- Speaker #0
I think one of you said that you have one to two seconds to get someone's attention. I would say that it's a millisecond. You have a millisecond to get someone's attention and prompt them or motivate them to actually lift the product off of the shelf or the peg.
- Speaker #1
Your watch on Marketing Mystics with Norm Farrar and Kevin Kane.
- Speaker #0
Mr. Farrar,
- Speaker #1
good to see you. Another week. Another time, I got to look at your beautiful face.
- Speaker #2
And you too, K-squared.
- Speaker #1
K-squared. K-squared. Man, so I got a question, though, for you, Norm. You know, there's something that I think you like better than anything, and that's ice cream. Which one actually wins? If I said you got to go to a desert island and you get to take one thing with you. Would it be Coke Zero or would it be ice cream? Assuming there's no refrigeration on the island where you could keep the ice cream cold.
- Speaker #2
So hopefully there's three, you know, including the woman.
- Speaker #1
No, no.
- Speaker #2
I still choose ice cream.
- Speaker #1
I'm not talking about big woman. I'm talking about, you know, that's different. Maybe she's there. No, no, it's not.
- Speaker #2
I would take the ice cream.
- Speaker #1
You'd take the ice cream. So a lot of you don't know this, but Norm is like a huge ice cream fan. And I'm going to tell you two quick stories about that. about this this ice cream um so norm we were at a podcast event in washington dc in august of last year and our tradition is every night we go and we smoke a cigar and just talk uh life and business and whatever and at the end norm usually has the munchies so this is sometimes like two o'clock in the morning always and at this hotel the the little tienda the little store was closed and so there's nothing to get so we're walking over to the elevators and And I'm looking out the corner of my eye over kind of in the distance, probably 100 feet away. And you see these two vending machines. But they don't look like Coke machines. They look like something different. Almost like one of those things that you see at a fair where you put a quarter in and you get one of those big arms that goes down. And you try to grab the teddy bear or you try to grab the iPod or whatever. And you get like one chance at it. And I'm like, no, that looks like an ice cream machine. I didn't know it was an ice cream machine. It looks like an ice cream machine. He's like, oh, what? Let's go over there. So we head over to this ice cream machine. It turns out to be an ice cream machine. And he was like, he was giddy. He's like a little kid in a candy store. He's like, oh, look at all the flavors they got. Look at this. I'm going to get two. So he puts his credit card in and he's like, Kevin, you want one? You found it. I'll buy you one. So we go back to the room with our arms full of ice cream. So that's one little story. But the better story is. Norm came to my house one time to stay. We were doing some business, so I have a spare bedroom. So we stayed in the house. We had been out smoking some cigars out on my balcony, set our pleasantries, and everybody went to bed. Sometime in the night, Norm's like, I got the munchies. He goes in the refrigerator and opens up the door, and inside the refrigerator are these little self-serve ice creams. I have Blue Bell ice cream. I'm in Texas, so Blue Bell ice cream. And the little self-serve, like 160-calorie little small containers. and there's a couple different flavors in there. So he grabs one, starts eating it, and he's like, this kind of tastes funky. Kevin, I wonder what kind of ice cream this is.
- Speaker #2
Can ice cream go bad?
- Speaker #1
Can ice cream go bad? He looks at the container. It looks like it's, oh, this looks like birthday confetti. It's like a lot of little colors. He didn't have his glasses on, a lot of colors and stuff. And so he takes another bite. Then he looks at it, looks a little bit closer. I don't know, maybe you put your glasses on, and then you look a little bit closer. You're like, wait a second. That's not confetti or like little birthday flavored ice cream. Those are little Paul's like of a dog. He's like, looks at it again, flips it over. It's dog ice cream. It's ice cream that they make. It's called frosty Paul. So he's, he's eating this frosty Paul ice cream. And it, and so he goes and he goes into the trash can. They'll just throw it in the trash, buries it in the trash, like halfway down. So nobody, it's not sitting on top the next day when I come in. And then like, all right, I got away. I got out of this.
- Speaker #2
I thought I got away with it.
- Speaker #1
I thought I got away with it. But a couple of days later, we're at dinner. And he's talking to some people at the other end of the table. He starts telling the story. And my ears perk up. And I'm like listening to him. And when he got through this whole story, I just started busting out laughing. I couldn't stop laughing for the longest time. So now it's a running joke. And we were just at another event. And he said he went to his refrigerator at his house. and opened it up and there was some ice cream and then he started to grab one and his wife was like what are you doing is that i'm grabbing an ice cream saying no no no that's for the dog uh that that that's the ice cream is for the dog uh so uh yeah it's uh that was human that was human but she had bought it for the dog yeah so norman his ice cream could get you in trouble but that kind of plays into a little bit what we're talking about today When it comes to CPG, or most people don't know what that means, that's consumer packaged goods. And so the way something is packaged, you talk about the ice cream with the paw packaging getting confused. You got confused. Is this birthday confetti flavored ice cream that some people have? It's got all these colors on it? Or what is it? And when it comes to consumer packaging, there's a lot that goes into it, but one of them is the physical look of the package. do you kind of take that message of what this is and why this is for you within a second or two when it's sitting on the shelf? And how do you stand out when it's on the shelf? And our guest today is one of the top experts when it comes to consumer packaging. Been doing it like 25 years. He's had a very successful brand that he developed and exited. And now he helps people, especially a lot of you guys that are listening to this are coming from the e-commerce world, Amazon especially and some other Shopify. And maybe you're like, you know what? Maybe I actually want to get into retail. I want to get into Walmart. I want to get into Best Buy. I want to get into some of these big consumer places, but it's a whole different animal. A lot of people, a lot of you listening are coming from the e-commerce space, and that's what you know. What you don't know is the CPG space, and what you don't know is the CPG space is actually considerably bigger than the e-commerce space. Despite all the press that you hear, despite all the Black Friday sales are up this much at Amazon and this much here, that's all great. And you should be taking advantage of that. But if you can do retail right, retail is still the biggest opportunity. But it's a whole different animal, a whole different approach, a whole different mindset, a whole different financial model. And that's what our guest today is going to be telling us about his story and about what you got to be thinking about. And actually probably give you some really actionable tips that you can do on your own. Or maybe you can even reach out to him and actually... he help you actually accomplish these. So I'm excited to talk about this. Norm, you got a big background in doing this, helping people go to retail. You've got a whole company that helps people do that with a partnership with somebody else. And Dragonfish does that kind of stuff too. So this is going to be cool, I think.
