Hanna Hasl-Kelchner:    Figuring out how to successfully scale a brand is easier said than done, but if you’re interested in some advice on how to do it, you’re in the right place because next up is the author of Ramping Your Brand.

 

Announcer:       This is Business Confidential Now with Hanna Hasl-Kelchner helping you see business issues hiding in plain view that matters to your bottom line.

 

Hanna: Welcome to Business Confidential Now. I’m your host, Hanna Hasl-Kelchner, and today’s special guest is Dr. James Richardson. He’s an expert in early-stage consumer packaged goods brands, the founder of Premium Growth Solutions and a professionally trained cultural anthropologist turned business strategist who has helped household brands owned by companies you’re familiar with, such as General Mills, Kraft Foods, and Frito-Lay to mention a few.

 

As I said at the beginning, James is also the author of the book Ramping Your Brand: How to Ride the Killer CPG Growth Curve. It’s a number one bestseller in the business consulting section of Amazon, and so I’m really delighted to have him join us today. Welcome to Business Confidential Now, James.

 

Dr. James Richardson:   Thanks, Hanna, for having me.

 

Hanna: You know your background in anthropology, the study of human behavior, no doubt gives you some really unique insights into consumer preferences and decision making that is really invaluable when it comes to developing a brand, especially in successfully scaling a brand. How hard is it to successfully scale a brand for those of us, those mere mortals, who don’t have the benefit of your training in anthropology?

 

HOW CONNECTION AND HABITS ARE THE KEY TO SUCCESSFULLY SCALE A BRAND

 

James: Well, if you’re just really rich, you might get lucky. [Laughter] But the reason I wrote the book was for the 99% of people who aren’t sitting on $20 million, and they have to build their food or beverage brand or their beauty brands from nothing with seed money. And the way that that has worked for people like Dan Lubetzky, who founded KIND Bar and others, is that you have to build a business that connects with specific kinds of human behavior. And the kind that I focus on in my book and that I became an expert in in my career was habituation to new brands.

 

Hanna: Tell me more about that.

 

James: There are some famous business authors like Daniel Pink who’ve written about habit and habit formation. And behavioral economics has talked a lot about that in the world that I work in which again is basically everything sold at Target. Those – those hundreds of categories that we all buy. Habits form very differently based on the category in play. And so, once you start to get your head into the – into the data and you actually talk with people, you realize that there’s an enormous amount of variation in how habits form from category to category.

 

This is usually where people’s heads start to explode as a founder. [Laughter] Because as a founder, founders are what I call in my book category geeks. They have geeked out in their little world, and we’ll call it like fitness nutrition bars. We’ll just use that as an example, and so, they’re geeked out. Maybe there’s some fitness endurance athlete. Maybe there are many celebrities, you know? So, they developed their perfect bar, and they believe that the world now needs to eat it right? So, they’re the true innovators out there, which they innovate without any business context. Initially, they just don’t care, right?

 

THE ILLUSION OF INNOVATION

 

Now, they want to go and get everyone to eat it, and that’s when the business starts, but they didn’t start with a business background, most of them. So, the challenge and the challenge I focus on continually every day on my clients is how to get them to think about the end user first with every single decision they do in the business. And those are the brands that actually tend to scale, the ones that are operated that way.

 

When you talk to the founders, when you look at executional moves that they make in the market, that’s usually the operating culture. It’s a consumer centric operating culture. It’s not just a passionate person who has invented the next great nutrition bar and then hires a sales team. I mean, they’re out there.

 

Hanna: So if you – if you build it, they won’t necessarily come unless you do your – some serious homework. Does that sound right?

 

James: Yes, it’s worse than that. Even if you get on the fields of targeting Walmart, they may not come right.

 

Hanna: Aha. So, what factors go into it?

 

James: And you will – and you can – and you will – you will quietly buy back the inventory and skulk away just to do anything.

 

FACTORS NEEDED TO SUCCESSFULLY SCALE A BRAND IN THE CONSUMER-PACKAGE GOODS SPACE

 

Hanna: Well, we don’t want to do that. We want to successfully scale a brand, so help me out here, James. What factors need to come into play to make that a reality?

