Category: Drew’s Articles

13 Things Every Entrepreneur Can Learn

Posted on by Drew Neisser

Here are the highlights from my interview with Joe Meyer, CEO of HopStop, one of my favorite online utilities.  I got in touch with Joe after he sent an email to me and thousands of NYC-based users apologizing for a recent change to the site that ended up needing to be adjusted after user feedback.  (A shorter post will appear on FastCompany.com at some point soon).

1. Sometimes the founder needs help

“I’m actually not the founder; I’m the CEO who took over for the founder [18 months ago]. Often times in successful startups, the founder steps aside after a certain point and the company matures and grows to a certain level where you need a different type of leader or CEO to take the company to the next level and beyond. I came from Silicon Valley where I spent around a decade working for highly successful companies such as eBay, ,  and as a result I’ve seen this play out many times before. HopStop is no different.  I’m personally responsible for taking a very good service, a very strong brand, a good vision and putting a business around it and making the company more successful and the user experience even better.“

2. Having a large competitor is a good thing

“One of the things among many that intrigued me about HopStop when I was first approached with the opportunity was the fact that we compete directly with Google, and as a result Google is our only true competitor in terms of offering  an analogous service and that’s a nice place to be in. For some companies, it’s intimidating and scary. But I’ve seen this play out before; Google not only validates markets but it leaves a lot of crumbs on the table. If you can focus in on those vertical areas that Google pays attention to and spends resources on (but doesn’t focus all its business on) and if you focus on it much more than they do and you create a better user experience, then that leads to opportunities.”

3. Stay focused

“We were the original pedestrian navigation service and we still consider ourselves to be the best.  Navigation is all we do. We come to work every day with one ambition and that’s to provide the best user experience possible. We’ve identified many ways to  further impress our users, but we’ve resisted the temptation to build them because we’re still trying to accomplish the core objective of having the best routing experience possible.  Without that, none of those other opportunities will matter.  Our primary job is to get someone from point A to point B in the most efficient way possible. Once we’re able to do this better than anyone else, then we’ll look at additional bells-and-whistles but  you need people using your core service en-masse to do those other things.”

4. Be a “must-have” service versus a “nice-to-have” service

“People need to know how to get to-and-from where they need to go. It’s part of your everyday life when you’re going to interviews and meetings and social gatherings and visiting relatives and friends. If you screw that experience up, then people get mad. But if you get it right, then you have a loyal user. Often times we get compared to companies like Foursquare because they are another location-based service and as great of a service as they offer, I don’t consider that a must-have. It’s kind of nice to have. You know, do I check in when I get to the bank or not – maybe, but first tell me how to get to-and-from the bank. That’s useful.”

 

5. It’s not just about the size of your budget

“Probably the most impressive thing is that HopStop had built a strong brand, a strong following, a great user experience, competing against  great companies all on a shoestring budget. We’ve raised very little outside capital to date and I was very impressed with how much the company could accomplish so much with so little in terms of outside funding. We’re very judicious with our time and money, and we spend both very wisely.?

6. Revel in direct user feedback and admit your mistakes

“Sometimes we don’t get it right, but I think that’s another thing that differentiates HopStop versus the Goliaths that are out there. We highly value user feedback. Speaking of, you saw my note to HopStop users. That was a note that I sent to hundreds of thousands of users and needless to say, you aren’t the only person that replied. I’m replying to every single one of those emails and we invite and encourage this sort of feedback. The users tell us what they like, what they dislike, what’s working, what’s not. They find bugs for us that we fix and prioritize and, you know, we use that feedback (of the people using our service everyday) to improve our service, because  there’s not enough of us here at HopStop to identify these issues. Millions of users have to bang away at it 24/7 and tell us if we’re doing a good job or not.”

7. Think about providing a genuine service, not marketing hype

“We’re kind of anti-marketing, anti-PR. Some of it is intentional; some of it is unintentional. Unintentional because whatever resources we have we devote to the core business and to engineering, and intentionally because, again, I came from Silicon Valley where every start up is trying to differentiate themselves and trying to get buzz and send out press releases every week and most of the time I think it’s just noise. I mean if people find you interesting enough to write about, they’ll write about you, and they’ll come find you. You’re a user right? And you find it interesting what we do, and therefore that will make for a much better story than it would if it were being written off of a press release. I realized this dynamic when I was a GM at eBay. Many of the best stories that were ever written about eBay were those written by avid eBay users who just so happened to be professional writers as well. HopStop is no different.”

8. Leverage partnerships to create a win, win, win

“We forged a very strategic, integrated partnership with Connect by Hertz, which is the largest competitor to Zipcar, almost a year ago. It’s a multi-prong partnership where if HopStop users realize they don’t want to take a trip via mass transit, they can rent a car for an hour or two or three. We brought-in the reservation functionality from Hertz directly into our user experience and then HopStop brought its direction/routing functionality directly into Connect by Hertz’s site so that we can route you to any one of their parking lots (based on where you’re coming from). It’s a very interesting, value-added partnership for both companies, but most importantly,  it directly benefits the users of each service.”

9. Being mobile means more than just having an iPhone App

“We have a top ten iPhone app within the navigation category of iTunes, which is the most popular app category on iTunes so we’re right there against AT&T Navigator, MapQuest, among others. That’s very impressive for a small company like ours. As a result, we’ve seen tremendous growth in our iPhone app usage and downloads. We also have a very popular and widely utilized mobile site, which is m.HopStop.com (or HopStop.mobi). We’ll also have an Android app launched by the end of the year, and again our users are telling us what they want. We also have very advanced text messaging capabilities  and can power direction via SMS. So if you’re a MyHopStop user and you text us a message in which you list a starting address and a destination address, we’re fire-off a route to your cell phone within seconds. So mobile is a very large opportunity for us. Our growth on the mobile side is several hundred percent year-over-year. “

10. You know you’re in a good spot, when you’re brand becomes a verb

“Our founder was recently speaking with a news editor from The Wall Street Journal and she was talking about her first time using HopStop and someone in her social circle said, ‘You should HopStop it.’  While HopStop is not quite like Kleenex, our users do use the word HopStop as a verb – ‘You should HopStop it.’  Considering that HopStop is still a start-up, the use of HopStop as a verb is quite amazing and very complimentary, and it goes to show how we were the first-mover in this market and how people equate pedestrian navigation with us. You can’t buy that endorsement. No marketing in the world can replicate that power of word-of-mouth and a positive personal referral. At the end of the day, it’s still a job for us, but it’s certainly nice to know the service you’re providing and improving is helping millions upon millions of people.

