How Sephora built brands through creators, partnerships and loyalty - CMO Zena Arnold

0:00Zena Arnold:Hey everyone, just before we get into the show, I just wanted to give a really big shout out to my founding sponsor, System One. As many of you know, I worked at System One and before that, I was actually a client of theirs. Now, the thing I love about System One is when I need to make a big decision, they have been there to help me. Because what System One does is use the power of emotion to help predict the likely impact of my innovation or advertising. So when I've been stuck in the boardroom needing to justify why we're going to pick one creative route over another or launch this innovation over that one, it has been indispensable.

0:33Zena Arnold:It's also really simple to use, very actionable and incredibly good value too. So if you want to find out more about System One's Test Your Ad or Test Your Innovation, simply go over to systemonegroup.com and find out more. OK, without further ado, let's go on with the show.

0:56Zena Arnold:So, ladies and gentlemen, welcome back to Uncensored CMO. Now we're going to be talking about beauty with someone that knows all about beauty, who runs Zephora, the CMO, Zena. Welcome to the show. Hi, thanks for having me. It's a delight to have you. And thank you very much for spending the time with us. Now, dying to get into Zephora, all about what you're doing and how you're doing it. But give us a quick overview of your career, how you got to this point. Yes, I've been fortunate. a lot of really great experiences. I grew up and started the formative years of my career in CPG, in packaged goods, and it was a really great place to start my career.

1:36In CPG, you learn so much, not just about marketing, but about business, and that marketing is a growth driver for the business. And that's been formative information that's helped me in every role that I've had. So I spent 10 years or so in academy companies, CPG, Procter & Gamble, and Kellogg. And then I made the jump to Google, which was really fascinating. Not that I was there in the early years by any means, but still high growth time period. And they brought in someone like me with more of a classical CPG background because they had always been experts in digital marketing. They were really looking for people to help them grow and develop deeper brand connections.

2:29At that point, a lot of the products and areas that Google was competing in were becoming crowded. Lots of competitors coming in and product differentiation was there, but not the first and primary thing. So you really needed that kind of classical thinking of how do we position this brand? How do we talk about our product benefits in an impactful way for our users? And that's why they brought in someone with my background. So I was there for almost seven years, had a wonderful experience. I worked on a few interesting product areas, Google Play, which is the content store for Android, and then Chromebooks and Chrome OS, and really fun time to be working on that and helping to accelerate that growth.

3:18Because I was not a typical marketer, you know, in tech, most of the marketers are very focused on marketing communications, advertising, and product marketing, you know, positioning. But when I was working closely with my leader in Chrome OS, Chromebooks, he said, Zena, you're not a typical marketer. You're asking me about my portfolio strategy and how we were thinking about growth. I said, yeah, because I grew up in packaged goods and we really think about marketing as a growth lover and something that's beyond just the communication side. So I actually moved over to the product team in kind of a business operations role and was running our overall business for Chromebooks in the U.S.

4:07and had a really great experience there, kind of heavy operational role. But I'll tell you, the thing I missed was marketing. In that role, I wasn't so close to it anymore and ultimately realized that's what I love is where I can do marketing, the consumer insight, the messaging, the communications, and have a strong kind of business foundation to it. So I left Google and went back to packaged goods where we have both of those things. And it was at Kimberly Clark and then PepsiCo. And I really feel like it's all come to this wonderful amalgamation in this role I have now at Sephora. It's fascinating and people laugh, but I tell them Sephora is a lot more like Google than it is traditional packaged goods.

4:59And by that, I mean just the pace of the work that we do, the quantity of things that we do. You know, retail is very much about how are you relevant right now for your shopper, for your customer, for your client. And the kind of way that you need to be agile and respond to market dynamics is really similar to tech. The thing that's slightly different, we don't have the endless budgets that tech does and the endless kind of scaling that you can do when you don't have physical products. But we really see everything we do as a fresh chance to engage with a customer, meet their need at the moment.

5:46And it's really fun.

5:48Zena Arnold:Yeah, I'm fascinated actually that you said it's more similar to tech than packaged goods because obviously you retail a lot of packaged goods, don't you? Effectively, you have thousands of different products in your range. Just looking back over your career, what have been the two or three most significant lessons that you've learned along the way that have kind of made you the marketer you are today? As I was saying, I learned a lot about managing a business and not just marketing and packaged goods. That, I think, has been really critical to success everywhere that I've been. Because I think the best marketers are the ones who ultimately realize we're around to drive a business.