- Speaker #2
Yeah, because, and we're going to get to Doug in just a second, but I see so many people making mistakes trying to bring their online product and packaging into retail. and they just don't get it. So I'm looking forward to this. I'm sure I'm going to learn a few things today, but why don't we just bring Doug on board?
- Speaker #1
Let's do it.
- Speaker #2
All right. So welcome to the stage, Mr. Pick.
- Speaker #0
Great to be here. What a funny intro with the dog ice cream.
- Speaker #2
But it's a perfect, like the dog ice cream. First of all, it looked like confetti ice cream. Let's face it.
- Speaker #0
yeah so i think that the packaging should change just personally you know well you know what's funny about that is you know my um when i started my business i had zero experience developing any consumer packaging so i literally went to in los angeles a local drugstore chain is called thrifty drug and because i didn't know anything about packaging i had no budget to hire anyone to help With the packaging, I literally sat on the floor of this drugstore chain and just stared at brands like Gain Laundry Detergent, Budweiser Beer, Coca-Cola. I'm thinking to myself, if these multi-billion dollar international conglomerates know how to package goods, I'm just going to copy from them. And one of the things that I find very interesting about this story that you just told about the dog ice cream is... I call them reads as it relates to brands and packaging. The first thing I always looked at was the first read that I wanted to communicate, which was what's the brand name? And then quickly, the second read after that is what is the intended use? So it seems like a misfire for Frosty Paws to not have said very clearly dog ice cream so that you got that really fast. So anyway... We all learn from those mistakes and certainly you learn from it as well.
- Speaker #2
You know, Doug, it's interesting that, you know, we're talking about, you know, that brand standing out. And then what's the next thing that you're looking at? Well, with Budweiser, you know how it has that little seal up top and there's probably about 30 different, no, maybe about 50 words. You know, I don't know what it says. I'm sure you guys don't know what it says. But this was a college trick. So my buddy would go away. I don't drink anymore, but my buddy would, we, we went into the bars and how do we get free drinks? You know? We'll bet you one beer, two beer that he can read that label from 10 feet away, and he'll put his hand over, and then he would say it, and he'd win a couple of beer the next night. But he had already memorized it, so it was perfect.
- Speaker #0
Well,
- Speaker #1
speaking of that same thing, Norm, what was that little you teased me one time. I think we were in San Diego or somewhere. You asked me about a couple of brand logos, consumer package good logos. You're like, I forget what it was. It's like does the kefir elf does it does it have leaves on the tree or something it was something that everybody thinks is different or what what do you remember what i'm talking about where there's a couple logos and you're and can you give us an example of that if you can remember what i'm talking about ah you know i'm uh i'm old so no no i completely forget what you were talking about you said that it's like does the uh you know i don't know i'm just used by what does budweiser have a red dash over the top or or not And everybody thought, of course, it has a red bow on the top. And you're like, nope, it actually doesn't. Go look at it. It's misconceptions that happen with a lot of brands and their logo design and their packaging that people think.
- Speaker #2
Hey, look, Kevin, we were just on the phone with somebody. And if they ever tried to take that seal and put it into a retail store, they would fail miserably, even though it might be a really great product. So this is, you know what? We're. We're taking away your steam dug, but this can be found anywhere where somebody will go to Fiverr. They don't know anything about branding or CPG and they'll get some packaging done for online. And that even sucks. Their logo sucks. Everything about it. But one step further, I mean, this is a lot. You have to know what you're doing when you're starting to get into retail and you won't get in because the buyer will shut you down. They won't even look at your product.
- Speaker #1
Well, how did you get into doing this? I mean, you said you went to the grocery store and you sat on the floor, but were you working for somebody else and said, hey, I just got this idea for a product? And this is before the internet because you said this is like 25 years ago. It's actually longer.
- Speaker #0
It goes back to 1992, actually. I had just left my job at A&M Records. It was my dream job. I came out of the USC Entrepreneur. program and as a former photographer for motley crew as a teenager on the hollywood on the hollywood scene i was really interested to become the next david geffen or jerry moss and manage artists it turns out that um i was very fortunate that jerry moss my idol actually recruited me to work for a&m records where i where i stayed for two years And around the time that I was turning 24, I started to take a long-term look at my life. And as someone who just believed in myself, that I could become a successful entrepreneur, both my grandfathers were entrepreneurs, I saved and I was managing, I ended up managing a rap artist. Upon leaving my job at A&M Records, I had $15,000 in savings. And I quickly found out that this rap artist was more interested in girls and smoking pot and really not focusing on his career. So I know, I know, I know. It's crazy to think about this. But so I really learned very quickly that I didn't want to be in adult daycare. I really wanted to control my destiny. And. And I had been wearing earplugs to sleep for about three years prior to that. I also used them to go into concerts. And what I found as just a retail shopper, the products that were available to me, just the products themselves, they actually hurt my ears. And then it just kind of clicked one day as I went to buy a package of earplugs that the category itself was incredibly boring. It was commoditized. There was nothing going on from a packaging, sales, marketing, promotion, publicity standpoint. And here was this niche that I felt was never going to go away because we really catered to noise reduction, hearing protection, and water protection. And I thought, well, there's no Procter & Gamble here that I have to compete against. Unilever is not present. There's all these kind of smaller niche players. And so I just started researching the category. And before I knew it, I had come up with...
- Speaker #1
This is researching not online. This is having to go to the library or something back then, right?
- Speaker #0
Yeah, this is just like...
- Speaker #1
There was no Google. There wasn't... Y'all are doing this. Exactly. AOL Online might have had a few little things, but this is like old school. I just want to explain it to everybody. Yeah. This is like real research, like real hit the pavement.