 

James: So, the folks that succeed, they find a way to modernize a category. In the food, it’s usually an ingredient formulation tweak, and it can be very subtle. I mean, it may just be raising the fat grams really high. It could be lowering the sugar grams, not wild and crazy stuff, but if that tweak, or if that modernization in the formula allows you and say something like food to suddenly connect culturally to a dietary outcome that has mass interest and then you can back that up with an approach to go into the marketplace, that makes your brand essentially what we would call cool on the evening news.

 

You get sort of the formula that KIND Bar generated, which KIND Bar is not a very innovative product. I think that a lot of people think that the magic of getting someone to adopt the new brands and consumer packaged goods is about wild, crazy, and complex innovation and it’s rare even. There could be some complexity under the hood, but you don’t want to introduce any of that to us, the consumers, because we have no appetite for it. We’re not interested in reading a dissertation on why we should have a nutrition bar.

 

THE ROLE OF PACKAGING IF YOU WANT TO SUCCESSFULLY SCALE A BRAND

 

We just want to quickly look at the package, look at some symbols, and then our brain will make the connection.  And usually the brands that do well, there’s like no conscious awareness of the signaling process, and that’s actually what I spent a lot of time studying is one of the symbols on the pack. What do they mean unconsciously? And if those unconscious meanings once they start getting generated.

 

If you can pick them up in marketing and amplified it, and things really take off. It’s easier said than done, but the one thing you have to do is you actually have to be willing to launch your product and not assume that you understand the really hard one.

 

Hanna: Yes, I can imagine especially to – for the founder that this is their baby, and they think they know everything about it and they really – they really don’t. What are some of the best practices associated with successfully scaling a brand?

 

James: So, the first thing that – that I – that you need to figure out is what is the – your early fans who buy you regularly assuming that you’ve actually created them? The first thing you have to do is you have to talk to them, then you have to open yourself up to the possibility that the reason you created the brand or the business has nothing to do with why they like it.

 

HOW APPEALING TO A MASS MARKET TO SUCCESSFULLY SCALE A BRAND REQUIRES MORE THAN A MISSION

 

So, my favorite example is mission-driven founders. There are a lot of them. They want to solve climate change and sustainability issues, you name it. Very rarely is that a primary driver that scales a consumer brand, almost never. This can be proven, [Laughter] but the founder may care about it a lot, right?

 

Hanna: Right.

 

James: Those are the folks who really to get in front of them, you need to listen to their fans, explain to them why they use their product and why they decided to replace another one with it. That’s even more important, right? Then, you can get stories of how they actually use the product, what it means to them, but more importantly, what is the outcome we’re trying to get from it? That’s when people – and every time I do this with the clients, there’s often a, “Aha. Oh, well, we did this. We created it for this reason.

 

But our fans are telling us that, you know, it’s a weight management tool.” [Laughter] You know? And what you have to do is you have to find the consumer groups. It doesn’t matter if they’re a big percentage over your consumer base early on, but the consumer groups who like you because of a – of what marketers will call a mass market consumer benefits that they believe your product is the next great thing. So, weight management is the one I talk about in my book because it’s the one that scales business. It’s the fastest.

 

If you can connect to that with an innovation, you can zoom in food or beverage and you can operate successfully, you can grow very quickly. There are other areas and benefits that you can use as well, but what happens with innovators in a – in consumer-packaged goods, they tend to be so geeky that they really designed it for themselves. They designed it for this tiny group of geeks in Austin.

 

They designed it for a consumer benefit that’s not a mass market at all, Hanna. It’s literally just for the geeks in the world of nutrition, something like anti-inflammatory eating. That’s been around for like since the 70s. If you talk to the right people in California, they’ve always been there. They’ve always been in L.A., and they can’t grow the audience because no one cares.

 

Hanna: Well, it’s not sexy.