6:32And that's why we exist, why we get investment. And what I've seen, the best marketers are the ones that can show that investment has a strong return. And so getting that fundamental of business in addition to marketing has been key for me. I think the other thing I've really enjoyed and grew in both my packaged goods days and at Google and in tech is storytelling. How can you really find an impactful insight in your target customer or target consumer? How do you craft communications to change their behaviors? And how do you get them to connect with you? And how do you break through? So those kind of fundamentals, too, I've picked up along the way and are really important.

7:27You know, today, everything is extremely fragmented, hard to get people's attention. And really thinking through some of those basics of insight and behavior change are how you ultimately drive successful marketing.

7:42Zena Arnold:Yeah, that makes a lot of sense. And moving on to Sephora, what is it about the business that makes it so successful? So many things. I think, firstly, beauty as a category is super dynamic. It's been really cool to see it evolve over time. You know, when I was growing up, and I'll say I've been a beauty enthusiast my whole life, the definitions of beauty were really different. It was much more aspirational. There was a lot of, you know, you must meet this ideal in order to be beautiful. And what I really love that the whole industry has done, Sephora, a number of the brands that we carry, and most importantly, consumers, have really redefined that in the past many years.

8:33It's now about self-expression. It's about self-care. People don't see it as an ideal or a goal to be reached. It's more of the process. It's the fun that you have. It's the community that you connect with. So industry is changing in lots of really great ways. We've also seen such an enormous level of engagement come our way through all the social media platforms. You know, once people have a voice to share their point of view, they do. And beauty is one of the most popular categories of content out there in social media because everyone sees it a bit differently. And that's what makes it really fun.

9:18So we've seen a lot of that growth as well. I think where Sephora has really won and is driving the forefront of growth in this industry is because we really take a lot of time to figure out what do our clients really want and need. And, you know, that's beyond just a product or set of products. it's what's the shopping experience it's you know what's the marketing and communications it's it's really a broad set of things that I think we've just been so focused on and driving in many different ways that's driven our success.

10:02Zena Arnold:One of the things I love about Zephora is the branding it's so distinctive isn't it I mean as marketers we're always talking about distinctive assets, but your black and white stripes and the way you kind of present yourself is very, very distinctive and disruptive, isn't it? Yes, we do. We've got luckily a lot of really great distinctive brand assets and we all see ourselves as stewards of that brand every day. I talked about earlier the pace and quantity of the work that we put out there. We've got new products launching every single week. We've got thousands of campaigns that we run every year.

10:43And it's so, so important that we maintain these key kind of cornerstone things of our brand so people know what to associate with us and that it's Sephora bringing them all of these wonderful things. So we look into it, we look at it every single day.

11:00Zena Arnold:Now, I'm not your typical customer. However, I do have two daughters. And every time I come over to New York, they always say, Daddy, you have to go to Sephora and bring us something back. And of course, I go in and I'm like, where do I start? You know what I mean? And so last time, I think I grabbed one of the assistants and said, right, you've got$200. I've got two daughters. They're 16 and 18. Literally tell me what I should buy. So what's trending? What can I only get in this store that I can't get back home in the UK? And they were amazing. I mean, literally, I mean, how to spend money. I mean, honestly, I could have just written an open check, I think.

11:38Zena Arnold:But it was great. But I just wondered, from your point of view, what are the things that are trending at the moment in the category? What are the things that people should be looking out for? Yeah. Oh, gosh. You know, there's a trend of the minute, I would say, in beauty especially. Things come and go so quickly. Where I think we have had such success is really leaning into not just what happens to be trendy at the moment, but is this speaking to something broader and deeper that is a true need or concern of our client. is it authentic to us as a brand? Can we actually say something meaningful here, either in a marketing capacity or from the product standpoint?

12:26Do we have the products to meet that need? And you mentioned it. You had this great experience with a BA, a beauty advisor in our stores. That's one of our critical points of difference. And they are seeing and hearing all of the trends all the time. You know, this is where they shine in both helping our clients navigate that world, but also as a marketer, they tell me all the time, this is what we're hearing. This is what's getting popular. This is what's not. And so it's a different channel and one of our most unique and differentiated ones to drive both the client kind of help and knowledge and our own.