- Speaker #0
Yeah, it was really a lot of working the phones and going to stores. And really, you know, research was not, you know, information was not available in 1992 the way it is today. And before I knew it, I had come up with this concept for a high quality consumer brand of earplugs that I named Heroes. And people would say, Heroes, well, how do you spell that? We spelled Heroes, H-E-A-R, like I hear you, O-S. And anyone can go to heroes.com today and see what ultimately became of that. But that's how it really started. And that started in 1992. November 1992 was when I actually came to market. And over the next 16 years, as I started out as a distributor of 3M earplugs, Honeywell and 3M earplugs, I grew this idea that I had working literally every day. probably every day of those 16 years, to build Heroes to become the number one selling earplug brand in the country, along with a sister brand I had created, kind of like your shirt, Kevin, it's called Sleep Pretty in Pink. And I built those two brands to be the number one and number two bestsellers with ultimately what would become multi-decade relationships with Walmart, Target, Walgreens, Rite Aid, CVS, Whole Foods, Kroger, Albertsons, and even Guitar Center. We sold them on concert tours. And I was just having an absolute blast being the founder and CEO of the company. Did some very unique things in terms of outsourcing that we can touch upon. And just really continued to grow at it. And it was a wonderful run that I ultimately... oversaw for 26 years before being acquired by a multi-billion dollar private equity group.
- Speaker #1
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- Speaker #2
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- Speaker #1
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- Speaker #2
So your experience, as we stated earlier, just to get the packaging right takes a skill. And your skill was doing the research. Is that correct?
- Speaker #0
Well, you know, it was, let me just say this. I can't draw a circle to save my life. I can't draw a straight line to save my life. But what I will say is thanks to technology that was available. at that time, and it was just starting, I was able to work with some designers over my career. I've only worked with four packaging designers, my last packaging designer I worked with for 15 years. And he unfortunately passed away. But packaging design, I'll give you a little bit of perspective on it. Number one, all cool packaging for the most part has probably been invented uh or brought to market by some company so what i did was i literally when it came to new packages i would simply walk the aisles of walmart and target and and really just put my mind in a neutral space and just look at what's happening on the aisles and what what is like catching my eye because packaging is something that I think one of you said that you have one to two seconds to get someone's attention. I would say that it's a millisecond. You have a millisecond to get someone's attention and prompt them or motivate them to actually lift the product off of the shelf or the peg. And so in my designs that I've created, and if you go to heroes.com, every package that you'll see, every word of copy, it all came between my two ears. That just became... I'm a student of packaging. I love it. It's a wonderful creative outlet. And I always look to push the boundaries of what's happening in packaging. Many examples that I did over the years. And really, the earplug category is just a small niche. So if you or your podcast guests or listeners go to... see heroes or our competition, you'll see that heroes is like this bright shining star in color and graphics, because my grandfather taught me sell the sizzle, not the steak. And so I applied that to my packaging activities. But I would also say what I quickly learned in product marketing is quite honestly i don't care how great packaging is in some regards because unless the product really delivers on the promise of what the packaging says you're dead in the water so whenever i go to market with any product it's all about quality it's all about delivering on the promise and um that's what our heroes sleep pretty and pink products always did it always started with the product and sometimes in many regards There are countless examples of products where the packaging may not be that great, but because the product is so extraordinary and creates such an experience for the user, it's somewhat irrelevant. It's kind of like cream of the crop rises to the top. One last thing I would say in regards to packaging is because I loved it so much, over the 26 years that I ran my company, I probably updated the heroes. and sleep pretty and pink packages more than two dozen times because I was always trying to be on the cutting edge, stay ahead of whatever was happening in the marketplace because it's important for a consumer packaged goods brand to refresh. You look at Pepsi, most recently did a refresh on their brand. Think about the tens or hundreds of millions or billions that they put into that brand. And yet they're still looking to refresh and keep the experience on shelf active for their customers.
- Speaker #1
Well, that can backfire, though. Look at what Jaguar just did. Jaguar just completely rebranded. Was it Jaguar? Or am I getting the big car luxury? They just rebranded this whole different look. And it's like aimed at the 22-year-old millennial, the way the colors and the schemes. And it caused all this controversy online. I like it. alienating all their previous customers. So you got to be, but I agree with you. You should constantly be testing, but I'm going to go back to something you said about the product quality. I agree with you a hundred percent. Product quality is how you build a sustainable. It's one of the key components of building a sustainable brand. Cause it doesn't matter how good the packaging is. If the product sucks, it's just not going to fly. But product quality is usually comes from some previous experience with the product or word of mouth or. general advertising so if you don't have that and you're trying to stand off if people if you're not running it when you first started heroes and i'm looking here you got the red uh bar across and everything uh if you're not if they don't know you there and i haven't been in the market for they always say you you pay attention to what you need so if all of a sudden i realize i'm going to a concert tomorrow night and i need some earplugs or i'm going on a trip and somebody's sleeping with my brother my brother's coming with me and he snores like a freaking mac truck i need to get some earplugs to plug this up i wasn't in the market looking for that so i don't know what the brands were i weren't really paying attention in the last five ten years so i go into cvs and i'm looking at the shelf and to me it's like which one of these do i get i have no idea there's one that's 499 one that's 999 one it's 2999 and to me i think that's where the packaging makes a huge difference because i may go with the 299191 even though it might be virtually the same thing as the 4991 because of the packaging and because this looks like it's a better quality. It's a people eat with their eyes first. It's a perceived value thing. How do you balance those two things? Uh, because packaging can add. add to the price it's just like online you know i always say some people that are selling online i say the packaging doesn't matter people aren't holding their hands they're not touching it they're not flipping it over but i'm like so we can just put in a plain brown box who cares and sometimes you might be able to get away with that but a lot of times i think that the packaging reconfirms the price you pay reconfirms the purchase it's that it's that reconfirmation thing and so when someone gets in the mail like oh wow i just spent 99 for this thing off of amazon This is a nice box. It must be worth $99, even though it might be only worth $10. So can you talk about that a little bit?
