What will the new normal look like? The future doesn’t require a crystal ball. Innovative beauty retailers like Sephora and brands like Beautycounter are building it right now—in real-time—and it is overwhelmingly digital. New ideas, behaviors, and technology usually take years, if not decades, to reach critical mass, but as a result of the pandemic, beauty brands have had to adopt new ways to connect with consumers and find new opportunities to hack their growth.
Businesses big and small, regardless of category or distribution channel, have the same goal—nurture existing customers and acquire new ones, profitably. However, the rising cost of acquiring customers in the increasingly digital world of beauty has become prohibitively expensive for many businesses, while others have been faced with the reality that digital strategies alone no longer pay off. This has driven marketers to tap into the proven strategy known as “the halo effect.” It’s the ability to connect your brand to relevant audiences through the power of brand equity and community—both yours and that of partners and collaborators.
Internet trend guru Mary Meeker touched on this issue in her 2019 Internet Trends report, deeming the rise in customer acquisition cost (CAC) as “unsustainable.” Perhaps that’s why digitally native brands with direct-to-consumer sales models find that online marketing is the lifeblood of growth. These campaigns have been proven to be efficient and measurable, but at what cost? The magical thinking of growth has been replaced by unit economics and profitability. This trend toward pragmatism has DTC start-ups working together to build audiences by collaborating with like-minded brands that target similar demographics. Product drops, giveaways, strategic partnerships, capsule collections, collaborations, and events all offer organic, inexpensive ways to harness the power of the halo effect and efficiently acquire new customers in the process.
SOMETIMES, IT TAKES A VILLAGE TO DRIVE GROWTH
Steve Jobs famously said, “Great things in business are never done by one person; they’re done by a team.” Today, some of the savviest brands in beauty are embracing this wisdom and using the power of collaboration to tap into new communities, build awareness, and delight customers with groundbreaking new products and experiences.
In October, iconic luxury fragrance and makeup brand Byredo partnered with fellow Swedish furniture retailer IKEA on an exclusive capsule collection of accessibly priced candles to be sold at IKEA stores globally. The unexpected collaboration, built on the concept that “scents are a form of invisible design that can improve life at home,” has drawn widespread editorial attention for both brands, and comes at a time when consumers are looking for affordable upgrades to their personal space. Importantly, both brands can tap into the power of one another’s’ loyal brand advocates to build awareness and expand their reach.
Late last year, skincare and fragrance brand Malin + Goetz partnered with uber-cool streetwear retailer Kith on an exclusive line of unisex body, hair, and fragrance items aimed at “bridging the gap” between the elevated streetwear Kith is known for and the daily lifestyle needs Malin + Goetz provides. Hair salon and barber supply brand Andis worked with iconic streetwear brand Supreme on a similar collaboration. The common denominator between these partnerships is a complementary base of loyal customers that each partner can access to expand their reach and drive growth.
Harnessing the power of the halo effect doesn’t always require scouring the globe for the perfect brand partner; sometimes that partner is already part of the “family” and can come in the most unexpected form—like your payment processor. Perhaps the coolest player in the fast-growing, Buy Now Pay Later (BNPL) ecosystem, Klarna, is the perfect example. Klarna allows retailers to add interest-free payment options (like Pay in 4) directly on their site, increasing conversion and AOV. They also have a shopping app, which introduces new merchant partners and brands to Klarna’s 11 million US customers. Emerging from Sweden’s vibrant ecosystem of start-ups and scale-ups, Klarna embodies the effortless cool of Swedish design and the adept ability of the Swedes to create iconic, covetable brands—Byredo, Acne, and IKEA come to mind. A laser-like focus on brand and value creation at all touchpoints is nurturing community and value for Klarna’s shoppers while creating synergies and opportunities for retailers. Consumers and merchants are buying into and want the association with the culturally relevant, statement-making brand Klarna is building.
Deciding when, where, and with whom to collaborate is a skill. For niche brands like Blind Barber, a speakeasy-meets-barbershop concept with branded products, the choice to partner with Klarna was first and foremost driven by a knowledge of the brand’s target audience. “They speak the same language and, as a brand, who you surround yourself with makes an impression,” said Jeff Laub, Executive Creative Director and co-founder of Blind Barber. “Klarna has thought of us for marketing opportunities and popup activations, which is meaningful for a business with limited budgets. The exposure created touchpoints and context that helped us build awareness with new customers.”