 

James: It’s not. No, it’s depressing. It’s sort of like – it’s sort of like the people who try to raise money to solve world hunger. It’s not that easy because it’s the most depressing topic you could possibly have, right? And it’s not even clear with the solutions of it. Wounded Warrior, however, creates great money very quickly because this kind of problem is really easy to understand and the solution is really easy, especially if it’s something for your legs or your arm because you’re a – you’re a paraplegic, right? So, it’s a very simple solution, and it feels good to do.

 

THE CRITICAL ROLE OF CONSUMER FEEDBACK

 

So, what happens with a lot of founders is that they failed to learn from their consumers what that big benefit really is, and then they failed to market it or they actually spend money. I’ve seen this when they spend money, and they market the strange weird benefit, like saving the world with nutrition bars because the wrapper is compostable, right? So, that – that’s actually something that’s going on right now in the industry

 

So, I hope that helps listeners understand, and really, the challenge is that you have to do – you have to accept that the product is a cultural thing. It’s a cultural object. And until you release it into the world and give it to people and they start using it in ordinary life, it actually doesn’t mean anything yet. It’s just – it’s just an idea. I mean, you may want it to mean something, but the market is going to tell you what it means.

 

And that’s a social process, and that’s what – it’s a hard thing to explain to folks who weren’t trained in social science, but you know, for a brand like KIND Bar, you suddenly knew what it means today. Well, that was a 20-year process, and it was a social process. It – it wasn’t actually created at the white board by anybody, right? So, you have to let – you have to let the market help you define what it is and then listen to – to how it’s being defined and then run with that. And that is a – that’s a big piece of humble pie.

 

Hanna: A lot of patience for sure.

 

James: Yeah. Yes, yeah.

 

TRANSFERABILITY OF JAMES’ SUCCESS TIPS TO OTHER GOODS AND SERVICES

 

Hanna: I understand that your experience is largely with consumer-packaged goods, but I’m wondering if some of these concepts that you have or best practices couldn’t be transferable to other types of products or even services. What do you think about that?

 

James: Oh, I totally agree. You know, I would say that anything, any service or product line where recurring revenue is part of your business strategy and part of your route to profit. The idea of understanding how to generate repeat customers and how to scale their absolute numbers.

 

That is the not-so-secret formula that’s buried in my book when it comes to generating exponential growth because for every recurring customer in any line of business that’s paying you money two times a year, or five times a year, or 10 times a year. If you can accelerate the amount they’re paying you, you just don’t need to create as many customers. If you can accelerate how much money they’re giving you, your basic – it’s a basic business logic, and it works in almost every industry including B2B.

 

WHY YOU MUST SELL STRATEGICALLY TO SUCCESSFULLY SCALE A BRAND

 

The challenge [Laughter] the challenge in my industry is that a lot of the ecosystem where founders work and interface with every day, they don’t understand that, and they don’t care. So, I’ll give an example. Most of the people who start food and beverage businesses that are selling in retail like a physical store, they’re going to have to go through a third-party distributor. They look at their sales based on what they’re selling to this trucking company, and that trucking company only cares about moving volume, right? They have no understanding of anything I just talked about in the last 15 years [Laughter] and they don’t care.

 

So, if you’re a founder and you know that your customer is a trucking company who sells – who moves your thing to a health food stores, you’re going to have a very strange endeavors because they’re going to keep calling you until – and feeding you there, you know, with the others, which is when do we get more cases, right?

 

So, you might decide, and I meet a lot of people who get sucked into this in consumer-packaged goods, any customers are good customers. I just need to sell more cases because then my revenue goes up and you know that’s true. The problem is that if you sell with that mind, if you run your business with that mindset and I’ve done the research in – in cash register data, the odds are pretty high. If that’s your only motive and that’s the only principles you’re using, you’re going to find yourself on the shelf in a totally inappropriate retailer.

 

It won’t move, and you may even have to buy back the inventory. You may go out of business in the buyback process financially by the way. [Laughter] So, it’s because if you spend your cash on something else on these, it’s important that you don’t think that every customer is valuable.

