Can a Company be pro-regulation and pro-commerce? Gregg Renfrew from Beautycounter thinks so

It’s the middle of an election year and, according to the Pew Research Center, the country hasn’t been this polarized since the Civil War. In such a climate, it would seem to be an oxymoron for a company to push for both financial growth and tighter regulations. Gregg Renfrew, CEO & Founder of Beautycounter, wouldn’t agree, however, and she is on a quest to “put safe cosmetics into the hands of everyone.”

In 2012, a federal analysis showed that 400 popular lipsticks contained trace amounts of lead. As reported in The Washington Post, “in 2007, the Campaign for Safe Cosmetics tested 33 red lipsticks and found that two-thirds of them contained lead — and that one-third exceeded the FDA’s limit for lead in candy.” Since 1938, when the FDA was given authority to oversee the safety of cosmetics, the agency has enacted almost no regulations on the use of ingredients in cosmetics. In fact, cosmetic labels list known toxins linked to cancer, reproductive issues, and hormone disruption without warning their customers. (The Environmental Working Group has built an extensive database to compare ingredients listed on cosmetic labels with databases on chemical toxicity.)

Before launching Beautycounter, Renfrew had already established herself as a retail leader. Regarded as a serial entrepreneur, she is known for turning concepts into thriving businesses. Prior to founding Beautycounter, she sold her successful bridal registry company, The Wedding List, to Martha Stewart Living Omnimedia. Renfrew also served as CEO for the legendary children’s retail group Best & Co., which she reinvigorated through design, traditional retail, and hundreds of national trunk shows. Renfrew has led new-concept, brand, marketing, merchandising, and operational consulting engagements with Bergdorf Goodman, Goldie Hawn and Kate Hudson, Intermix, Sugar Paper, Lela Rose, and Jessica Alba, among other high-profile corporate and entertainment clients.

In an interview with the Huffington Post, Renfrew explained the reason behind her company: “I started Beautycounter because I wanted to create a safer and healthier place for my children, family, and ultimately everyone in the world. My decision to start a company was initially rooted in emotion, but being the serial entrepreneur that I am, it translated into an incredible vision for a business that is filling an existing void in the marketplace.”

Because Renfrew knew that Beautycounter had a story to tell, she decided against creating beauty counter displays in department stores. Instead she committed to an ecommerce platform and selling via independent consultants, thus allowing the company’s mission to be shared online and friend to friend. In addition, Beautycounter strategically partnered with Gwyneth Paltrow’s Goop.com and J Crew.

In the fall of 2015, Renfrew joined a group of industry experts on a trip to Capitol Hill. “At Beautycounter, we are leading a movement for better beauty. We are a company who is pro-commerce and pro-regulation. While we have shipped close to two million products, we know it’s only the beginning – there is a lot of work to be done. We are radically transforming the beauty industry by introducing safer, high-performance products into the marketplace,” said Renfrew.

Join us on March 7-8 for BRITE ’16 and see Gregg Renfrew talk about how Beautycounter is aiming to transform the beauty industry. REGISTER NOW.

BY GABRIELA TORRES PATIÑO

KIND Snacks: Starting a healthy conversation

Daniel Lubetzky had the lofty goal of starting a company both economically sustainable and socially impactful. In 2004, after ten years as a social entrepreneur, he started KIND Snacks. Now valued at more than 700M USD, the company still follows his vision to build a community, a movement, and ultimately a company with the goal of doing the right thing.

It was early in his career, however, when Daniel Lubetzky learned the hard way that a mission does not sell a product, the product sells the product. Back in the early Nineties when he was starting PeaceWorks, Lubetzky methodically walked the streets of Manhattan selling dried tomato spreads. Peaceworks produced Mediterranean spreads and other goods, but Lubetzky’s pitch focused on the company’s model to try to promote peace in the Middle East by sourcing and partnering with companies from regions in conflict — Israel, Palestine, Egypt, Turkey, Indonesian, and Sri Lanka. He wouldn’t leave a store until they either bought his product or told him what he should do to improve it. Through these interactions with store buyers he realized Middle East peace wasn’t selling the spreads, the spreads were selling the spreads. So, he soon put quality first, even when it was more time consuming and expensive.

As Lubetzky himself notes in his book Do the KIND Thing, “Yes, increasingly consumers are focused on ensuring that the companies they buy products or services from are genuine members of their communities, doing their part to make this a better world. But that is not a substitute for delivering on the functional merits. First and foremost, the product must stand on its own.”

