Driving Growth through Omnichannel Presence and Product Innovation, with Aaron Zagha, CMO at Newton Baby

Transcript

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Lauren Livak Gilbert (00:00):
Welcome to Unpacking the Digital Shelf, where industry leaders share insights, strategies, and stories to help brands win in the ever-changing world of commerce.

Peter Crosby (00:22):
Hey everyone, Peter Crosby here from the Digital Shelf Institute. When last we met on the podcast in 2022, Aaron Zaga, CMO at Newton Baby, was selling some amazing baby mattresses through D2C. Four years later and a lot has changed. They've gone full omnichannel, expanded their product portfolio and built a community of parents that are sticking with them and their email list for years. Managing all that change takes a ton of rigor, controlling the bottom line while fueling top line growth. Erin walks us through with this journey on today's podcast. Welcome back to the podcast, Aaron. It has been a bit we are so delighted to have you on. Thank you.

Aaron Zagha (01:03):
Great to be back. It's been a

Peter Crosby (01:05):
While. And it's good thing you're here because a lot has changed since the last podcast. When we first talked to you, the company was a fast-growing mattress company, mostly DTC, and you've seen so much growth and you're expanding. So we want to talk through that change management and the transformation of that. So fill in our audience on where you are today and what has changed.

Aaron Zagha (01:29):
Yeah, so I mean to some degree, everything.

(01:35):
About a little over 10 years ago now, we were founded to commercialize a new crib mattress. And the journey since then, especially over the past three to four years, saw us really go from a crib mattress company to a baby sleep company. So we launched a whole host of ancillary products, Fascinats, Packet Place, Cribs, and now even further out into really just a baby and kids, mostly still sleep brand, but more and more lifestyle brand. We launched pet beds, we launched kids' mattresses and really just want to make sure that we're there for every step of the way for the parent towards the premium end who really wants peace of mind and the baby side and then wants safer, healthier, better products for her family going forward. And throughout that process, not only product launches but also channel launches. So we launched a bunch of wholesale really starting a year ago.

(02:37):
We were always wholesale with BabyList and the big baby registry site, but also Target in- store with end caps, Creighton Kids online, some other larger baby retailers in Canada. So we really went more wholesale, but with a mind towards being in- store predominantly and on end caps whenever possible. And then it all culminated last year with the sale of the company to Ashley Home Furniture. So it's been quite a journey. Wow. Can we

Lauren Livak Gilbert (03:11):
Go back to the fact that you have pet beds? I did not know that. Peter and I both have pets and me to look into this. This is new information.

Aaron Zagha (03:20):
Yeah, we launched them three or four years ago now because the now former CEO wanted to have puppies and babies on the same page. They're really expensive, super high end. They're awesome. Dogs love them, but it's hard to sell a $300 pet bed, I found out. So it's more discontinued at this point, but people who have them love them.

Peter Crosby (03:42):
Well, if you got any hanging around, we both have pets. If you want to get rid of surplus. Yeah,

Aaron Zagha (03:48):
Send it by legs. I hope they're big because we only have larges left, which are like-

Peter Crosby (03:52):
Oh, that's Lawrence then.

Aaron Zagha (03:53):
My

Peter Crosby (03:53):
Dog's

Lauren Livak Gilbert (03:54):
110 pounds and he has chewed through 15 beds, so let's see if yours is the winner.

Peter Crosby (04:03):
That is a lot of change, Aaron, in a short amount of time.

Aaron Zagha (04:09):
A lot of change. I think the last time we spoke, we were probably, I don't know, maybe a 15 or 20 person company. And at the time of sale, we were closer to 40 people.

Peter Crosby (04:21):
Yeah, our last conversation was 2022, so that's amazing.

Aaron Zagha (04:24):
Yeah.

Lauren Livak Gilbert (04:25):
So Aaron, you survived what I think a lot of people call the D2C apocalypse and you've made it to the other side, you've expanded, sold on different channels. You're now in store in some location, you have experiences. So can you talk a litle bit about how you approached those different distribution channels? How did you decide to do in- store and create those experience and do popups and how did you figure out those next steps?

Aaron Zagha (04:54):
At the very launch, which predated me by a couple years, the former founders launched in- store at BuyByBaby because they thought people really needed to feel and see and touch something like a crib mattress. And then as all the online mattress companies started, that was proven to really no longer be the case for everyone at least. And that coincided with the basic bankruptcy of buy-by-baby. And so we were D2C and Amazon only and that worked really well for us. During COVID, we took a ton of share. We were perfectly positioned to capitalize on that and so we grew incredibly quickly, but then our Hero product started reaching saturation. We are a premium product and we had pretty large market share of the premium crib mattress market. And so as we were launching new products, as we were looking for ways of reaching the people that we weren't already hitting up online, retail was a new frontier, ironically, in many ways for us.