 

If you’re going to be a cash strapped start up in the world that I’m in. And honestly, probably in a lot of startups that don’t have a couple million dollars with seed capital which is most, you know, their using their own, their own family money or they’re using maybe an angel check for $100,000.00 or $200,000.00.

 

It’s not a lot of money in my industry. I mean that that disappears really fast. If your view of the universe is, “I just moved more cases of my product, I don’t care who the customer is down the line consuming it,” the odds are very good that you’re going to have a dead business before it even gets to half a million in sales, and that’s actually where most brands in CPG die.

 

They don’t even get to a million dollars now, and part of it is they don’t sell strategically. They think every customer is valuable, and the reality is if you’re doing something that’s new to, say, food culture that have legs, most people don’t want it, and they never will. Most people in America don’t want a KIND Bar. It’s a minority of Americans that have created this billion-dollar business, still, and that it’s based on people like me who buy two cases a month. It’s not based on people buying one bar randomly. So, I hope that math makes sense.

 

HOW SMALL AND EARLY STAGE BUSINESSES SUCCESSFULLY SCALE A BRAND

 

Hanna: I understand that the math is very important, but let’s say you’ve got somebody who’s bootstrapping their business…

 

James: Right.

 

Hanna: …and maybe their intent is not to go national or global. Let’s say it’s a consumer-packaged good, and they’re happy with local. They’re happy with regional to get started…

 

James: Yeah.

 

Hanna: …to test their market and so forth. And maybe they put something out there. And you know, like you said, it was a founder who was married to their idea, and they thought if they created, people will come. And yeah, a few people came, but not that many. What do you recommend for somebody in a situation like that to give their brand a facelift? Do they have to totally rebrand? What advice can you give us?

 

James: So, I always tell people in that situation to start with the evaluation of the product formula. And you know, when you’re in food beverage, you really have to get some honest feedback from strangers, which may take a little legwork, but it should be possible in today’s Internet age.

 

Get feedback on – on the sensory what they call the sensory experience because often, if you really are selling at a trickle and you went into a decent retailer where people go and look for new things like a specialty food store, the odds in my experience are very hot. There’s something wrong with how it tastes, and I know that sounds ridiculous because you’re – you’re thinking, “Well, how could a food innovator create something bad tasting?” but it happens all the time.

 

So, that’s why I tell people that they have got to look there first, make sure that the thing is it has that Frito-Lay sensory excellence. In other words, you could feed it to your Uncle Larry. He doesn’t care about how it is, right? They’re going to love it just on the taste. You’ve got to have that in today’s market to get that initial traction going.

 

After that, I think you can look at things like, “What is the symbolism on the package? Are you really actually telling? Are you selling obscurity or what I like to call weirdness, or are you selling something very subtle, like the kind with like the KIND Bar which is basically just trail mix in a rectangle.” That’s all it is. There’s nothing else, [Laughter] but no one had sold that in a bar form.

 

COMMERCIALIZATION CHALLENGES THAT CREATE BARRIERS TO ENTRY

 

Hanna: Well, let me ask you a dumb question. I hear what you’re saying, but like the KIND Bar example, you’re saying it’s nothing more than trail mix in a rectangular form. Well, that makes it pretty easy to knock off, doesn’t it?

 

James: You would think so. The problem is there.

 

Hanna: Yeah.

 

James: The problem, it is conceptual like if we’re thinking – if we’re sitting at home imagining these things, it seems true. But the KIND Bar actually was an R&D technical nightmare to manufacture at commercial scale. So, sometimes, and there are many brands that are scaling, which are just like that right now, like Spindrift. It’s a sparkling water brand. It’s got a very subtle formulation change.

 

There is no natural flavor active, which is a chemical extraction from plants made in laboratories that simulates the flavor of whatever you want, like blueberries or strawberries. They remove that, and they just put fruit juice in. So, again, another one – another example of very small formulation twist, no seltzer plan in the United States can make that product when they started, I won’t go into all the reasons, but there also is no nutrition bar manufacturing facility for higher that could make the KIND Bar. So – so, that’s why it hasn’t been done.

 

Hanna: So, you’re talking about manufacturing scale.  

