The 7 Deadly Mistakes CPG Challenger Brands Make

This is CPG Insiders, the podcast that helps consumer packaged goods companies survive and thrive in business. Now your hosts, Mark Young and Justin Gerard. Welcome everybody to this edition of CPG Insiders. I'm your host, Mark Young with my co host and compadre standing next to me or sitting next to me, actually, Justin Girard. Both. A couple of, how would I say this, terminal ad guys.

Yes.

We just can't stop selling things.

No, it's an illness.

But you know what the reality is? We're both, we have fun, we're passionate about what we do. And I gotta tell you, I love, love seeing entrepreneurs succeed. I think it is so much fun and it's so much fun, especially the new companies when you see them start from nothing and all of a sudden they're a multimillion dollar company, that there's a multi millionaire million dollar business sitting there two years later where nothing existed before.

Yeah, absolutely. And you also the rush that you get not only knowing how you change an entrepreneur's life but, but then once they grow, you know they're making a great product. So you also know that there's so many other people that lives have been better just because of that. And I mean, there's nothing better.

And that's the key to good advertising.

Yes.

You know, one of the things you gotta remember folks about advertising, no advertising in the world is going to keep a bad product on the market indefinitely. It will for a little while, but eventually the marketplace catches up. The second thing is really good advertising isn't conning people or convincing people to buy something. Real good advertising is informing people about a new product or service that can benefit their life.

Yes.

So if I'm selling a dental whitening kit, doesn't matter what I say, I'm not going to sell it to someone who has no interest in whitening your teeth, Right?

Absolutely.

I'm only going to sell it to you if you feel you have the need to it. If it's an arthritis product, you're only going to buy it if you have arthritis. But what happens? What happens is most people are afraid of making a bad choice. So what our job in advertising to do isn't convincing you, conning you into buying. It's giving you the motivation, the information and the strength as a viewer to go out and try something that will make your life better. Now that's assuming we're in the business of selling products that make people's lives better, which we try to focus on. We try to focus on products that bring people value.

Yes. Absolutely. And you know what's great about what we get to do every day here at Jekyll and Hyde is not only do we help get those products and really help the consumers out, but we get to take the same mindset. We are working with our clients here. We really get to help them overcome their fe. Overcome their challenges, because we have the ability to not only help them from the advertising perspective, which we're very good at, but we understand their entire business. We understand how to scale it properly. And I think that really leads into what our show is about today.

It does, because one of the things that happens. And, Justin, you're on a lot of these calls.

Yes.

Sometimes we get calls from young companies or entrepreneurs and the partway down the road in their business, but they've made a lot of mistakes, and sometimes it's hard for us to reel them back from those mistakes. So we made up a white paper, and we're gonna kind of talk about today, and it's what we're calling the seven deadly mistakes. And there's a few more than seven, to be honest with you. But these are the ones that come up frequently in conversations that we have with companies.

Yes.

So let's jump in, and we'll start with. Start right from number one.

Yeah, absolutely. So number one here number is too many new SKUs. Now, this is a big issue for a lot of our clients here, and it's a different phase whether they're starting off with too many or they're trying to grow too quickly. I can let you jump in, Mark.

Yeah. What happens here, Justin, is the company launches a product, and that product's doing okay. So there's a lot of pressure on the company to go come up with new SKUs. Some of that pressure is from investors. Some of it's internal. Some of it is from the buyers themselves. Because you're gonna meet with your buyer every six months to a year. And it's often your buyer's gonna say, well, okay, your XYZ cream is doing all right. What else do you have? Yeah, here's the problem. The problem comes in when a small company jumps in and they start making too many skus or more skus, is they often come up with an SKU that is just another flavor of what they have. So I've got a toothpaste that's working, and I decide I'm now going to do peppermint and spearmint and ginger ale flavored. Probably what I've just done is I've taken my one sku. Which is doing okay. It's not spectacular, it's doing okay. And I took that business and I divided it up amongst two or three products.

So you took your revenue, your profit, and you just, you didn't increase it by any means. No. You just segmented it.

Right. So I had a line of toothpaste that was selling, let's say it sold a million dollars at Walgreens.

Right?

Now I have three SKUs of toothpaste that are maybe selling a million, a hundred thousand, which means now I went from one good solid SKU to three bad SKUs.

So then, so what's the problem then for the, for our client? When you've done that, what are the issues? Because they're assuming that if the cost of goods is similar, then they haven't lost any money, but they have created a problem for themselves.

They have. Because what's going to happen is the very same buyer who said, what other skus do you have? Will now come back in six months or a year and cut all three of them off the shelf. Because the buyer's going to say, well, all of your products are below our minimum sales line. And you can't always. Sometimes you can, but you can't always convince the buyer, well, let's just kill these two new ones and let's keep the original one. Because now the buyer has people to answer to. And the buyer's got to go back and answer to their bosses. Why you keep in a line of toothpaste that sells 300 grand a year.

Right. And I want to make sure our listeners understand too. If you're new to the show, understand that these buyers, their business is like real estate, okay? They have this much space that they have to make this much money or more for. So anything that's on that shelf needs to be making them more money than what could be in that space or you're gone.

So we want to make sure that when we come out with new SKUs, one, we're not taking our current business and breaking it up. So adding a flavor is dividing the business. Now, sometimes people say, well, we're going to come out with an extra strength model. Okay, well, that can make sense. But if the price gap between your regular strength and your extra strength, let's say your product's 10 bucks and extra strength is 11 or 12. Guess what? 70%, 80% of your business is going to migrate to extra strength. Your core product is going to drop through the drain, and on the next review, your core products going to get cut. And the only one you'll have on the shelf is the extra strength. Because I'm always going to buy extra strength if it's 10 or 20% within. 10 or 20% of the price.

Absolutely. Why wouldn't you? Right.

Because I want the big gun.

Exactly.

I want the toothpaste that does everything.

Right. If I got to lose £10, if you tell me I could lose £25 on it, well, it's going to work for me.

Right. And I'll just use half as much.

Exactly. Done.

So when you come up with the stronger version, there needs to be a substantial price difference. Now, here's another problem that happens, Justin, and that is, let's say we come up with a new indication for our product, and that's a safer bet.

Okay.

So right now I have a product for arthritis, and I decide I'm going to roll out a new product for neuropathy.