(05:57):
And so a bunch of the large retailers had approached us, we had always said no because we wanted to remain D2C. And then we were in a position where we could dictate a little bit better terms and do it on the way that we wanted to do it. And I think an end cap in store is really the way we look at it, it's like a free giant billboard. And so if there are people who still really only want to buy things in store and touch and feel them at that point, Target seemed like a great place to do it. There was some overlap on our demographic. They skew a little higher income. So we said, sure. And the test went well. Again, it was really a function of us being able to dictate pricing and margins and terms that made sense for us as a business.

(06:45):
The reason we survived the D2C apocalypse was because we never raised outside money. We didn't have crazy VC money to blow up. So we always had to be profitable and we approached that channel the same way. And fortunately because we had built a national brand that a lot of their shoppers were looking for anyway, we were able to do that in a way that made sense.

Lauren Livak Gilbert (07:06):
And you were D2C first, so you were selling something that people couldn't touch and feel and you had such good success. And then you moved in store for people who could touch and feel it. I'm just curious, what did you learn from the digital experience that helped you create a better in- store experience because you had to recreate this understanding of what the mattress was,

Aaron Zagha (07:31):
Right? It's hard. And I think it's really tricky to understand customer journey when you go from D2C only to in- store also, especially because you go from getting a lot of data to getting very little. We don't have an app that tracks the location of every person who shops. Some brands, we don't have that. So it's hard to piece together. And I think we've always, well, at least for the past five years, had such large online ad budgets that we're getting in front of every pregnant woman in the country, our poor customer, 20 to 50 times a month. So at some point it's a little chicken and egg. We don't know if they first saw us on an end cap and then ended up buying online or if they saw us online and then ended up buying in store. It's really hard to tie those pieces back together.

(08:24):
But the point is we want to do as much education as we possibly can as intimately as we can. So that's probably through an influencer you follow or through a long-form video because our product is so differentiated, we really have to teach the difference and why it matters and why it makes a difference. And it's impossible to do that just in store on a package. Maybe some people go through and read every line of a package and we certainly design our in- store packaging to do that as much as possible, but that's still a static label or two on a relatively big package in our case for the crim mattress. It's never going to be as persuasive or as thorough as a three-minute Instagram reel. So we do the best we can, but really we look at it as another touchpoint in the customer journey, but also one that needs to sell the entire thing if the person is going to the store because they need to pick something up today and they can't even wait for Amazon.

Peter Crosby (09:25):
Have you thought much yet about, because we sort of added another shopper to the mix really, which is the machine shopper, the new agentic conversation of the shopper goes and asks a mission, a question rather than ... And all of a sudden in that moment they want all the stuff, the video reel, all of that. And do you feel like that you have a potential advantage in that sort of fight for the recommendation because of your rabid customer base, all the content that you have? Or how are you feeling about that? Have you spent a lot of time thinking about it yet?

Aaron Zagha (10:04):
Yeah, I mean, we do, absolutely. And the nice thing about being a part of a bigger family like Ashley Furniture is that they have the very fancy tools to measure it and really track it and a team dedicated to it and they're incredibly AI forward more so than any other organization, frankly, I've heard of that's outside of tech. And so the nice thing about where we came from is that in large part, the AEO or GEO, whatever you want to call it, largely follows SEO and we always put SEO very near the top of our priorities. And so we have a huge blog, we have huge communities. We were always moderating Reddits. So we were already doing the things that the answer engines used to surface their answers. So we were already in a pretty good place, but we've made absolutely sure that we continue to do best practices for those guys too.

(11:05):
So we've redone a bunch of our sites to make sure that we're friendly to their crawlers, that our FAQs makes sense for what people are actually asking on those platforms as well. It's absolutely top of mind, probably disproportionately so relative to the size of the opportunity at present.

Peter Crosby (11:23):
Right now, yeah, it is definitely a longer term investment that you're making and I can sense the empathy from a bunch of our listeners who are not as fortunate to be at organizations that are ... I believe they move as quickly or have the knowledge. And so the combination of Ashley and you guys just seems really powerful there. And so we've talked a bit about you expanding into other products and other categories. Can you talk about, can the new products be entry points have you found? How does that journey work?

