We're back today with the Speed of Culture podcast with E.L.F. Beauty CMO Kory Marchisotto. Kory, it's so great to see you. I'm so excited to do this podcast and I feel like we've had a podcast before the podcast already, but now we're really going to dive in.
Well, thank you for having me and thank you for the service that you provide to your audience. I think what you're doing is incredibly admirable and any way I can help service the audience, I'm happy to do so.
Oh, thanks so much. Well, you're doing it today just by joining and I'm really looking forward to this especially because we're coming off the heels of the Super Bowl where you had your big judged beauty spot which are seen by hundreds of millions of people. Tell me what goes behind the decision for a brand like E.L.F. to invest in the Super Bowl and what's the process like to land on the creative insight that you're going to move forward with?
That's a loaded question. Let me see if I can unpack that. Coming out hot. Because I would not advise a brand in their first year on the market, for example, to do a Super Bowl ad. So, I do think it's important to just back the truck up. The first time E.L.F. Cosmetics did a Super Bowl commercial was 18 years into our existence. So we had a collection of experiences 18 years long where we had penetrated the digital space as a digital native. We had done all sorts of marketing efforts that were proofing positive of opening the aperture to wider audiences and the benefit that that was bringing both to the audience as well as to the brand. So we were asking ourselves a lot of questions in that moment to say well where do we go next? We've had a significant rise in brand awareness. We've had a significant rise in brand health metrics and all leading indicators said you need to go on bigger stages to reach more people. So we put our head in the scars and asked ourselves where could we possibly do that and what we found out was women were being underserved and that was the hypothesis. So we said okay well underserved during the Super Bowl. Correct. So yeah, you have last year which was our first foray 115 million viewers which was a record-breaker last year and then this year it was 124 million and 50% of those viewers are women. Yet less than 1% of the commercials were serving women.
I've been saying that for a long time and that's not even a new phenomenon. I mean the NFL has long been the most watched live program amongst not just male but female viewers as well. Yet you see so many ads for pickup trucks and beer and things that don't really target women.
Yeah. So, we decided to bust down that wall and we came in real big last year with Jennifer Coolidge. And that spot was all about our power grip primer. The reason we chose those two cultural BMFs is because Jennifer Coolidge was having an incredible moment and she had this unique ability to really speak to all generations. And then we had this product that came out like a bat out of hell called Power Grip Primer that was TikTok viral and everybody was obsessed with the stickiness of it. So we said, well, how do we put these two things together in an engaging entertaining way that has a high level of cultural relevance? We test piloted it with a regional buy and what came back was extraordinary. Our hypothesis was proof positive. Not only do women want to hear about beauty, but women wanted to hear from us, right? So we asked ourselves if we should return again and if we should return bigger and better than ever before. So we did the same thing. We tuned the E.L.F. in and we asked ourselves what's happening in beauty, what's happening in culture, what's happening in entertainment. And what came back to us was that E.L.F.'s values were really leading the charge. Our ability to deliver the best of beauty at accessible price points was really part of the cultural dialogue around beauty and people not wanting to overpay for beauty anymore. When E.L.F. can deliver five, six times lower price than competitors but yet not compromise on quality. So we saw that conversation was happening and then courtroom drama was exploding. Judge Judy, Ronald Gladden, and the cast of Suits were...
How did you number one? How did you uncover that trend?
Data, right? So we looked into the data. Judge Judy's show was number one on Amazon Freevee, Suits was having an explosive year. Most viewed show after it had launched years. Incredible the resurgence of that. Yeah. Incredible. So, and you know, we're in a unique position, to use the title of your podcast, where we move at the speed of culture. So, we don't start the script on a Super Bowl commercial a year or 18 months in advance. We start it like six weeks, seven weeks in advance so that we make sure that we're at the center of the cultural zeitgeist.