Okay. So it's safer because you're getting other consumers.

Now I've got a new line of consumers because arthritic patients are not necessarily the same as the neuropathy patients. However, there's still a glitch. And you know, you're gonna know exactly what I'm gonna say here when I say it. The client comes back and says, well, we have a million dollar ad budget. We were spending a million dollars on arthritis. Now we're gonna spend a half a million on arthritis and a half a million on neuropathy. Both products fall through the floor again.

Yep.

So when that new SKU with that new indication comes out, it needs to come out with its own ad campaign and its own budget.

Yes.

Now a lot of people will say, let me give you an example here. So I've got a shampoo, and now I'm going to roll out a conditioner. Because I'm going to say, people that buy my shampoo will probably want to buy my conditioner because they go together naturally, kind of like mouthwash and a toothpaste, their system. So here's the real hard numbers. The truth is that the halo effect on your first product is about 20% on the Companion product. Okay, so now I'm. Now we're talking about going from a new indication to what we'll call a companion.

Yeah.

So when you're looking at a companion SKU, now the question becomes, if I sell 20% of what my current product sells, does that meet the Mendoza line, Does that mean that I'm meeting the store's minimum requirements? So now what you have to look at is you have to say, I've got a mouthwash I'm going to roll out of toothpaste. My mouthwash is going to need to be selling five times minimum requirements for my toothpaste to survive, assuming I'm going to use a halo effect to market it. So assuming I'm not going to launch a toothpaste, TV commercial or ad campaign, I'm just going to halo it. My first product needs to be five times minimum for my second product to survive.

That makes sense. All right, that makes sense. So number two, underpricing products. Now, Mark, I'm confused. So what we've been told, and even as a consumer myself, if I'm finding a good product and it's cheaper, I'm gonna buy it. So why would underpricing a product be a bad thing?

So here's the issue, consumers. First off, folks, let's remember, consumers never buy the lowest price. They buy the highest value.

That's a good point.

If everyone bought the lowest price, everybody would be driving around in, you know, the cheapest whatever it is that Ford makes or Chevy makes. They'd be driving the cheapest car. Made sure, because a $20,000 new car will get me to work just as well as a $200,000 car.

Yep.

Still gonna get me there.

Right.

So it's not what people buy. They buy the best value, and value is in the mind of the purchaser. So it's what is my perception of the most value.

Yep.

Now, one of the things that I can tell you, when you look at most categories in CPG, there's a 10x difference between the bottom product and the top product as an average.

Okay.

So let's look at hairspray as an example. We can buy the cheapest can of hairspray, which I think is like White rain or Aquanet, and it's going to be between 99 cents and $1.49. Or we could go buy a can of Sebastian or Big sexy at what, $15? It's about a 10x. However, the same study shows that those 10x more expensive products have a 4x cost of goods. So the average product. So when you look at that can of hairspray for $1.49, and then you look at the hairspray for 15. The $15 hairspray cost four times as much to make as that $1.49 hairspray, but it sold for 10 times more.

Right.

So step one, the profit's not selling $1.49 hairspray.

Right.

The profit is selling $15 hairspray. Two the 15, guess what? The $15 hairspray company has got money to advertise.

Yeah. I mean, think about the margins you just talked about.

Right. Because they can afford to spend $2 a can easily in advertising to move that product. And the other company can't hope to spend that because they don't even get $2 a can.

Right.

And just because I make $1.49 hairspray doesn't mean that radio and TV commercials are going to be cheaper for me.

Oh, absolutely not. Right.

They're still the same price.

Yes, absolutely.

So if I can increase my sales by 5,000 cans a week at $15, I'm a winner. If I increase 5,000 cans at $1.50, I just added $7,500 to my sales. So that's a problem. Here's another problem. Clients perceive value based on what they pay for something. So if I have, let's say I make the best hairspray and I can afford to sell it for $1.49, guess what? No consumer is going to walk in and say, you know, the $1.49 hairspray is as good as the $15 hairspray. It's not believable.

No.

So I'm not going to buy it.

Nope.

Now that's not enough. Now let's look at the retailers. As you said when we went in, retailing is a real estate game.

It is? Yeah.

So we stick with our hairspray. We go to the average store and there's probably about a four to six foot set of hairspray.

Oh yeah.

That four foot set has, you know, 120, 150 cans in it. If one can gets has. If we have to add one can to that shelf, some other can has to be discontinued. There is no blank space on that shelf. Every inch of real estate is accounted for. Put this in perspective. A Super Walmart has 144 to 148,000 SKUs. There's every inch of the store is accounted for. So now I go to the buyer and I say, hey Justin, I've got a new can of hairspray out. And you say, well, what's the story with it? I'm like, it's the best hairspray in the world. It's amazing. And I'm competitively priced with Aquanet at $1.49. And you say to me, well, why would I bring that in? Yeah, well, because it's so much better than Aquanet. So what? Because you're looking at it saying, I'm Gonna bring in $1.49 product that is going to steal the business from my other $49 product. And now I have two cans on the shelf instead of one to sell the exact same amount of product.

The same people, same consumer.

Same consumer. Now I come in and I say, hey, Justin, I've got a new can of hairspray. It's $15.

I'm listening.

And you say to me, why would I want a $15 can of hairspray? Well, Justin, I'm gonna come in and show you how this is the best hairspray. I've got a TV commercial going on, I've got print ads going, I've got a website going up. I've got all this cool stuff. And I'm gonna show people how this $15 can of hairspray lasts four times longer than the leading brand, how it's better than what's in the salon, how it's half price of what you pay for the salon, but it' be at retail. Now you look at it and you say, okay, so maybe some of my $4.99 hairspray customers will decide to upgrade to the $15 hairspray. And you're at Walmart. You work on 32 points.

Yep.

So you're saying, well, let's see, 32 points of $5 or 32 points of $15. So Mark, if you can really get my $5 people to pay 15, you just expanded my category. You just made me. At the end of the year, my category will do more dollars with the exact same inches of real estate. I'm interested. That makes sense to me.

Yep, yep. And on that note, when you're talking about a premium product like that, and depending on the category, not only are you expanding it from a profitability standpoint, but you could be expanding it by bringing in new consumers into that store that never shop there through your advertising.

Because you can afford to advertise.

Exactly.

Alright, let's go to the next one.