- Speaker #0
Sure. I mean, there's so much to unpack there. And it's a very interesting question. We dealt with it in many ways. I'll approach it from just a couple of angles to start. First of all, what you talked about is certain packaging conveys a story. I would also say to you that the price tells a story as well. If I told you that a Mercedes-Benz is $150,000 and a Hyundai is $40,000, right there, your brain will automatically go to, there is a higher value for that Mercedes-Benz. Even if you haven't even seen the car, you haven't sat in it, you automatically, our brains are just logical to the extent that you think that there's going to be greater value there. The other piece of that is... with retail today, not Amazon, but I'll just speak within regards to retail. There are some retailers that just offer one brand and that is their store brand. So you really don't have a lot of choice.
- Speaker #1
Like Trader Joe's or Aldi or something like that.
- Speaker #0
Well, you know, many of the retailers and there's a story that I wrote about on my website, dugpick.com. And I'd also encourage any of of your viewers to go to my website because there's a free digital box set which is called from heroes zero they can read five kind of fun interesting stories about my journey to sell 500 million earplugs but i'll give you a specific example of kevin in that regard which is um there was a point in time when my company was going through due diligence and we were a month into due diligence to sell it and my number one customer Walgreens at that time, I had a conversation with the category manager and I learned that the product, all of my products without my knowledge were discontinued from the chain. They were discontinued because the category manager decided to go with an all store brand assortment. They did that. because their profitability will be would be maximized because when you work with store brands that's what happens their own label yeah yeah so um so i had to tell the ceo of the acquiring company guess what my number one customer that i've had for 22 years that was one of the reasons that you wanted to buy my company is now gone and um and at that point the the deal could have imploded um however i i my guidance at that time was that i didn't think it would work because um we had we had worked with walgreens for 22 years the heroes and sleep pretty and pink brands had worked with that shopper so they were incredibly a good a good contingent of those shoppers were loyal to our brands and and i would also say to you um the consumer in the earplug space believed or not is very educated. They know their products. And if you read any of the reviews in that space, they know their products inside and out. So what ultimately happened in this particular case was six weeks into Walgreens going live with this new national store brand assortment, I got a call from the new category manager and he says, I'm losing market share every week. Can you please help me? And so I knew instantly what to do. And I designed four innovative, unique branded products for them. In about a week, I flew to Chicago, presented them to him. He loved them. We went in and they became national bestsellers kind of overnight. So. Getting back to the high level, is packaging important? Yes, of course, it's important. Does the price tell a story? Does the packaging tell a story? Yes, it does. And it also depends on the venue of where the products are being sold. On Amazon, you've got dozens and dozens of brands where people really don't know what they're buying. And I can tell you and your listeners that in the earplug space, a lot of it's garbage. They're bringing in very low quality products. But that just leads to returns. And in this day and age, whether you're shopping at Costco or Walmart or Amazon, the consumer is empowered in a way that if they're not satisfied with the product that they just bought, they'll return it. So it's really in the best interest of the vendors that are selling goods to really bring high quality products to their products. Otherwise, they're going to eat that product along with other costs associated with poor quality product.
- Speaker #1
And when you're taking a look at packaging, at least on Amazon, and I'm sure this is in retail as well, you can, I always look at three tiers. The product cannibalization, you know, tier, these are people that just come out so low, they don't care if it's garbage packaging, they expect a low quality product or an okay product for that cost. Then you have that middle tier, which is. A bit better perception. This is the average that people buy. Might be a little bit better packaging. And then you've got the high level tier. And I'll give you some great example. A great example. Dead Sea Mud. It's a commodity. It comes from the Dead Sea. Eight ounces. Check it out. It's on Amazon. It might have, I don't know if they're still there. They're probably under by now. But it was eight ounce, $7. Went up to 14. First tier. Product cannibalization. And he went up to that second tier. And there was a few prices in between, but it was 24 to 44 when I did my research. And better quality listings, probably where some of the best traffic was coming in. Product or profit, not so good. Next one was, it was 75 to 99. But the difference was the 99 was 3.5 ounces. And... the 75 one was, I still think it was eight. I think it was eight ounces, but it was Dead Sea mud from the Dead Sea. What convinced people was a good listing, but perception and incredible, really incredible packaging. However, just on that note, still wouldn't cut it in retail, you know, but it's the same in retail. If I'm going out there and I want to buy some. Cheap, crappy thing, great. Then you have the average and you have the upper end. But I know where people will not do that. Pets, for example. If I see a $30 dog bed and I have a dog and I know I'll pay $140 for a dog bed, which I know because I have, or babies. There are certain things that price is really no object unless it's absurd. But it has to be in the right package. And a huge fail? is if you try to take a poor or an average at tier one, tier two, and put it into really good quality packaging, people are going to think, and you have that price point, they open it up, that's a huge fail. Expect one stars. Yeah. You have to provide. Yeah. I just wanted to mention that.
- Speaker #0
Yes. Value, quality, the experience. You know, the other thing I also think about in regards to this conversation, which I've always leaned on, I think is very interesting, which Warren Buffett once said, if I gave you a billion dollars today, you could not replicate the goodwill that Coca-Cola has. If you think about the brands that he owns, you know, he owns brands where the lineage is. decades, you know, in the case of Coca Cola, it's over a century old. And it's that goodwill like, you know, I can look at even the brand that I started back in 1992. It's now 32 years old. And there are still people even though I'm not associated with the company or the brand or, or anything that's going on with the product. It's there are still very loyal shoppers because in many cases, It is when one has a good experience with the product, we as humans tend to stick with what works for us. Unless there is some extraordinary compelling reason or the product fails to deliver on the promise that we have expected over years. You know, that's that's that is the value of brand over time is people have in a custom experience that they're going to enjoy with whatever products they purchase.
- Speaker #1
So can we start talking about getting prepared? What do you have to do with your with your packaging to get prepared for retail and colors and materials? And, you know, how do you start in start to even. know what's good and what's bad?