Many of Klarna’s 11 million customers in the US are Millennials and Gen Zers. Known for thinking like a consumer brand, Klarna often runs creative campaigns to target younger audiences and draw new customers to their retail partners. At the end of November, the payments provider partnered with Cosmopolitan to launch a one-of-a-kind holiday edition of their magazine. Designed to engage Cosmo’s audience of digitally-savvy Millennials and Gen Zers, the campaign bridged the gap between print and digital shopping experiences, leveraging QR codes in the print magazine to create an instantly shoppable moment using Klarna.
To fuel growth and profitability, beauty brands and retailers constantly need to find ways to attract new consumers, while adding value for loyal followers. Game-changing color cosmetics brand Eddie Funkhouser partnered with Klarna because they do things differently. Ash Mokhber, Vice President of Operations at Eddie Funkhouser, said, “Unlike their competitors, Klarna is a brand, and they help out smaller brands. You can see it on their website, you see it on their social media, and in other forms of advertising.”
One of Klarna’s key superpowers is that the company knows how to connect with Gen Z and Millennial audiences, with its shopping app giving retail partners access to 2 million monthly active users. The company also comes to the table understanding the importance of social media and inventive marketing in growing a beauty business. Mokhber went on to say that tapping into Klarna’s community has proven to be an effective customer acquisition strategy for Eddie Funkhouser. “Klarna…[continues to] drive new customers and help expand our target audience.”
LEVERAGING PARTNERS AND THEIR MARKETING TOOLBOX
The beauty landscape has never been more competitive, and the events of 2020 have created an online sales boom that will likely perpetuate a permanent shift in consumer behavior. According to McKinsey & Company, 47% of skincare and makeup and 26% of personal care products were purchased online before COVID-19. It’s expected that post-COVID-19, online purchases of skincare and makeup will increase by 18% and personal care products will increase by 38%. The purchasing behavior is reflective of our COVID reality – mask-wearing, working from home, and the rising trends of self-care, DIY treatments, and pampering. Klarna’s recent US Beauty Consumer Survey shows that half of all beauty shoppers (47%) feel that if the checkout process is too long and drawn out, they won’t shop there again. As the first truly digital generation, Gen Z is leading the evolution of shopping. They expect frictionless, intuitive shopping experiences, and choose brands that fit seamlessly into and enhance their lifestyles.
Branding is crucial but branding without execution is meaningless. Ciaté London, known for its innovative, magical, and approachable beauty offering, is a master of collaboration. Partnerships have ranged from influencer collabs with the likes of Olivia Palermo and TrendMood, to the less expected, more nostalgic ones like the capsule collections created with ’70s heritage brand SmileyWorld, or their recent collection with Miss Piggy. Historically, these collaborations involved carefully orchestrated in-store activations with retail partners like Sephora, but the brand shifted in April to a digital-first strategy, meeting consumers where they are online.
Ciaté London has amplified its online marketing efforts in partnership with Klarna to leverage its unique set of marketing tools across the customer journey. Ciaté London’s Head of Ecommerce, Lauren Adams, said, “We leveraged Klarna banners to promote pre-payment across our digital communications—primarily email marketing and paid social—and onsite badges across product pages and checkout. The wide variety of creative site customizations available in the Klarna toolbox are easy to use and don’t require in-depth site development skills. Overall, we have seen ‘add to cart’ increase as a result.” She continued, “The addition of Klarna banners has also proved an effective acquisition and retention tool, driving customers to click through to our site, with 5% of link clicks in our marketing emails coming from Klarna banners.”
Sometimes, the power and reach of a collaboration is only limited by your imagination. Sampling, for example, has always been an integral part of the consumer path to purchase for beauty and cosmetics brands, but for small brands, the minimum order quantities and investment required to sample at scale is often prohibitive. Blind Barber realized Klarna provided a “try-before-you-buy” hack as part of their marketing toolbox. They leveraged this feature of Klarna’s offering to bypass the need for actual samples, significantly increasing sales with no impact to return rates.
THE BOTTOM LINE
Companies—no matter what size, shape, or form they come in—can tap into the halo effect to hack growth and build brand awareness. The key to success is brand affinity and partnership, and the bigger the collaborator and the stickier the community, the bigger the potential return. Finding imaginative ways to engage with partners will be critical—and sometimes the most prolific partners will be right in front of you.
Learn more about how your business can benefit from the halo effect by partnering with Klarna.
