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Ep. 11: What Can Traditional Mattress Brands Learn from D2C Brands?

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While the lines between online and traditional brands continue to blur, the strategies employed by the players in these categories haven’t necessarily followed suit.

So, what can incumbent brands learn from online disruptors?

Lifeloom

In this episode, Mike and Jeff analyze the successful playbook that D2C brands have used to rapidly grow their share of both the market and consumers’ attention, identifying which tactics can be successfully adopted by traditional brands as well.

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Full Transcription:

[Mike Magnuson]

Right on, you got a mother’s day present yet?

[Jeff Cassidy]

No.

[Mike Magnuson]

You get a card? Do you do cards?

[Jeff Cassidy]

I’ll make her a card, a personal letter.

[Mike Magnuson]

You draw like hearts and stuff?

[Jeff Cassidy]

There might be a heart on there.

[Mike Magnuson]

Nina and Lila are going to be making cards so that’s-

[Jeff Cassidy]

No, but I… I don’t know-

[Mike Magnuson]

Maybe it’s like; until you have your own kids, you just continue making cards. That’s how it works.

[Jeff Cassidy]

I don’t think kids… It only works in one direction. It works; handwritten note/card to your mom, your mom likes it.

[Mike Magnuson]

No, I meant though like once you have your own kids then they are the ones making the cards for… Like my test of this theory is, does Chris make cards for your mom?

[Jeff Cassidy]

No

[Mike Magnuson]

So the theory could hold, once you have your own kids then they are the ones who are making the cards.

[Jeff Cassidy]

Oh, I see what you’re saying. There can only be one generation at a time that’s making cards.

[Mike Magnuson]

Exactly, so you’re the bottom of your generation so you’re making cards until the point where you have your own kids.

[Jeff Cassidy]

I can’t tell you how many times I hear that you’re the bottom of your own generation.

[Laughter]

Different words used for bottom. I mean they don’t use the word bottom, they use a different word for bottom.

[Mike Magnuson]

That’s where we met, just scraping along the bottom of our generation. You know, we were just kicking along the bottom and we looked around and saw each other there and that’s just the theory. Yeah anyway, so if you ever want to get out of that situation…

[Jeff Cassidy]

Just have some kids?

[Mike Magnuson]

Just have some kids. Yeah, then you’re-

[Jeff Cassidy]

That’s a very expensive way out. I could also just decide to buy a card that would be a little cheaper and easier.

[Mike Magnuson]

Yeah but I don’t know if that violates the rule or not, that’s the only thing. You have to kind of make cards until you have the kids.

[Jeff Cassidy]

Anyway, I don’t know how Carol is on this front but our mom appreciates something that’s personal like the fact that you took the time to write a card and it has a message of love in it, she appreciates that more than if I went to the store and bought a card that said ‘Love, Jeff.’

[Mike Magnuson]

Oh for sure yeah, in fact our family always did cards. I suck so I have kind of gotten out of that habit but my sister’s still really good about it and even if it’s buying or… Well, I don’t know if she makes them but what we did more is; we would buy a card and then we would write a message. It wasn’t just like… We didn’t just sign it, we would add a message and with my grandmother, my dad’s mom; Oh my gosh it was like water works every time. It was just part of any holiday or a birthday to just watch her cry as she read each card.

And she just got so much joy out of it so we would write those. Like I said, I’m terrible, I’ve gotten out of the habit of that sadly but I’m sure my mom would appreciate it and actually our kids are really good about that. They write us notes and I love it as a dad. I seriously, not even joking, have on my own nightstand like father’s day cards from my kids from last father’s day. I guess maybe in my defence-

[Jeff Cassidy]

Is it because it’s the only time that they say something positive about you?

[Mike Magnuson]

Pretty much, the gratitude doesn’t rear its head that many other times during the year so I have to remind myself. I have to use that father’s day card to just get through… particularly the teenage years here are not replete with a lot of explicit gratitude so the cards that I get, I cherish.

[Jeff Cassidy]

Yeah you cherish those, I could see that.

[Mike Magnuson]

No doubt.

[Jeff Cassidy]

My favourite card making for mom, maybe not for receiving but it was fun making, was her 70th birthday and I made a card out of wood with a hinged card out of wood so brass hinges and wood engraved with a wood burner and-

[Mike Magnuson]

Oh my gosh is this in the 1800s or when was this?

[Jeff Cassidy]

No, this was five, six years ago. Whatever, she’s… Yeah anyway, that was my most-

[Mike Magnuson]

That’s hard core.