11. Look for the hidden goldmines

“I think where an opportunity lies for us is we’re sitting on a ton of data. We’re sitting on a ton of transit data, which makes our routing possible, but also we know where millions upon millions of people are traveling to and from everyday.  We currently utilize that information from a geo-targeting ad-serving perspective (to help us monetize our traffic and bring-in dollars to pay for employees and pay for engineers), but I think there’s a realistic opportunity for us to highlight and promote the trends that are bubbling up from those millions upon millions of searches.”

12. Find your unique SEO opportunities

“We get a good amount of our traffic from SEO. We do SEO a little bit differently than other digital media companies. We don’t have traditional content? We’re not putting out articles. The directions are our articles, are our content. We SEO those to the hilt.”

13. You can be a social brand without expending resources on social media

“We’re not a social media platform. We don’t have the big “wow” that social media sites like Facebook and Twitter have. That said, we have incredibly passionate users and they’re users that voice their opinions and use our service as if we were a social media platform. Very passionate, very vocal, very engaged, very willing to share their opinions about good and bad. People are using HopStop to do inherently social things. People are using HopStop to go meet other people. They’re using HopStop to go figure out how to get to that restaurant, to go to that business meeting, to go out to the Hamptons or come back from the shore, or to meet their friends in the park, or to go to the summer concert series, or go to that rooftop bar. They’re doing it to be social in the real world, not behind a computer.  As a result, HopStop is a means to an end in that we help enable people to get to those popular locations at which they plan to interact and be social with one another.”

“That said, there are definitely distinct opportunities for us to become more social within our core user experience, to engage with our community more on the site itself and to infuse social media elements into our experience, whether it be Facebook Connect or the Facebook Like button or Twitter Places or potentially Foursquare check-ins. So we will likely do that, but we need to be very smart about it because, again, people come to our site to get directions and we have to nail that user experience and we’re still   in the process of perfecting that.”

Paul Revere, JFK, Aerosmith and Halligan?

Posted on by Drew Neisser

How Brian Halligan, CEO of HubSpot, Hopes his Fast-Growing Company Can Help Shift “Modern Marketing” to Beantown

Brian Halligan is nothing if not a dreamer. In his dream, the Redsox win the pennant every year, hundreds of thousands of small businesses use HubSpot and Boston becomes the epicenter for “modern marketing” that eschews traditional media in favor of his highly digital, “Inbound” approach. And while Halligan can’t keep his beloved Sox off the Disabled List, he is well on his way to realizing at least part of his dream, building a company that has taken small business marketing to a new, more cost-effective place.

How Halligan and his compatriots at HubSpot have gotten this far is a potent reminder of the need to think big while minding the store, blending a Puritanical work ethic with an Aerosmithian will to “Dream On.” Whether or not HubSpot and Halligan can transform Boston into the Silicon Valley of marketing, which will require an entire community of like-minded marketing services providers to take a ride north on the Metroliner, my interview yielded several location-neutral insights for any entrepreneur.

The future is coming, the future is coming

With Paul Revere-like clarity, Halligan is quick to warn of the impending doom of traditional marketing. Noted Halligan, “My whole thesis in life is that the way people market their products is broken, that TV/radio/print and interrupting people with spam messages and cold calls [doesn’t work].” “I actually think that Madison Avenue is going to crash because no one is watching those ads they’re making anymore and I want Boston to be the next generation Madison Avenue,” explained Halligan, who helped to organize Future M, a conference in early October that focused on “modern marketing,” and featured 50 or so Beantown marketing innovators.

The company on a hill

When John Winthrop famously declared Boston the “city on a hill,” he certainly anticipated the fervent city-centric loyalty of Brian Halligan. “I’m from Boston and I’m a little pissed of that Silicon Valley has out-innovated us in the PC revolution and then the internet,” exclaimed Halligan. Sharing Winthrop’s evangelistic bent, Halligan noted his desire to “revive the area in terms of the internet and around marketing,” building as big a company has he can that maintains its New England roots. Even though Halligan aspires to a West coast-style company like Google or Amazon, he makes it clear he has no interest in selling out to one of these giants and seeing the company leave town.

Not the same old song and dance

Sometimes referred to as “the Bad Boys of Boston,” the band Aerosmith made its mark by blending elements of pop, heavy metal and R&B to create their own unique sound. So too has Halligan and his team created something new by blending a number of tools “into one simple relatively easy to use package for businesses to take advantage of.” Designed to address “a massive shift in the way modern humans shop and learn,” the HubSpot platform includes software for blogging, social media monitoring, marketing analytics, email and lead nurturing. To prove HubSpot has a hit on their hands, Halligan noted that they have about 3,500 customers today up from 1400 a year ago while revenue has grown to $20 million from $7 million over the same period. And that’s got to music to Halligan’s VC backers if not to the rest of Boston.

Ask not what you can do for your company, ask what your company can do for its customers

JFK’s famous call to action inspired an entire generation to lead by doing. This notion is at the heart of HubSpot’s success, enabling and encouraging businesses “to create remarkable content that becomes like a magnet to pull people in.” Halligan calls this approach Inbound Marketing, an approach he preaches about in a book and on a blog of the same name while practicing it religiously at his own company. Noted Halligan, “we create tons and tons of blog articles, we create eBooks, we create webinars, we create a weekly TV show” all designed to draw people into HubSpot often by way of Google without having to buy keywords. Explained Halligan, “a webinar works for years and years whereas with Google ads, you just throw money at it month after month.”