So number three, trying to be everything to everyone. Okay, so what I don't understand if I've got a product, okay, I've got a product. Let's say it is. Let's go with toothpaste. Okay. Everybody brushes their teeth, right?

And what does everybody say when they call us? When we say, who. Who buys your product?

Everyone.

Everyone can use my product.

Everyone can buy my product. It's the greatest product in the world. Yeah, so, so, but, but it's toothpaste. Everybody. I mean, I hope, but everybody's supposed to brush their teeth.

Okay, I'm going to share something with you that is frightening.

Okay.

I have the stats on oral care because we have some great oral care clients.

I don't want to know.

96% of America brush their teeth.

Oh, that means 4 doesn't.

That means there's 4% of America that do not brush their teeth. That's just gloomy, isn't it?

Okay, well, I guess it's not everyone.

Okay.

But.

Well, we digress.

We'll get back to it. So why wouldn't I try to be everything? Why wouldn't I want to reach the most people I could and get the most people to buy my product? Understand?

So the first thing we think of is you don't want to be everything to everybody. And I'm going to tell you, I did business on QVC for years and I was back. You know, Chuck Woolery and I were back on QVC back in the late 90s, early 2000s. Sold tons of stuff. When you go to QVC, they bring you in for this thing called guest training. And on guest training, you spend a day there learning how to be on air.

Okay, all right.

Because remember, you're the on air guest.

That's true. Yeah, it's live, too. That's right.

Right. So you spend a day being trained how to be an on air guest.

Okay.

They did not make Chuck do that, by the way.

What? Yeah, come on.

They were intimidated by. They already figured he knew what it was like to be on TV by the Woolery. But I have sat through guest training. So here's the first thing they do at qvc. They have you take out a piece of paper and they tell you to write down every feature and benefit of your product, as many as you can think of.

Okay?

So people will write these down. And they're busy writing away, and they've got 15 features and benefits. Then the person holding the class says, now I want you to cross off every one of them but the top three and forget about them.

Wow. Now, is that because there's not enough time to talk about all of them?

Well, think about it. They have eight minutes per product.

That's true.

Okay, but what QVC has. QVC has live data. When you're on qvc, you see the person on camera. We all have earpieces in. And then there's a person back in the green room which is watching two computer screens. One is showing the exact number of phone calls that are buying at this moment. And another one is a graph showing if the trajectory of the sales is going up, flat or down.

Okay.

And you watch that, and based on whether it's going up or going down, you tell the person. So somebody's telling me, my ear, stop talking about what you're doing and go back to the money back guarantee.

Okay.

Because when you were saying the money back guarantee, the numbers were going up. And when you started talking about yellow teeth, that they started going down.

Right.

So everything's being adjusted in live time. But what they have is they have this beautiful live environment of knowing what works and what doesn't.

Yep.

And what they learned very rapidly was you can only tell people one to three key elements. After that, you just start confusing people and they don't. They tune out.

Okay.

So you can't be everything to everybody.

Okay.

The second reason is if you want to be everything to everybody, that means you need to be able to become a brand name. In. In a 340 million people US universe, most small companies don't have the money to become a brand name. I mean, if you're P and g, if you're McDonald's GM, you can do this, right?

Unilever. Yeah, of course you can.

But advertising to 340 million people isn't easy. So when you niche yourself out, you decide to pick on. Let's pick 20, 30, 40 million people who passionately love what I'm about. Now, we can define that ad campaign, we can narrow the scope of that ad campaign so our dollars are focused on this smaller group of people where we can get frequency, where we can build some brand.

Okay.

And we're only talking to people who passionately want to have our product.

Okay.

Just kind of see where I'm going with that.

Absolutely. So I understand you're going to be building a lot more efficiencies from your ad campaign because you're only targeting these people. So to target these people that we know that we can activate, here's where we can activate them, here's where we can find them, here's the message to get them to move forward. That makes sense now. But isn't there another benefit to going after that type of consumer? The consumer that's passionate about your product outside of just simple advertising efficiency?

Well, yeah. The advantage to going after a passion play is passion. People tend to be early adapters, and they tend to be what's called influentials. So as an example, about one out of a hundred people are what are called an influential or a key influencer. A key influencer. And they're not key influencers in every category. So a key influencer is someone who within their circle of friends and relatives is considered to be an expert or a knowledgeable person. So as an example, as you know, I host a show called living beyond 120. So people will automatically gravitate to me and ask me questions about vitamins and nutrition and supplements and things of that nature. Yes, because. Well, I know he knows. So I'm going to ask him, is this vitamin any good?

Yeah, absolutely.

And he'll know the answer. And I have that influence. Well, different people have influences in other areas. Some people might have an influence on what's the greatest TV or sound system or what's the best car to have, whatever the case is. Well, those tend to be passion people and those tend to be people who seek out the latest products and seek out the greatest stuff. And those people will go and tell other people about products. By the way, if you look at the research, no product has ever become successful that hasn't first captured the early adapters and the key influencers because without them products don't have long term life to them.

Yeah, I can see that.

So you have to have it.

There has to be some earned growth, some earned media growth as what's said now. So whether it's through social or as you said a one can influence 10 immediately. Right.

And here's the last thing to keep in mind on that and that is when we're advertising our products, especially when we're not McDonald's and P and G telling people about, you know, buy the XYZ brand. We're the brand that cares, we're the brand that donates money, we're the brand that saves the environment all nice. What I want is the brand that is going to fix a problem that I've identified.

Yes.

I want the brand that I have funky toenails and you've got the product that's going to make my toenails look better quickly.

Yeah, absolutely. That's it.

I mean, this doesn't sound sexy folks, but I've got hemorrhoids and I want the cream that's going to make my hemorrhoid pain go away.

Absolutely. I mean there are some bigger brands.

I don't actually have hemorrhoids. I was using that as an example.

I mean you don't look like you're sitting differently.

No, I'm doing fine. I've got a few hemorrhoids in my life. I'm sure they're not on me.

We've got a product for that, so. But there are Many brands that, that have a, their brands have been built on that social cause. Toms, for example, TOMS is a big one. And you know, they, you buy a shoe and they donate a shoe. That was their big movement.

But you still have to like the shoes.

Guess what? Yeah, I've bought a few pairs of toms. I only bought a few pairs of Toms because I like the shoe. Right. That was it.

