Things are not always as they seem in the dietary supplement marketplace.

The supplement industry needs a paradigm shift. Here’s how your brand can lead the way.

Born out of an obsession with muscle building, my career in the sports nutrition industry began in the early 1990s. (For a trip down memory lane read this.) I was naive and idealistic, yet I managed to work my way up thanks to an insatiable hunger for knowledge and taking on every challenge I possibly could, particularly if I had no prior experience doing it. Move fast and break things, right, Zuck?

Over the course of 20+ years while working with 30+ brands, I’ve learned how to consistently add value to almost every facet of the business: brand and product ideation, formulation, clinical studies, manufacturing, creative direction, marketing, copywriting, legal and regulatory, sales and distribution, finance, you name it. I’ve made plenty of mistakes, enjoyed some outsized successes 🔥 and developed an ability to see the “white space.” All of which brings us to today.

[Note: Although the bulk of my career has been in sports nutrition, much of what is said below can be applied to the dietary supplement space (if not consumer packaged goods) more broadly; thus, I use the terms “supplement industry” and “supplement marketplace” to encapsulate it all.]

“Hope in a bottle”

While it’s far from alone in this regard (hello, cosmetics), as a veritable “insider,” I can attest to the fact that the supplement industry frequently shortchanges consumers using a variety of practices, some unintentional, many not so much. A colleague once described it to me as “selling hope in a bottle.” Economists politely use the term “information asymmetry”: The producers know more than the consumers. This allows them to charge higher prices for lower-quality products. Ultimately, everyone loses. 

We’re all getting less out of this than we could be.

I’ve witnessed information asymmetry and its negative effects up and down the supply chain, to varying degrees 🙈: brands, contract manufacturers, ingredient suppliers, distributors, retailers and more. It is as pervasive as it is pernicious. While it may juice sales in the short term, it disempowers consumers, stifles innovation and limits the growth of the supplement marketplace as a whole. The result is that we’re all getting less out of this than we could be. 👎 Gordon Gekko might be proud. Elon Musk or Harvard Business School professor Michael Porter (take your pick) almost certainly would not be.

In recent years, some supplement brands have made efforts to reduce information asymmetry, such as by foregoing the use of proprietary blends on product labels. These attempts at “transparency” are typically superficial at best. In many if not most cases, they continue to practice the same old smoke and mirrors, shortcuts and slights of hand.

It’s time for a paradigm shift.

Perhaps now more than ever, the world doesn’t need another supplement brand; it needs a new one that ushers in a paradigm shift by being straightforward, honest and open with consumers to an unprecedented degree. I refer to this as an Above-Board Brand.

Above-Board Brands are the antidote to information asymmetry.

Rather than declaring “transparency” while paying it lip service, Above-Board Brands embody it in their everyday actions. They openly share their knowledge while acknowledging the limits of it. This empowers consumers and accelerates innovation and value creation while helping to elevate and expand the supplement marketplace as a whole. The result is that we all get more out of this.

Below, I’ve provided 7 recommendations for how you can create your own Above-Board Brand. This is just the short list. 

Some of you may read the list and say “Other brands aren’t doing this, so why should we?” or “Yeah, we’re not ready for that.” First, the fact that no other brand is doing all (or most) of these things is evidence that there’s plenty of white space. Second, in the spirit of Jeff Bezos, the time to become an Above-Board Brand is before you have to. Third, if you’re not ready, then you’re probably part of the problem. Wouldn’t you prefer to take the lead now, rather than watch as someone else captures market share by doing it before you? (“Uh oh.”) Rest assured, it’s only a matter of time. ⌛ 

So here they are…

Use these 7 steps to build an Above-Board Brand that makes the competition say “Uh oh.”

1. Talk with consumers, not at them. 

As my wife regularly reminds me, “It’s called having a conversation!” (emphasis hers) Too many supplement brands talk at consumers rather than with them. For instance, product development takes place largely by diktak (“You want this product because we say you do”), unilaterally imposed with little or no input from consumers. This is ironic, since conversation is the single most powerful way a brand can uncover consumers’ unmet needs and differentiate itself from the competition.

Conversation is especially critical in the supplement marketplace. Unlike, say, apparel, cars or, more recently, digital gaming platforms, supplements are rarely used in a social setting. For the most part, they’re consumed privately, especially at home. Nor do they come with an on-board computer capable of relaying the user’s behaviors back to the producer -essentially, a form of “conversation”- like, say, a Tesla. (More on this later.) 

Up your conversation game.

Recognizing these things, Above-Board Brands are always trying to up their conversation game. Going a step further, they encourage consumers to actively participate in shaping and molding their brand to create the products they want rather than the ones they think consumers want. No more product development by diktak. (This can also be extended to marketing.)

2. Get rid of friction.

Above-Board Brands constantly hunt for friction and try to figure out how to create value by reducing it. When it comes to product development, for instance, they know that their success will ultimately be determined by their ability to solve problems that consumers actually face IRL (in real life), not those fabricated in a marketing meeting.

Sports nutrition has a colorful history of creating products and using marketing tactics that add friction to consumers’ lives rather than subtracting it. Think night-time fat burners (and proteins), “stacking,” nutrient partitioners, cortisol blockers, myostatin inhibitors, AM/PM [insert product here], “intra-workouts,” “post-workouts,” and auto-subscriptions, to name a few.