[Jeff Cassidy]

Most time spent on making a card was that one, but it was fun.

[Mike Magnuson]

Next time she hits a major milestone birthday you’re going to chisel a tablet for her.

[Jeff Cassidy]

Yeah, marble.

[Mike Magnuson]

Well hey, let’s dive into the content for today where this is kind of a continuation of our last episode in which we talked about some things that we thought brick and mortar retailers could learn from online retailers. This time we’re going to turn the microscope towards the brand side of the equation without-

[Jeff Cassidy]

The ‘microphone’.

[Mike Magnuson]

Exactly, we thought that was only fair so let’s talk about some ideas. Really, just where we think there could be learning and again we’ll set the stage in a similar way which is that you know this is certainly something that could go the opposite direction. I’m sure there are things that we could do a whole episode on about what online brands can learn from traditional brands.

One thing that comes just to the top of my head would be things like; how to make your products, how to design products that really stand out and appeal to people on a physical sales floor. Things like that, I’m sure are things that many online brands are in the process of trying to learn right as we speak.

[Jeff Cassidy]

Yeah, or having different models to target different people. So having multiple models, that one’s happening already too.

[Mike Magnuson]

Yeah people, they’re diversifying their product lines and different price points and yet catering to different needs from the consumer’s standpoint. And so yeah, there’s lots I believe that just like with retailers we could turn the tables and say this is something that the online guys could learn from the traditional guys but in this case we’re going to talk about the other direction.

We think it makes a little bit more sense to start with this so far as the general market share trends of course for the last six or seven years have been that the online guys have continued their incursion on this space in terms of stealing share. So I think clearly there is a lot to be learned from what they’ve been doing and I guess along those lines we should also, just like we did with retailers, start with some things that probably the brands have already learned and we could hat tip to the brands for from that standpoint.

I mean one of those things would be, to my way of thinking; seven or eight years ago, most traditional brands in this space had been neglected. Really, in so far as any kind of consumer branded marketing efforts went. Where they were doing some advertising but it was basically just co-op advertising and I remember for example when I came into this space back in 2010 I had already started the site a couple years earlier and got it to a point where there was enough audience that I thought, well I should start to meet some people in the industry and I remember going into Sealy and discovering-

[Jeff Cassidy]

At a market there.

[Mike Magnuson]

What’s that?

[Jeff Cassidy]

At a market?

[Mike Magnuson]

Yeah, exactly I went into a Las Vegas market, walked into a Sealy showroom, asked for the head of consumer marketing to speak with and was taken to someone who said ‘Oh no, I think you have me confused. I’m the head of marketing but really it’s to retailers and that would be our customers. That’s who we’re marketing to.’ and I said ‘Oh my bad, I must have not been clear. Who would be the person to speak to about consumer marketing?’ and this person sort of thought for a moment and goes ‘Well, I guess that’s still me’.

And at that point it became very clear that Sealy had nobody in 2010 whose job was to do consumer marketing. So that obviously has changed substantially, I mean it’s hard to even imagine that. Frankly, it was hard for me to imagine even then. I couldn’t believe this is the brand that was, in my mind, at the time the biggest consumer brand in the mattress category and didn’t have a single person whose job it was to manage that brand or build that brand or build value in that brand.

[Jeff Cassidy]

Right, and to be fair you’re not singling them out as being worse than everybody else. This was one of, if not the, leading brand at that time in your mind and as a representative of the industry-

[Mike Magnuson]

Just using them as emblematic of what was happening at the time. if they didn’t have somebody, chances are nobody did. And that all has changed, a lot of brands now have consumer marketing and they’re putting a lot of emphasis to their credit on consumer marketing and building their brands. Doing it directly, not just through co-op advertising, doing it through advertising they can control the messaging of and using it to try to build value in their brands. And so, that’s something I think that has come a long way and it’s an area where I think they have learned a lot from online brands. Like, they’ve learned how important it is to have an identity and in order to have that identity you’ve got to-

[Jeff Cassidy]

You have to build it.

[Mike Magnuson]

You have to build it and you have to be messaging those consumers directly. It can’t be a telephone game thing where you’re sending the message to the retailer and then the retailer sends it on to the consumer. If you want to have the identity that you want to have, you’ve got to tell that story directly.