After a decade of positive press with KIND snacks, it came as a surprise to Lubetzky when the FDA sent KIND a letter this year indicating that four of its bars were in violation of marketing labeling guidelines for the use of the word healthy and the plus sign.

Like many others would do, KIND responded immediately and adjusted its labels. Unlike others, they took the slap on the wrist as a way to start a conversation on what it means to eat healthy and how the FDA guidelines may be misleading. On December 1, 2015, KIND submitted a citizen petition to the FDA, asking the agency to update their requirements related to food labeling in order to reflect a shift in dietary guidelines that focus on whole foods that help achieve and maintain wellness, rather than on specific nutrient levels.

This move, which if made by a different snack company could look like just another lobbying effort, has been embraced by KIND’s stakeholders as a way of doing something good for the community: aiming to help people recognize and understand distinctions between whole foods and processed, low-fat “healthy” foods. This permission is given because the snack company has built its brand with the hope of spreading kindness. One example of this is the #kindawesome initiative –part of the company’s KIND movement- that is“a little program we cooked up to celebrate kind acts everywhere, spot a kind act, give a KIND snack. On us!” Anyone can send KIND snacks to recognize an act of kindness via twitter, Facebook, or email to people they’ve spotted doing everyday kind things.

See Daniel Lubetzky at BRITE ’16 (March 7-8, NYC) to learn more about his story and KIND.

BY GABRIELA TORRES PATIÑO

DOES UNLIMITED STREAMING MUSIC HAVE A MODEL THAT WILL LAST?

This post first appeared on the AIMIA Institute blog.

This is the second part of a two-part series. Click here to view part one.

Over the past decade, literally hundreds of start-up companies and established tech leaders have built free streaming and subscription services for music. With good reason, since in 2015 alone over one trillion songs have been streamed. Google and Amazon joined the fray a few years ago, but the big mainstream splash occurred this summer with the launch of Apple Music. Even casual music fans are now aware they have options to sign up not just for free internet radio, but also for paid subscription music services.

Although it almost seems silly to wonder whether today’s streaming music business models will last, I felt for years that their financial stability was not necessarily secure. So, I feel the question is worth asking.

First of all, it is not a good sign that musicians are aggravated about how they are being compensated. Artists have been making headlines by rebuffing the tiny royalty payments they receive from such services. The biggest news was Taylor Swift pulling out of Spotify, and a range of star-studded performers, led by Jay-Z, are re-launching their own subscription platform, Tidal, with the promise that a greater share of revenue would go to recording companies and artists.

There is a need to take a deeper look at the financials behind these services. Let us say that the word “obtuse” is a generous way of defining the transparency of these deals. When I sent a musician friend of mine this Ernst & Young analysis of how Spotify in France splits its revenue, he remarked, “Meet the new boss, same as the old boss.” The music labels, as before, take in the majority of post-tax revenue.

Where is the money in music?

Most artists receive fractions of a penny on every track played, but almost none of the streaming music services are yet making any profit. Plus, there are lawsuits and regulatory changes (here and here) that could make the financials even more challenging. The deals Apple Music made with the labels are actually under investigation, because of the possibility that some provisions could be anti competitive.

Despite all of this, a big-picture look at U.S. music revenues (2014 RIAA Music Industry Shipment and Revenue Statistics) makes it clear why this model is here to stay. The growth rate of streaming services has been extremely rapid, nearly tripling between 2011 and 2014. Next year, streaming services will likely provide a larger percentage of music revenue than physical music sales. If these “disruptive” services are now the second-largest source of revenue for the music industry, they are not likely to disappear anytime soon.

As streaming use has grown, physical and digital download sales have shrunk, and the overall revenue for the music industry has plummeted. This decline has less to do with these new forms of legally purchasing, or listening to music, than with the opportunities to easily “share” music via the Internet. Not to mention numerous years of an economic downturn and the simultaneous growth of other forms of digital entertainment that grab people’s eyes, ears, and cash.

Since 1973, the peak of the industry in the United States occurred during 1994 through 2000, with the average American spending $60 to $70 per year on music. At present, that number is down to close to $20.

Consumers adopt paid entertainment services

In the midst of this, I believe that the subscription model actually offers hope for the industry. Marketers seeking to understand the potential future behavior of the music audience can see signs of the future in other entertainment media.

A majority of the U.S. public is now accustomed to paying for cable TV, Internet service, and mobile phone service, with streaming video services about to hit mass market adoption as well. Subscription service competition is rampant, so there is a real possibility that a majority of households in the country will set up a subscription streaming music service as part of their annual entertainment spend.

