How much does it cost to start a skincare business? – Part 2
20/01/2023 by The Red Tree
Our previous article detailed the pre-launch investment required to start a beauty brand. This article continues the analysis and moves onto some pre-launch and post-launch considerations.
The main point we stress to clients is to plan ahead. Many brands focus too much on their initial launch and forget about their NPD (New Product Development) pipeline. We have discussed launch timelines in our article here.
We are great advocates of sampling activity here at The Red Tree. It gets product into your customers hands and can be distributed in a careful way to ensure maximum ROI. It is also an expected investment with retailers, either via checkout sampling with sachet sizes, or deluxe samples for use within GWPs (Gift with Purchases) or activations such as advent calendars. You can expect to pay around £1 for a deluxe size (anything from 5-20ml depending on the SKU) and up to 50p for a sachet (0.5-5ml size). Usually there are considerable savings to be made if purchasing in bulk, but this can quickly escalate so our recommendation is to initially focus on sampling your hero SKU(s). As a general guide, retailers can ask for GWP quantities of anything from 100 to 10,000 units and advent calendars can be as much as 50,000 units!
If retailers are part of a brands distribution strategy, then Trade Marketing (investment spent partnering with retailers) could be the next biggest investment a brand will make. The costs in this instance can be extreme, from small scale activations such as an Instagram post on a retailers account (around £1,000-£2,000) to full scale events which could be as much as £100,000. Bricks and mortar retail can necessitate additional costs such as training, staffing and commission payments, as well as collateral to be used in store e.g., shelf talkers and tester units.
All of this can be handled and negotiated by an agency such as The Red Tree, who also have extensive experience in listing brands in the first instance. Country Management – as explained in our previous article – requires dedicated skills to successfully navigate the complexities of each retailer.
Brand marketing incorporates all of the costs to promote your brand, this includes physical materials (bags, stickers, boxes, tissue paper – an initial layout could cost anything from £500-£5,000), POS material, content creation to generate assets (photoshoots again can vary, especially if models are required – we usually budget £10,000-£30,000 to generate pack shots and lifestyle shots for use on a brands website and social media for a launch campaign). PR retainers can be anything from £1,000 to £30,000 per month, plus expenses (postage, mailers, etc) of £500+. Events can be extremely effective to produce content and raise awareness, but costs can spiral out of control if not managed correctly.
Digital marketing starts from the moment your brand’s design has been finalised. Your website can be your most valuable asset, as you have full control over all aspects and this can be a huge revenue driver for your brand. The company you select for your website design and build will be crucial. They need to understand your brand and visualise it in a way which resonates with your consumer to push them to covert. Websites can be costly, anything from £15,000-£100,000. On top of this will be a level of upkeep/maintenance £500-£1,000 per month. There will also be merchant/transaction fees from your payment gateway, usually a per transaction fee (1-5%) depending on the provider.
SEO (Search Engine Optimisation) is a specialist area and should not only be built into your website but constantly a part of your marketing efforts. Brands can expect to pay anything from £1,000+ per month.
Outsourcing your PPC (Pay Per Click) advertising is usually recommended to focus your efforts and ROI. This can lead to costly mistakes if not dealt with correctly.
Inbound Marketing or Content Marketing should be the bread and butter of your marketing plan. There’s a reason why the phrase, “Content is King” was born! Copywriting takes time and expertise to ensure the tone is aligned with your brand – but should be easily communicated via your brand guidelines. Blog posts can cost around £500 per post.
Social media management is another consideration; this could be initially handled in-house if you have the expertise or outsourced to an agency such as The Red Tree. Management can be upwards of £1,000 per month, with advertising spend from £500 per month.
Email marketing – if done right – can be a substantial sales stream, but it needs to fit seamlessly within your wider marketing plan. Management can be handled by an agency from £500 per month.
All of the above activity needs confident direction and can seem overwhelming for a brand. On top of managing each of the third parties involved, managing your customers can also be a time-intensive task and may require additional resources to support. You may consider employing an agency or internal operations manager or customer service agent to handle day to day activity.
The Red Tree is the UK’s leading international beauty brand consultancy and a powerhouse of ideas, insight and inspiration. For an informal discussion on how we might help you, please contact us.
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