[Jeff Cassidy]

Right, and usually also co-op dollars are ads for the retailer which cover multiple brands, right? So you’re not going to have as much depth of brand message communication for your own brand if it’s an ad that covers three other types of mattresses that are-

[Mike Magnuson]

Well yeah, I mean sometimes a co-op ad could be focused on one brand and sometimes they could pool dollars from multiple brands to do one single ad creative but nonetheless it’s still going to be… Even if it’s focused only on your brand it’s still going to be the retailer packaging up your message within their message which is not the same. And their message PS, in a lot of cases is going to have something to do with prices and promotion and things like that it’s just not the same as controlling the message directly end to end.

And so again, not to say that co-op advertising isn’t important. I want to just draw a distinction that it’s not the same and brands I think have realized that there’s value in both kinds of advertising so that’s something that has certainly changed. I think that also, where people advertise has changed to a degree. Where these brands who are advertising are choosing to advertise has changed to a degree in so far as I think that, let’s say 2013-14 even post Casper, I remember any kind of bragging about brand campaigns always focused on TV spend.

`We’re going to spend a hundred million dollars on TV.’ would be the headline that they would want to have in furniture today and it was always about TV because TV was sexy. TV was what was going to dazzle the retailers and impress them and it spoke to the point of view that really the brand campaign wasn’t really about building this brand or really about driving pull demand for these products.

It was really more about driving demand from the retailer base so this was just another selling point that they could use with the retailers to say ‘Hey, you should put more of our products on your floor because we’re going to spend 100 million dollars on TV.’ and had it been focused on the end goal of really driving pull demand, there would have been a lot of things done differently to try to reach in-market shoppers and there would have been more of an emphasis on taking that interest that they were generating and actually funnelling it into their dealers through, for example, having a store locator on their website.

Which at that time very few manufacturers did because they were more worried about having other sales reps from other companies go poach their customers than they were about actually helping consumers who were interested in their products find those products in their market.

And so a lot of that has changed. I mean if you think about it, of the major brands, almost all of them have store locators and even down the line a lot of brands now, way more, have store locators. Way more are spending their money, their advertising dollars, on digital and so that’s a great start. We’re going to talk a little bit more about shades of grey there that are really critical and important later on but I just want to pay some homage to the fact that I think there’s been a lot of lessons learnt

[Jeff Cassidy] 

Yeah, the mix has shifted towards digital which is good.

[Mike Magnuson]

Yeah, and I think they’ve tried to move towards more metrics that they can measure that really do translate into the retailer more and actually driving demand.

[Jeff Cassidy]

Traffic into it, yeah.

[Mike Magnuson]

Yeah, so I think another area where the brands have learned a lot as it relates to these unique model names and for decades brands allowed retailers to essentially demand this. Having unique model names in each of their stores and what it did, is of course, it deprived them of the ability to build value in their unique products. Because when you have a product, when you have multiple products that fall underneath your brand but they are always under different names in every different store and so therefore you can’t really refer to them in any of your advertising, refer to those names.

Well, those products, they’ve got different features and benefits. And since you can’t refer to the different products by name, you can’t refer to any of those features and benefits because not every product has the same features and benefits. So, you end up with this really watered-down brand message at the top where it’s just kind of like… Imagine if every Honda sold in every dealership had a different name then Honda wouldn’t be able to tell you about why the CRV is the best compact SUV for you and all these features that it has that make it good. They would just be like ‘Honda; we’ve got cars and you should definitely get one’. You know, it would just be generic and I think a lot of the ads were like that and so what we’ve seen now… and PS; the other big limitation is they wouldn’t have had any reviews.

[Jeff Cassidy]

Reviews, yeah. That’s what I was just going to say. When you have a unique brand name for every retailer there are effectively no reviews or just a couple.

[Mike Magnuson]

That’s right.

[Jeff Cassidy]

That hurts you badly and we talked before about how that name game contributed to anxiety and distrust for the consumer so it was part-

[Mike Magnuson]

That’s right.

[Jeff Cassidy]

It was part of that negative customer experience so-

[Mike Magnuson]

It fed into this feeling of being ripped off and-

[Jeff Cassidy]

Right, so it makes me as a consumer feel potentially more ripped off, more at risk, and there’s no reviews to make me feel better about it. So, it hurts you in a few different ways.

[Mike Magnuson]

So I think clearly we can look at the last seven years and go ‘Okay brands in this category have learned a lot from this.’ I mean the major brands have taken pretty much all of their higher end products and made them into national lines and a lot of other brands down the line have followed suit with at least some portion of their product lines. They’re building national lines within those and I think that retailers are coming around to the benefits of that which is great and so they’re not feeling like this is a disservice to them.

