The recession in the West should have been hard times for the cosmetics industry. But in one of his last interviews before resigning on October 1 — to “pursue other interests,” according to press reports — former Revlon CEO Alan Ennis said that the business has not been particularly impacted. True, women put their children and family needs ahead of spending money on makeup and beauty products. Yet at the same time, he noted, many consumers were still concerned about making sure their hair color was just right or finding the perfect shade of lipstick. What has happened in the industry, he added, is a certain amount of trading down as consumers go for cheaper brands.
Ennis had served as CEO since 2009. Founded in 1932, Revlon reported that its revenue fell by 2% to $350.1 million in the most recent quarter. The company also grappled with regulatory issues, including payment of an $850,000 fine to resolve federal charges that it withheld information from shareholders during a “going-private” transaction, the Associated Press reported.
Revlon founder Charles Revson once said: “In our factory, we make lipstick. In our advertising, we sell hope.” Following in his footsteps, Ennis told Knowledge at Wharton: “What’s really important with marketing is to have a message, a communication that means something to the consumer.”
An edited version of the conversation follows.
Knowledge at Wharton: I wanted to ask you first about your leadership style. There are two aspects. One, you come from the finance area. You’ve been an accountant and yet here you are the head of a cosmetics company — [in charge of] the creative side and all the rest of it. That seems a bit of an anomaly. Also I can’t help noticing that you’re a male in what is very much a woman’s product line. So, could you tell us about your leadership style, taking those two things into account?
Alan Ennis: First of all, putting aside my gender, industry and background, my leadership style is pretty straightforward. That is probably not typical of a CEO. It is founded on a very basic principle, which is that I’m not uncomfortable being wrong. I have a leadership team where I tell them regularly, “Listen, guys, I’m going to be wrong half the time. And if you can be right half the time I’m wrong, then we’ll be right 75% of the time. And making three out of four decisions correct in the corporate world today is a pretty good thing. So, I think I inspire my leadership team to be opinionated, to be vocal and to challenge me. This also benefits them because they feel like they’re playing a role. So, there’s a CEO and then there’s the CEO leadership team that leads Revlon. That’s sort of unique. I avoid people leaning where they think I’m leaning, and we therefore get better results.
In regards to my finance background, a lot of businesses today, if not most businesses — certainly outside the charity world — [are] for-profit organizations. It’s all about making money — money in the form of shareholder wealth, in the form of free cash flow to reinvest in the business or to buy additional assets. It doesn’t matter whether you’re selling a lipstick or a screwdriver; it is about how you sell more of them at a higher profit margin per unit. I think a big part of any business is the financial underpinning. Finance is a very good basis and a very good foundation for any general manager of any business.
I will say, also, that Revlon is majority owned by Ronald Perelman. Perelman is at heart a finance guy. His is essentially a private equity organization, and he likes to have strong finance people run his companies. I’m not the first CFO turned CEO that’s run Revlon. My predecessor [who was named interim CEO when Ennis stepped down] David Kennedy was the CFO at Revlon before he became the CEO. You do see a lot of finance guys running Perelman-type companies.
As for being a male in a female world, I am certainly conflicted because I’m not a consumer. And I can be noticed debating different shades of pink to my detriment. But in reality what I do is submerge myself in the category. I can be spotted daily working on wearing different types of nail enamel that are supposed to exhibit different characteristics. In our product commercialization process, I actually try all the products. I’ve become very adept at putting on mascara and eyeliner. I take it off most of the time before I go home on the train.
“It doesn’t matter whether you’re selling a lipstick or a screwdriver; it is [about] how you sell more of them at a higher profit margin per unit.” — Alan Ennis
Having said all that, the person who runs our marketing organization is a woman. So the one who really calls the shots in terms of products and shades, and connects with the consumer, is someone who is not conflicted because she is a consumer in the space.
Knowledge at Wharton: Okay, fair enough. Your company’s been around for a long time — since 1932. You’ve got a lot of longstanding customers. But at the same time, you need to attract younger consumers. How do you go about doing that? Where is your sweet spot for marketing?
Ennis: Well, it’s interesting. The color cosmetics category is very much based on innovation and bringing news to the marketplace. That’s probably not dissimilar to most fast moving consumer goods companies. It’s about bringing news to the consumer, whether it’s in laundry detergent or Pampers or toothpaste — whatever it may be. How do you bring something to her that solves a problem that she has? How do you bring mascara that is both volumizing and comes off easily but doesn’t stain in the rain? How do you bring a lipstick to her that’s long-wear but doesn’t feel tacky at the same time?
Bringing innovation to the marketplace is a critical part of our success. We have a three-year rolling portfolio plan for all our brands. Our product development team, research and development team, our chemists and scientists and our packaging group all work together to bring either real product innovation — as in new technology or new formula and package innovation, which is the same product in a different delivery system — or a marketing innovation, which is bringing an existing product but having a new claim or a new spin on that product that solves her need.
Of course, it’s a very competitive space. Revlon competes directly with the likes of Maybelline and L’Oreal — which are both owned by the L’Oreal Company — or CoverGirl, which is part of Procter & Gamble (P&G). There are a lot of big hitters in the marketplace. So [innovation is] bringing something new to the consumer in a timely way that solves a problem that she either has or doesn’t know she has but believes that she could have. And we do this along with the latest trends. It’s a tough game. But we’ve got a great team.
Knowledge at Wharton: Your company, like others, has been through a very deep recession. How did it affect you and the industry?