Good Grade Hunting

Boston boys Damon and Affleck took Hollywood by storm with their Academy Award-winning debut. HubSpot generates good will and great leads with it highly praised “grader” tools. These free tools rate a company’s performance on keyword search, website, blogs, Facebook and even Foursquare. Offered Halligan, “if they get a crappy score, they say, ‘who are those HubSpot guys?’ and they end up in our funnel,” watching a demo, trying the software and ultimately buying. The idea according to Halligan is to “free up as much knowledge and content as you possibly can and use that knowledge to pull people into your business and try to convert them into customers.” Halligan also noted that their customers see meaningful results in 4-6 months, averaging 13% increases in sales leads that compound on a month to month basis.

More than a Feeling for Culture

The band Boston exploded onto the rock scene in the mid-seventies but after two multi-platinum albums, management issues got the best of them. Halligan is keenly aware that rapid growth brings its own set of problems and works diligently to keep the band together while bringing in fresh blood. Explained Halligan, “when you grow this fast, everything breaks—many of the systems you put in place break and you are constantly revolving and reorganizing.” Not wanting to be “just another band out of Boston” that imploded, Halligan and his cohorts put extra effort into clarifying and cultivating their corporate culture and mission. “When we do annual reviews of employees, the culture is part of that review—there are seven points in our culture and we grade them [on each],” noted Halligan. It is little wonder both employees and clients seem to sing the praises of HubSpot.

Final note: With over 80% of advertising still going through traditional media channels and a sizeable percentage of that flowing through New York-based agencies, shifting the epicenter of “modern marketing” to Boston won’t happen overnight, if at all. That doesn’t bother Halligan who has accepted this mission as his “life’s work,” and whose accomplishments to date justify further consideration. As such, I’d encourage you to read more of my interview, as I am in the end a New Yorker, too busy weeping over the Yankees’ demise to belabor this further.  This article first appeared on FastCompany.com

Breaking Down the Social Media Fences

Posted on by Drew Neisser

When part of my garden fence fell down this week, my dog was delighted, my neighbor exposed, my wife mortified and my impatiens completely flattened. After spending a couple of hours jerry-rigging the crumbling wood back into place, I realized this experience was a convenient if not appropriate metaphor for the challenge marketers face in dealing with social media within their organizations.

Like a dog with a bone, consumers are thrilled with the tumbling divide between themselves and the brands they choose to engage with. Unfortunately big companies do not necessarily share this enthusiasm, treating social media as yet another channel to be managed by an existing department like marketing or corporate communications and in doing so limiting the opportunity for a truly new approach.

In fact, in a recent poll conducted by The CMO Club, a whopping 62% of CMO’s said their department leads social media. Added one of the polled CMO’s, “social networks are about engaging customers ands stakeholders so Marketing has that responsibility.” Pete Krainik, founder of The CMO Club, explained that, “marketing departments have a more strategic view of the business, customer trends and upcoming programs,” and therefore should be leading social media initiatives.

In this same survey, CMO’s acknowledged that just over 1 in 5 companies have PR/Corporate Communications leading social media. But this may be a vestige of the early days of social media. Explained one of the polled CMO’s, “responsibility started in PR/Corporate Communications but we quickly moved it to the Marketing department as community marketing became more and more important to us.” (Hmm, can’t help but think a Corp Comm head might see these as “fighting words.”)

And despite the fact the Social Media is a fence-busting hydra touching just about every aspect of a company’s business, only 11% of the CMO’s surveyed said that social media was lead by a cross-functional team. When I asked Catherine Davis, the former SVP of Marketing at Diageo about this, she explained, “Cross department collaboration can be quite complicated, particularly with new disciplines like social media.”

Complicated or not, Josh Karpf, Senior Manager of Digital Media Communications at PepsiCo, professed that “everyone has a role, marketing, communications, HR and you need a variety of skill sets from customer service to insights to editorial strategy.” Added Karpf, “you likely won’t be able to find all those experts in one function within a company.” So, while Robert Frost’s proverb “good fences make good neighbors” may be true in real life, it is not necessarily the ideal approach to dealing with social media.

Like my mortified wife, companies are less than thrilled by the collapsing fences between brand and consumer, and many are jerry-rigging solutions while they figure out a long-term plan. Noted Dan Greenfield of Bernaise Source Consulting, “PR and marketing pros seem a little conflicted; few deny the value of integrating sales, customer service and community moderation teams when building a modern day engagement strategy but most lack a clear sense of how to do it.” (Greenfield will be addressing this challenge head-on at the upcoming PR+MKTG Camp.)

And while there is little hope of recovery for my flattened impatiens, a flattened organizational structure may be just the trick for companies seeking to truly engage with consumers via social media. PepsiCo’s Karpf instructed, “it’s really about process and clearly defined roles, so the trick is finding the right team and a cohesiveness that allows the process to move forward.” Confirmed Davis, “I have always found it helpful to establish joint objectives with clearly defined roles and responsibilities.”

Instead of plopping social media into a pre-existing department structure, this author can’t help but wonder why more companies aren’t trying a new and highly collaborative approach. Despite the inherent challenges of cross-departmental collaboration, if ever there were a time to try something new, this would be it. Social media simply touches too many disciplines from customer service to PR, human resources to marketing, recruiting to sales, to rationalize keeping the old departmental fences in place. (Note: this article first appeared on MediaPost.com).

Is Net Promoter Really the Ultimate Question?