- Speaker #0
Well, what I would say is, and I go through it in my book, I recently came out with a book, it's called Stop or Go. It's the 25 critical factors that every CPG prospective founder needs to learn, research and analyze before they make their stop or go decision. So the packaging component is an aspect of it. And First and foremost, the way that I approach products is by ensuring that I've got a great quality product. Once I have the great quality product, then I come up with the brand name. I make sure that I can get the appropriate URL as well as the trademark. Then I move on to the packaging norm. With the packaging study, it's really kind of… three components the first component is what's the competition doing um because if the competition is using red as a as a base back color or white or black i'm not going to use any of those i'm going to look for a an iconic color that's going to be recognized as that brand so i'm already thinking of even though My strategy will start essentially with a Amazon DTC go to market because I want to make sure I've got that product market fit before I even start to contemplate the type of hundreds of thousands or pardon me, potentially millions of dollars that I or my investors would need to consider before making a decision. Do we want to work with Walmart? Do we want to work with Target? Because the costs of doing business are extraordinary and the risks can be a game ender for succeeding brands if they don't get it right. So it's those first two components. And then the last thing for me is just what kind of spin do I want to put on it? What is, what's the excitement? What's the sizzle that I want to build? And what's happening in the category that could be very interesting?
- Speaker #2
Well, a lot of people come from the e-commerce world and they don't understand that they like that because they feel like they have a sense of control. They feel like, well, yeah, I can control. I can manipulate the rankings on Amazon a little bit or I can do this or that or if I have my own Shopify site. But if I go into Walmart and I have zero control, a Walmart might order 10,000 units and they sit on a pallet in the back of 10 of the 15 Walmarts because the store manager never puts them out. for whatever reason and they just get returned to me or they can't control where they're at on the on the shelf because there's a planogram that some buyer somewhere designed and says this is how you do it or their product packaging doesn't fit the allotted space on the shelf and there's all these other little control these variables well how do you how do you handle that and and prepare for that uh when you're planning to go cpg i'm assuming this is probably part of the 25 things but how do you yeah well uh
- Speaker #0
All of the points that you mentioned, believe it or not, are completely handled before one unit of your product is shipped. For example, the first step is you meet with the category manager. You make the presentation. This is during what's called a category review for some of your listeners out there. They might have a great product that they want to bring to Walmart, today being December 17th. um 2024 it may turn out though that in november of 2024 the category manager closed their review process so guess what there's no opportunity to sell the product to walmart for the next 10 months because they're there's they only go by windows so you have to be able to follow that calendar in order to get going uh with them assuming that you are in the calendar review, you make your presentation, um there's a complete process kevin that goes along with it so for example if the buyer is interested you fill out vendor forms you fill out new product forms you get approved as a vendor the next step is we need samples of your product because what happens then is let's assume that there are um two items that walmart's gonna buy you send in about let's just say a dozen samples of each and what they do is they have what are called planogram rooms that are duplicative of what is occurring in the stores because there's different planograms. So they allocate the space for every single product. So there's no confusion whether it's going to be on a peg or it's going to be on a store shelf. The real estate has been properly accounted for. So there's no issue in that regard. Then in regards to inventory, it's great. The retailers are incredibly adept at allocating inventory, and they look at it from inventory that is shipping to their distribution centers, to product that is in the store, to the velocity movements that will be occurring at the store. And there's this magical formula that their programs are able to utilize so that it is all timed perfectly. There is no... product that's generally left in the back. If your product is slated to be on the third shelf up, two slots in, it will be there in every single store without question.
- Speaker #1
Now, a quick word from our sponsor, LaVonta. Hey, Kevin, tell us a little bit about it.
- Speaker #2
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- Speaker #1
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- Speaker #0
Also in regards to an account like Walmart, Walmart requires that you as the vendor help to manage the business with your category manager. So the category manager has dozens of vendors. He or she is pulled in a million different directions. It is incumbent on any Walmart vendor to help to manage their business. And that is done through a program which is called Retail Link. So you either have to have an expert in Retail Link. that you hire or on board because what you're expected to do amongst the 4 000 plus stores that they have you're expected to look at all the inventory levels of every single store every single distribution center and in the event that there are shortages you need to notify your category manager of those so that the proper allocation can be made to the reorders which by the way come every single week so once you're plugged into this system It always comes down to execution. And I'll share with you one thing after. So it took me eight years to land Walmart. And one thing that my first buyer said when she said to me, Doug, if you could have one item in our chain, which one would be? I told her. We finished the meeting. She looks up at me. And I'll never forget, in a rather stern way, she said, Now, just don't miss any of my ship dates. And the reason why she said that is because she was making a bet on me and my small company at the time that we would be able to support Walmart in their needs to number one, sell product and make additional profit. But think about the risk that she was also bearing by going forward with this kid. You know, I was probably in my early 30s at the time. And what she was gambling. was that if she made a bet to bring in one of our heroes items in the event that we didn't make our ship dates and we were late and there were out of stocks on the store shelves that's like the kiss of death in retail because the way the retailers look at it is it's kind of like a soda fountain if you press in on the soda that you want you want coca-cola but they're out it's a lost sale and the retailers don't like lost sales they have real estate that they need to account for and so execution of any and all purchase orders that my company got We beautifully executed. We always carried, just for your listeners to know, we always carried between six to eight weeks of inventory because you never knew if there was going to be a spike in sales. So it's a very complicated, complex business with some great upside, but also some very difficult downsides if you're not bringing your A game. And that's why I always said that. A plus is the only score that they're looking for. Because one last thing in this regard is that Walmart, Walgreens, Target, doesn't matter who the retailer is. They are all evaluating their vendors performance and you must ship to the level of 98%. And they have some exceptions because sometimes shipments gets lost or some other factors occur. But for the most part, if you're not shipping at a 98% of all purchase orders, you're going to lose the account. And I never took that chance. I always invested bigger in my inventory in order to do that. So it's kind of a long-winded answer.
- Speaker #2
But there's a whole industry of people that monitor the retail because I used to have a buddy that worked for a company. It's a third-party company. And he was hired by that Mars, you know, Hershey's. They straight up hurt all the chocolates and everything. that would go in they it's like a 40 000 a year job but he had 160 walmarts he didn't work for walmart he worked for the third party comp agency of the brand and he had to go into all the walmarts and cycle through them once a month and adjust make sure that there wasn't these pallets sitting in the back uh he said that happened quite a bit and go into the shelves where the guy coming from i don't know what the competitor to mars is the uh i don't know my cushions yeah hershey's had come moved the Hershey's Kisses over into his space. The stocker that was getting paid $7 a night and I didn't care to do the planogram. And so he'd have to straighten up stuff and see where there's holes because the buyer wasn't actually supplying the shop. It's this whole complicated thing. And there's a whole industry around the United States that that's what these guys do for these big brands to stay on top of the retail. So that was...