Aaron Zagha (11:59):
Yeah, so it's interesting. I mean, largely the decision process for us is when the woman's deciding on her registry, that's when she does the research, but some of the things are a little earlier even than that. So from a flow perspective, we find that the first thing she does when she finds out she's pregnant is starts thinking about the nursery. And the first thing decided upon for the nursery is a crib. So we started selling cribs about a year and a half ago now and those are super, super top of funnel early purchase, early decision that happens on Pinterest. So we ran Pinterest probably more than most of our competitors because we wanted to make sure that we were at that point in time, that consideration. So the crib's proven to be a great one for making sure that we're addressing the earliest possible consideration point in that process.

(13:00):
Another one we thought about was the pregnancy pillow, but it turns out you don't need a pregnancy pillow until much later in the process. And so we thought it could be an opening point, but I think we didn't really think through exactly when the pregnancy pills were most often purchased, and it turns out to be a later one. The bassinet's another one. Some people are procrastinators, yours truly included and it's like, I don't want to deal with this. I just need whatever I need when I come home from the hospital. This is too overwhelming. So I have to have a place for the baby to sleep. Let me just get a bassinet. I'll deal with the crib later and the crib mattress. So the bastet has proven to be by far and away our highest LTV product because once you understand why our mattresses are different and why sleeping on Newton is better for your baby and you buy the bassinet, you're going to buy all of our products, but it may be that you just buy a bastinet for now until six months later when the baby's growing out of the bassinet, and then you buy the crib and crib mattress and everything else.

Lauren Livak Gilbert (13:57):
And did you think about all of these entry points as new opportunities for growth or was it just a natural evolution of there's only so much target market for a mattress? Because growth is a big topic that we talk about now. Where's the growth going to come from? Especially when you started in a D2C world, it's a very big focus. So how do you think about growth as you're attacking these channels and entry points holistically?

Aaron Zagha (14:23):
Yeah, so I mean some things were just naturally obvious. We started with a crib mattress, but most moms don't start with a crib. They start with a bassinet. So the bassinet was just super obvious, low-hanging fruit. It's also used when the baby's tighter and the suffocation versus actually is higher. So that was just a no-brainer. It was easy. And then same with the travel crib back and play. It's another place for the baby to sleep, especially when you're traveling, you don't have your ... So making sure that we're addressing safety in those critical moments when parents need the most peace of mind, that was easy. Now we're at the point, and especially once those get to scale and the bassinet and PacketPlayer are still scaling pretty well, so there's still room there. But our roadmap for the past few years has really looked two different ways.

(15:10):
Number one, how do we continue to grow our share of wallet at that moment in time in the registry decision process and in the infant baby sleep category and related products? And then how do we make sure that we're extending LTV also? We're great at acquiring that customer, can we sell them more at the point in time when we're acquiring them? And that's bundles and upsells and things like that. But then also, how do we make sure that we're capitalizing on that relationship and selling them whatever it is they really need as the child grows? And so that's the second vector. And the first thing we really did on that kind of direction was the kids' mattress, which is a little janky because that leaves us a three-year hole in between when the baby's born and they grew out of the crib. So we had nothing to sell in between.

(16:02):
We still kind of does it, but we're working on that. Damn it.

(16:04):
But the great thing about our brand is that people, it seems to resonate and we've always put out content and we do Facebook lives with experts and education, but so the nice thing is they don't churn off our email and SMS lists. So we've found it to be the case that three years later they actually are buying our kids mattress and we're like, oh, hey, maybe it's time for the big kid bed, would you consider a mattress? And we'll guarantee the easiest transition from crypto Big Kid Bed with no sleep progression because it's the exact same mattress basically. So yeah, growing with the child is the next growth plan.

Peter Crosby (16:44):
All these new products and the fact that you're bootstrapped essentially, you're working off your own thing makes me think about two things. One is the organizational and process change management to grow this product line, but keeping your balance sheet in line as well, the bottom line part of it. I'm just wondering how you manage that. What has that changed been like to be able to introduce new products and yet not bust the bank? Yeah.

Aaron Zagha (17:17):
I mean, look, again, because we had to have that discipline from the very beginning, my mandate was always make sure we were breaking in or profitable. That's always been part of the DNA. And so we've never really had to struggle with cashflow. And part of this hurts us too because some of our major product launches that went better than planned, we stocked out because we didn't make multimillion dollar investments in inventory out of the gate. We didn't really know how they would do. So we launched AllStages crib last summer and it sold out in three weeks and we wanted to make sure that we had some customer feedback and saw how it performed, return rates all that before really ordering in. So we were out of stock for four months and that's the downside of being financially conservative is that we lost millions of dollars in sales by being out of stock for that period of time.

