Learning From Estee Lauder’s Leonard Lauder

“[Launching in Europe] we deliberately chose a different approach: Re-Nutriv, the most expensive cream in the world… [Treatment] creams were unabashedly expensive – and that was one of their selling points. Estée Lauder led this rarefied club.. Not only was it a terrific product; it had one of the most brilliant positioning statements we’ve ever made: the most expensive cream in the world… it was the positioning, not the ingredients, that propelled its success.”I wanted Estée Lauder to be the most upmarket brand there was. I wanted to have limited distribution so that every store that was selling our product knew that the person they were selling to could only come back to them; conversely, the person who was buying revelled in the exclusivity of where she bought it. That’s how you build a great brand and a great business.”

“I knew that out products had to be the highest quality, unique, creative, original, and, of course, efficacious. The Lauder brand would be synonymous with luxury, and Re-Nutriv would be the epitome and standard-bearer of luxury products.”

We wanted to sell our products in high-end specialty stores because their prestige gave us prestige.”

Positioning a brand says, “This is who we are.” I’ve seen too many companies fail by trying to reposition a brand. Know who you are and stick to it. Enhance your brand but don’t reposition it.”

“Up until then, every cosmetic ad was designed to sell a product. I decided that rather than selling only a product, our ads would sell the brand.. All our advertising would be orientated toward the brand. Focusing on the brand would hone our identity and be our North Star. Marketing a brand gives you more pricing power. If a product is a musical instrument, a brand is the entire orchestra.”

The launch of Clinique was a classic case of leveraging market segmentation. Looking back, this was probably the most important lesson I learned in my career: if you understood market segmentation, you understood everything.”

“Its well known in our industry that when customers like one product from one brand, they’re willing to try – and maybe buy – other products. Fragrance, in other words, broadened the profit stream for the entire Estée Lauder brand.”

“Fragrance became an intrinsic part of the all-round concept of being an Estée Lauder woman. Our fragrance advertising sold romance and prestige. You can’t sell romance with an anti-wrinkle cream.”

“A few years earlier, I had retained Harvard Business School professor Michael Porter to consult on the future of Estée Lauder. His advice: ‘Never get stuck in the middle.’ If you’re in the middle you’re nowhere. You’re neither value line nor the prestige line, so what are you?”

Brands have their own DNA and don’t always follow the story you script for them. It’s like when a child is born: you think she’s going to become a doctor and she decides instead to become an astronaut or an actor. We thought [with Prescriptives] we were launching another treatment line – another anti-Lauder line, a’la Clinique—but that morphed into a cosmetics/colour line driven by the Calyx fragrance.”

“I had an epiphany: I realised we needed new brands to understudy our existing brands as well as to fill in the gaps and expand the company as a whole. We needed to launch or acquire competitors so that as newer consumers came into the market, they could discover new brands and make them their own.”

“Creating a new brand that really is new is very difficult to do. It’s even more difficult to do from inside an established organisation. Outsiders are all about blowing up conventions: ‘I’ve got to beat the old guys.’ People inside the organisation, however, hesitate: ‘Let’s be careful in creating something new, so we don’t destroy what we have.’ Playing it safe sabotages boldness.”

I’m a risk taker and I always have been. In order to survive, you have to take chances. But I don’t believe you should destroy the old before building the new, you’ll have no ground to build on. Brands need to change to stay relevant. Consumers are constantly evolving in ways you can’t even imagine.”

“As I saw it, acquiring brands was – and remains – a great way to expand our customer base. In order to grow, we needed to acquire not just new brands but new thinking. The best way to acquire new thinking was to acquire a company with the founders, who could then, with our help, drive their original creation to new heights.”

“There’s nothing more high-touch that a freestanding store, no better way to protect the brand and control the customer experience.”

Autonomy

“M.A.C Cosmetics would have an organisation all of its own, from top to bottom. They would be able to create their own world without anyone saying, ‘You can’t do that.’ There wouldn’t be any naysayers around.”

Distribution

One of our most important epiphanies was, ‘You’re defined by your distribution.’ For us, that meant luxury department and specialty stores, pure and simple.”

You’re known as much by where you don’t sell as by where you do sell.”

I’ve said it a thousand times: you’re defined by your distribution. If you’re in luxury, stay in the luxury segment. Don’t be bewitched by the volume that can be gleaned by selling in a distribution channel that does not match the equity of your brand.”

In the prestige sector, no brand is strong enough to withstand over-distribution. Distribution is forever.”

“Financial analysts always praise ‘distribution expansion.’ But without realising it, they’re encouraging slow death because over-distribution kills a luxury brand. Over-distribution certainly killed the Prescriptives stores. And that is especially poignant, because over-distribution went against everything we stood for. We had become a prisoner of our P/E.”

Growth

I decided to focus on growth: growth of market share and rate of growth. America loves growth. Growth is a story that gets people excited.”