- Speaker #0
kind of what i was referring to yeah and it's indicated and there's all these little just like in the amazon selling there's all these little little fingers going out to do different things absolutely i mean um so what you're talking about is that sounds like a direct to store relationship where the vendor is of such magnitude that perhaps they are shipping directly to the stores my relationship was much smaller for a walmart so we would ship to any one of their 40 plus distribution centers. And then from there, the products would roll out. So we didn't have the direct management of stores. And I could see that that could be, that certainly could be problematic. I totally get it.
- Speaker #1
I remember, oh, this goes back a few years, many years, but we had a lot of arts and crafts in Walmart. And exactly like you said, we... probably had six weeks to eight weeks that we had because there was penalty clauses too so we uh we no problem we had a great relationship for some reason the on this uh this uh one brand that we made blew out the doors and i remember that we had to go to taiwan make it like asap yeah get it and it fly it over. It costs us 50,000 bucks just to make sure that that relationship with getting it on the shelves was like, you can't describe it better. It's a must have or you're dead.
- Speaker #0
For sure. For sure. I mean, one of the blessings of being in CPG was that you really didn't, again, for my size of a business, it was not a... procter and gamble colgate size very small niche player um but i really didn't talk to my walmart or walgreens buyer target emails very few and far between um because they were so busy but if you ever if i ever got an email or a call that was like all hands on deck because you didn't know and the importance of these relationships you know you just can't mess up i i'll just share with you one example and this was with a regional northeastern grocery chain that i worked for 11 years to get we shipped the first order there was some complication related to the second order where my director of ops did not um get the correct date right the shipment for this grocery chain arrived one day late The buyer said, that's it, you're out. We lost the chain right then and there and never got back in. So there's a degree of intolerance and what any future prospective CPG entrepreneur needs to know is there's always someone knocking on the door looking to take you out.
- Speaker #2
Can you talk about the fees that a lot of people don't realize happen? When you go CPG, I mean, they think that, okay, my wholesale price is this to Walmart. It's a $20 item and I'm selling it to Walmart. They like to at least keystone it if they can, sometimes better. Let's just say it's keystoned, which means double. Let's say it's at $10. But then there's all these other fees. If I don't put the label exactly half an inch from the left-hand side and 17 millimeters from the bottom, it's a $50 per box fee. If there's an advertising co-op fee, whether they advertise my product or not, a product or not. There's a shared markdowns in many cases for seasonal stuff that if they have to discount the Christmas stockings after Christmas from $10 to $5, they're now paying you half of what the original PO was for those. All these additional things and risks, can you talk about some of those that people may not realize? And I'm not saying these are necessarily bad, you factor them in, but it's things that people got to think about.
- Speaker #0
Well, it's amazing. I still have any hair, believe it or not, because, because, um, It is, wow. It's one of the reasons that I actually needed to take some time off because some of the costs, some of the fees, I call them blind sides. They're blind sides that came in. A lot of them, you know, in advance, I'll give you a couple of examples. The first one is in regards to Target. Assume that we come up with a product that we think is great. We present it to the Target category manager. She says, I love this product and I love a second product. And we say, great, let's get started. She says, okay, terrific. Now our new vendor setup is $50,000. So in order to get set up as a vendor, it targets 50,000. And then for the two items that you wish to bring into our stores, that's 15,000. So now you're 80,000 in the whole to a relationship you haven't shipped or sold one unit to. Then you have to factor the inventory that you're going to ship to the chain. Um, And imagine that.
- Speaker #2
Wait for it to get paid on and wait for it to get paid.
- Speaker #0
Yeah. So assume that I'll walk you through it. So you're 80,000 in the hole there. And then you have to fill 2,000 doors with your inventory. Perhaps there's six units for the store and six units for the distribution center. That's 12 units. That's 24,000 units just to get started that you funded in addition to the 80,000. And then your payment terms are net 60. So after about two weeks of shipping your first order, you're going to start to get hit with reorders on a weekly basis. So then you're talking about eight weeks out on shipping replenishment. If it takes off, you're even further in the hole. Now you get paid on your first order two months out, but they've deducted the $80,000 for the new vendor setup. as well as the slotting. And now the next thing is you have promotions. So you need to create awareness for your product. So there's a cost associated with the promotions as well as the redemption value. And I give the example in my book, which is with Walgreens, great account, wonderful to work with. We had a new promotional setup fee of $25,000. So for the right to offer our products at a discount to the Walgreen shopper, it was 25,000. It's probably more today. And then on the product that we wanted to promote, it sold. We could expect a lift or an increase in sales. And for that month period, we expected that it could sell 24,000 units. And so you multiply the 40 cents that we gave for the redemption value. On 24,000 units, that's $9,600. You add that to the $25,000. And now you recognize that I just invested $34,600 for one promotion at Walgreens. Why do we do that? We do that to increase sales so that when category review time comes around, the buyer recognizes, oh, we saw a 7% year-over-year sales lift. This must be an item we need to keep for the next 12 months. So it's all part of that. I'd say one of the dirty little secrets that people don't know about retail is chargebacks that are associated. And you touched upon it, Kevin. There are chargebacks. If you don't put the label in the right place, bam, you get hit. If you don't deliver your products on time, bam, you get hit. And sometimes those charges are erroneous. But it doesn't matter because in some regards, your money is in their stores. And if they have control over your product, they've got you right where they want you. So it becomes a kind of sometimes a friction-filled situation, especially if the charge is erroneous. So there's a lot that goes into it. A lot.
- Speaker #2
These buyers, a lot of times, too, like you said, these category reviews come up typically about once a year. I was told by someone that there's high buyer turnover. A lot of times it's like six months. And so you're constantly having to reeducate the next person. Like, why should you continue this? And they're just looking at a spreadsheet. So maybe that's why you do this promotion, because they're just looking at a spreadsheet going, oh, they're not paying attention that you did a promotion. And it's like, oh, the numbers say, OK. So how do you deal with that constant? Business is about relationships in a lot of ways. Yeah. It's also about making money. But relationships play a key factor. And like you said, it took you 11 years to get into one, eight years to get another. And I'm assuming that's just because there's buyer turnover and you just had to hit the right person that's paying attention to you that you resonated with.