13:11Zena Arnold:Well, I have to say, when I got home, I was very popular. So she did a great job. But you're right, actually. The amount of expertise that exists in the people that work for you that can represent the customer. And how do you, as a marketer, stay close to the customer? How do you get all that intel? Yeah, a lot of different ways. I mentioned our frontline folks, our beauty advisors. We stay very close to them to hear about what people are asking about or, in some cases, what they're not asking about. clearly we see all the sales data of everything that we are selling and can look into you know what's working what's not we've also got a great social listening program where we lean into all the things that everyone is saying about beauty to try to you know get through all of all of it to to find the nuggets of this is what's coming next i'll say too we've got an amazing merchant team that they live and breathe this stuff.

14:12And I swear, they sometimes think trends into existence because they are thinking 18, 24, 36 months ahead of time. So we use a lot of different sources to find what's relevant, what's trending for people. And we also listen ultimately to what people want when they're voting with their wallet. So we see these are the types of things that are actually getting purchased. And how do we lean into that for our assortment and our marketing?

14:46Zena Arnold:Now, one of the biggest moments last year was when you launched Hayley Bieber's Road Island. I mean, I was looking up the data. I couldn't believe this, actually. $15 million in one week. Is that the biggest? Would that be the biggest ever product launch? That was the biggest brand launch we have ever had, yes. That's amazing. She and her team have built such an incredible brand, just really putting so much into the product, again, meeting the needs, the marketing behind it. It's really an outstanding presentation and group that comes through with all the multifacets of what it takes to be successful.

15:26Zena Arnold:So if someone's listening and they're going, right, I've got this beauty idea. I want to go and pitch Sephora and I want to get a big partnership going. what would they have to convince you? Yeah, you know, beauty is such a crowded space these days. Many, many people have started brands. Cost of entry is not so, so high. I'd say there's a few key things that are needed. Like first, you've got to have a differentiated product. Like, is it actually doing what you say it's going to do? And is it a high quality product? then you need to have a point of view. Why is it different? What's the consumer need you're addressing?

16:11How are you helping meet kind of cultural trends or broad kind of macro trends and having a distinctive point of view? Really, really important. And then the third one, I'd say, which is maybe the behind the scenes is almost as important as the front of scenes product and positioning. It's do you have a great team? So we see a lot of amazing founders. And you think about everything you have to do to be a founder, belief in yourself, an artistic vision, a product vision, packaging vision, all of these things. And there's also people for a successful business that need to run the legal and the finance and the operations.

16:56And having a really strong team behind you as a founder is absolutely critical. I've seen so many amazing visionary founders that don't have a great team around them and ultimately can't make the products or get them into the hands of the customers that really want them. So I'd say not just have a great product and positioning, but have a great team as well.

17:21Zena Arnold:I'm lucky because I get to meet loads of startup founders on this podcast. And you're so right, because the amount of times they say the reality of being a startup founder is actually quite boring. You have to do the real basic things consistently and to a high standard. And of course, the idea is easy, but the execution is hard. And you're absolutely right. And also when you're dealing with someone like you, you've got hundreds, thousands of stores. There's a lot of logistics to manage and a lot of pricing to get right. And there's a huge amount involved, isn't there, beyond just having a good idea?

17:50Yes. And that's where having that team to support that vision is really key because the operational side of things can make or break a brand.

18:01Zena Arnold:How important is celebrity? Because obviously Rare Beauty would be another example of a brand that's launched in Sephora. So what difference does having a sort of celebrity partner make? I mean, I think it's a great way of getting some instant recognition and credibility. But I wouldn't say it's by any means a definition or a necessary thing for success. You know, I think Road has just done so amazingly well because Haley and her team have a really great vision of what they want to offer. and they execute against it so, so well. I don't know that it's only because she's a celebrity. I think that helps.

18:47But really, it is having that singular vision of what products that you want to offer, being very maniacally focused on making them excellent, and then getting all the back-end kind of operational stuff right. And really, she and her team have done all of those things.