(18:17):
So it's been tricky. But again, when things don't go so well, it's helped us. And we never ran out of cash in search place and had to shut down and liquidate. So there's that.

Peter Crosby (18:30):
There's that. Yeah.

Lauren Livak Gilbert (18:32):
Pros and cons to everything, right? Pros and

Aaron Zagha (18:33):
Cons.

Lauren Livak Gilbert (18:34):
Well, so you talk a lot about getting consumer feedback and educating and there's a big community element to your brand. And can you talk a bit about ... I think community's so important and a lot of brands are starting to realize that because they get access to the consumer and you get feedback and you can ask questions. How did that come about and how are you using that community element to help drive lifetime value?

Aaron Zagha (19:00):
Yeah, I don't even remember the impetus for starting our Facebook moms group, but Kayla and my team, I think came up with Vidia and it's been an amazing success for us. There's 70 plus thousand moms in there now. There's hundreds of posts today, people just asking for advice helping each other out. It's amazing. But the nice thing about it is that not only are we able to help our customers and communicate with them regularly, but they help us in return. So I don't think there's been a single product that we've launched that we haven't used the group for feedback, whether it's color, feature, price, positioning, whatever.

(19:41):
We use them extensively for the product development roadmap and that's been amazing. We thought about changing a color on an idon. We used to only have one color for everything pretty much. And we got insight, I think there were a couple thousand votes that completely upended what we had thought and that was amazing and really helped us in terms of understanding ordering quantities, things like that for a product that hadn't launched yet. So it's really been tremendous and it's really just nice. It's a really positive place. There's no parent shaming allowed. It's really great. And just seeing it become a self-sustained community has been awesome.

Peter Crosby (20:24):
I think looking back at your career, you spent a while at Teleflora, you've been in other categories. I'm wondering how you think about that just in terms of your own kind of career. You were JP Morgan for a while in your earlier career. We talked about that in the last podcast. How do you think about the overall arc of your career?

Aaron Zagha (20:46):
Truth be told, I started life as a finance guy and all I really cared about was the financial aspects of things and I didn't really know that I had a preference on what industry to be in or anything else. And then I ended up working at Teleflora, which was super interesting and big company and unique in that so much business is done on two days and it's impossible to do those two days well and inevitably there are screw-ups and the only time you hear from your customers is when they're angry at you. And so we got- And you

Peter Crosby (21:22):
Can get that at home,

Aaron Zagha (21:23):
So you don't need that at work. Well, that's when you order Teleflora.

Peter Crosby (21:27):
Yeah, exactly.

Aaron Zagha (21:30):
But all of the customer feedback was largely negative and sometimes toxically so because these were relationships that maybe people really thought that if they screwed up the flowers, it was saying something about their relationship. So they would get really passionately angry. There's a

Lauren Livak Gilbert (21:51):
Bigger problem there.

Aaron Zagha (21:52):
We're another podcast. Oh my God. And also I worked in Australia and so I would listen to some of the calls we would get and it was just like F bombs all over the place, you effing ruined my life, whatever. So I went from that to Newton, which is the exact opposite where- It's like Mary Poffins with

Peter Crosby (22:13):
Birds chirping.

Aaron Zagha (22:16):
It's really amazing. We really give parents peace of mind and they're incredibly thankful and they're vocal about that. And I went from a place where reviews were largely negative to nearly pristinely perfectly positive and it makes a difference. I had no idea. I thought I was a financial mercenary banker type, but it really makes everyday better. It's nice when people were like, "Oh my God, you were working Newton Baby. I love it. I love your products you get something best." But it's really made a big difference to the day-to-day job satisfaction levels.

Peter Crosby (22:51):
I can so identify with that because earlier in my software career I was in the security software space and those are folks, God bless them, super smart knowing that they don't want advice from anyone. They certainly don't want to engage on what they're talking about. That's the joy of being in this community is that everyone's just trying to figure it out together and it's hard. And we can all commiserate and then just try to fix it. And so to that note, I really want to thank you for being on here because this sort of giving back, showing up and representing and talking to our community about what you work through and how you think about it is incredibly useful and we're really grateful.

Lauren Livak Gilbert (23:42):
Thanks, Erin. Of

Aaron Zagha (23:43):
Course.

Peter Crosby (23:44):
Thanks again to Aaron for joining us. Communities can be pretty powerful and we hope you'll join ours, digitalshelfinstitute.org and thanks for being part of our community.