Yeah. Because I think that brands can definitely try to plan too early. And it's funny like I was at CES and interviewing Alison Witherspoon CMO of Nissan and she was telling me that they have to plan automobiles seven years out and I was saying well how could how can you understand what's going to happen with the consumer seven years from now where things change now you know every seven minutes and I can't imagine how hard that would be but so it sounds like you had your finger on the pulse of this trend. How did you know that that trend of courtroom drama connected with your brand ethos? Like what, you know, I understand it was a fast growing trend, but how did you make that connection?
Sure. So, we were reading among many different community sections on beauty that people were starting to judge each other. They were starting to really place judgment on why are you spending 50 bucks for this when E.L.F. can do it better for 10. So, we were watching these trials, if you will, happening in the comment section of social media posts. So, it's one of those moments where the bright stars just align and make a constellation. And one of the things that I would say is my superpower is I feel it when that constellation hits and I tell everybody just stop. We've hit it. Like the constellation is there. We have the courtroom drama. We have our value proposition coming up loud and clear. We have all of these people judging one another. And then we can utilize this Halo Glow product that we had, which is our biggest launch ever. Put those things together, bring them down to Earth and make an incredible spot where the community is going to find themselves in it. And I think that's the core piece of this is to find the cultural relevance and the emotional resonance. And that center panel is the sweet spot where these things really thrive.
And when you mention value and a value brand, you know, one thing I would imagine being in the beauty category is value can be a blessing and a curse because you don't want it to be a race to the bottom. You don't want it to be mistaken for lack of quality. So as you think about going to market, I guess how do you balance the two of those things?
Your product has to speak for itself. And when I think about the growth trajectory of E.L.F., and I'll take you back to 2004 when the company started in 2004, it was two entrepreneurs, father-son duo, who were looking for a white space. They knew nothing about beauty. But what they did see was a white space where women were not being served high quality cosmetics at a low price. It wasn't something that you could find in the dollar store, yet you could find everything else for a dollar. So, they had this crazy idea that not only could they create high-quality cosmetics for $1, but that they could sell it over the internet. Now, while that may sound normal today, in 2004 that was an earthquake, nobody believed you could sell cosmetics over the internet because you have to feel it, you have to touch it, you have to be able to see the colors, choose your shades, all those things. So, they actually disrupted the entire beauty industry by proving everybody wrong. And everybody told them, even if you could figure out how to create $1 quality cosmetics and sell it over the internet, you'll never make that a profitable business. And we were able to do all of those things. So I think the core component when I think about E.L.F.'s ethos is we're born to disrupt. It's in our DNA. So part of the funnel through which we have to pass everything we do is, well, is this disruptive? Tell me how this is different. Tell me how nobody else could do this but us. And we really water those roots every single day and make sure that we're constantly feeding our internal algorithm, as I like to call it, so it gets smarter and smarter. But it's built on that same core ethos.
And I think a lot of companies lose those standards that bar they set as they get larger as they have to drive volume and please their constituents where you're like okay well this maybe this product doesn't meet the quality standards but it meets low value and then you start brands kind of erode over time. E.L.F. strikes me as a brand that has been able to keep that cultural I guess you know levels at scale which isn't easy to do.
It's not. And I think that's where you need fierce protectors. And I'm really proud to say that it's not just me, right? Because sometimes the CMO is the lone soldier who's trying to protect a brand and trying to protect an ethos and they're battling uphill. And I'm really proud to say that our entire executive team is very protective of not only our ethos and our culture, but also our number one strategic imperative as a company. Number one is to build brand demand. So absolutely we understand the power of brand. But that's you know that also comes from a ladder of nearly 20 years of learning. We're actually going to be 20 years old this year. And when I got here five years ago, we were not investing in the levels of marketing and brand building we are today. So just to give you that in numbers to show you the sort of giant leap. When I got here five years ago in 2018, we were investing 7% of net sales into marketing and digital. That would never get you to the place that we're standing today. We accelerated that significantly over time and this year we guided to 24%. So you have an enterprise and a board of directors. We're a publicly traded company who believe in the power of brand building. So then the work becomes okay if my number one imperative is to build brand demand how do I do that in a strategically smart calibrated way because if I can prove that this marketing investment works then I can build even more of it over time. And so you really have to have a set of brand health metrics that you can measure to prove the worth of what you're doing and also not hold anything so precious that you're not willing to pivot and say, 'Hey, I thought that thing was going to work. It didn't. But great news, let's fail forward. Let's use our set of experiences, both good and bad, as forward movement to inform the next decision.'