You were, you're not going to buy a shoe you don't like so that somebody you don't know in Africa gets a shoe.

No, the social cause was. And did it influence part of my decision? Absolutely. But it's not the reason I bought it.

Right. It's a tipping factor.

Yes, exactly.

Between there's these Toms and there's these cool looking Keds.

Yes.

But you know what? Tom's going to give some shoes to somebody that needs them. They're roughly the same price. I'll go with that.

Exactly. Yes.

But the benefit to you was still the highest value.

Yes, Yep. Value.

And that's what we need to look at. The last thing is where I was going with this. And that is when we look at name recognition of trying to be everything to everybody. Everybody knows the name Kmart, but nobody's shopping there because having ubiquitous 100% name recognition means nothing if you don't stand for something. And Kmart lost its brand identity.

Yeah.

It didn't stand for anything.

Yep, yep.

In reality, what's the difference between Kmart and Target?

Target developed a brand, but if you.

Go in the store, if you went in the store blindfolded, you'd see mostly the same merchandise.

Mostly.

The only difference in Target is Target had created a bunch of in house designers.

Yes.

And Kmart has some too. But Target branded themselves as cheap chic.

Yes, yes.

They made saving money cool.

Yes.

Kmart, their existence lives on blue light specials. And when you shop there, you don't feel good about yourself. You feel like you're down and out when you go to Kmart, but you go to Target to buy the exact same paper towels and Windex and everything that you could get at Kmart. And you feel smart.

Yeah.

Because it's smart to save money. When I go to Target.

Yep. Yeah.

All right, what's our next one?

All right, so number four, an incomplete go to market strategy. Now, I don't think I need to ask a question on this. I think everyone can understand how not having a complete go to market strategy is a bad thing. But I would like you to really start going into Detail on what are the things that they're mostly missing. Because there's always something you have. Everyone has a product, everyone has an idea of who their consumer is. There's a concepts here, but I think there's some major things that are constantly being missed by a lot of the clients we talk to.

So the first thing we do when somebody's lacking a market strategy is we ask them a question. And that question is, if we were sitting back in this exact same place three years from today, in this very same room, and we were having a discussion about the past three years, what had to happen for you to call it a success. Now, the reason we do this, first, I'm going to give you the neuro linguistics programming purpose behind it. So this is my psychology major coming out now. So the reason we do that is because it's easier for people to look into rearview mirror than it is for them to look into the future. So I ask you to imagine for a moment we're sitting in these exact same chairs three years from today. And as you look back over the past three years, what happened, your mind will start to fill in all the blanks as if you were actually looking backward.

Right?

Now the reason I asked, now why is the big reason I asked that. Because if we don't know what your destination is, then it's very hard for us to give you a map to get there.

I mean, it seems pretty basic.

So why is it so confusing? Well, some people will say, my product is sold everywhere and we're doing $20 million. No, that's a wish, right? That's a wish. That's not a plan. Okay, A plan is we have two SKUs in Walmart, we have two SKUs in Walgreens, CVS, Rite Aid, Target, we've penetrated food, we've built a million dollar business on Amazon. Now we're starting to get to more of a plan where there's a picture that says, okay, so us as the ad agency dealing with that new company, let's say they don't have any distribution, a very limited distribution. We all of a sudden know, okay, we need to build an ad campaign that's going to get Walmart to say yes and Walgreens to say yes and CVS to say yes. And what are the sales figures in those stores? So what are the minimums?

Right?

So we're going to sit down, we're going to say, okay, your product sells for 20 bucks. You're going to put your $20 product into Walmart. If you're going to go chain wide, that's 4,200 stores. You're going to need to sell a piece and a half. That's $30. So you're going to need to do $30 times 4200 every week. That's how many dollars Walmart needs to sell. Now let's do the math for Target, let's do the math for cvs. So now we go backward and we say, okay, so in three years, based on this $20 product, you want to be selling $12 million in product. Okay. Now we can look at that and we can say, okay, so if these five retailers are where you want to be, and those five retailers need $12 million to be safe, to not get delisted, what do we need to do as an advertising agency to help you sell $12 million with a product?

Right. What's the plan?

Now we know the plan.

Yes. Yep.

And now we can say, okay, we're going to start here. We should probably go to this retailer first. We should probably start with this kind of ad campaign. Let's be prepared to move from digital to TV when we get in national distribution. We can lay it out.

Absolutely.

But so many people come in with no plan. And it gets back to the old Ben Franklin thing of, you know, failing. The plan is planning to fail.

Yeah, yeah.

And although it sounds like a little colloquialism, it's 100% accurate.

Absolutely. Absolutely.

Don't run your business in a reactive nature. Run your business in a proactive nature.

Right. And I think in our. Especially in the state of the market today, we've talked about this a few times with just the reemergence of Direct to Consumer. Now, it used to be, I guess that vision and that picture used to be simpler because there weren't as many choices. Yeah.

Direct to Consumer used to be the shamwow and the Ginsu night.

Right, right.

And my favorite, my absolute favorite was Tom Vuitton. Oh, you never saw Tom Fu? Tom Fu was great. Tom Fu. He sold a Direct to Consumer how to get Rich in Real Estate program.

Oh, wow.

He was this Vietnamese guy with this horrible Vietnamese accent. And he would. He would literally say, you tired of being loser? Come to my seminar. I'm not making fun of his accent. That is what he sounded like. And that's what people thought of Direct to Consumer.

That's why Direct Consumer got such a schlocky name.

But Direct to Consumer today is now legit.

Absolutely.

And it's major brands. And Amazon is what's caused this.

Yeah.

Because Amazon has now made. It's changed. It's made a paradigm shift in how consumers feel about product.

Yes.

Because it used to be, I want to go to the store and touch, see, feel, hold, before I'm going to give you my 20 bucks. Amazon has made it where. Yep, I'll order it off the picture because if I don't like it, I can slap the label back on the box and Amazon will take it back. So I'm not worried about buying something and getting it home. Plus, old direct to consumer marketing was allow three to four weeks for delivery. Now you order something from Amazon, it's on the porch before you close the browser on your computer.

Yeah, absolutely. Yeah. So it's like you said, it's created so many more choices for clients now and for products. And we haven't even gotten to what Dollar Shave Club did in the subscription model and how they built their own category there that obviously.