 

James: You got it. So that is – that’s the world I’m in, which is when you want to get your thing to go from a local city to a region of the country, you want to go from, you know, half a million dollars of sales to five and ten million. You’re actually now going to have to hire a contract manufacturing, food and beverage, to get that many units produced.

 

So, you know, even if you don’t want to become the next KIND Bar and be that big, you’re going to have to do commercial production in a product-driven business that gets passed five million bucks being able to create an innovation that is very easy for the consumer, the right consumer to say, “Wow, that is innovative.” Yes, I’ve been waiting for a seltzer water or a sparkling drink, very low calorie with absolutely no additives and Spindrift is the only one in United States. There’s probably five to ten to twenty million people ready for that right now. Some are discovering it as we talk.

 

So, that’s the challenges that I call it not over innovating, so that when you get to the point where you’re going to have to hire contract facilities to make your product at scale, that you have something that’s doable or they could modify their equipment to make it happen. The folks that over innovate in my industry, they tend to run into the wall of I can’t ever – I can never get beyond the artisan chocolate shop, right, because I am who makes it by hand, right?

 

Hanna: Right.

 

James: If you can’t get industrial machinery to have my computer processors to make it, you can’t really scale in my industry at all. That is where there’s this balance between innovation that is commercializable versus entertains you and the commercial innovation.

 

It’s that very large audience that’s sitting out there waiting for your thing. They may not know it, and it’s going to be your job to design the packaging symbolism and everything else so that they get it and they see it on the shelves and they make that connection. And when it’s done really well, you don’t actually have to use a lot of marketing. It’s fascinating. I mean it literally, it will – it will just explode on the – on the shelf when it’s all aligned.

 

Hanna: Well, that’s great. The thing is you’ve got to get those stars aligned.

 

James: Yep.

 

BEST PRACTICES TO SUCCESSFULLY SCALE A BRAND

 

Hanna: What would you say are one or two best practices an innovator needs to focus on in order to get to that stage?

 

James: I think the first thing is you need to sample your product.

 

Hanna: Sampling.

 

James: And then the services, you should do that as well. I did it. I used to give free one-hour sort of calls, and I was just – I was honestly trying to understand my client base. I wasn’t actually trying. I wasn’t trying to actually sell them like convince them that I’m a hotshot consultant. I just – and it’s the same thing with sampling.

 

Give them a small version of your bar, give him a free one in the giving process, and there, here is a social science thing. They will feel obligated to give you some kind of feedback, either as then, which is not the right time, but later. If you can say – give away what you have, a sample of what you are selling, get the money now, get them in some kind of a digital relationship and then ask for the feedback later. That works really, really well.

 

I think you’ve probably experienced that. I know I have. When people – you asked for people’s feedback, they’re shocked usually, especially if it’s something like that as mundane as a soda bottle or something. So, they like to give it, especially if they were one of the early adopters. They like to give that feedback. This is when you begin that dialogue I talked about earlier where you can iterate or figure out. Oh, but I don’t have an anti-inflammatory nutrition bar. I like the next greatest weight maintenance thing. They’ll tell you if you listen.

 

Hanna: Well, yeah. People – people like to give their opinions, you know, sometimes even when they’re not ask for it. That’s why social media is what it is.

 

James: Well, that would be agreed. Yeah, that – that’s not the work of the right environment because there’s no…

 

Hanna: Right.

 

James: There isn’t really – sociologically, there isn’t a feeling of reciprocity with some amorphous group of strangers and some social media public sphere, but I think…

 

Hanna: Right.

 

James: …when you have handed it to them and handed them a card or something where they said, “Hey, go to our Instagram or sign up for email list,” get him on an email drift email campaign. Now you’re in a relationship. It may not be super intense, but if you’re selling something new and they signed up your email in 2021, I think they like you. [Laughter] I mean nobody wants more email. So, if they even signed up, that’s a great sign, right? So, it’s yours to screw up.

 

So, I tell people early on, you’ve got to have the bandwidth to engage in that dialogue early on, because that’s when you’re going to figure out. “Oh, wow. I founded this for X, but my consumers are telling me that this brand is really about Y.”  