19:04Zena Arnold:And you were telling me earlier that you even have a department, brand marketing department, which most people think is you advertising yourself. But you have a brand marketing department for the brands that launch within Sephora, don't you? How does that all work? Yeah, that's right. That's actually one of our key differentiators as a retailer. We have a function within my team that we call brand marketing. And as you said, most people think, oh, that's marketing the Sephora brand, right? Because at most companies, that's what brand marketing is. But here, it's actually how do we market and help grow the brands that we carry?

19:36You know, we have definitely taken a stake as a retailer in we want to grow the next big hot brands in addition to having all of the big popular beloved brands. And for us, on both ends of that spectrum, we devote a lot of time and effort with these brands to help them with their positionings, to help them with their product roadmaps, to help them with marketing. And we do that in close conjunction with our merchant team. And it's truly a differentiator. We do annual planning in depth. We have these sessions called In the Kitchen where you think about coming with ingredients and we say, how do we make something great together?

20:23And so it's a very different relationship than I'd say most retailers have with the product companies that they carry. We invest a lot because we know our success as the Sephora brand is dependent on what brands that we are able to cultivate and grow.

20:41Zena Arnold:And you're very famous for that, of course, aren't you? And a lot of your range is brand exclusive, isn't it, that give people a reason to come to you rather than go somewhere else. One of the sort of dilemmas it must set up for you, though, is how do you manage the choice? Because, like, there's so much choice, isn't there? And I know in behavioral science, you know, people talk about choice paralysis, that when you've got too much choice, people don't know what to do. Now, talking about how close you are to your customers and how much you know them, your loyalty program is huge, isn't it, and a big, big part of your business.

21:09Zena Arnold:How many people have you got on your program? Yes, we are over 45 million in North America. And we've been growing so much over time, because we've really spent time to hone what is our value proposition. And, you know, I'll say we've taken a bit of a differentiated one versus some others in the marketplace. We really think about when you become a beauty insider, what's the information we can share with you? What are the samples we can give you? What's the birthday gift that we can give to you? All of these kind of unique benefits, the points you earn, you can use them to get kind of cash off of your purchase.

21:51You can also use them in our rewards bazaar to get products, to get experiences. And, you know, what we hear from our clients is they really like the offerings that we have because it's not so transactional. There's actually unique and interesting things that they can get from us beyond just a simple discount. So we're thinking now about how do we continue to grow our loyalty program? What are the other benefits, even beyond the Sephora ecosystem, that we can offer to the people who are members of our program? So some exciting things we're working on that hopefully you'll have me back to talk about in the future.

22:31Zena Arnold:45 million in North America. That's actually quite a sizable percentage of the whole population, isn't it? It is. I mean, it's not far off the population of the UK. That's a lot of people. It's a lot of people. That's a lot of data and insight you must have on kind of buying behavior and what people look for and that kind of thing. How do you use all that insight? Oh, in lots and lots of ways. You know, I mentioned earlier, we're always looking for what's the new emerging trends. We use a lot of the data that we get from our clients. What are they buying? What are they repurchasing? And what are they not repurchasing?

23:06We can see a lot of wonderful trend data coming from that. We also use a lot of the data that we get from our clients to make things more personalized and effective for them. We've got a great personalization program we've built over the years where we use a lot of different signals from how often someone comes to our store or to our site or app to what types of products are they buying. How can we show them things that are going to be really interesting to them based on their purchase history and all these other kind of insights that we have on their behavior? And it's been working. So, you know, we really aim to make that shopping experience as personalized and effective for them as possible.

23:53You know, you mentioned that kind of conundrum of choice. And we carry a lot of products. There's a lot of things coming out. But when we can actually use the contextual clues we have about our shoppers, what they want, to serve them up the types of things that they're going to be interested in, that's where the shopper has a great experience and we are actually able to meet their needs.

24:14Zena Arnold:I mean, presumably that's the dream of personalization, isn't it, is that you can then target all 45 million of those people individually. Is that how you're using the data now is to make it very personal? Yes, we use it absolutely. And in various channels, you know, we obviously most programs have been developed on email over the years. But what's been fast growing for us is our SMS program. So, you know, now that's how especially Gen Z prefers to communicate. So how can we send them, you know, texts that are relevant and compelling for them, whether that's, you know, interesting new launches, whether it's a reminder for repurchase.