Posted on by Drew Neisser

For years, I’ve been counseling clients to use Net Promoter as the metric for measuring everything from overall brand health to the success of an event, customer satisfaction to online experiences. Undoubtedly, the likelihood of recommending a product or service to a friend is really important in the scheme of things but is it sufficient to make intelligent business decisions? Can one question alone even provide a clear picture of brand loyalty? After interviewing Calvin Vass, Senior Manager of Research at CDW, a company that has turned research into an insight-revealing, decision-enhancing, revenue-generating machine, my answers to the above questions in a word, is a contrite “No!” More importantly, my interview with Vass provides an exemplary questionnaire for any business looking to use research to reveal and leverage the “voice of the customer.”

Are you asking the right questions?

At the heart of any good research inquiry, of course, is the quality and ultimate value of the questions you ask. Over the last 11 years, CDW’s Vass has worked diligently to refine the questions his company asks, by listening to feedback from research professionals, his CDW coworkers and even the customers themselves. Rather than depend on one question, CDW’s loyalty index is based on an approach developed by Walker Information. The questions explore, according to Vass, “different dimensions of the relationship; what the customer plans to purchase with us, if they are committed and what they would do if we went away.” Explained Vass, “Net Promoter is a one-dimensional kind of metric; one will often get better, more consistent results by asking more questions.”

Can you identify the questions that correlate strongest to your company’s sales?

The holy grail of any research program is to find the single barometer that has the strongest correlation to business health. For some companies, Net Promoter is this barometer. For CDW, it was the combination of their Customer Loyalty Index and a highly evolved loyalty program. Through their loyalty research, CDW also discovered that customers who filled out their survey wanted to see their feedback implemented. Consequently, CDW built a system that feeds customer complaints right back to sales for prompt resolution.

Do you segment your studies?

While Net Promoter divides customers into two camps, Promoters and Detractors, this black and white segmentation may or may not be right for your business. CDW elected to segment its market surveys into two main categories, Active Customers and Less Active Customers. The first group is surveyed quarterly and the second group is surveyed monthly. Vass explained the reason for the outreach to the second group, “we are always trying to bring them more deeply into the franchise.”

Do you use your research to uncover new business opportunities?

Measuring loyalty is unquestionably important but in a difficult economy, you’ll want to go deeper. Knowing that they were in a battle for “share of wallet” among even their most loyal customers, in 2009 CDW added to its research program. Explained Vass, “we asked them what types of technologies are you interested in rolling out in the next couple of months?” Through this research, CDW identified thousands of customers interested in specific offerings that were passed onto the sales team. These leads were turned into several hundred thousand quotes and orders placed, amounting to millions in additional revenue.

Is your research department really part of the team?

One of the great byproducts of Net Promoter is that it helped bring research back into vogue, though not necessarily into every C-suite. For CDW, reviewing customer loyalty data is a top priority up and down the organization. CDW leadership reviews customer feedback quarterly, which in 2009 resulted in new customer retention initiatives. Offered Vass, “this is a priority for our Sales, Operations and Marketing departments which allows us to have a truly unified customer loyalty program.” Added Vass, “it is the overall recognition that the voice of the customer [is critical],” who sees himself as part of the customer service team versus the traditionally isolated research platoon.

Are you using research to identify problems too?

With Net Promoter, the emphasis tends to be placed on the Promoters almost at the exclusion of the Detractors. In a battle for share of wallet, he who addresses customer issues the best, wins. And oh by the way, even Promoters can have issues. To address this reality, CDW uses its research to identify and take action on negative feedback and specific problems. Calling these “hot alerts,” CDW does its best to resolve them quickly and amicably. “When we first started doing this, the customers were surprised,” explained Vass, who also noted that just resolving something as simple as a shipping problem results in higher loyalty.

Do you have a customer community to ask for guidance?

While measuring loyalty is clearly important, it can’t in and of itself increase loyalty. Building a community of customers for research, on the other hand, can do just that and much more. Knowing this, CDW has built three private communities made up of 300 small, 300 medium and 300 large business customers. In addition to asking its communities for input on advertising, product and operational issues, each community is also encouraged to talk among themselves. Reported Vass, “they can ask another member about a specific type of technology; it is a very vibrant back and forth conversation, certainly not one-way at all.” He added, “these aren’t just loyal customers but super-loyal, providing feedback other customers couldn’t.”

Final note:  This article first appeared on FastCompany.com and is currently being discussed on a Forrester Research community page.  For a bit more balance, see the video below on Why People Love Net Promoter.

How Privé Products Succeeded Where P&G Couldn’t

Posted on by Drew Neisser

Before I could even get in my first question, my hands were already covered with a soft liquid that transformed into a foamy shampoo. An excited Jackie Applebaum, the CEO of Privé Products, exclaimed that “this is an unbelievable shampoo and never before has this been done in a can.” And before my hands were dry, she had me trying a non-aerosol mousse from a tiny 2.5 ounce bottle that Applebaum noted was “also blowing out the door.” This emphasis on unique products was both refreshing and enlightening, setting up this 8-point guide for small business success.

1. Create unique products to take the challenge out of marketing

With sales expected to rise 30% in 2010, obviously Applebaum is not alone in her enthusiasm for Privé’s new products. “The assignment I gave the lab is that I don’t want ‘me too’ products,” offered Applebaum. “We now have cutting edge products with cutting edge delivery systems that the market is responding to,” she added. While many small businesses feel out gunned by their larger competitors R&D departments, Privé decided that having unique products that “marketed themselves” would be the only way they could cost-effectively build their company.

2. Sometimes you have to go backward, to move forward

When Privé reclaimed the license to market its products from P&G in 2007, it made the tough decision to drop 150 salons that sold the brand. “They were not right for us so we systemically dropped them,” said Applebaum, who noted that these represented about one third of their salons at the time. Taking a hit like that is not easy for any business but it set the stage for a stronger network of salons that would actively promote Privé products as well as make themselves available for product testing down the road.

