Hello and welcome back to the Walk podcast. I'm Anna Hamill, senior editor at Walk. I'm back with a new episode of The Effective CMO, where we interview marketing leaders at some of the world's most interesting brands to learn more about how they implement effectiveness across every part of their brand. Today, I'm talking to Kory Marchisotto. She's chief marketing officer at E.L.F. Beauty. E.L.F. is one of the hottest brands in beauty, offering a premium beauty experience at a price that doesn't break the bank. The brand has broken category conventions with its offbeat partnerships, cultural relevancy, and entertainment mindset. Kory joins me now to dig into the details. Kory, welcome to the pod.
Thank you for having me back. Let's get straight into it. As a marketing leader, what is your philosophy on effectiveness? Well, first I think you have to define what effectiveness actually means to many. So I'll give you a perfect example from yesterday when it comes to one word meaning many different things. I was with the See It Be It group, the Young Lions, which was an exceptional experience, and I did an exercise where I said, 'I say marketing, you say effectiveness.' Okay, see, perfect. And I got 25 different words back.
Everything from marketing is creative, marketing is selling, marketing is value, marketing is insert word here. 25 different words. So one word meant 25 different things to 25 people in that room. So I'd love to understand from you, what do you mean by effectiveness?
I would say that when we think about effectiveness, we're drawing the line between the amazing activities that you're doing and how that is growing your brand specifically. How do you think about that and also communicate that vision across your company in terms of making sure that every single touch point is helping to grow your brand as part of your brand experience?
The most important thing that matters to any brand is the community they serve. So the number one way I judge effectiveness is are we reaching and touching our community in meaningful ways. And meaningful ways means are they responding back to us through comments, engagement, purchasing product, saying our name in rooms that we're not in. And that is really how you build a groundswell. As a publicly traded company, of course, we also have KPIs that we measure and there are many different metrics that matter. So when you think about, for example, net revenue, E.L.F. has delivered 25 consecutive quarters of net sales growth. We've also delivered 25 consecutive quarters of market share gains. And in the category that we're operating in, out of about 1,000 brands, we're the only brand that could say that. So I would say that's pretty effective.
Yeah, sounds like it. I was going to ask you about that actually because what part is marketing playing in that consecutive quarters of growth given you are in such a competitive retail-based category?
Massive. So when you go back six and a half years ago, which was the starting point of the 25 consecutive quarters, our investment in marketing and digital as a percentage of net sales was around 6%. Fast forward to the close of our most recent fiscal, it's 24%. So there's a direct correlation between the level of investment that we put in marketing and the performance of both the top and bottom line. Now the way in which we think about that is also to measure the ROI for every dollar we invest in marketing. How much do we get back? And what we see through that level of measurement every year is that we're multiples above benchmark.
You mentioned that around 24 to 26% of your total net sales revenue is reinvested back into marketing, back into your digital operations. You've clearly really cracked the code that a lot of CMOs are looking for in terms of making the argument for marketing investment to your C-suite executives, your chief exec, your chief financial officer. What have you learned along the way about doing that successfully?
Audience before content. What that means is if you're going to have a conversation with a CFO, you need to speak to them in their language. You need to be pragmatic. You need to explain how marketing is an investment. In a lot of companies, people think marketing is a cost center. And I think a lot of that is because the marketers don't know how to tell an effective story that proves the direct correlation between the investment that's made in marketing and the growth that it delivers for the company in a multitude of ways. So if you go back to the six and a half years ago, our CFO Mandy Fields and I started within two months of each other and we've been on this journey together. We call ourselves the power couple. We get on stages together and most...
The dynamic duo. Most people see friction between a CMO and a CFO. We see power. And it started with a very pragmatic approach. We were at 6%. Both of us knew we were going to need to invest in marketing to actually get the business to accelerate to another level and scale. We didn't know what the magic number was. So, we went on a test journey. Let's see what happens when we take it from 6 to 10%. Then let's come back around the table. If it works, we'll do more of it. And that happened over a succession of time to get us to the 24 to 26% we had in outlook and the 24% that we closed last year. The reality is marketing works. And when marketing works, your CFO is also going to want more of it as is your CEO as is the C-suite. So I think the key on this one is building a relationship where you can speak the language of the person that matters in this moment to advance the agenda that you're looking for collectively. You're on the journey together. Everybody has to make 1 plus 1 equal 11. So the key is really understanding each other deeply. Mandy also understands the power of marketing. She doesn't sit in a separate part of the organization and think we're some foreign object. She loves to get involved with the team. She goes on TikTok lives. She goes on Twitch live streams for us. Name me a CFO that you know that gets on a Twitch live stream where 100,000 people show up to hear her give financial advice.