Oh, Madison Reed with hair color. Boland Branch with sheets. Who would ever think that selling sheets would become a business? Who would ever think buying pillows would become a business?

Who would think selling beds before you've ever touched it.

Hundreds of pounds.

Exactly. But it's happened now, so it's making it. It's provided more choices. And the choices mean that we really, again, we need to get the vision correct. We need to get the plan correct, which is talking about all the points that we've been really discussing leading up to here. Understanding your category, who's in your category, who is the really the consumer, the consuming habits of the category. Who is your best consumer? You know, really getting into the space so that you can start making decisions on should I go direct consumer and then retail. Should I never go retail?

By the way, I'm gonna tell you who else really cracked this market with along with Amazon was like Dell computer.

Yeah.

Dell computer really made. Really made it okay to order a computer and not see it.

Yes.

Until you got it.

Yeah.

And now if you look at Tesla, Tesla's direct to consumer.

Yeah. Oh, yeah.

So many people are buying cars.

Oh, yeah.

Direct to consumer.

Yeah. There's a few different services now that Carvana and that stuff that you're. Yep. You're delivering it to your house. It's insane.

So that. That has kind of changed.

Yes, it has, but that's why it's more difficult. But it's important to get it set. So next. All right, so here's. Here's a really tough one. And we run to this all the time. So number five, expecting to make money on A regional or national market test. So this is the situation that any product that's going to be going into retail, I'm going to say almost 90% of the time a buyer is not going to say, great, I love your product, I'm going to put you on every shelf that I have.

Does happen.

It does happen. But most of the time, no, most of the time the buyers will say, well, I'm going to give you a test like anything else. You know, we're going to test you out before. And these tests are horrible. They're so bad.

And try to resist them at all costs.

If you can, don't do them, okay? But if you do do them, try to get some basic things, such as the number of stores, such as the addresses to said stores that you're going to be in when you're going to be on shelf. There's a few details that sometimes are very difficult to get, sometimes you can never get them. But if you can push for them, it's going to make a huge difference in your ad campaign.

Now here's the thing. You can't make money doing this.

No.

And folks, this is the long and the short of it. In the world of consumer packaged goods, the most efficient way to advertise is coast to coast is national.

Yes.

And that's because the bigger the piece of geography that we're buying, the less money we pay per person we give the ad to. And these are in massive multiples. So let me give you an example. If I was to buy local radio commercials in your city on morning drive time, those commercials can cost anywhere from 30 to $60 for a thousand listeners. In your demo, if I go by Sirius XM now, I'm buying radio across all of North America, including Canada, and I'm buying what, 36 million, 38 million about that subscribers. I can buy that. Or at least we can buy that because of our contract for sometimes under A$1000 listeners. So now think about this. Your product is on a store shelf in Miami and it's costing you 40 to $60 to tell a thousand people you have the product versus I can tell all of America about my product for a buck. So you're Talking about a 40-60x handicap and being able to tell the story, it's huge now, but you do get the regional campaign or the test. You have to make it work. So here's the story. When you're doing that test and you're forced to do the test, here's the questions that you need to go with Your buyer. How will we know that the test was successful? So how many pieces per week per store do I need to sell for you to call this test a winner?

Yep.

How long will the test go on for? And if my test is successful, how long will it take before I go from being in your 600 stores to being in your 8,600 stores? Because if there's no end game in sight, don't bother doing it.

No, no, no.

So here's what happens. We have 500 stores. We'll use Walgreens as an example. They give us a 500 store test. They got 8,700 stores. We're going to need to go out and advertise those 500 stores. We're going to need to get the addresses. And we're likely going to have to attack it digitally because in digital we can geotarget where those locations are. Because understand when they give you the 500 stores, they're gonna scatter them coast to coast. They're not going to put them all in Chicago. They're gonna be everywhere. So we're gonna have to use digital means to geotarget where we're literally going to get down where we're advertising and making decisions about city blocks. We're getting that narrow of a target and we're spending more money to do it.

Absolutely.

Here's where your mindset needs to be. I'm probably going to spend more advertising those 500 stores than I probably will ever make in what I sell in those 500 stores.

Oh, yeah.

Because the goal here is not to see if 500 stores can make me money. The goal here is to see if I can push 500 stores over the line.

Yes.

So that I get 8,700 stores. This is not a business model to make money. This is a business proposition to prove, concept and invest in your future.

Yes. Short term pain for long term gain. That is it. And understand too, these tests are you don't usually get a very long time period. You're talking a couple months. So you need to push units, push velocity and push it quickly, which again, needs frequency, which means overspending. There's just no other way to do it.

And don't put the product on the shelf and say, well, let's put it on the shelf for a few weeks.

See what it does.

See how it does on its own. Because by the time that you decide it's not working.

Yeah.

And the time that you now have for us to do something, you've already been delisted. The second issue Is, remember at the earlier part of the show, I said that Walmart, there's 144 to 148,000 SKUs. Granted, Walmart has a lot of traffic in their store, but if you're counting on people coming into a Walmart and happen to locate and find and fall in love and take your one product out of the 148,000 possibilities that are in that store, you are someone of great faith.

That's a good way to put it. Good way to put it. It's not gonna happen. Okay.

You are probably also someone who believes in Easter bunny and the great Pumpkin.

Yeah, yeah. It's just not gonna happen, guys.

All right, let's go to our next one.

All right, so number six, trying to go it alone. Okay, so what we're talking about here, we're not talking about building your business alone. We're talking about trying to go to retail alone. The secret is, and this is the best way that I can equate this from my experience so far, very few people choose to buy their homes or sell their home alone today. It's very difficult. Having a real estate agent really helps with the process. Having that intermediary that this is their sole job is to make this transaction happen. And they know the ins and outs. They understand the business. They understand how to negotiate your contracts, all that thing. All of those details are very important. And you want to rely on their. Their. Their knowledge and their expertise to make sure that you get the best value for this transaction. Right. Okay. But you don't always have to do it. Some people get it on their own. It's possible.

Sometimes it happens.

So you have to think of trying to bring your product into retail. It's very similar. Can you do it on your own? Sure.

Some people do.

Some people do. Some people do.

But they usually learn some painful lessons.

And lessons you'd rather not learn that way.

So I'm gonna go back to my childhood hero that I mentioned earlier, Ben Franklin, who said he who has himself as an attorney has a fool for a client.

