Secrets of a Break Out Brand

An Interview with Justin Winter, Diamond Candles CEO

What online retail trends are you noticing?

Justin Winter, CEO, Diamond CandlesYou can draw some strong analogies in the early mid-90s with publishing content. Barriers to entry for content publishers started to wither away to nothing with something like Blogspot, where a “Mom blogger” in Iowa can share an opinion about something and that can show up on the front page of CNN.com the next day. Up until that time, media and opinions were controlled by a handful of major players across mass media: TV, radio, newspaper and print. Because of Blogspot and other publishing platforms, the number of people participating and getting something out there has exponentially increased the long tail. As a result, you can view this as a triangle. At the top are the guys controlling things, and the base is so much wider now. This affects the mid-section of the triangle because there are people at the bottom level who are popping up and reaching some level of popularity and getting “discovered.”

Think about all those brands owned by Procter & Gamble – they are still P&G, and that creates an artificial barrier to entry.  The long tail of those products and services (the ones who aren’t backed by P&G) just aren’t able to get face time and be considered because the only way that people used to find products was to go to a Walmart or Target. With the Internet, a lot of those barriers are being broken down, so people have more and more choices. There is an increase in the small business end of the spectrum, and you’re starting to see more medium-sized companies like us emerge. In consumer-related verticals, the number of players controlling the top 80% of the pie is increasing simply because of what the Internet is doing fundamentally.

What does this mean for new and emerging brands?

When it comes to ecommerce, I think about the Shark Tank effect for entrepreneurs. I love Shark Tank: there are so many people who are able to create new products now. There are plenty of ecommerce platforms that allow entrepreneurs with virtually no technology skills to launch a website and sell something online. My previous store platform, Shopify, does a great job of addressing the needs of the beginner company just starting out, and because of that, a lot more people have a lot more options to be able to function at the entry level.

Obviously, increasing the volume of new entrants is also increasing the size and the scope of the mid-market because you’ve got more winners that are breaking out. With more people competing at the low end of the market, you’ll see more companies figuring out how to break into the million-dollar-plus mid-market tier. Inherently there will be additional development to try to help consumers to discover things at the low end, so that these brands will grow into the medium market, both in terms of size of retailer and number of brands. On the other hand, we will definitely have businesses peter out at the mid-market level because their vertical is actually really small (so there is just no upside), or they don’t have the ability to execute, perform and compete. They don’t develop the business expertise to go toe-to-toe with a P&G-type brand.

The differentiating factor for ecommerce is that there are so many more people who have a product (or the potential for a brand) to really move beyond the mid-market to compete with the prominent players.

What will it take for small and medium sized brands to become competitive players generating sales in excess of $5MM a year?

You can get to a couple million a year with a great product, but know absolutely nothing about business. You can tap into all these productivity and technology tools that will help you get started. But to get from a couple million a year to a hundred million a year – you can’t do that on a good product alone. That starts to require a higher level of execution, and a brand with a suite of products and offerings, which really does require a lot more than what the tools can give you.

A solution like my current platform, Symphony Commerce, will take a lot of that work off your hands, but it’s still going to require a higher level of business and operational execution. If someone doesn’t have any business background or experience then they are going to peter out.

The key for the mid-market is certainly having more time to focus on the important things and outsourcing the more commoditized things. That way, managers can focus on the core differentiators with their product and figure out how to grow traffic and/or how to sell more to their existing customers over the next year or two. That’s what I see going on. More companies emerging to address this newer need of the mid-market: more people are going to be winners.

How did Diamond Candles break out to become a successful, mid-market brand with triple digit growth year over year?

A ring in every candle

For Diamond Candles, first and foremost was the inherent uniqueness of the product with the word-of-mouth viral factor. Think of it this way: on a scale of 0.1, 0.2, 0.3, how different is your product or brand relevant to your market? For someone who buys regularly in this market, is this a 0.1, “Oh, that’s kinda interesting,“ or is it a 0.2, “Hey that’s really interesting!” or is it a 0.3, “Holy crap! That’s awesome!” That effect really interfaces with many different parts of the business when it comes to growth. Inherently, it will make PR much easier if you have the foundation of a buzzworthy product or service. It will make all paid traffic sources much easier and much more cost efficient because paid advertising is based on click through rates (CTR). In my advertising copy, am I able to communicate something so fundamentally different that I have five times the CTR of my competitors’ ads because they don’t have anything interesting to talk about?

It’s reasonable to say that Diamond Candles is on the far end of the spectrum of being really, really high word-of-mouth, so it makes all of the other channels easy for us. How can other entrepreneurs compete if their products are not so much more awesome than the competition? Where there isn’t a level of differentiation, focus on developing specialization, build a brand with a local or interesting story. So maybe you’re a 0.1 in terms of a multiplier, but it will still help to reduce the difficulty of other channels whether that is PR or paid traffic channels. I really think the answer is that word-of-mouth helps everything.