To grow users, the services will need to add pricing tiers at the lower and higher ends. This could start, for example, at $4.99/month with some restrictions (and/or some ads). Higher prices could be charged for added services (e.g., Tidal offers a $19.99/mo. option for lossless quality audio).

The ad-supported streaming music model of the future may not look quite like it does today, depending on regulatory decisions, lawsuits, and future licensing negotiations, but with Pandora now generating $1 billion in annual revenue and building a loyal brand following, it is hard to believe that the model will disappear either.

After years of thinking that this unlimited access to music was too good to last, I’m now wiping my brow and smiling. But I have knocked on wood, as well, just to be safe.

What can marketers outside the music world glean from this industry and apply to their own? The music streaming sector has evolved greatly over the last decade, and industry leaders now offer an increasingly personalized experience. Spotify offers their subscribers “Discover Weekly” which is an ultimate personalized playlist based on recommendations from analyzing listening history. With such advanced capabilities for marketers to collect data about their customers, they are able to offer truly personalized and customized experiences like never before.

Examine your business to see if you can encourage customers to move past the ownership model to a “renting” or subscribing one. The rise of the sharing economy shows us that this model has become more prominent. How might a similar disruptive innovation change your industry?

BY MATTHEW QUINT

COULD STREAMING MUSIC PREVENT AN INDUSTRY SWAN SONG?

This post first appeared on the AIMIA Institute blog.

Back in 2005, I discovered Rhapsody, a first-of-a-kind subscription-based music streaming service, and my jaw dropped. What? For the same money I spent buying just one album every month, I can listen to every new album that came out that month, as well as a catalog of almost every album ever released.

So, for the past decade, I have easily perused music of all kinds, checking out knowns and unknowns.

Right now, for example, I am taking a quick listen to some of the latest album releases, from Tame Impala’s Currents — I appreciate that the song craft is not predictable, but it is too produced for me — to Future’s DS2 — good grooves, but I am turned off by misogynistic lyrics — to Wilco’s Star Wars — a favorite band of mine and a nice new album.

With the launch of Apple Music in July, this kind of offering fully hit the mainstream, but the evolution of streaming music to this point provides a fascinating look at the psychology of consumers, brand building, and how this business model is affecting music industry.

I am Not Buying It

I am a big fan of music and established many friendships, both offline and online, through this shared passion. Once I discovered Rhapsody in 2005, I was thrilled to spread the word to all of these friends. To my surprise, however, they did not buy into my excitement.

“So, do you own the albums?” my friends would ask.

“Well, no,” I would reply. “But as long as you pay your monthly fee, you continue to have access to everything, and there is rarely an album I can’t find on Rhapsody.”

Their typical response: “Hmmm. Sounds interesting, but I am not sure I need it.”

Mind you, this was coming from people that likely spent over $100 a year purchasing music, whether CDs or mp3s. There was psychological resistance to paying for access to an album without getting ownership. People were comfortable relinquishing ownership for other types of long-form media, whether borrowing books from a library or renting movies from Blockbuster, but they could not buy into this idea for music.

Unlike most books and movies, songs and albums are listened to over and over again, so the value of ownership is driven by both emotional and functional benefits. I believe people also were skeptical that a service like Rhapsody would even last. So, they preferred the idea of buying one new album each month that they could listen to forever (if they liked it), rather than paying each month for unlimited access to millions of albums because of the perceived potential of losing that access at any time.

In 2006, though, one brand changed the model for streaming music, Pandora. Because it mimicked the radio model, Pandora fit an existing expectation of “temporary” music access. Pandora took the radio listening experience to a new level with personalization. Once you picked a single song, album, or artist, Pandora produced a stream of music matching that style. Like radio, all you had to do was suffer through a few ads.

Pandora is not designed for users to select and immediately listen to any particular song or album, but without any fee (and no DJ chatter), people were happy to have a cool, new passive listening experience using the web.

Brand Building Changes the Game

Is it better to be a first mover or a fast follower? The streaming music model offers an interesting case study on this oft-debated question.

Rhapsody was developed and launched independently in 2001, but it was acquired in 2003 by RealNetworks, a pioneer in developing the capability to steam audio and video content over the internet. Despite creating an innovative model for listening to music, with licenses from all the major record labels, Rhapsody could not escape the shadow of iTunes, which launched that same year.