I haven't heard that one.

It's very accurate.

Yes.

Have you ever noticed attorneys all hire attorneys when they're in court? They hire attorneys, don't they?

Yeah.

No, they don't represent themselves?

Absolutely not.

Why not? I'm an attorney. I should be able to do this. It's because your thinking's not in the right place.

Right.

The second thing is this. And what we're talking about, folks here is brokers. Is having the right brokers when you have a great broker, that broker has relationships at that retailer. He or she knows the buyers, they're in the building probably every day or every other day. They have a trusted communication, they have a line of contact and they already have other products in that account that are making money for the buyer. So they have more credibility with the buyer because the buyer says Steve Anderson, let's say Steve Anderson has got products in my store that are doing 30, 40, $50 million. Steve Anderson makes me money.

Yep.

Therefore, because Steve Anderson makes me money, I will listen to Steve Anderson if he wants to talk to me again.

Right.

Okay.

Okay.

Second reason is he knows or whoever this broker is, they know the nuances of that account.

What nuances? What are you talking about?

Do I have to do I have to do trade with this account? Do I have to do Bogos with this account? Do I need to put ads in the Orodo's in their circular? What can I say yes to? What can I say no to? Because if you're not familiar with the account and you walk in to meet the buyer and the buyer knows you don't know the game, the buyer is going to clean house on you.

So what do you mean clean house? What kind of things?

I'm going to look at you, I'm going to say, well I tell you what Justin, if you want me to bring in your new HairSpray, I've got 8,700 stores. I want you to give me three free pieces per store and in place of charging you a slotting fee, oh, I want you to run three ads in my circular this year at 30,000 apiece, I want you to give me a 2% ad co op. I'm going to do a cross doc and a return policy. I'm just going to take 3% off the top for all returns. Right off the top. And I want to do a guaranteed sale. So when you ship the product to me, I'm only going to pay you on scan. Which means no matter how long your product sits in my store, I'm not going to pay you for it until it crosses my cash register and then 30 days from there I'll give you the money. If you're new to this business and you're desperate to get your product into that store, there's a good chance you might say yes to all or most of that.

If it's been your dream for the last three years and you've been working hard, ad campaigns, everything else, to get this product into Walmart and Walmart's telling You, I will take you in. As long as you do this and.

You'Re looking at it and you're saying, well, if I want to be in Walmart, I have no choice.

I got to do it, is what.

The buyer is telling me.

Yep.

A good broker knows that buyer knows the category and knows what you have to say yes to and knows what you can say no to. So that good broker is going to say, all right, Mark, you know what? I'm not. There's no way I'm going to give you 24,000 pieces of free product. I can't do pay on scan. What I will do is I'll do some dating.

Mm.

So instead of paying me in 30 days, I'm gonna give you 90.

Okay.

I'll do one Roto ad. I don't need three. I've got my own ad campaign.

Right.

And I'll do two rollbacks per year with you. I'll do two price rollbacks per year for three weeks each. Because that. That broker is doing this every day.

Right.

So he knows what he can say yes to and what he can say no to. He also knows that the stronger the ad campaign is that he walks in with, the more he can say no to.

So you're saying again, the stronger ad campaign, the stronger marketing plan for that product. Walking in saying, I'm going to support this product with this plan. The strength of that is going to provide the broker with the leverage to be able to negotiate about a contract. That's what you're saying. Right. Okay.

It's important because buyers all suffer with the same disease of everybody else, which is called fear of missing crap.

Mm. That fomo.

So I don't want to have you roll out your new hairspray with this fabulous ad campaign and then explain to my boss how come we're the only account that doesn't carry this.

Yep. Right.

And I'm gonna say, well, you know, they didn't want to do my free goods program, and I asked them to put in Roto ad. And now your buyer saying, yeah, and they're now the number two hairspray in America, and we don't have them.

Yep. Yeah.

So the more that I can walk in there with, for lack of better words, guns blazing, and convince the buyer that I'm a success. I'm not even on the shelf yet. But you know what? We're going to be such a success because we've got meat on the bones. Look at this ad campaign.

Absolutely.

Here, watch my TV commercial. Look at my ads here. Look at the group of magazines I'm going to be in, look at the schedule of radio ads we have planned.

Yeah.

The buyer's gonna look at that and say, damn, that's a pretty serious ad campaign. I don't want to miss out.

Yep, makes sense.

And your broker knows how to play that game. The last thing I'm gonna say is a lot of people think that the broker does an introduction, gets them in the door, gets them in the meeting, and the broker never works. A good broker is working on your account every day?

Yes.

They're looking at out of stocks. They're contacting the replenishment buyers to make sure that inventory numbers are back up. They're working with the buyer to what's the next sku. They're working with the buyer to make sure you're getting paid on time. So a good broker is working all the time. A crappy broker, by the way, will get you in the door and do the meeting you'll never hear from again. And that's the wrong broker. And if you have a broker like that, my advice would be get rid of your broker and go get one that wants to work every day.

Right.

All right, number seven, our last one.

Number seven. So number seven is a two party for us. So number seven we have labeled here as a broken digital strategy. So we see this all the time.

Isn't a web just a fad?

Yes. No, the Internet's not a thing.

It's the interwebs. I thought.

Yeah, on the line. So if you're on the line. Yeah, you'll be off soon. So we see this all the time. Okay. Now we know that again, especially with the direct consumer market emerging, there's a lot of brands and there's a lot of products and marketers out there that are, that seem to want to jump into the digital space. They see the sizzle, they see it being sexy. Right. But they don't know how to do it. So what we're seeing a lot of the times, and we're going to start with the first one here, is we're seeing people jumping into these sexy markets and these sexy mediums such as social media. But they don't understand it. They're not going about it in the right way because they don't. A lot of the times they don't have professionals behind it that understand the space, working it correctly.

And so don't I just like open up on my Facebook or a face space and see this and I start posting pictures of my product and tell.