3. Don’t be afraid to ask for exclusivity

Under the P&G regime, Privé was one of many products carried by their salons. In 2010, Privé management started seeking out exclusive distribution arrangements with select salons. Noted Applebaum, “we just started this program and now have about 20 and by the end of the year maybe 50.” In addition to rooting out competitors like Bumble and Aveda, these salons provide a showcase for Privé, getting first dibs on new products and enjoying special attention from HQ. Applebaum, an acclaimed cook, even invites these salon owners over to her house when they’re in town.

4. Don’t let anyone come between you and your customers

In the salon world, many brands elect to use distributors to sell and deliver products in the US. One of the big downsides of this approach is “diversion,” where supposedly salon-only product ends up at mass merchants. Offered Applebaum, “we have a very strong anti-diversion program because we sell directly to the salon.” Having this kind of control means Privé’s customers, the salons, will not lose the trust of their customers, the end user of these products. Privé also support’s these salons with both personal and online training, ensuring their on-going loyalty.

5. Test new products in the real world

At the heart of the Privé brand, is Laurent D known to many as the “hairdresser to the stars.” Reported Applebaum, Laurent “is a working hairdresser who is behind the chair everyday.” “He provides the vision for the product and uses it in the field before it goes into production,” explained Applebaum. She added, “he has probably tested it for three to four weeks,” before it goes into market. This ability to test product, especially among Laurent’s celebrated clientele provides Privé with a unique advantage versus larger, corporately owned brands.

6. Invest in systems before you expand

Applebaum is as free with advice for other small businesses as she is with her product samples. “Have your house in order” she explained, referring to software systems like online ordering, inventory management and shipping. “When we went online, the salon’s weren’t used to it so we offered a free gallon of shampoo for sales ordered online,” noted Applebaum. Explaining that “the efficiency of doing [business online] has cut down our staffing needs,” Applebaum concluded “there is no other way,” to manage growth profitably.

7. Don’t be afraid to try unique promotional approaches

When we met, Applebaum showed me a picture of old shampoo bottles piled two feet high on a hairdresser’s table. Then she told me about a new promotion they were testing cheekily called, “cash for clunkers.” A smiling Applebaum explained, “We had a salon in Indiana invite their customers to bring in old bad product in exchange for 20% off new Privé products.” They sold over $4,000 worth of product in a week and even drew the attention of Senator Harry Reid who wrote the salon a letter, leading to more PR and an expansion of the program to more salons.

8. Never sacrifice your integrity

Now a family-run business, Applebaum and Laurent D hope to turn over the reigns of the company to their children some day. To ensure this possibility, Applebaum places integrity above all else. Explained a momentarily serious Applebaum, “I think our salons value our integrity, [knowing] we are only as good as our word.” Believing that this integrity starts with the product itself, Applebaum ended right where we began, showing me the entire line and emphasizing the investment they make year after year to create “the greatest products” in the market.

Final note: Applebaum also regaled me with stories of things gone wrong, a chance encounter with Johnnie Depp’s mother and how one of the products was created for Uma Thurman’s ‘very fine hair’. For the complete transcript, click here. This article first appeared on FastCompany.com.

Hair Salon CEO Launches New Green Products

Posted on by Drew Neisser

This is the complete interview I had recently with the highly engaging Jackie Applebaum, CEO of Privé Products.  It is a long interview but there’s lots of good stuff here.  For a condensed look, see my article on FastCompany.com.

Jackie Applebaum: This is a new product [Concept Vert rejuvenating pure shampoo] that we launched last year, (maybe August or September.) It is a new concept in the delivery system. This 6.7 ounce bottle is the equivalent of 32 ounces of shampoo. It is not concentrated, it is a system called nanotechnology. For my hair, I would use about this much (approximately the size of a quarter.) You will see when this starts to foam and expand.

Drew: Is it good for your skin too?

Jackie: Yes it is, men should shave with conditioner, because it conditions the skin. Take a look how that feels.

Drew: That feels good.

Jackie: It feels very, very rich. This is an unbelievable shampoo, but never before has this been done in a can.

Drew: If I were to put this on, I’d be worried that it would stay on too long and it would be hard to wash off

Jackie: This comes off just like normal shampoo. The delivery system is how it is delivered in the can. We were so successful when we launch this, when we shipped it to Taiwan, they sold out. They had a shipment of over 500 units. It was blowing out the door. It is the most successful launch that we have ever had on a product. Immediate, it just moved out the door. So we are now shipping this to everyone that we show it to, Italy, France, England, Taiwan. That was the first of two products we launched.

Drew: What is it called?

Jackie: Concept Vert. It means Concept Green. The interesting thing about this product is that the products are paraben and sulfate-free, which means they are perfect for color treatment, and as you know, that is a huge percent of the market. This is the second product we launch, and we are thrilled. It has also received great acclaim. This is the equivalent of 8 ounces of mousse, but no aerosol. Every mousse you have today has aerosol but take a look at this. Right before your eyes it becomes a mousse and it doesn’t take any aerosol. So this is the second product in the Vert concept line, and the third is in company to these. This product is also blowing out the door. I was in Boston last night, for the opening of a salon customer of ours. On Tuesday we get a call to fly all this stuff in. They sold out of everything. To fly in aerosol and house-ment products is not inexpensive. We flew in approximately $5,000 worth of products. That is a lot for a single salon, but they love you for that.

So the thing that we are doing in terms of marketing is focusing on really interesting, new products. And the assignment I have given the lab is that I do not want “me too” new products. We now have cutting- edge products with a cutting-edge delivery system that the market is responding to. That is the path we have to continue to take. We have been working on product development along the lines to add in to our concept, and I’m going to be testing those products in the next few weeks. This is totally interesting marketing. You know the first time they came out with hairspray, it was a new product and a new category. When they came out with mousse, mousse was a new category. This is a new category in shampoo, a totally new category.

Drew: Will this mousse come is a larger size? It doesn’t feel very “salon-sized.”

