Nail Polish Line: Product Development & Go to Market Strategy
Overview:
Manicube (now AtWork by Red Door) was a Next Generation Commerce Startup founded in 2013 by two HBS graduates. It offered in office beauty services for busy professionals and it leveraged technology (scheduling, booking, payments, other task automation) to acquire scale. At the time of the acquisition by Red Door Spa in November 2015, Manicube was successfully operating under a B2B2C model that was serving over 250 corporate clients and about 50,000 of their employees across 4 markets.
Strategy:
Manicube was venture backed (Series A from Bain Capital in April 2014) and the strategy evolved around rapid expansion. In order to raise more venture funds we needed to proove that we can not only expand vertically (quickly sell new clients in existing markets) but that we can also efficiently expand operations in new markets. To secure Series B funding we had to reach certain #Milestones that were tied to new market expansion and REVENUE (which I'm covering here).
What can we do to increase revenue?
To understand how we can increase revenue we have to look at its components. What's REVENUE made out of?
REVENUE= $Price x Units sold
or
Total REVENUE= Service Revenue + Product Revenue (if you have any products that make sense selling)
To increase Total Revenue, we considered the following:
Increase APS (average price per service)
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Introduce More Services with higher price points
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Introduce add-on’s to new and existing services
My job!
You can read more about what I did to increase this hERE
Increase # Services Sold
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Acquire more clients sites
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Increase utilization at existing client sites (convince more people to use our services at each client site)
Sell Products
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Sell physical products that complement the services offered
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Develop and sell your own products
My job again!
and the stuff i'm talking about in this post
How did we approach Product Sales?
1. We tested if people were interested in buying stuff from us and how we were going to get the product to them if they did decide to buy. Because we were a beauty services company, we would of course try to sell them beauty products.
We believed that people would buy products from us and we tested this assumption early on (in 2013) by scheduling a 6 week sell test between Thanksgiving and Christmas. The test ran in NYC at all our client site. We bought about 200 Essie mini nail polish cubes (at wholesale pricing) and distributed them to our 14 Service Providers to sell across the 40 client sites we were serving at the time. We printed out a flier that the service providers placed next to the goods detailing the product and the price so that we don't put the entire burden of pitching the product on the service providers. And people bought!!! We sold 176 cubes at a 120% markup from the wholesale price.
So we validated our hypothesis that people are interested in buying products from our company and most importantly buy them on the spot from our providers. We also learned the following from this test:
A. Service Providers are interested in selling products for us IF they get a commission (which makes perfect sense and we should have thought of ways to motivate them better prior to the test)
B. We needed to figure out a way we distributed these products in particular (and supplies in general) to our service providers, AT SCALE. It took me 4 days to deliver all the products to everyone. Between my schedules and theirs, there was not enough time in the day.
2. We then figured what product made the most sense to develop and sell.
The decision was easy, NAIL POLISH . We knew this was something that our customers would purchase from us. e then performed an analysis of our customers, competition,product development process and pricing to inform a go to market strategy. We decided to move forward with a proprietary nail polish line 15 pieces (12 Colors + 1 Base Coat+ 1 Top Coat+1 Drying Drops) to offer diversity in color and seasonality.
CUSTOMER
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33% women age 16-45 own on average 25 bottles of nail polish
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The top 3 factors women are considering when purchasing nail polish? 1. COLOR 2. DURABILITY 3. PRICE
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No brand loyalty when it comes to owning nail polish (when it comes to buying nail polish brand considerationccame in at a surprising 8th place.
COMPETITION
Competition research focused on pricing and distribution.
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Low price point (average $8) Distributed mainly via drug stores and nail salons
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High price point ($16 and up) Online and Luxury brick and mortar Beauty Stores or Beauty departments. (Sephora, Marc Jacobs, YSL, Christian Louboutin, Chanel, Neiman Marcus, Bergdorf Goodman)
GO TO MARKET CONSIDERATIONS
Promotion and Distribution:
(In office product sales. Product had prime eye level placemenet all day every day. Using this promotion channel would allow us to effortlessly place our product in front of our customers and allow them to test it during service or buy it directly. This was further augmented with email marketing promotions.
If customers liked the product they would purchase it from the Service Provider if the provider had the product on hand (ecommerce build was to be gauged post launch from customer feedback).
Cost:
Cost considerations were allocated for: Manufacturing (Polish,bottes, caps, brushes, labels) Exterior packaging, Fullfilment Center Costs, Distribution cost (Service provider commision), Marketing.
Product:
Nail polish formula, Bottles+Caps/Brushes and associated label printing, to be outsourced to Private Label Manufacturers. Samples to be tested inhouse for Color & Durability .
Custom packaging to be cutomized for our brand and outsourced separatelly.
Size. Typically a "regular" nail polish bottle is set at 0.5 oz. The manicube bottles were set at 0.32 oz because NOONE finishes a bottle of nail polish)
Price:
Our brand image and mission “affordable/accessible luxury” so we decided to set the price per bottle in between the competition pricing at $12. This decision was supported by healthy gross margins & a cost advantage gained via our product promotion.
Product R&D
Formula Testing
Conducted color and pricing analysis with 3 manufacturers. We decided to move into the testing phases with the one manufacturer that fit the most requirements (price, durability, variety, size). In order to test the product (durability, ease of application, colors) we set up a blind experiment at one of our client sites (one of New York's biggest Agencies Y&R). We decided on this location because the employees of this client fit our targeted demographic.
Main Concerns we were hoping to address during the test were related to color and durability as they were two of the top 3 qualities customers were looking for in a nail polish. Our demographics looks at salon brands like Essie and OPI as being the benchmark for a manicure in terms of durability. Because our customers would most likely get to sample our nail polish before before committing to the purchase it was even more important that we use a formula that is seen just as good or better than Essie or OPI in terms of durability.
Experiment Description
All 30 participants were offered complimentary manicures. The participants agreed to keep disposable eye masks on for the duration of the polish application. Half of the participants received Essie nail polish on their right hand and Manicube Formula on their left hand. The other half of the participants received the opposite. Colors were matched to be almost identical across the 2 brands used.
Participants updated us on the wear and tear of the treatment via 3 different surveys, administered as follows:
Survey 1 assessed the state of the manicure immediately after treatment (Day 1).
Survey 2 assessed the state of the manicure on Day 4.
Survey 3 assessed the state of the manicure 7 days post treatment.
Experiment Results
From an initial sample of 30 participants, we had a 89% survey response rate across all 3 surveys. The results we conclusive:
1. Manicube Formula won on color, shine+pigmentation.
2. Manicube Formula fell far behind the Essie polish on durability.
The results were disappointing, however given the importance of the durability factor to customers, we decided to select one of the remaining manufacturers for an additional test.
Project Conclusion
While in the process of replacing manufacturers, Manicube was acquired by Red Door SPA and the project was placed on hold. The acquiring company, Red Door SPA had a contractual obligation to only use Elizabeth Arden Cosmetics and so the product line was cancelled. While the end of this project was premature, it offered a great learning opportunity in product & market research, product testing, strategy and decision making.