People, go buy it stop laughing, it's painful. So here's a big thing and I'm going to start off on the soapbox here. I'll let Mark take over. But when it comes to social media, here's the biggest mistake that we see every single time. So please, please, please, if you are doing this, if you have a social media right now that you have yourself running or somebody else running, put it through this filter, take a look at it and answer this question for you. So we see this all the time with social media accounts, whether it's your Facebook, your Instagram, whatever the case may be, you're there just trying to sell product. Now the first thing you're gonna say is, well, why wouldn't I want to sell product? I'm putting money, I'm putting resources behind my brand. My brand is a product, I want to sell more of it. So why wouldn't I sell product? The issue is social media, okay? Social media was created, it's in the name to be social. Social media was created so that people can have relationships, they can have conversations. People are on social media, they're inviting you into their world. So I don't know if you've ever, it's very similar to if you've ever gone to. Let's say you're looking for a new car, okay? Now how irritating was it if you just walked on the lot and you had a salesman in your face saying, you need to buy this car. And you said, no, no, I'm just looking, okay, fine. And another salesman came to your face, no, no, no, you should really buy this car. No, no, this is the greatest car in the world. You should understand. They never asked you what you're looking for, what you care about, about your life. All they're saying is, buy the car, buy the car, buy the car.

Nor have I spent any time with them to find out if I even trust this dealership or trust this brand.

Exactly. Social media was meant to create those relationships. Social media was meant so that you can come out and introduce yourselves to people's lives and provide them with value, provide them with valuable content. And it could be so many things, but that's how you're going to get to the sale. You got to show them that you care about them before they're going to care about you.

Like Harley Davidson will. You'll see stuff in social media from Harley Davidson which are pictures and profiles of Harley riders, customers.

Yeah, absolutely.

Look at this picture. Here's 98 year old Barbara Smith who just rode cross country on her Harley Super Glide.

Yeah. Yeah.

That doesn't sell a bike, but you're like, that's badass.

Yes, yes.

I'm so. I'm happy they posted that because that's really cool.

Yeah. To that community.

Or I see this veteran with one leg who just had his motorcycle rigged up so that he could ride. Right, that's cool.

Yeah, absolutely.

Or they're having a fundraiser. Or there's a. You're right. There's a poker run that's gonna raise money for kids. That brings me into the community.

Yes.

It lets me think that, okay, I like these people. These people are like me and I want to have a relationship with them because I share values with them.

Yes, absolutely. I mean, it's like anything else. You want to work with people you like. Right, Right. So then why wouldn't I want to buy a product from somebody that I like? It's the same concept, but you can't tell me, hey, you should buy this product because it's so good for you. Does this, this and this before. I know who you are and I like you. And it's not meant for that. That space is not meant for that in the organic sense. And we see it all the time. So I'm telling you right now, folks, go to your social media if you're running it or not, and go through your content. If every single post you have is just another ad for your product, next thing I want you to do is take a look at the engagement numbers because I guarantee they're basically non existent.

Right. So a social event is not a picture of your product on the beach.

No, no.

And then a picture of your product on a ski resort.

Exactly.

And then a picture of your product in Hawaii.

Right, exactly.

And we have seen that exact thing.

We have seen that exact thing. And then people more than once and they all say, well, I tried social media and I didn't make any money off it, so I stopped. And first thing we have to tell you is social media. Any investment you put in there, okay. It is investing in customer service.

Yeah. It's a long term play.

That's what you're doing. Okay. If you're in social media, you're building a brand, you're trying to build that community, that ethos, but it is customer service first and foremost because that is where people now are going to go to talk about your product, good, bad and the ugly. And you need to be there. You can't let these conversations happen without you being a part of them.

Right. They are going to happen with or without you.

Exactly.

And people complaining about you in social media in many cases is an opportunity.

Absolutely.

If you jump in and fix it.

Yes, yes.

If you jump in. I bought your hairspray and I had a bad experience. I am so sorry that happened to you. Tell me more about what happened. I'm going to send you six free cans of product, yada, yada, yada. And then all the other readers are saying, oh, well, Joe Blow. Hairspray seems to really care about people being happy.

Absolutely. And again, think about your product, folks. Okay? Many times, and I'm sure you've seen it, the complaints that people have about your product, most of the time it's user error. They didn't read the directions or they didn't understand that they use it at the wrong time or the wrong way. And if you can go in there and you can simply correct them and help them out and maybe give them a little something extra, you've just gotten a new fan, a new advocate for your brand. Not only that person, but their entire circle. Like we talked about with influential, the people who are the ones out there that are complaining on social, especially in the broad space, are usually the loudest voices, okay? So that means that they have the most impact so they can show a good experience. Then you've just gained a lot more fans than even just that one. So it's an opportunity. So we also hear. And the last thing on social that I'm gonna say and I'll pass over to you, Mark, is that we have a few brands that say, well, why would my product be in social media? Nobody cares. Nobody's gonna talk about this again. Let's get back to toothpaste. Why would anybody want to have a social media conversation about toothpaste? So then I'm just not going to do it again. You may think that your product doesn't cause conversations, but the people who are buying it are still people, and they have things to say. They have wants, they have values, they have desires, and they want to talk about it. And also they're going to complain about your product if you're not there. So you still need to invest in social media. No matter what your product is, no matter who your consumer is, you should be investing. That investment level can change depending on the consumer and product category, but you need to be there regardless.

Now, the back half of the broken strategy idea for digital, the other half of that is a search process. We see companies all the time that they come in and let's say it is psoriasis medication.

Yep.

Well, the first thing you have to look at is if somebody goes to Google and types in psoriasis medication, do they find you?

Right.

Because you cannot possibly get a more targeted consumer than someone who took the time to type in what your product does into their phone or computer.

Right.

If they don't see you, you are invisible to that consumer. And something I find really interesting, and that is the research shows that brands who hold a top one or two position in search, which is the paid boxes, which is the top three to four, have a 150% higher name recognition at the store planogram. Now what's interesting about this, Justin, is it didn't matter if they clicked the ad.

Hmm. The impression alone.

The impression alone raised the bar. So in a lot of cases people are going to Google, they're typing in psoriasis medication, they're looking at the top three or four results. That ad is laid out where this particular product available over the counter. It's at Walmart, Walgreens, cvs, Rite Aid. They're not even clicking the ad. They're just looking at the ad and saying, okay, here's a brand and it's a Walgreens and there's Walgreens. On my way home tonight, I'll stop and look at it and maybe I'll buy it. So what they found was that people who used search when they started interviewing these people standing at the planogram recall of the brand was 150% higher if they saw them in the top two positions of search, even if they didn't click it.

And it's important fact because if you don't know paid search is paid for on a cost per click model. So you're never paying for an impression. It's only if they click the ad.

