the advantages of shelf space. This means a wider product line and holding on to customers.
So what’s the best way to be sure beauty innovation is on the right path?
“If it will keep me looking young and fit, I’ll try it,” said every middle-aged company ever. And so investment is pouring into beauty products fueled by tech, science, and, um, imitation.
No matter the size of your R&D budget, however, your product needs a market, and it needs the messaging and creative strategy to connect with customers right out of the gate. Beauty companies are believers in research to generate insight into consumer behavior. But the research methods they depend on—surveys, focus groups, panels and the like—are not very good at predicting behavior. That sort of research isn’t a great way to hone the messaging that can make or break a new product launch, either.
Our take: Why not do some IRL testing first? Make sure people want whatever it is you’re cooking up?
What we've found: using advertising as a form of market research allows marketers and product developers to see consumer responses to product concepts in a completely natural way. It's also a great way to experiment with positioning and messaging before you get too far over your skis. Best of all, performance is measured in the currency of the day: clicks, likes, comments, and saves.
A successful product launch in a very crowded beauty market is no small feat, and it often involves big bucks. Insights derived from actual consumer behavior eliminate a lot of the noise emanating from traditional market research.