Keep it Simple

Our formula was simple; limited distribution in prestige specialty and department stores accompanied by the personal touch of a beauty advisor.”

Hiring & Firing

“[The Navy taught me the greatest lesson of my life…] no matter how smart you think you are, there’s always someone who’s smarter. No matter how good you are, there’s always someone better. I vowed that when I got out of the Navy and went into business, I would search out and hire exactly those people. So if they were the head of sales, they would sell better than me. If they were a copywriter, they would write better copy. They all had to be better. I would respect and celebrate their abilities and never be threatened by them. This belief would play an enormous role in the growth of Estée Lauder and help us build a company of the greatest people in the world.”

“Don’t hire your best friend and don’t hire former classmates. In short, don’t hire people that you can’t fire. Friendship is friendship but business is business.”

“My father had a saying when he had to fire someone: ‘Better a sharp pain in the end than pain without end.’ If you’re having trouble with a person who looks like they will not be able to improve, it’s better to help them to leave than to suffer with them. There is a point beyond which patience becomes neglect, Fail fast. Cut your losses.”

Everyone in the world has worth. If you cannot get someone to produce for you in a satisfactory manner, it is almost always your fault and you should acknowledge that, honestly and with respect. When I have to fire someone, I’ll say to them, ‘It’s really not your fault, it’s our fault.” We probably didn’t train you right, we didn’t supervise you well, we didn’t work with you properly, and we didn’t put you in the job most suited to your talents. The reason I’m asking you to leave is not because you are no good. It’s because we’re not good enough to be able to use the great talents you have.”

Win-Win

During our promotions the first floor of the stores reported sales increases well over 100 percent. Thanks to limited distribution, the stores got a fantastic return on investment.”

The intimacy of our relationship with our stores was crucial to our growth… It’s often said that you can only be as good as the people who work for you want you to be. I would add, we could only be as good as the people we are selling to want us to be, too. Our message: ‘Support Estée Lauder and you support your store.’ To enable them to support us, we supported them with a lot of work behind the scenes. Each store was given an annual program, broken down month by month, of what we would do to improve our business – and theirs.”

We’d always had a partnership with our stores: more than a partnership, the stores were part of the extended Estée Lauder family.”

Diversity / Women

Almost the entire Clinique leadership team was composed of women. (Over the years, when Clinique was run by women, its P&L was always higher than any of our other P&L’s). This was the secret sauce. In fact, I would turn it into a management formula. Every time I set up a new international office, I always wanted to have two people in charge: a man and a woman.”

Our great strength has derived from the fact that from the beginning, we had women giving women the products and knowledge to make themselves feel beautiful, as opposed to Charles Revson [Revlon] telling women that he, as a man, knew what would make women desirable to men. Today, this is what is called ‘mirroring’ the market.

The last thing you want is a team of mini-mes. Difference – whether it’s a different background, different ethnicity, age, or different gender – is a source of strength.

Committees

I never relied on a committee for a final decision. Committees are the death of creativity and productivity.”

Mistakes

Never be afraid to admit you’ve made a mistake. It shows you’re human and people will respect you more.”

Market Share / Private Company

“I never, ever forgot that once you’ve lost market share, you can’t get it back again so easily. And I was always going to protect our market share, no matter how much it cost. As a private company, we had a huge advantage over our publicly held rivals: we could spend years nursing along a new brand or spending to gather market share because we didn’t have to answer to our shareholders.”

“We were always contrarian. When the competition tightened its budget, we increased ours: we doubled down to protect out market share.”

It would have been difficult to sustain the flexibility that nurtured Clinique and Origins if we had shareholders demanding a steady stream of profits and growth. The hard fact is, I don’t think we would have been able to maintain either brand if we had been a public company.”

“Getting ahead of the curve also means imaging and preparing for what might go wrong. Don’t wait for bad things to happen to you. Don’t wait to defend your market share. Fight for every percentage point while you’re growing because by the time you lose it, it will be too expensive to get it back.”

Frugality

My wife liked to regale people with stories of my frugality. For example, I couldn’t understand why she had to take a taxi to visit stores in Brooklyn. ‘Why can’t you take the subway?’ I’d gripe. Anyway, because our overhead was so low, we could afford to use – in fact, we could insist on using – expensive ingredients.”

“I am the legendary Scrooge-in-Chief.”

Instinct

“As I established my place at Estée Lauder, I learned the most important lesson that would shape my career and life inside and outside the company: to trust my instincts. Instinct is something that is natural and ingrained: however, instinct has its foundation in experience. If you have enough experience, somewhere along the line, instinct will kick in. If we’re making a decision to buy a company, my experience helps me connect the dots faster and see bellwethers others might not. Then my instinct will take over and make the decision.”

First to Market

First to market always wins.”

“My dream was to put our stake in the ground. We had a once-in-a-lifetime opportunity: to be the first brand of prestige cosmetics in what could become an enormous market. Deep in my gut, I knew that Europe was ready for Estée Lauder.”

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