- Speaker #0
Well, you know, here's what I'd say. It is that and it's also one other thing, which is I kind of mentioned in the Walmart story, which is you might have a great idea. You might have an incredible product that really is filling a need. Right. But again, the retail buyer is, anyone that's working for a company is navigating the question, if I do this, will it get me fired? And the one thing that category managers have to be very cognizant of is what is the financial wherewithal of my potential partners? So it is that, there's that calculus that the buyer must evaluate because the last thing he or she wants. is to make a commitment to any one vendor, only to see that that vendor now is out of business, because they can't supply the chain. And then we go into, okay, what's the contingency plan? And that's just, that's a headache, no, no buyer and really no vendor wants as well, because it just becomes very friction filled. So
- Speaker #2
Costco that actually has a rule that they cannot be more than 20% of your business or something like that. Isn't it?
- Speaker #0
Yeah, I mean,
- Speaker #2
their POs cannot be more than 20% of your income or something like that.
- Speaker #0
Walmart used to have they couldn't be 30% of one's business. Unfortunately, with the consolidation of retailers, you know, and I'm going back 30 plus years, that was something that could have been possible. But in today's world, sometimes Walmart is 60% of someone's business 70% of someone's business. And They were about 40% of mine. We had pretty ubiquitous distribution. And it also depends on if the relationship is going well, that buyer really wants to keep growing that brand and that relationship because, number one, they know they can count on the vendor for filling their stores. And number two, they're coming up with innovative products. So sometimes that's a percentage that no one ultimately can control. And hopefully everybody is making prudent decisions to make sure that everybody is safeguarded against some unexpected issue.
- Speaker #1
So you started, I guess, sitting down on the floor of CVS or wherever and did your research.
- Speaker #0
I'm a bit more of a fossil. Okay, I'll just say that.
- Speaker #1
Oh,
- Speaker #2
I'm right there with you. I'm a dinosaur.
- Speaker #0
Sitting on a rock, not a floor. But this, I think you'll get a chuckle out of this and our listeners too. So back in the day, we would actually go to our buyers who were there for years, probably. You know, these category managers. You take them out and you go for lunch. Yeah. And- You would buy, like, I know that we would go into the liquor store for some of these. We go, okay, this one's XO. This one's, you know, cheap bottle of wine, you know, Ripple. But we would pick out. I remember having these three different categories that you would give to your buyer, right? Try to do that nowadays. Like, you don't get to know them. And it's for a reason. No, but yeah, back then. Okay, so this is even further, but I remember sitting down in an office and you could have a cigarette. It was crazy, but times have changed.
- Speaker #2
Yeah, I remember one thing. My whole thing was really interesting when I was running Heroes was I always wanted my business to be important to a category manager. One of my reps ultimately told me, he's like, Doug, there's nothing you'll ever do to become important to a category manager. And I remember before my Walmart buyer came into our cubicle for the category review, I was like, well, maybe I can give her a hero's pen. So I set up a notebook before she came in the room. I put a hero's pen there and she was able to write with it, but she did not take it back. to her office so they're very very you know the the leadership is like even even i would say this at walmart because graft was something that started to spread because if you think about it if if you you know if you incentivize a buyer to bring in your products to a walmart that could be tens of millions hundreds of millions of dollars of business so at walmart they literally have in the rooms you know, amongst all the meeting rooms that they have, they have a camera overhead, over the top of the desk to see what's happening in that room. So, you know, that that's a whole other story. But, but yes, buyer turnover is frequent. And, and the ability, you know, I would say this also, to get an email response from a buyer. is sometimes very rare. And that's, you know, I mentioned to you about Walgreens, where I lost the account. I didn't know why I went back and I reviewed all of my notes, the buyer that actually kicked us out of the chain or discontinued our items. I know I noted that I sent her 18 subsequent emails post our first meeting, and she never responded to one. So, you know, part of the stress of working in CPG is sometimes you're working in a vacuum. You don't hear from people sometimes until it's too late. And that just, you know, again, that makes it very precarious. And I would say also there are some situations that, you know, it comes down to what I would do before I met with any category manager is I literally would plan out the financials. of what that year would look like if we work together because there could be situations where i would have to fire the customer and i actually for one particular grocery uh chain in in the on the east coast i actually had to say thanks but no thanks i'm not interested to do business because i'm going to lose business doing this i'm going to lose money doing business with you
- Speaker #1
Hey, Kevin King and Norm Farrar here. If you've been enjoying this episode of Marketing Misfits, thanks for listening this far. Continue listening. We've got some more valuable stuff coming up. Be sure to hit that subscribe button if you're listening to this on your favorite podcast player, or if you're watching this on YouTube or Spotify, make sure you subscribe to our channel because you don't want to miss a single episode of the Marketing Misfits. Have you subscribed yet, Norm?
- Speaker #0
Well, this is an old guy alert. Should I subscribe to my own podcast?
- Speaker #1
Yeah, but what if you forget to show up one time? It's just me on here. You're not going to know what I say.
- Speaker #0
I'll buy you a beard and you can sit in my chair too. And we'll just, you can go back and forth with one another.
- Speaker #2
Yikes.
- Speaker #0
But. That being said, don't forget to subscribe, share it. Oh, and if you really like this content, somewhere up there, there's a banner. Click on it and you'll go to another episode of the Marketing Misfits.
- Speaker #1
Make sure you don't miss a single episode because you don't want to be like Norm.
- Speaker #0
I know a person right now this year that they had a really nice premium soap, shampoo, conditioner, lotion company. They went into wholesale. They went into Whole Foods, and they had to say goodbye because they got nailed with so many nickel and dime charges that at the end of the day, they were losing money. But look, we are at the top of the hour. And I'm not going to lie. I want to know a little bit more about your book. Can you tell us some?