Jackie: This is the equivalent of an 8-ounce bottle. What could be better? Talk about the environment. Talk about being Green. No can, no aerosol, and we are selling this at $24-$25 and they are blowing out the door. The Salon people love this because they love how it performs, and has an environmentally aware edge. We had salons, when we first launched it, we had sold out all our stock, and they were taking back orders from their customers. These were orders in advance. It was great- we loved it. It has been very successful. So to add to that, we came up some other very interesting promotional ideas, including converting our salons into exclusive salons, meaning they carried other lines before, but now only carry our products. We had special outings for them in LA and even have over for dinner at my house (I’m a great cook.)

Drew: What percentages of your salons are exclusive?

Jackie: We just started the program and we have about 20 now, and by the end of the year maybe 50. We just got a new one today. These are the salons that carried one of our big competitors like Bumble and Aveda. We have converted Bumble salons to our product. We are excited about that.

The second program we have done is very exciting. It is hot of the press. Called “cash for clunkers”, the promotion started last week. We had a salon called Trillium, in Indiana, and their customers brought in all their old bad products and got 20% off new products. They sold over $4,000 [worth of products]. We have another salon running this program starting next week. Senator Harry Reid heard about it and was so impressed that he wrote a letter to the salon.

Drew: Let’s go back to the exclusive program and explain to me what the offer is.

Jackie: They get double points meaning every salon that purchases products if they do at least $1,000 a month. They get points and which they can use for their stylist to use at the salon.

Drew: What is your business model? Are any of your products sold to the consumer or are they only used in the salon?

Jackie: They are only used in the salon. We have a very strong anti-diversion program. The fact that we control that is because we sell directly to the salon. We don’t sell through distributors. Our customer is the salon, and our consumer is the salon’s customer, so hopefully all these salons will sell directly to the consumer. We have a program that if a customer cannot find a product because they don’t have a salon in a 30 minute radius of their zip code. They do have the ability to go online and order it online. We ship them and we are starting to pay salons a commission on that. We make it difficult for them because we really want they to go to the salon, and drive that business to the salon. We don’t want to lose a sale all together.

Drew: In non-exclusive salons, how is it that customers come to learn about Privé?

Jackie: Our line is specifically of French heritage, but our real place in the market is our red-carpet line. (Laurent, my partner is a hairdresser who does celebrities.) It is a line that addresses the needs of celebrities, when they need a specific hairstyle to do a specific movie. We do a lot of product for a lot of movies and TV shows. Then the line developed and became more streamlined and more a professional line based on those needs. Obviously you cannot do a line of hair products based solely on a celebrity need–you need to make it consumer friendly. We tested every single product, not only on the celebrities. Tested on celebrities with a specific hairstyle or hair type and developed it. Laurent would say So-and-So has this hair and I need a product that can do this. Our Shining Weightless Amplifier, which is our number 1 product, was developed for a celebrity with very fine hair, Uma Thurman. We wanted a product that would hold and be very light and won’t hang down.

As the line expanded, Laurent said we should be an efficient line, not carrying a lot of product. There are a lot of lines out there that carry 100 SKUs–we have about 28 of which many of those are duplicate sizes. We have some other products that aren’t hair care products. By and large, it is an efficient, streamlined line. What we do is add products. Let’s see what this replaces, because if this is a better product. A car that you run 30 years, may still run but the version today is better, the air conditioning is better, and automatic airbags, and seat belts. The same thing happens in the hair care industr. We delete a product when we have developed a better product. We just deleted our styling wax because we feel clay products have filled that need.

Drew: Who is your biggest competitor?

Jackie: The high-end brands , which are Colourist, Bumble, and ourselves. Colourist is an L’Oreal brand. We started out very well with salons that carry both because that line is very strong on treatment, but not as strong as styling products. They aren’t because of the work that L’Oreal does. We are very strong on styling product because of the work that Laurent does–that is where his heritage comes from. Well Bumble–the new market position that they have taken. Now you can find it at Sephora, CVS, Bloomingdales and other locations. It is clear that they are starting to segue more to the consumer out of the salon, or they are trying to bridge both. We have heard from a lot of other salons, that they are unhappy about that. It is hard on the customer. They are doing a program now where if you buy the product from Bloomingdales they give $20 off a haircut at any Bumble salons. When someone asked how many times can a customer do that…Well as much as they want. So now the Salon has to give $20 off no matter who pays, but they bought the product at Bloomingdales. So now they are not selling the retail product at the Salons, and I think that is a problem. We are getting a lot of salons converting.

Drew: How big can you get without tempting to go mass?

Jackie: Bumble doesn’t consider themselves “mass,” they consider themselves “class” because of the stores they are selling to, except CVS. But if we are able to grow our business and sell directly to the salon and not the distributors, we will not have an issue. We will not see the product sold at Target and CVS because it’s not going out the back door. True to our vision is what we are doing. So we think we can maintain that, how big can we get? I would like us to 2,200 salons. If we had 2,500 salons, I would be very happy. We would have a very nice business. I have a daughter who would love to take over my position. My partner has a son and the people who run our factory have two sons. We are still a family business.

Drew: How did you get started?

Jackie: About 11 years ago, I was sitting in Laurent’s chair and he knew I had worked on the Guess hair care business and as a consultant to P&G for about 8 years. He said “I want to start a line,” and I said “okay let’s do it.” So we started with 10 SKUs and there was a show called ICE on Long Beach. It is a show for Salons but a lot of stylists go to that show and do a lot of retail business. We launched the line there and we were very successful. Laurent was a big hairstylist because he did celebrities that everyone knew. So in about 3-4 months I called a friend who was a distributor and he got us a bunch of salons. 10-11 months later there is a knock on our door and it is Graham Webb, and he said we would like to buy us and I started to laugh because I’m a former stockbroker. I said “I have nothing to sell you, we have only been in business for 10 months.” Turns out they had been the loser in a bid of Bumble. They were still interested in the business and were out seeking hairstylist who was working still working behind the chair. They loved Laurent and we said “we can’t sell it to you but we can license it. “ So we did a licensing deal. They are very involved in how the line was put together and they do the packaging. In 9 to 10 months, we have a line that comes out we think it is gorgeous. So we meet with them every month and we think it is exciting and we are getting more business and we are getting some nice royalty checks. We were involved in all the steps for marketing and shows.