Well, I can't think of any off the top of my head, but I will say it's probably fairly rare that a C-suite exec in the finance department is being used as part of the brand. So, everyone is buying in.
Yeah. And she's an extraordinary figure. When we launched the So Many Dicks campaign, Mandy and I actually got on Twitch together to explain to our community why we were doing this, what was the problem that we were trying to solve and how could they come along for the journey to help us put more women and diverse individuals into the boardrooms. And what was amazing in that moment for both of us was people were asking us not about the brand, not about the recent product we launched. They were asking us for career advice.
So when you realize that your brand has advanced beyond a level, you're almost an ideology. You're besties. When you can connect with an audience on a human level, then they want to have a human conversation. So when Mandy realized that we were actually offering people something so much more than a transaction of a great beauty product, that we could help them create pathways for growth in their careers and help them reach whatever ambitions they had, that made her want to get even more involved in the community. So, when we launched Fortune Island, which was our Roblox game where we teach financial literacy through gameplay, as soon as I said, 'Hey, Mandy, I'd love to see you launch this game for us on Twitch and give financial advice,' it wasn't even a question. She said, 'Let's look at my calendar and find the best date.'
One of the questions I wanted to ask you actually was about some of these streaming platforms. And I guess they're not really alternative media anymore, but they're perhaps places that you wouldn't necessarily expect a beauty brand like yours to show up. You were one of the first brands on TikTok, on Twitch, on BeReal as an early adopter of those platforms. How has your creative strategy evolved over the last few years and especially in light of the creator economy versus, for example, a paid ad placement?
We tune the E.L.F. in. And what we're able to do is look for the brightest stars that are shining and bind them. So, what that means is having your finger on the pulse of the community signals. What do they like about what we're doing? What do they not like about what we're doing? What more do they want to see from us? So, our evolution comes from shaping this thing together with our community. So, if you go back to TikTok, for example, six and a half years ago, none of us knew what we were doing on the platform. We're growing up together. It's a brand new channel. We're just putting out our first pieces of content. We keep an open door of communication. I go on TikTok lives all the time. What do you want to see from E.L.F.? What do you like about E.L.F.? What do you not like about E.L.F.? What more do you want to see on this channel? And we use all of that feedback as a consistent loop that allows us to improve our content to deliver for them over time. So even if you go back to the beginning, we had an original music track. We knew people wanted to hear more from us in music. 'Hey E.L.F., we loved when you made that song. It's still in our heads. Are you going to make more music?' So the next year we came back with a holiday album called E.L.F. the Halls.
That wasn't our end point in music either. We then understood that there was an entire community of Latinas that were underrepresented. So we created Ojos Lips Space, which is eyes lip space in Spanish. We put an entire Spanish cast on it to make a music video and we had Manuel to basically create an anthem for the beauty of Latin women. And so you see that we're taking all the signals that we hear, all the data points that lead us to be in a constant state of evolution. And one of the things that I talk about often when brands have to go through a revolution, a revolution happens when you've been asleep at the wheel for a long time. If you are in a constant state of evolution, fine-tuning, incremental progress consistently over time, then you're always going to find yourself in a position of relevance.
It sounds as though you have a fantastic customer insights operation. Can you explain a little bit more about that and where you're getting all these data points from? You mentioned social media, but it sounds as though generally social listening is a huge part of what you do.
Huge part of what we do. And the key is how we're structured. It's actually a very unique structure where I oversee end to end. So as a CMO, I have everything from innovation all the way through DTC. So what's really unique about that is we've actually made a circle with eight different key functional areas with the community at the center. So essentially the community is the heartbeat that pumps the blood and the oxygen to all the vital organs. And when you are centered around the community, nobody moves without bringing the community to the table. Why are we doing this product? Oh, we're doing it because the community is asking us to do it. Great. And then we move that forward. So every single time our checkpoints are, is our community asking for this? Have they spoken to us about it? Do we need to put something into continuous improvement if there's something about a product, for example, that they don't like or are they not finding themselves in our content and they want to see more of something? So, as a for example, we got a lot of letters, handwritten letters that come in, which for me, if somebody is taking the time to sit down and write you a letter, I'm going to take the time to personally read it word for word...
...but not just read it, action it. And we got quite a few letters from women that were 50 plus, 60 plus, 70 plus, even 80 plus saying, 'E.L.F., I love your brand. I've been using your brand for years, but I don't see anybody who looks like me in your communications.' And we took that to heart. We care about putting the E, capital E, for every in every single eye, lip, and face. So, we utilized that information to make sure that we were putting a more diverse array of even age cohorts into our communication vehicles.