By October 2003, Apple’s iTunes, originally developed for the iPod, was also compatible with the Windows operating system and everyone with a computer could own digital music with a few clicks. By combining an easy way to purchase music “by the drink” through iTunes with the iPod, the portable music device of choice, Apple usurped any earned attention that might have come to Rhapsody, even though Rhapsody offered users the ability to purchase and own most of its licensed songs and albums, as well its subscription model. Without an investment in marketing and PR dollars to truly compete with iTunes, Rhapsody continued to trudge along in relative obscurity, gradually growing a small user base.

Other entrepreneurs were spurred by the possibilities of streaming music. Spotify, launched in Sweden in October 2008, smartly combined the ad-based and subscription models. This allowed it to grow large numbers of casual users who were willing to submit to ads and some service limitations, while also gaining more dedicated music fans willing to pay for full capabilities and no ads.

By 2011, Spotify was available throughout most of Europe and the United States. It not only surpassed Rhapsody in its number of subscription users, but also boasted another three to four times as many registered users who picked a free option.

Rhapsody was run by an older Web 1.0 team, who had likely become risk averse after the dotcom bubble burst. Rhapsody management focused on a stable, buyer-only business model with modest growth expectations. Spotify was developed by experienced entrepreneurs whose business model and growth plan were driven by VC funding and the goal of a high valuation based on rapid user growth and buzz. The Spotify team employed Web 2.0 principles: a freemium model, active social media integration, an open programming interface (API), and a budget for marketing, PR, and advertising.

Rhapsody was a first-mover, but it did not do much to build a brand, while Spotify—although it came later—proudly waved its flag as a disruptive agent that would transform the way music was consumed. That message got the tech startup community and its growing user base to spread the word along with Spotify. Today, Rhapsody has around 2.5 million paid users while Spotify has around 20 million paid subscribers and an additional 55 million active users of its ad-supported service.

Score one for the fast follower.

And in part two of this two-part series, I will discuss whether or not all of this will last.

BY MATTHEW QUINT

The Intuitive Future of Wearable Tech

Imagine not just watching a football game, but also feeling the impact athletes feel as they tackle each other. Sound far off? It’s not. The Alert Shirt, a combined effort of FOXTEL and We:eX, is “a fan jersey that uses wearable technology to take the experience into the physical world, allowing fans to feel what the players feel live as it happens during the game.”

Gartner forecasts that wearable devices will deliver $15.8 billion in worldwide revenue by 2020. Such devices have quickly become ingrained in our day-to-day lexicon, and wearable technologies are now transcending smart watches and fitness devices. While many manufacturers are focused on analyzing and delivering personal data as the value exchange for consumers, other companies are taking it a step further with a more experiential and intimate approach.

We:eX (Wearable Experiments), founded by fashion innovator and creator of the Alert Shirt, Billie Whitehouse, seeks to uphold the human experience and how it can work in concert with technology. “Too often have I seen another big, chunky watch. I call that the arm party.” She opted to produce products with a more personal, less obtrusive approach. Her first was Fundawear for Durex Australia, intimate apparel “that transfers touch for long distance couples….” The campaign won a Silver Lion at the Cannes Lions International Festival of Creativity.

When looking at the intersection of fashion and technology, Whitehouse saw a gap in the wearables landscape. “Statistics show we’re starting to forget to use touch as a form of communication in our daily lives because we’re so dependent on technology.” Whitehouse and her team design items to tap into the feeling of touch to create an emotional bridge between the digital and the physical space.

At Columbia Business School’s BRITE ’15 conference, Whitehouse elaborated on her wearables mission—to merge fashion and technology with a functional design aesthetic to elevate quality of life. Her products are compelling and entertaining with a practical twist, not only easing pain-points, but making life… well, fun.

A self-described “body architect,” Whitehouse explained that she dives into “the nooks and crannies, the softness and the movement of the body and how we integrate technology into that space.”

The 20-something entrepreneur has fashion and innovation in her DNA. Her mother founded the Whitehouse Institute of Design in New South Wales, Australia, which hosts Project Runway Australia. Together, they designed a curriculum notable for incorporating new innovations. In taking a deep look at the future of fashion early on, Whitehouse explained, “I was having the right conversations at the right time… and [looked at] how we use fabrics and fibers and technologies to invigorate fashion, to give it intelligence, to make sure everything you put on your back has a purpose.”

One of her newer creations is “Navigate,” a location-enabled jacket that does exactly as the name implies—helps people to navigate through the streets of cities like New York, Sydney and most recently Paris. As Whitehouse explains, “Wearable technology must be intuitive and seamless within our daily lives, enhancing our life experience while connecting us to other people and the world at large. Our new product is a major first step in the right direction.”

Watch Billie Whitehouse, keynote speaker at BRITE ’15.

BY ALLIE ABODEELY