So 3 or 4 years later there is a knock on Graham Webb’s door and it’s Wella [the shampoo people] and they have decided to buy, and Graham says “that’s enough money” so he decides to sell.

So we wait to see what happens, and whether or not they have the ability to really embrace this or not. Big companies have a problem really evaluating small businesses that don’t fit into their normal business model. Even though we have a lot of interest in pushing the business and developing and selling it in Asia and Europe, they didn’t really want to figure out reformulation and packaging. They couldn’t be bothered. But the Wella checks are still coming in so [we wait]. Before we had meetings every month, now we had phone calls every two months. Well 2 years come rolling around, and now P&G has come around Wella’s door and they want to buy now. Wella says “that is enough money” and they sell. Well P&G might embrace us because they do sell their professional hair products directly not through distributors. They might see this as taking the small little brand and taking it to the next level. But it was too small– anything under a $100 million is a small brand. Starting in October or November of 2006, mind you we started the business in 1999 and so we have all these sales in about 7 years. So we hear they are starting to run out of product and they say they are reformulating. I say they can’t be reformulating, the lab would have told us, and they say they aren’t. So I talked to my colleague and ask what’s the story. They are going to close the brand at the end of the year. I say “I don’t think you can close it, because you don’t own the brand it is only a license deal.” He says “Let me get back to you…”

We had gentleman’s agreement, and we wanted to have a nice and orderly way so that our salons don’t feel the rug is being pull out from under them. We called every single salon we had which I think was 500 at the time. We took the brand back January 1 2007. So I have to call the vendors and beg for cans because we were out of cans. At the time Coke or Pepsi was introducing a new can. So every can vendor in the country was chocker block full. I had to get on the phone.

But we got the cans and by May and June we were up and running with a full line. Then we started working with a new line of products and product development. In 2008, we launched about 3 new products and 2009 about the same and 2010 maybe three or four. Plus I have decided we are going to launch international. So that meant every single product had to have all new packaging. But you can’t throw away the old when you are a small company you have to wait until you run out. We had to make sure all the formulas were compliant. We spent all of 2009 doing that.

In 2010 we started internationally and now I’m proud to say we are shipping to Taiwan, Australia, England, France, Italy, Saudi Arabia. We are about embark on Russia, Guatemala, Costa Rica, Malaysia, and Singapore just told us yes. This really started to get hot when we started to convert them, selling samples.

Drew: How does a small company extend to all those countries?

Jackie: Distributors, but you have to check that everything is legitimate and everything. So I decided I’m going to hire someone who know the ropes. We hired a consultant. So he knows all these people on a personal bases and he knows which distributors are good, which ones don’t divert. When I was in Europe I visited our distributors in France, England and Italy and saw their operations. It is interesting; it is not technically sophisticated on the backend and don’t have ordering systems online. They aren’t there yet. All of our salons order everything online. Also our system — when I took over I hired a software company. And in November when the guys came I said I wanted a very robust backend business because in the past the order went as follows– a salon would call a customer service person and a customer service person would come and take an order, and the order went to the warehouse. The warehouse gave it to someone who picked it. The picking person would come back and fax it to order department. That system took maybe two or three days. Now all our salons order online and the order come in immediately.

Drew: How many Salons do you have now?

Jackie: 350 salons now. What happen when we took this firm from P&G, we had to fire 150 salons, that were not right for us. So we went from 500.

Drew: How did you go through that process?

Jackie: By the order, we can see that they aren’t right for us. We went through systematically and dropped salons

Drew: How many people are in your sales force?

13, maybe 14. That’s what I talk about when selling direct to the salon. When they walk into a salon, that person represents us. With distributors, they represent about 7 brands, with us, they only represent Privé. It is a slower business model for growing the business but it is a more intimate relationship with the Salon. At the end of the day, I think that is the way that relationships stay strong.

Drew: What else do you do with the Salons apart from provide a great product?

We have a concierge program where we have them appoint someone in the salon, who comes to our training program. It runs for a whole year for each of the people, and that person is intimately involved in product rep almost as if they were a sales person. They learn how to use the product, how to sell it, how to market it, and merchandise it. We give them the tools like “cash for clunkers.” We have about 7 of the salons that are doing this now, and we have one starting Monday. Now we have these things that we can convey via our training program but also directly to the salons because of the Internet. Every article that comes out–we have a lot of press. Immediately all our sales people get a copy, Women’s Wear Daily, Vogue, Harper’s Bazaar, et. Our sales folk get those stories immediately. We don’t wait.

Drew: How do the salons get their promo materials?

Jackie: Everything is available online. I’m very efficient I don’t believe in using any more trees than we have to. In the old days they used to send posters. So if you had 1500 salons, you would have 1500 poster and not only the poster but also the cost of the rolls and the labor to put it together. How many salons do you think used those poster? Maybe 10% and 15%. Why? -Not the right size. Now we have an online tools section, with 20+ images and they can pick the image, download it and put it on a DVD. They can take it to Kinko’s and print out any size they want.

Drew: How much time do you spend talking to Salons about products & marketing?

Jackie: Our exclusive salons are involved in that process, and even that process is an online process. They get the product sent to them and it tells them to go online and do the evaluation. They pick 1-10. If they really want to see something, we have a marketing meeting on the phone.

Drew: What are you doing in Social Media?

Jackie: We have other people who are overseeing that. We are doing Twitter and Facebook.

Drew: What lessons can small businesses learn from you?