I love that because, you know, older consumers, older shoppers, older women are so often overlooked in the beauty industry and it seems to me like there's a huge amount of white space for beauty brands like yours to really lean into that audience.
Yeah. If you think about our Super Bowl spots, the first year we did a big game commercial, the reason that we were there was because biggest sporting event of the year, but okay, that doesn't lead you to a beauty brand, right?
Well, it does when you know that half of the audience are women.
Exactly. And when you ask, well, what do they love about the big game? 75% of them say the commercials. So then the next question obviously is well what are those commercials and are they speaking to you with things that you care about? And we studied all 104 commercials the year before we went to market and none of them were speaking to women. So, not only did we come to the biggest cultural moment of the year, we came with Jennifer Coolidge, a 60-year-old woman. Then, when we came back the second year, we came with Judge Judy, an 80-year-old woman.
Two complete icons that made the case that not only does beauty have a right to be here, but beauty can be any... it's ageless, if you will.
Yeah, I love that. What you're talking about really leads into my next question about looking beyond traditional beauty boundaries as a brand and really leaning into those strategies more as an entertainment company. Can you explain a little bit more thinking about that mindset? You said the holiday album and all of that, but how is entertainment playing a huge part in your brand building strategy?
One of the things you have to understand about E.L.F. is we uncheck all the boxes. We have an allergy to lines, borders, boundaries, and the reality is the community doesn't see that. We've created these boxes that we think we have to check as marketers. Guess what? They don't. For them, everything is blurry. Is it cosmetics? Is it skincare? No, it's all of the above. I want skincare ingredients in my color product, right? So, for them, they're not seeing these borders and boundaries. And I feel the same exact way about every single movement we make across every touch point. There's no border or boundary between the physical and the digital. When you walk into a store and you see our shelf set, you're taking out your phone, looking up the ingredients, going a step further, popping into my TikTok. It's all happening in one fell swoop. So, the way that we think about things is we need to create a world that is a place of belonging, a place that you want to return to over and over again, a place that respects your most precious asset, your time. And what we've been able to do is put out this engaging and entertaining content that makes people want to come back over and over to say, 'What is E.L.F. doing today? What are they going to do next?' Yesterday it was a multi-talented small-boned horse or it was Jennifer Coolidge sticking a shower door to her face or insert incredible thing here that they love about what we're up to. And that is really important because if you say to yourself, I am a beauty brand, then you will only sell beauty products. If you say to yourself, what business am I really in? It completely takes any ceiling off. And what we think about is the E.L.F.-ing limit does not exist. People ask why. We ask why the E.L.F. not.
I love that you've got this real renegade spirit in your marketing and your advertising. How do you translate that into your internal decision-making process? How do you balance the need to plan ahead for the long term as a listed company while also keeping that flexibility to be a part of real-time culture?
Both can be true and it really depends on what part of the engine are you talking about. So, if we go back to what we were talking about before, our disruptive marketing engine is one piece of the puzzle and it takes all of the cylinders firing at the same time. And there's really three core things that drive what we do. The first is our value proposition. We make the best of beauty accessible. We are giving you something that you don't have to trade a meal for a high quality lipstick. Zero compromise when it comes to E.L.F., neither to your values or to your wallet. The second thing is our powerhouse innovation and that's actually where you need more time creating super high-quality products that at the end somebody is going to say this is even better than prestige at a fraction of the price. So those pipelines have to be a little bit longer because you've got to do testing and quality checks and does this formula actually, is it compatible with this delivery system. So there's a lot of tweaks that have to go on over time. While our innovation engine is faster than all of our competitors, it still can't operate in real time the way our disruptive marketing engine can. So I'll give you a perfect example of when a perfect marriage happens. So every day I wake up, I don't want to have a relationship with reports. I want to have a relationship with people. So, I start my day by going on TikTok and seeing what's coming in, who's calling for us and where. And all of a sudden, we got a flood. And when I say flood, I mean hundreds of videos with tens of millions of views of people taking one of our complexion products called Halo Glow Liquid Filter, emptying out whatever was left in their bottle, cleaning it out to absolute perfection, and filling it with a variety of lip glosses to make their own do-it-yourself lip gloss color and flavor.
That's innovation. And we're watching, I'm watching this going, 'But why are they doing that?' Like, they can have a lip gloss, they can have a this, there's a million delivery systems. Like...