So progress has been made and learnings have been adopted from the success that the online retailers have had in this area.

[Jeff Cassidy]

Absolutely.

[Mike Magnuson]

So that’s again like a credit, maybe even another credit would be; I don’t know, this is a little bit more borderline… This one might be something that I think brands could still learn something from. It’s the kind on the customer service front, I feel like one of the things we can learn from the online brands is they’ve been exceptional about saying ‘We’re going to make sure that our customers have a great experience and of course we’re going to make sure that experience is reflected online in the form of these reviews and what have you but first and foremost we’re going to make sure we bend over backwards to give them a great experience.’

And one example of that is like warranty type issues and I think that the sort of modus operandi in the mattress industry for decades has been that this part of the customer service process gets outsourced by the manufacturer to either the retailer who sold the product or to a third-party inspector, and that I believe is a little bit fraught with peril and I mean…

Maybe it’s not just the outsourcing itself, maybe that part of it isn’t the problem but the certainly the ultimate outcome of this has been that people don’t feel that they’re being treated right. The issue resolution has not been to people’s general satisfaction in this area. It has gotten better, I do think, I mean in the early days when we started this website I would say the vast majority of reviews that we got were people who were pissed off about having a warranty claim-

[Jeff Cassidy]

About a warranty issue not getting handled.

[Mike Magnuson]

And then yeah, getting the run around basically. Whether it was they’re saying that this doesn’t meet the standard but it’s like so clear that it does. It should meet the standard that this is definitely a defect or coming in with the black light and finding a stain. Like, hunting around for some way out of responsibility for handling this problem instead of trying to solve a problem, they’re trying to find a way out of solving a problem.

[Jeff Cassidy]

Right and another thing; a meaningful portion of those were submitted as store reviews, right? Which highlights the fact that to the consumer, I just have an issue. Like, I have an issue and I don’t want to worry about who’s responsible. I just have this issue and please solve it for me.

[Mike Magnuson]

Somebody resolve it, yeah.

[Jeff Cassidy]

Yeah, so they kind of conflate all those entities into their one experience so-

[Mike Magnuson]

Well and there was, in the consumer’s defence, the buck was being passed back and forth between the two parties and so that was fundamentally the problem. I think that that’s been improved in a lot of cases but I think there’s still probably room left to learn from the emphasis that online guys have placed on making sure consumers have a good experience. and making sure that there’s not people out there who are pissed off.

That squeaky wheel who is always going to find as many outlets as they can to vent their frustration, making sure that doesn’t happen very often. And maybe even turning those problem cases into success cases, where you can benefit from ‘Hey, look at our customer service. Look at what we did here, this is evidence that we would have your back if you ever encountered such a situation.’

So, I think online brands have been really good in general about that and traditional brands have gotten better but still have something to learn there and maybe that involves getting a more direct involvement in handling these cases. Or maybe it involves just changing the messaging to these third parties that are handling this and saying ‘Hey, we want the policy to be; make this right’.

[Jeff Cassidy]

When in doubt, support yeah.

[Mike Magnuson]

Yeah. ‘When in doubt, make it right’ as opposed to ‘When in doubt, look for a way out’. I think something-

[Jeff Cassidy]

That’s a good tagline when in doubt look for a way out.

[Mike Magnuson] 

So, I think that’s an area where it’s sort of a little bit in between. Like, there’s been some progress but there’s more to go. Another area where I think there’s been some learnings adopted is this idea of selling direct. This is an area where clearly the benefits of selling direct have been made clear. I mean PS; we already kind of knew these benefits if you thought about it from Tempur-Pedic and sleep number.

They already had shown us the benefits of selling direct from the 90s onward which specifically are; higher margin sales that you yield from your direct sales efforts fund an investment in building your brand. That’s like essentially, it’s an economic engine that funds the brand building that then-

[Jeff Cassidy]

That draws traffic into the store.

[Mike Magnuson]

Yeah, that then creates this trickle-down benefit to all of your retailers.

[Jeff Cassidy]

That brand messaging, that brand credibility gets built with me. The consumer and I then go to the local store and say ‘I want to check out this-

[Mike Magnuson]

Yeah, I mean anybody who carried Tempur-Pedic in the first 15 years that they were in the stores will remember this exact dynamic. Like, they were just advertising like mad on television and people would come in saying ‘Oh my gosh, you have this thing that I heard about and seen on TV, I want this’.