- Speaker #2
Well, really, so the book that I wrote, it's called Stop or Go. It's available on Amazon. Your viewers and listeners can receive a free five-chapter excerpt from Stop or Go on my website, DougPick.com. And the book was written, number one, for my children because I wanted them to see it. what their dad did for 28 years and beyond, and get some idea for the expertise that I have. And also, it was written for, really for myself of 1992. I had no blueprint. I had no idea what to do. And I just kind of stumbled forward, making a lot of mistakes. And so I really wanted to put together something that memorialized um how anyone could get started and you know the book i'll show you this is a this is a pre production print event this is called stop or go it's small it's a little booklet and it takes like 60 minutes to read um the narrated version that i had a lot of fun doing is 87 minutes the the the secret to it is that the answers to how to start a cpg company are in the work that is required because I highly recommend that anyone that's interested take it on like a college course. And I refer to people in the book as taking on the role of being a CPG detective. Don't come to any conclusions that your product is great until you've completed this analysis. And that's why I list 25 critical factors that I recommend any prospective entrepreneur go through. before they make that stop or go decision because that decision should be made should be based upon prudence that they've done their own homework they've done their research they've looked at the financials they've looked at the risks associated and they make an educated decision to either stop and say this isn't something for me for xyz abc reasons or This is a thumbs up. Let's go. This is something that makes a lot of sense. So that was the whole motivation of reading that book.
- Speaker #0
All right. So we're at the top of the hour, and we always ask our misfits, do they know a misfit?
- Speaker #2
Oh, I know plenty of misfits. I know plenty of them. Most of my friends are all misfits for that. And there is someone that I'm thinking about that I think would actually be really great for this podcast. And I'd like to check with them first and then get back with you guys for a referral for who might be someone you might like to interview.
- Speaker #0
Fantastic.
- Speaker #1
That'd be awesome. That'd be awesome.
- Speaker #2
Great.
- Speaker #0
I would look forward to that. So, Doug, we're going to remove you. Oh, first, before that, how do people get a hold of you? What's your contact information?
- Speaker #2
Yes. Easiest is either through LinkedIn. You can just look me up, Doug Pick, or you can go to dougpick.com and there's a way to contact me through that website.
- Speaker #0
And get those five chapters.
- Speaker #2
Yeah. There's a lot of collateral on there. I think one of the things about the box set, I think people will enjoy one story that is true, which is called how making earplugs landed me in a Mexican jail. And I won't. I won't create any spoiler around it, but it's a story that really happened. I really was in a Mexican jail and, and I'm amazed I made it out.
- Speaker #0
Kevin's got me put into a Mexican jail once or twice, but, and that was all, ah, we won't get into it. But, Hey, Doug, thanks a lot for coming on today. I'm going to remove you. Okay. And we'll bring you back in a sec.
- Speaker #2
And guys, thank you very much. It's been a pleasure. Thank you.
- Speaker #1
Appreciate it.
- Speaker #0
All right, buddy.
- Speaker #1
Yeah, that's good stuff. I mean, it's an area that a lot of our listeners don't have a lot of experience with. And it's an area that I think, you know, you got to approach it right. And like Doug said, you got to have a strategy to it and understand what you're getting into. But if you do it right, it can, like he said, that was, what did he say, 70% of his business at one point? Or Walmart was 70% of his business, I think he said. It can be huge numbers. I mean, Walmart. can move a lot more as much or even more than than amazon and a lot of times when people need like a product especially like in his case they they need earplugs they need it now not not tomorrow or not in two days or not even in some areas where amazon delivers the same day they need it now uh and so people still go retail i mean it's it's one of those things that people especially in our world just kind of discount and they shouldn't be you know
- Speaker #0
Just to get an example, so anybody who's listening, check it out. Go over to Heroes, H-E-A-R-S. OS. Check out, what's that? Oh, yeah, OS. And check out the packaging. If you're walking down an aisle, that red stands out. It's almost like just pointing you right over to that direction because of the packaging. And the second thing, why not? create your packaging when you're creating your online products. It'll save you time and it'll save you money. And a lot of it, you don't have to have two sets of packaging. You just got to do it right the first time. What do you think about that,
- Speaker #1
Kev? That's exactly what I do. I mean, I've done that since I started selling e-commerce is all my packaging is designed for retail in mind. So even though it's going on Amazon, I don't cut corners. It's got all the descriptions on the back. It's got all the UPC codes, got all that. as if it could go straight into retail immediately. And I did that with several of my Slow Feed Dog Bowl. I mean, it went into Chewy and other online places, but also went into a lot of retail stores. And the same thing with my Apple Watch charging dock. And all my calendar products are all made for retail. So everything I do is made for retail first, even if I don't end up taking that product to retail because it fails or because for whatever reason it's a cash flow thing. We didn't get to talk to Doug about that. But retail, and it's at... at a successful level is serious cash uh that you're having to float like you mentioned the 60-day terms there's companies out there that will factor your invoices so they know that uh walmart is going to pay you even though it's net 60 terms they probably will not pay you in that 60 they will probably pay you net 120 or net 90 unless you give them a on invoices you can do something like 210 that net night 16 sometimes that'll motivate them that means if they pay you in 10 days that you get they get a two percent discount or 210 that 30 or there's ways to actually accelerate that and some brands i mean some um retailers will take advantage of others they pay you when the whenever they want to pay you basically and and sometimes it's tough if you're robin peter to pay paul growing your business especially if you're expanding to keep the lights on make payroll so there's companies that will factor those invoices because they know walmart will eventually pay you basically assign the invoice to them they take five seven ten percent uh depends on the situation uh
- Speaker #0
for doing that and those are costs so there's a there's a whole number of things that we could go into much deeper but podcast is over kev it's still a really good opportunity it's all right though i'm delivering value so we're gonna keep okay but that's it i do know what i'm gonna do when i get off this call and after the next podcast i think i'm gonna approach that bloody dog paw ice cream company and tell them to redesign their bloody go how's that you want to come in on that big bucks big bucks and we can design it.
- Speaker #1
Cool. Well, if you, if you like this episode, be sure to forward it to somebody. Make sure you hit that subscribe button so that you don't miss a single one on whether you're watching this on YouTube or you're on Apple or Spotify or whatever. We'll be back again next Tuesday, like Norm said, with another edition of the marketing misfits until then. All right. Take care, everybody.
- Speaker #0
See you later.