Ennis: It’s interesting. I’ve done some research, and if you look at how a recession generally impacts consumption behavior across a broad range of categories, what you’ll find is in most cases – 80% of households — the woman in the household is the decision-maker with regards to household spending. And she has a certain level of trade-offs: things she’s least likely to forego in a situation where she’s short of money. On the top of that list — things that she’s least likely to forego — is spending around her children. Food, clothing, a roof over their head, warm water; she’ll pay bills and pay her mortgage, buy food, etc.
“Bringing innovation to the marketplace is a critical part of our success. We have a three-year rolling portfolio plan for all our brands.”— Alan Ennis
Knowledge at Wharton: Maslow’s hierarchy of needs for American women?
Knowledge at Wharton: Or global women?
Ennis: Yes. That is the top of the list. At the bottom are things that are more discretionary — a new TV, a new sofa, changing the car for a newer car — whether they be big or small purchases, things that don’t need to be changed on a regular basis. Interestingly, her health and beauty regime is quite high on the list. So, a woman can tell you, “Yes, I’m cutting back discretionary spending.” If a woman who has gray hair has her hair treated or colored every six weeks, she may stretch that to seven weeks or maybe eight weeks, but she’s not going to leave the house and go out in either a professional setting or in a domestic setting with gray roots. Certainly she’s not going to go out without putting on her concealer or her foundation … or her moisturizer.
And so, in reality, what’s happened over the course of the recession is that the beauty category broadly speaking has really not been hugely impacted. Where you do see some activity is what we call the concept of “trading down,” where a consumer who is a department store consumer may say, “I’m not going to buy the Clinique or Lancôme lipstick. I’m going to go to a drug store and I’m going to buy the Revlon lipstick.”… So the color cosmetics category actually grew, albeit in low single digits, through the past five years. And we fared reasonably well.
Knowledge at Wharton: When it comes to marketing though, how do you approach the trends that are already out there? You’ve got different ages also.
Ennis: What’s really important with marketing is to have a message, a communication that means something to the consumer. It used to be you run a TV commercial or you put a print ad in a magazine and you would control the agenda. Now, with the onslaught of social media, it’s instantaneous. Your message is in the blogosphere; it is communicated broadly, instantaneously. And people have opinions about your product, which are also broadcast instantaneously.
So, you don’t control the dialogue any more. But what’s really important is to have a message that the consumer can relate to. There’s a need in the marketplace that we directly address with a specific message — a claim that we make, a shade that she wants that’s on trend. We communicate that to her in a way and at a time when she’s open to receiving that message. So, people are inundated with information today; even standing in an elevator you now have a TV screen. There’s no peace. It’s difficult. But if you have the right marketing organization, you can reach her at the right time with the right message.
Knowledge at Wharton: Compared with the past, how do you characterize the importance of social media?
“People are inundated with information today; even standing in an elevator you now have a TV screen. There’s no peace.” –Alan Ennis
Ennis: Well, it’s hugely important. And social media as we know it today is a blip in a continuum of communication. And not professing to know what the future will be. Take Facebook, for example. A year ago, it used to be how many Facebook fans you had. [For example, saying] “I’ve got 800,000 ‘likes’ versus Cover Girl’s X hundred thousand ‘likes’ and therefore we’re better.” But that’s shifted away from simply Facebook to what they call, “How many of those Facebook fans are actually interacting with your brand?” They call it “consumer engagement.” So, how many of those fans are actually clicking … that they like a picture or writing a comment or downloading a coupon, for example, from your Facebook page?
Metrics have become very important in the overall measurement of how effective social media is. Of course, the types of tools out there keep evolving. So Facebook, Twitter, Tumblr, Instagram, Pinterest — whatever it may be — staying current with how you communicate with the consumer is critically important. We’ve got a dedicated digital team working with a bunch of external agencies to make sure that we’re delivering the right message at the right time through the right medium.
“If those who tried a product don’t like it, ask why? Are they using it the wrong way?” –Alan Ennis
Knowledge at Wharton: There are a lot of people out there blogging about cosmetics. What’s your strategy? How do you work with them, or communicate with them?
Ennis: We look at beauty editors and bloggers as one group of communicators. Beauty editors would be the editorial staff within the major magazines. And bloggers would be the online group. Our objective is to make sure that they have whatever information they need about our products. We have what we call “desk-side meetings” with them, where we invite them into our offices, either both together — the magazine and the online — sit down with them and take them through our product offering. We’ll give them some samples that they can use. Explain the benefits of the product. And then let them do their thing. Ultimately, the benefit of a blogger to a consumer is independence. It’s one thing for Revlon to air a TV commercial with Halle Berry or Emma Stone to say how wonderful the product is, but the consumer respects, to a much greater degree, an independent voice of someone who is a consumer like them — like a 25-year-old woman who’s tried a whole bunch of different lipsticks and is doing either a video blog or a written blog post telling the consumer group her view on the products.
Maintaining that level of independence with the bloggers is important. But, of course, you have to facilitate the dialogue if they have questions, if they have needs, if they have concerns…. If those who tried a product don’t like it, ask why? Are they using it the wrong way? Is there something about the delivery that they’re confused about?
Knowledge at Wharton: And the last thing, what challenges keep you up at night as a leader?
Ennis: Well, I have three young children and they keep me up regularly at night. Generally, I sleep pretty well when they don’t wake me. I’m a pretty calm individual. I don’t get overly animated by business issues because getting animated in any way — anxiety, stress — isn’t really helpful. I try and manage that. I think in reality, in the business world, the strength of competition is a big factor. You’re up against an $80 billion company like P&G or a $20 billion company like L’Oreal. We’re a $1.5 billion company. They’ve got the big stick. We have to stay one step ahead of them and deal with market place dynamics because they change very quickly. This is probably what causes me the most sleepless nights, if there are any.