So anyone who remembers Tempur-Pedic or sold Tempur-Pedic in those early days should get that. The other thing is it allows for review building because when you sell direct, you have a direct relationship with that customer. You have a way to contact them and therefore you have a way to ask for a review and that builds reviews in the product and so that’s another benefit of selling direct.

And then, the third is speed. Just speed to innovate and speed to iterate based on the feedback that you get. So by having a direct connection to the consumer, you’re getting feedback on everything from your marketing message and what’s working and what’s not working there, to even the product and what’s working and what’s not working there. And you’re not having to try to decipher this from some –

[Jeff Cassidy]

The telephone game –

[Mike Magnuson]

The telephone game of intermediaries. So yeah, the online brands have shown that is an incredibly valuable feedback loop to have and so those three benefits to me of selling direct are meaningful. They benefit both the brand as well as the retailers that carry that brand and I think that as a result of those being kind of laid bare and made clear by the online brands; over the last seven years, a lot of traditional brands have learned from that and started to dip their toe into that water.

And by the way this is not to say that we think that necessarily all brands should do this. I think one could make that case, I think I may even have made that case myself that all brands should do this but I do understand that some brands, they want to differentiate themselves as one of the brands that doesn’t do this. And that retailers do place some value on the idea that this is a product that only consumers can only get in a physical store and so I get that. And that does make sense to me as well but nonetheless they need to find other ways. Those brands need to find other ways to solve these problems, to address and get these benefits that selling direct offers and that’s the challenge.

[Jeff Cassidy]

Yeah and also selling direct; the brand is building out a website that is effective at selling direct hopefully and if they’re doing the marketing mix like we talked about before, if that’s shifted more towards digital. What happens then is; that brand’s website becomes one other destination that a customer might find online that actually increases the likelihood of the retailer getting a sale. If that brand isn’t selling direct and their website doesn’t get found, it’s ranking lower because there’s no reviews coming in. Reviews coming in consistently will help it rank higher but if that brand’s website is not really found, it’s not going to help drive traffic into the store, right?

[Mike Magnuson]

Yeah.

[Jeff Cassidy]

So improved online appearance and just one other destination to pull a customer in is good for the retailer.

[Mike Magnuson]

Yeah exactly, I think anything that a brand is doing to build value in its brand or create demand for its brand or translate that demand into store visits is good for the retailer who carry that brand. So again, that’s something I think where we’d say a lot of brands have learned from the success online retailers have had in taking that approach but yet there’s still probably more to be done there. More value to be extracted from those learnings and so that’s why we put it at this point on the list.

But the consumer reviews thing, I think is something maybe we should talk more about because I think consumer reviews for brands have been hard to get in the past for traditional brands. And this is an area where again, we’ve learned from the online brands how important consumer reviews are because if you rewind the clock eight years, we talked about this in the retailer episode, there were no brands that had reviews in this category. So, consumers who were interested in buying a product that had reviews were just kind of out of luck so it was like, in a way all brands got a pass.

[Jeff Cassidy]

Because they didn’t exist, it didn’t matter.

[Mike Magnuson]

Because they didn’t exist, all brands got a pass.

[Jeff Cassidy]

Right.

[Mike Magnuson]

But once the online brands came in; they were able to generate reviews for their products and it was a lot easier for them because they had fewer products to start with too. But also, they had this most importantly, they had this relationship with the consumer that they could use to ask for those reviews.

[Jeff Cassidy]

And they’re selling nationally so they have more customers for this singular product.

[Mike Magnuson]

Yeah, well the traditional brands are selling nationally too but nonetheless the-

[Jeff Cassidy]

Yeah but through individual entities right?

[Mike Magnuson]

I understand. So, we’re thinking about this from the brand standpoint and the brands, the big advantages that the online guys had is the direct relationship with their customer. But the bottom line was that their success in generating reviews has shown I think clearly that consumers when faced with the choice between a product that has a lot of reviews and one that doesn’t, a lot of consumers will vote with their wallets and buy the one that does have the reviews.

So I think that is clearly a lesson that traditional brands can learn and to a degree I guess have learned probably from the online brands but they’ve been really challenged in how to get those reviews. To your point, they don’t have that direct connection even to the extent they’ve started selling direct, it represents a small portion of their sales. And so, a small number of customers relative to the number of people out there who have these products. They’ve got a much broader array of products that they’re trying to build reviews for simultaneously, they probably change their products more often so that the value that they build in reviews then gets lost when they change the product.