 

Hanna: Exactly, besides the sampling, what would be another best practice?

 

James: I think that one of the ones I talked about is building a strategic plan early on in the life of the – of your startup, where even though you’re small and it seems arrogant, you’re setting annual revenue targets. You are literally writing down some kind of hypothesis about how you’re going to achieve them, executionally.

 

I don’t even care how crude it is in the beginning, but if you don’t write those things down, it’s super easy to get to the end of the year. And after a couple of glasses of wine, declare that it was a great year, even when your revenue didn’t go up or it even went down. [Laughter] You know? And it’s like you’ve got to create some kind of minimal system, and I like numbers that keeps you accountable to achieving your goals.

 

And I can tell you. In my industry, even if you don’t want to become a big business, I think that’s great if you want to. If you want to talk about $10 million, hallelujah, that’s great. That’s really hard too, right? So, in my business, the capital expenditures are so high that most people aren’t making any money on hand until they spout them half a million to three quarters of a million dollars in sales every year, and so they’re literally losing money.

 

So I – you know you do – there’s a – there’s an initial in – and almost a mandate from the heavens that you’ve got to get that initial scale going or you’re really going to – you’re going to flame out

 

TAKE-AWAYS FROM “RAMPING YOUR BRAND” BOOK

 

Hanna: Now, your book, Ramping Your Brand, what would be the one thing that you’d want readers to take away from your book?

 

James: Make sure that in the early years, you are iterating and finalizing a product line that is just incredibly memorable in your category or space. And that memorability is all the way from the usage experiment experience to the packaging to how you interact with customers in email to marketing to events.

 

Memorability is basically the biggest weapon you have against incumbent businesses. If you can be 10 times more memorable and remarkable than a bag of Lay’s potato chips, which is pretty boring, you know it sells well. You’re going to have the DNA to grow well and survive.

 

If you’re just doing like I need to say a “me too” of someone else’s brand that you saw in a store and you don’t work that hard at making all those touch points memorable for people, it literally won’t get remembered. And until you get burned into people’s minds, they don’t even remember to come back and buy you again, right?

 

So, that’s why it’s so important. You don’t have a big advertising budget to just continually remind people you’re relying on their brains that literally, they remember to tell them to go and buy you. So, that’s what I tell. That’s what I mentioned in the introduction of the book, and I talked about it all the way through.

 

Hanna: Wow, it really boils down to the – the whole package of the – I don’t mean physical package…

 

James: Right.

 

Hanna: …but the entire customer experience from beginning to end.

 

James: Yeah. Unfortunately, it does. You know, optimizing it is what’s the best-in-class folks do. And that’s why I talk about something called, “Focus,” early on in the book because you can imagine how complex it would be for just like one thing, like a nutrition bar with five layers.

 

Imagine if you listen to the wrong consultant who told you, “Ah, no. You need – you’re building a platform, so you should go into five other categories, so you’ll be all over the store.” It’s going to unravel into total chaos pretty quick.

 

Hanna: Yeah, and your cashflow is going to be splattered all over the floor. So, anyhow, James, thanks so much for sharing. These – these really are interesting insights. And I think I’d love to share a bottle of wine with you and – and talk about some of these some more, especially the you know, the social science aspect because understanding the basis of that and what those triggers are, I think, is really the key to making these other things successful.

 

So, if you’re listening and you’d like to contact Dr. James Richardson to learn more about his book Ramping Your Brand, his business, his consulting practice, Premium Growth Solutions or his – he’s got a podcast too, Startup Confidential. It kind of sounds familiar, doesn’t it? I’ll talk to you about that separately, but you can find that information in the show notes at BusinessConfidentialRadio.com.

 

And if you found today’s program helpful, by all means, tell your friends. Let them be successful too and leave a positive review on your podcast app or at LoveThePodcast.com/BusinessConfidential. And yes, you’ve been listening to Business Confidential Now with Hanna Hasl-Kelchner, and I wish you have a great day and an even better tomorrow.