Second, I really think it comes down to basic business foundation understanding.

For example, when I sell something for $100, how much profit do I make after everything? Let’s say my profit is $50.  Can I find a place somewhere online where I can get a new customer for $45? If I can do that, and make $5 today, then I just made a 10% return. Thinking about this like the stock market, if I can invest $1 million and make $100,000, then I just made a 10% return which is AWESOME.

For my business, I need to be able to invest that money. Depending on how much money I have left in the bank, I might need to make 10% in a 30-day period of time. Maybe my market is hyper-competitive, and it will take me 6 months to get a 10% return. Thus, I have to wait a while to make my money back. Understanding those basic acquisition numbers, but then paying a lot of attention to the value of a customer over a 12-month period, is critical to making the numbers work.

I’m not a finance guy at all, but conceptually understanding the basics of those acquisition numbers is the foundation of our marketing strategy.  My job, particularly for scaling acquisition, is first off – where do I go to look for those places? Second, who can I have bring in their expertise to help me operate in those channels effectively and efficiently? For example, I’m not really familiar with Facebook ads, so let me find an expert who does. Then, let’s max that channel out for what I am able to pay. I know that I’m going to make $50 on the first sale, so I’ll pay $45. And, I know that everyone reorders within 6 months, so everything after that is just gravy. It’s free money.

I talk with million dollar brands all the time. You can do $1 – $2 million dollars just with some accidental SEO traffic, some PR hits here and there, coming out with some new products here and there, maybe you’re kinda doing something on Facebook. But to get to $10, $15, or $20 million, you have to really start to think like a business person, start to invest in the business, and understand your numbers.

You have to think more strategically about your time, and what you are doing and find the best experts in each of these areas that work in the most cost effective and cash flow efficient way. Like us, I’m going to guess that many small to mid-market brands do not have outside funding or access to all of the capital they want, so they need to be able to cover the electric bill between now and when they break even on any money they invest to buy a customer.

Let’s say that I have a business, and I have a product that people love. But, just naturally, only 10% of the consumers in my market (realistically, less than 10% of the market) are stumbling upon my site to find my product.  Obviously, some people are finding it and saying, “This is awesome! I’m going to buy this!” But how do I reach 20% of the market? Or 30%? I need more channels where my brand is present, so consumers are aware of my product as an option. In the old days, it was shelf space at Target – so what’s the Target shelf of today? Well, I need to be doing PPC ads. I need to be doing Facebook ads. I need to be doing Twitter retargeting. I need to be doing email: 2-3 emails a week to get people to come back. The list goes on and on.

I need to maximize each channel, and once I’ve maxed it out, I need to find another channel and optimize or outsource the maintenance and ongoing growth of that channel. My job is to find more channels and to get more eyeballs in a cost effective way. So that’s really the scaling discussion.

What does being successful mean to you?

Well, I didn’t grow up saying, “Hey Mom, when I’m older, I want to sell candles.” That wasn’t my big goal in life; I kind of happened upon it. For me, I don’t necessarily want to sell candles for the rest of my life doing stuff with Diamond Candles. I am inherently entertained and challenged by the challenge of really maximizing the opportunity to do something different in such a way that people actually care. I think the report card of whether or not I’m doing something that people actually care about (and is actually a better solution) comes down to revenue, and how I m doing compared to my competitors. If Yankee Candles is doing $900 million, and I’m doing $800 million, and I believe my solution is better for 75% of the market, then my job is not done yet.

Being challenged by disrupting markets, taking a look at these markets, and creating better solutions for people (whether that is innovative products or an improved buying experience) is really what gets me out of bed in the morning. I really want to do something different and exciting, and hopefully the report card will tell me that we grew revenue 500% this year. If that’s true, then we must be doing something right, so let’s keep doing it. I want to make things better using technology, social media and new products.

For candles, how can we better help women transform their house into a home when it comes to fragrance? That’s our thing: helping her to get to the perfect option – quicker and easier with less hassle – and having more fun doing it.

About Diamond Candles

Diamond Candles sales revenue grew from $4.5MM to $16MM in ten months. By partnering with Symphony Commerce to develop the web store and manage the ecommerce infrastructure, Diamond Candles was able to maintain their core focus on brand development. Before switching to Symphony, Diamond Candles introduced new products on a quarterly basis. Now the team is able to innovate and introduce new products every two weeks. Without the time and expense of hiring fulfillment and customer service reps, Diamond Candles was able to achieve exponential growth with the same number of employees: a 350% increase in revenue productivity per employee.

Read the Diamond Candles Case Study.

Visit Justin Winter’s blog.

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