How a DTC hair color brand builds on its pandemic boom—behind Madison Reed's rise

Brands on the Rise is a regular Ad Age feature spotlighting the marketing and business tactics of successful challenger brands. Read previous installments here. Hair color brand Madison Reed was both a star of the pre-pandemic boom in direct-to-consumer brands and a star of the pandemic shift toward e-commerce and at-home alternatives to stores and salons. Now, in a new phase, the brand started by venture capitalist Amy Errett is growing through a third wave—the late pandemic return to stores. Madison Reed is winning in part because its emphasis on selling both via in-person salons and home shipments—known as omnichannel—has allowed it to overcome new restrictions on digital identifiers that have made it harder for pure-play DTC startups to find their customers online. Below, more on how Madison Reed is getting it done. How it started The idea for Madison Reed started when Errett went to the store to pick up hair color for her wife. The trip ended up with her buying 60 boxes to do some experimenting. Instructions in each box started by telling people to open a window before starting, and she realized the at-home experience was at its core unpleasant. So she set out to fix it. Errett led the development of “Leaping Bunny-certified” cruelty-free hair coloring formulas, crafted in Italy according to European Union standards for safety, and free of ammonia and seven other ingredients (dubbed the Smart 8 by Madison Reed) that are avoided by many consumers. She named the brand, launched in 2014, after her daughter, which still figures into scripts for radio ads. While online help for choosing and using the products initially was what built the DTC business, Errett discovered some people would always want the assurance of a salon application at least the first time before re-ordering direct. So the company began opening salon “hair-color bars.” View this post on Instagram A post shared by Madison Reed (@madisonreed) How it’s going Madison Reed doesn’t disclose revenues, but its publicly-shared numbers are quite encouraging. The company had to close its 12 salons early in the pandemic, but they and many more are back up and running now. The company has 66 salons in 17 regional hubs and expects to have 80 by the end of 2022, with help from a new round of $33 million in financing led by Sandbridge Capital with participation from Marcy Venture Partners (co-founded by Jay-Z , a.k.a. Shawn Carter). That brings total outside investment in the brand to $250 million. The hair-color bars aim to provide “salon-gorgeous” hair color from licensed professionals at a fraction of the time and cost of traditional salons—and make it easy to re-order color for at-home application later if that’s preferred. Madison Reed expects to hire 850 colorists this year, who the company said will earn three times more than in a traditional salon. Key players Errett holds the CEO title. Other key leaders include Chief Financial Officer Jose Zuniga, a veteran of Unilever’s Dollar Shave Club who joined in March. See all of Ad Age's 2022 Leading Women in marketing, advertising and media. Competition Madison Reed is unique for a small player in that it competes in every segment of the business in some way: direct-to-consumer, in stores (via Ulta) and through its own salons. As Errett analyzes it, 52% of women who color their hair do so at home and 48% at salons, but the latter accounts for two-thirds of dollars spent in the $15 billion business. To compete effectively, she said Madison Reed needs to compete everywhere—which means with everyone from L'Oreal to the corner hair salon. Its at-home color kits cost about $30, or roughly three times as much as many of the at-home kits from brands such as L'Oreal or Clairol. But in-person services, which have various prices, often cost less than half of the price of coloring sessions at nearby high-end salons. Related: Why L'Oreal doubled spending on YouTube connected TV View this post on Instagram A post shared by Madison Reed (@madisonreed) Tipping point The pandemic was bad news for Madison Reed in that it forced the company to temporarily close salons, but good news overall in that it led to a surge in at-home hair coloring and demand for salon-quality alternatives at home via the brand’s online DTC business. “That business grew dramatically from before the pandemic, and we held onto a lot of customers because of that,” Errett said. “We more than doubled our base, because a lot of those people wouldn’t have tried us. A lot of them who were like, ‘Holy Moly. I'm saving thousands of dollars a year and my hair looks better.'” Also, Errett said, “There’s a defined sense of accomplishment when a woman does this” that keeps many coming back to at-home coloring. It also helped that the brand moved into Ulta Stores in 2019 just before the pandemic began. By extension, that now also includes Ulta shops opening inside Target stores. What others are saying Madison Reed’s “focus on delivering only the highest quality ingredients to the hair care market” was part of what attracted Sandbridge Capital to invest recently, Ken Suslow, the firm’s founder and managing partner, said in a statement. “Madison Reed’s innovative, omnichannel approach maximizes convenience while delivering a compellingly modern consumer experience across the board.” The brand also has won Allure’s “Best of Beauty” awards each of the past two years and three of the past four. What’s next Madison Reed may have gotten a lot of money to help it open new salons, but that doesn’t mean one salon in one city at a time. Errett said the brand’s growth and customer acquisition costs are much better when it’s “conquesting,” i.e. opening multiple brands in markets such as Los Angeles, New York and San Francisco rather than one store each in many cities. And she said future expansion will probably focus on “NFL cities,” at least the bigger ones, before, say Green Bay, Wisconsin; Buffalo, New York; Kansas City, Missouri; and Cincinnati. Data on where online buyers are concentrated will help guide expansion too. Sign up here for upcoming events and awards Ad Age In-Depth: TV Pivot Ad Age 40 under 40 Ad Age Small Agency Conference & Awards What big brands can learn Madison Reed has found power lies in making its business truly omnichannel, along with an omnivorous media plan that includes often-overlooked traditional media such as radio and out-of-home. Apple’s move to eliminate targeting based on device IDs has definitely driven costs up and effectiveness down for digital and social advertising, Errett said. That, in turn, makes Madison Reed’s omnichannel and diversified media approach more important. So does the fact that “we are a very considered purchase” for a customer worried about getting home coloring wrong and who wants more information from more places, she said. “She does not just buy things because she sees an ad or posts on Facebook or a story on Instagram.” Omnichannel thus has proved both a marketing and distribution lifeline. “The good fortune we have is acquiring our customers locally,” she said. “Our hair color bars are not that expensive, and we’ve been able to improve our omnichannel business by looking at the regions where the blended cost of acquisition works right.” Using the same approach online and in-store is crucial too. Colorists at hair color bars ask the same 18 questions as Madison Reed’s online color advisor, Errett said, which helps make product selection consistent—and the salon experience both faster and more cost-efficient. Enter the Ad Age Leading Women Rising Star awards at AdAge.com/LWRisingStar—entries close June 8. ~ ~ ~CORRECTION: A previous version of this story incorrectly reported that Madison Reed works with Dentsu X with 360i on media. The company no longer works with those agencies.

How a DTC hair color brand builds on its pandemic boom—behind Madison Reed's rise

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