Jackie: Have your house in order. One of the critical issues is trying to expand before you have enough of a base underneath your feet. It is probably one of the biggest problems that small companies have. Initially when we started the fact that I had a back-end business allowed us not to have five extra people in staff. For those 5 extra people that is a lot of cash flow going out. You need to make sure your sales are completely ramped up to support a change [in staff count]. So the efficiency of running your business tight before [you expand], is very important. We always spend our money on having good PR and good products and the rest will fall into place.

You have to make sure you have a sound base to get your products out the door efficiently. Specifically in the hair care industry, I don’t know whether it works in the fashion industry, the biggest issue is having enough product. If you have enough components, floor, inventory, that is the biggest problem to solve it, in being about to produce the products quickly. So in my labs we have stock on 25 000 of those cans inventory all the time. So if I need to turn this order around, because I got an order from a distributor. If Taiwan wants 5,000 I can turn that out.

Drew: Do you make it on order or do you have inventory?

Jackie: Inventory, I have 25,000 cans empty and 25,000 filled.

The cans are on 25/ week delivery now. If you don’t have those in stock and you wait until you have 5,000 to refill, you will not get the cans in time. For example, when you get the new distributors in Europe, maybe the first time they don’t want to commit to the line. We just had this happen in France, the guy commits and he is an important distributor, but he doesn’t order a huge order. They were out of the order in two weeks. They are now flying there to be displayed on Monday. It is a huge order going by air. Do you know how expensive that is? But he has to have it for his customers, because he didn’t order enough to begin with.

Drew: It is rare in business for things to run smoothly? Can you give us a story when things go wrong?

Jackie: Oh it always goes wrong. We were producing a product that was going to be on QVC and when the air date came the truck got high-jacked in Chicago and they found it in Texas. Tell that to the buyer that has time booked for you.

AH the boat strike, certain things are made in China, and you can’t fill it if you don’t have the component. That’s why I said you have to make sure you have floor inventory.

Another story, one day a woman comes into the Salon and it is a day before the Academy Awards. She wants to get her hair done, an older woman, and someone did her hair and someone noticed after she left, that she didn’t pay. So it is after 5 pm and Laurent gets a phone. The person says he is Johnny Depp, no really. And he says you did my mother’s hair today, and she liked it so much I would like you to do my hair for the academy awards tomorrow. He goes to the house the next day and sees the mother. And he gives Laurent $500 for his mother hair. Isn’t that a good story?

Drew: Do you do all your manufacturing here?

Jackie: Yes- California, right outside of LA.

Drew: What is Laurent’s role in the brand?

Jackie: He is a working Hairdresser, who is behind the chair. He is the vision for the product. His wife is the vision for how everything is in the creative- color, packaging. But in terms of the product is going to be used, sold–that’s Laurent. He uses it in the field before he takes it to be reproduced. He has probably tested it for three, four weeks. When this came out [Concept Vert], he said, “what is it supposed to do?’ Because it was so different. When he understood the benefits, he knew how it worked–he saw the difference. It will then take about 4-5 months to get the fragrance and color right.

Drew: Is that fast or slow?

Jackie: We can develop products faster because we are a smaller firm.

Drew: What is your annual growth?

Jackie: I would to say that we would be up by 30-35% this year. In 2009 we went up. In 2009 we were happy too because we spent a lot of money with repackaging, because we had to redo everything for international.

Drew: Did you have concerns about going international?

Jackie: Actually it was a nice feeling with our salons in the USA. [They responded positively], “Oh gosh Privé is expanding.” Secondly it added great efficiencies in our cost of goods. Because we were ordering more, our costs go down. So for the salons, it allows us to give more to marketing and advertising. Because in every program there has to be a financial plan, even with our “cash for clunkers.” We need to support that discount for their next order so that money has to come from somewhere.

When we went online, people were pessimistic, “The salon’s aren’t used to it.” I said we should offer a free gallon of shampoo for salons that order online per week. We started spreading the word. Also regarding the points you get if you order so many bottles over $1000 [per month]. You can only do that if you order online. There is no other way, because the efficiency of doing that has cut down our staffing [requirements].

Drew: Is the sales force involved?

Jackie: No the customers do it. The salon’s do it. For new products they get it for free to try it. That is another cost factor but we feel better if the salon actually gets it, uses it and tests it. All we have to do is get the sample in their hands, they use it, love it and buy it. That’s it.

If the product is good and has authenticity, it will sell. If it delivers what it is supposed to deliver. We also do a webinar and invite all the salons to come online. The webinar shows how to use it, and allows them to ask questions. Plus we use videos on our website to show how to use it. And every new customer gets a DVD with those videos.

Drew: How many people log on to a webinar?

Jackie: Well we had about 90 on the last one. We have to have it on a Monday when most salons are closed. And some people are somewhere else because that is their day off. Also the DVD is sent out to everyone. Now that same educational DVD, we have done in French, Italian, German and Spanish. So when we get our distributors, we have those ready.

Drew: I noticed on your website you support a lot of charities…

Jackie: I’m a breast cancer survivor of 20 years. So that is something we support. I lost my sister to cancer so I’m particularity involved in that. I think it gets diluted when added to marketing. One in every two women in this country is going to get breast cancer. In October that is when all the marketing comes out for Breast Cancer Awareness Month. If you are a small business I think you get lost. What we do support is what the salons do internally as well. Many salons do a fundraiser for breast cancer and we support those with extra product as well.

Drew: How involved is the consumer in the choice of shampoo?

Jackie: When you go to the doctor, you listen to what the doctor tells you because you seek his advice. This same is true with the hairdresser–the hairdresser has the confidence and the trust of the consumer sitting in the chair. It is one of the few services in which it consists of an hour and a minimum of half–hour of undivided attention. That person recommends what he believes is appropriate for you and your hair. If you want to replicate this hairstyle at home these are the types of products you need. That referral it is stronger then anything else.

Drew: What is the secret to your success?

Jackie: Integrity, I think we are a great brand with integrity with our products and staff. I think our salons value our integrity. We are only as good as our word. We have great integrity in our products, and our vision and staff. We spend the dollars to the greatest products.