Right. So let's say your category cost 75 cents a click.

Right.

The reality is about 1 in 20 people that look at that ad are clicking on it.

Right.

But all 20 of them got your brand name associated to psoriasis medication.

Yes, yes.

So you can't look at the, at the 75 cents for the click. You have to look and say 75 cents just bought 20 highly targeted impressions.

Absolutely, absolutely. And we talk about, especially when you're talking about driving to retail here with now especially within Google with the location ad extensions. Now a lot of people don't need to click on it. All they need to see is where's it located. And Google picks up on it, says it's at the Walmart. That's one point. Two miles away. Oh, that's where I shop. Fantastic. That's all I needed to know. Done.

And the other thing is, the volume is so significant, people don't realize. So we have tools that will measure this. So as an example, if somebody came in and said, how many people are looking for an arthritis cream? We will look that number up. And by the way, that number is in the tens of thousands per month.

Yes.

So we're talking tens of thousands of people who picked up their mobile device and said, I need a new arthritis cream or I need hairspray. I need this hemorrhoid treatment. I need this toenail fungus issue I have. They're raising their hand and they're saying, hey, I'm over here. I'm open. I'm interested. Sell me this product. And they're asking to be sold because they're literally knocking on your door saying, I have this problem. Can you help me?

Yeah. Now, I mean, and so these are those category terms. Those are those indication terms that, as you said, arthritis pain relief. Great. Again, no brainers. If you think about it, why wouldn't I be there for arthritis pain? Right. So another thing that we see constantly here is brands that are not buying on their own terms.

Well, I shouldn't have to buy my own term because it's my name.

Well, absolutely. Yeah. So if somebody's putting in there, you know, Justin's Toothpaste, why. Why would I pay for that term?

I'm the only Justin's Toothpaste.

Right. So what would be the point? Okay. There are many reasons why you want to do that. So let's start from the top. Okay. Number one reason, and this one should be for any of you out there that have experience in this space. This should be obvious if you're buying that term. And let's say that especially if you're a rising brand, if you're selling very well and you're starting to get on the radar of your competitor, your competitors could be buying your term. Therefore, your competitors are showing up in the search results before you are, which you say to yourself, well, but that. That consumer was searching for my brand, so why would they ever click on another ad? If they're searching for me, they're gonna do it. You have just given up, again, that impression share to your competitor, who would have an ad that could easily say, you know what? Mark's toothpaste is two times more effective than Justin's Toothpaste.

And I can go buy the search term Justin's Toothpaste.

Exactly. They can Be right there and they could steal the business. So you could be running this great ad campaign. You've got TV running, you've got radio, all this stuff. What do people do first thing when they hear something new? They go to their phones and they Google it.

Justin's Toothpaste. And then they see Mark's Toothpaste. Two times the whitening power of Justin's Toothpaste.

Exactly.

Available at Walmart.

So we just. Not only did we basically dump all of the ad spend, of all of the tactics that we put in front of that consumer to drive them to Google and to search us, we just burned that, basically lit it on fire because we just drove them to our competitor because all we didn't do is buy our own term.

And the other thing, Justin, is keep in mind most of these searches are happening on a mobile device.

Yes, absolutely.

And when you look at a mobile device, you only see the top two to three terms.

Yes.

So even if you're number one organically for your own name, the only thing that shows up on that phone are the top three paid ads.

Yes, yes.

So you're below the fold.

Yes. Well, and another thing you're going to see here, too, again, depending on where your brand is at in this life cycle, maybe there aren't any competitors going after your brand name. Okay. So maybe that you're just starting out, you've been in digital or you're in a new category that there really hasn't been anyone introduced into it quite, quite yet. You have to be careful because what is the goal of your campaign? A big thing we're seeing now is Amazon is ranking organically higher than your website is. So if you're trying to push your Amazon sales, then it's fine. Then maybe that's what you want to do.

But if you're trying to get them into brick and mortar, Amazon's not helping.

It's not helping you. You're losing those dollars, you're taking them to the wrong place. So you need to make sure you're buying in that term. So again, you're meeting the correct goals at that time, you're driving to where you want to go, whichever retailer that may be. So that's a big thing you've got to watch out for. And with those mobile searches, like Mark said, here's a big thing you're going to run into. You know what everybody has to search with when they're on their phone? What are you typing with your thumbs? Guess what you might do.

Clumsy thumbs.

Yeah. You're going to spell the brand name wrong. So you're going to lose. You could lose so many consumers because they just spelled it wrong and they're not seeing. They're not seeing your website come up first, which would be an awful thing to do. These terms are extremely efficient when you're talking about the spend on them. They're not expensive. When you're talking about Google's quality score, you're ranked. You're number 10 because people are searching for you. You're the most relevant thing on there. It's about protecting yourself and protecting your other investments. That's the biggest reason why you want to do.

Yeah, it should be the core of any ad campaign.

Absolutely. You should never run anything without having a solid paid search campaign that supports it, because that's what it's doing. It's supporting it. It can do acquisition things, but it's mostly support.

Well, everybody, I hope that this has been helpful to you with the seven deadly sins of CPG Marketing. As always, if you have questions about advertising, marketing or about the industry, you are always welcome to contact us. Go to cpg insiders.com or jekyllhyde labs.com you can reach out to myself, Justin, or anybody else here. We love entrepreneurs. We love to try to help you. You can ask questions and you don't have to pay for that.

Absolutely. And know that this white paper that we've just discussed today can be downloaded. So if you go to the cpginsiders.com website, go to the episodes page, you'll see an ad for it. Click on that. It'll take you to a page where you can download all this content for free.

Absolutely free.

Crazy.

It's worth more than that.

I think so. Yeah, you're right.

It's worth as much as people are willing to pay attention to it. That's it for today on CPG Insiders. We hope that the show's been good for you and we love doing it. And we're so appreciative of all the people that are listening. I mean, we're amazed with how many people are listening to this show.

That's fantastic.

And as long as people keep listening, we'll keep doing it.

Absolutely.

We'll see you on the next episode. If you're looking to greatly increase sales on your CPG product, don't hesitate to contact us at Jekyll and Hyde Advertising and Marketing. By the way, the only advertising agency with a guaranteed result, just go to jekyllhideagency.com or feel free to give us a call. At 800542.

SAM.