So, there’s all kinds of things that are kind of working against them and there just hasn’t been really great tools for this. The only tools that really have been available for brands on this front, by and large the only way they really work, is for massive enterprises .

[Jeff Cassidy]

Yeah, well they’re priced that way.

[Mike Magnuson]

They’re priced that way, they’re designed to target that customer for… TSI can afford it, SSB can afford it, and their biggest retailers can afford it. And by biggest retailers, I’m talking about their top five, ten, fifteen accounts. I think Macy’s, Bloomingdale’s, those types of retailers can afford it. But the bread and butter of this industry that makes up the vast majority of mattresses that are sold out there, those solutions are not for those companies. And so, that’s been an issue for brands and that’s something that I give them a pass for sure because even though they’ve learned the lesson they haven’t had the tools.

So in that respect, we’re super excited to be sharing in coming weeks some really cool things on this front because we’ve been approached. In recognition of this problem, retailers have come to us and brands have come to us and said ‘Hey, what can you guys do? As the people who have the largest mattress review platform on the internet, what can you do to help us with this problem?’

And I guess… Shame on us, and shame on me maybe in particular, that we hadn’t thought about that before. But luckily we were approached and we’ve been working on this and as a result of those efforts we’re super excited to be able to basically solve this.

[Jeff Cassidy]

Solve that problem.

[Mike Magnuson]

Yeah we’re going to absolutely solve this problem for the industry and so this is something that we’re going to be coming out with and it’s going to be a massive benefit to brands and at that point brands are going to have-

[Jeff Cassidy]

Yeah brands and retailers.

[Mike Magnuson]

And retailers yeah but we’re talking about brands today so that’s why I said that. But they’re going to have the ability to be on equal footing with the online guys and that’s huge. So anyways… but yeah you’re right, it absolutely benefits the retailers just as much if not more in a sense because they’re the ones ultimately who are going to be generating the sales directly for most of the products that are purchased.

So we’re super excited, we’re kind of sorry for being a little bit vague on that. We’re not quite ready to talk about that in detail yet but we’re willing to at least share that this is something that’s coming, that we’re working on. It’s going to be awesome and we’re super excited to share more as soon as we’re a little further along with getting it ready for market.

So nonetheless, I think product reviews, as a going back to the kind of general theme here of today’s conversation as it relates to brands… Brands, I think have learned about the importance of product reviews from the online brands. Traditional brands have learned this and soon they’ll be able to really take that learning and apply it in terms of helping themselves get to parity with the online brands through this platform that we’re going to be releasing.

So now, the next thing that we think would be a learning that traditional brands can take from online brands would be about how ad dollars get spent. So we talked a little bit about this earlier in the sense that traditional brands have learned that it’s important to build value in your brand and build value in your products. But how those dollars get spent, I think is something that there’s still room for a lot of improvement there because I don’t think that the dollars that traditional brands are spending now are working nearly as hard for them as the dollars that online brands are spending.

Which again, as we talked about in the last episode, those dollars that the online brands have been spending have worked harder than arguably any dollars in mattress industry history.

[Jeff Cassidy]

Yeah.

[Mike Magnuson]

I mean, previous to this you might say Tempur-Pedic’s dollars worked harder. That the billion dollars that they spent over 10 years on infomercials, building that Tempur-Pedic brand, was probably the best example of brand building in a concentrated period of time that this industry’s ever seen. And yet what’s happened across multiple brands in the last seven years, in getting multiple brands to this 500 million dollar in sales mark in such a short amount of time, and not to mention the level of brand awareness that these upstart brands… What you could still consider upstart brands have, speaks to just how effective their marketing has been and how much bang they’ve gotten for those dollars.

And so, that’s an area I think that traditional brands can still improve upon. I think, while it’s great that most brands are not bragging about the amount of TV spend they have, the reality is they’re still spending a lot of money on TV, A. And B; even though you’re spending 50% on digital or 60% on digital, just being digital is not enough because digital for the sake of digital… Or put it this way, most digital advertising you can do is still untargeted and the whole distinction that people should be drawing is what portion of marketing is going towards in-market shoppers.