Yeah. And in terms of attribution and making sure that the measurement really delivers. Obviously, it doesn't hurt that you have this direct to consumer strategy. It's very much a digital first brand. How does that you believe give you, I guess, a distinct advantage versus maybe some of the other players in the space that have to sell through third party retail channels?
For sure. And I'm still surprised even saying these words. So I would envision you and your audience are going to be surprised. We are the number one mass ecommerce site. Most of our core competitors are not commerce enabled. They have sites, but they lead all of that traffic to third party retail, right? So it does give us a distinct core competitive advantage because we have a collection of first-party data through our Beauty Squad loyalty program where we now have over 4 and a half million members, right? So that gives us a rich source of first party data, right, that can then inform our marketing effectiveness so it is this virtuous circle that we're allowed to you know drive basically which makes us increasingly effective in our actions. So, it's really tremendous. And also think about that 4 and a half million loyalists, those are 4 and a half million people who live, love, breathe E.L.F. every day. And they are our marketing engine.
Yeah. I mean, if you despite the fact that you ran a mass market Super Bowl spot, you know, we all know that all media is shifting and becoming more addressable, including TV. And you know, obviously we've seen changes with Apple with iOS 14 and more recently Google with their the crumbling of their cookie where the ability to have first-party data to understand your consumer to be able to bring them content they want contextually is really a differentiating factor. One I think a lot of traditional CPGs that sell through big box retailers are really trying to contend with right now. So the market's kind of coming to where your business model is, which I would imagine is going to continue to drive growth for your company moving forward.
Yeah. And you know, our community really informs everything we do. So why do we create specific products? Why do we create specific technologies? Why do we improve specific technologies? Is because we have a community of people who are increasingly vocal. And they're increasingly vocal because they realize we listen. They realize that we are actively listening, taking their feedback and putting it back into the machine in real time, which makes them want to do it even more so. Exactly. And what I like to say about E.L.F. is I worked on a lot of brands in my career is what's super unique here is we're a brand of the people, by the people, for the people, created with the people. I do not see E.L.F. as our brand. I see us as stewards of the community's brand.
And that's the way and I think so many brands need to go in that direction but for whatever reason can't. You know I like to say that the brands of the future are built from the sidewalks not from the boardrooms. Like you have some of these companies that have myopic thinking or what we like to call the HIPPO, the highest paid person's opinion that makes all the decisions, but those people are largely disconnected, right? But to have the I think the leadership support for you to do that I think often is probably the biggest hump to getting there because you know it's hard to break down those cultural boundaries to allow a company to be truly consumer-centric.
Well, I think there's a couple of things that are really important that I would love to share with your audience, which is you've got to shoot some three-point shots and shoot them early. You need stories for people to believe in and then want them to be repeated. So, what happens sometimes is people come in and they're like, I want to boil the ocean. I want to do a gazillion things. And it's like, just pause for a second and think about what can have the greatest impact in the smallest amount of time. Shoot a three-point shot. And now you have a story that people are going to take into rooms that you're not like, whoa, did you see that when this happened, this happened? And then people are like, oh, can you do that again? How did you do that? So then you get the support of the enterprise because they want to see more and more of that kind of performance. And what we were able to do at E.L.F. when we increased significantly our marketing and digital investment is showcase consistently in small batch nuggets that what we were doing was not only driving performance but it was driving love, loyalty, evangelism. And you've got to be able to prove all of those things because everything can't just be measured in a number.
Right. Because then the love and the community building, right?