That is the way. It’s not just because these online brands focus their dollars, focus the core engine of their advertising on digital marketing that made it work so well for them. I mean it’s easy to just, from a very high level to go ‘Oh, they’re online brands. They’re digital first, they did their advertising digitally. That must be the thing that we need to do.’ that’s missing the key. The key that they did was they focused on in-market shoppers first and foremost which of course you can only find on digital. That’s the only advertising channels that allow this but most digital advertising is not targeted towards in-market shoppers, so you got to specifically focus on the digital channels that are targeted at people who are looking for a mattress right now.

That’s the thing that the online brands have done better and that the traditional brands frankly still could learn a lot from, I think. And I say that because again, I think the customer acquisition is so critical in this industry and if you’re going to succeed it’s all about making sure those dollars deliver the most value for you. The dollars that you’re putting into that channel that customer acquisition channel and if you’re putting towards untargeted media then by definition basically 99% of those dollars are going towards people who don’t want a mattress right now.

And the only value you’re going to get from that advertisement is ‘Do they retain something about your brand or your products that will stick with them for however many years it is until the next time that they’re in-market for a mattress?’ Which is a tall ask, I think to say we’re going to leave such a resounding message with them that they’re going to be like ‘Oh yeah, that’s the brand I want to get. I don’t even need to do research when the time comes.’

[Jeff Cassidy]

Yeah putting it another way, like you said, the online brands have focused their dollars; number one on hitting in-market shoppers. So in-market shoppers are getting, no matter what, they’re getting messages from those brands because that’s what the brands are doing with their advertising. So, if you are a traditional brand and you’re not doing that, it means you’re not getting in front of those customers. So it’s the kind of the equipment-

[Mike Magnuson]

Or you’re not getting your share of voice at a minimum.

[Jeff Cassidy]

At a minimum but I mean we look at Google search data right? And you see the searches for those digital disruptor brands outpacing the traditional brands. So, it’s kind of like before Casper, before the online explosion… Like we talked about before, there are a lot of TV ads and having your ad on TV was a competitive advantage, so upstarts couldn’t advertise on TV you had an advantage by advertising on TV.

[Mike Magnuson]

Yeah.

[Jeff Cassidy]

This is kind of happening but at a more micro level now. So targeting in-market shoppers, the mind share of those online brands is dominating because there isn’t the representation of the traditional brands at the same level.

[Mike Magnuson]

Yeah.

[Jeff Cassidy]

I don’t know if that makes any sense but-

[Mike Magnuson]

Yeah I think so, the traditional brands… Someone could argue that if you’re doing a TV ad, you are reaching those people because you’re reaching everybody, right? Like, if you do a big enough TV campaign then you sprinkled a little bit of magic dust over the whole population including that one percent but the bottom line is that one percent got like 50 messages from Nectar.

[Jeff Cassidy]

Right.

[Mike Magnuson]

And they saw your ad like twice so you’re not getting your share of messages.

[Jeff Cassidy]

Right and they also saw that message from Nectar when their mind was thinking about that purchase versus-

[Mike Magnuson]

That’s true.

[Jeff Cassidy]

-Seeing it when I’m on Facebook and I’m thinking about what dog/puppy video I’m going to watch so it’s-

[Mike Magnuson]

That’s a good point.

[Jeff Cassidy]

-It’s hitting me right when my mind is thinking about what I should get for a mattress.

[Mike Magnuson]

That’s actually kind of a separate point, it’s like there’s reaching in-market shoppers, there’s reaching what’s sometimes called active shoppers or let’s call them in-market shoppers. Let me try to come up with a vocabulary that’s distinctive here, there’s in-market shoppers but then there’s in-market shoppers who are in the process of actively researching this purchase right at the moment you reach them. That’s a subset and you definitely want to reach them and they’re infinitely more valuable than anyone else in the 99% but if you have an opportunity to reach that one percent at the moment in time they’ve specifically carved out to think about this purchase, that is infinitely more valuable than reaching that same person in some other time.

And that is something too that the ‘Nectars of the world’ that the online brands, the most successful ones, have been extremely effective at. And again, it’s even a level of granularity higher in terms of how they’ve been able to make their ad dollars work harder for them.  Because, not only are they focused on the one percent but they’re focused on that one percent at the moment. They’re able to disproportionately hit that one percent during those moments when they’re actually thinking about this purchase.

So, they do of course do a lot of retargeting too so that they’re hitting them in other moments as well. It’s not to say that they’re focused entirely on that but it’s all about proportion so they have some ads that do reach the 99% but most of their emphasis is on the one percent and then they have a bunch of emphasis disproportionately on that moment in time where they’re thinking about this purchase. So, those are the things that make the ad dollars work harder and it’s not nearly enough to say ‘We’re doing all this digital’ or ‘We’re doing something on Instagram’. I mean Instagram is not where people go to shop for a mattress, let’s be honest. So generally speaking, the people you’re reaching there are… So, it’s not enough to focus just on digital platforms.

The other thing that I think is… An interesting concept I want to throw out there that I think potentially traditional brands can learn from online brands is about how they display information about their products and the degree of detail and transparency that they have in providing information about their products. And I think this is interesting or maybe even counterintuitive to a degree because this is something that I think online brands had a lot of success with in the early days and I think we can learn from that but actually many of those same online brands have themselves gotten away from recently.

They came out in the early going and were just like ‘Hey, here’s the deal. We’ve got four pound memory foam and then underneath that we got this like 70/30 blend of natural synthetic blend…’ and they were just super transparent. ‘1.8 pound density base foam and this transition foam it’s this and that…’ and all the certifications and whatever, they were just clear and explicit and that was a refreshing change I think for consumers.

Consumers had not been accustomed; they’ve been accustomed to what’s inside the mattress being more or less a black box.

[Jeff Cassidy]

Mystery. 

[Mike Magnuson]

Yeah or as a white fluffy box but nonetheless, metaphorically a black box, and they did not know what’s in it. And I think that in the early days when these online guys leaned into being more transparent and clear about that, I think that benefited them and was a point of contrast that worked in their favour. They’ve subsequently, I think done less and less of that as a class of companies, some companies have continued to lean into it just as heavily if not more so but some have moved away. And as a class I’d say they’ve moved away.

But nonetheless, I think the learning is still there. That can be adopted by traditional manufacturers that ‘Hey, I think that this is something that resonates with people.’ People like the idea of knowing what’s in the product that they’re buying, it’s sort of a proof point of what am I paying for? Is this quality? It makes it convincing. You’re going to make a claim about this or that, having more transparency about the components that go into it helps make those claims more convincing to a sceptical consumer and I think it’s fair to say that mattress shoppers are a sceptical bunch in general. Most people come into this purchase pretty sceptical.

So I think that there’s learning to be had there, that having more transparency… and maybe even to the extent that transparency encourages more investment in quality, that actually could be a lesson as well. Like, upgrading some components that may be weak links. If you were being fully transparent, you’d recognize that well this particular aspect of my product isn’t going to come across that group. Well, maybe just a few extra dollars, we upgrade that component and I think painting a picture that’s more convincing to the consumer by being able to do that. I think in the long run, that’s a winning strategy for traditional manufacturers.

[Jeff Cassidy]

Yeah, that transparency increased trust which increases the likelihood that I want to buy that product. And this is an area for opportunity which is either the point about quality, more transparency should imply quality, but I think there’s an opportunity to help educate consumers on what quality means and why they should pay for it. Because transparency with the numbers like density and stuff, consumers don’t necessarily know exactly what that means but if you could kind of demonstrate ‘Hey, this is what that gets you in terms of quality and longevity let’s say.’ then I think it becomes really powerful

[Mike Magnuson]

Yeah, that would just certainly be better but even if you couldn’t. Even just being able to say-

[Jeff Cassidy]

Just having the transparency increases-

[Mike Magnuson]

Even just having the transparency is better than where you are now. Because of course you’re saying this is going to last longer, or this is better, this is more this or that. But having some numbers to kind of substantiate it at least, is better than not.

[Jeff Cassidy]

Yeah, it’s saying we’ve got nothing to hide.

[Mike Magnuson]

Yeah exactly.

[Jeff Cassidy]

We’re proud of our products, here’s what’s in them.

[Mike Magnuson]

It’s a positive signal.

[Jeff Cassidy]

Yeah.

[Mike Magnuson] 

In that respect, so I look at that as something that I think traditional brands could learn from online brands and maybe even because of the fact that online brands have not been leaning into that as hard, it’s actually an area where traditional brands could potentially go on the offensive in a sense.

[Jeff Cassidy]

Yeah.

[Mike Magnuson]

So those are our thoughts. We’ll wrap it up there I think and as always we hope you like what you’re hearing. If you do, we’d love it if you subscribe to the show and leave us a review. It’d be great, Apple podcast is a great place to leave a review or even just a rating. It helps other people discover the show and so we encourage you to do that and in the meantime, we thank you for listening and we’re out.

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