Fiction is friction. 

Above-Board Brands know that fiction doesn’t just disempower consumers; it also makes their business operations run less efficiently. Fiction is friction.

I can’t tell you how much time and money I’ve seen wasted by supplement companies trying to fabricate a “brand story” or “mission statement” when they could have written a far more compelling version -by themselves, sans writer- based entirely on the facts.

I know as well as anyone that consumers love stories. We all do. It’s in our DNA. Facts? Not so much. However, the evolutionary biology of our species doesn’t justifying making sh*t up. So don’t. 

The best stories are built with facts.

When you’re honest and open, you can always find a way to tell a compelling story, whether it’s about your brand or your products (see “Just the Supplement Facts, please,” below). The best stories are built with facts. 

The “Refundless Guarantee”

Sometimes friction is staring you right in the face. Consider refunds. They’re a source of friction for all parties involved, not to mention the negative environmental impact. For a brand, refunds can be particularly costly. One study estimated that 10% of retail sales were returned in 2018, amounting to about $369 billion.

In light of the level of information asymmetry in the marketplace, it’s no surprise that consumers are often hesitant to purchase supplements. They may fear that the product won’t live up to expectations (e.g. claims) or that it might cause an adverse reaction (e.g. upset stomach), among other concerns

As a stepping stone to the purchase of a full-size product, many supplement brands offer samples, but why not try doing it a bit differently?

An Above-Board Brand might call it “The Refundless Guarantee”: Instead of giving away samples for free, it sells them to consumers at cost and promises that 100% of the money saved will be passed along in the form of lower prices. Consistent with the Above-Board way, all costs are disclosed (see “Cost Transparency”, below) so that consumers can see that there is no smoke and mirrors involved. You might be surprised at how warmly consumers receive such an offer.

3. Just the Supplement Facts, please. 

Product claims are such an egregious source of information asymmetry and friction in the supplement marketplace that they deserve their own treatment. 

As someone who has read more than their fair share of scientific studies and been heavily involved in the product development and marketing sides of the industry, I’m the first to admit that there are things we know about how the vitamins, minerals, amino acids, botanicals and other ingredients used in dietary supplements behave inside our bodies, and a heck of a lot more that we don’t know, not to mention that Rumsfeldian type of unknown, the “unknown unknown.” 

What does this mean for becoming an Above-Board Brand?

Put a study on it.

Specifically, don’t make claims about your products unless they can be scientifically substantiated. Read any study that you intend on using as substantiation yourself and make sure you understand its implications and limitations. Share this information honestly and openly with consumers.

In the case of a single-ingredient supplement, don’t attempt to use a scientific study to substantiate your claims unless your product:

  1. contains the identical ingredient used in the study and 
  2. provides the identical dose used in the study when used as directed on the product label. 

This is especially important in the case of complex natural materials, such as botanicals, proteins and probiotics, which can vary significantly in composition. For instance, an Ashwagandha, green tea or turmeric extract from one source is unlikely to be identical in composition to one from a different source. Therefore, the results of scientific studies on these types of ingredients are frequently not generalizable. Many consumers may not realize this. An Above-Board brand lets them know. 

The functionality of the parts doesn’t necessarily equal that of the whole. 

In the case of a multi-ingredient supplement, don’t attempt to use scientific studies on individual ingredients to substantiate claims that you are making for your formula as a whole. The functionality of the parts does not necessarily equal that of the whole. Unless the efficacy of your formula has been scientifically validated, you shouldn’t make claims implying that it has.

“These guidelines are too limiting. There will be nothing left to say about my supplements!” you may say. If that’s the case, either your supplements are part of the problem or you’re failing to see the many things that you could be telling consumers about them that don’t amount to fiction. Again, the best stories are built with facts. Limitations are opportunities in disguise. 

Limitations are opportunities in disguise.

Here’s a personal example. Many years ago, I coordinated a small proof-of-concept study for a client involving one of their weight-loss (“fat burner”) supplements. The study was conducted by a respected academic institution with expertise in this sort of thing. The results showed that the product did not work as intended; it lacked proof of concept. Nevertheless, the client went ahead with selling the product to consumers while making claims to the contrary.

An Above-Board Brand would handle things much differently. It would see the “failed” study as an opportunity. For instance, they would submit it to a peer-reviewed scientific journal. They would share the study with consumers and openly discuss how they intend on using the insights gleaned from it to develop and test another version of the formula, maybe this time with their active participation. And so on. Imagine how much trust and brand loyalty this approach would engender, and the opportunities to innovate and create value that it could uncover, versus burying the study like it never happened.

No “window dressing.”

Dealing in Supplement Facts, not fiction, also means not engaging in “window dressing.” This refers to intentionally underdosing an ingredient so that it can be declared on the label, thereby enhancing consumer appeal, without materially increasing costs. While consumer pushback against proprietary blends has made window dressing less common, it still goes on, often in broad daylight. (I’ve witnessed many more tricks of the trade, but for the sake of length, I’ve left them out.)

Just to be clear, it is acceptable for an Above-Board Brand to use a sub-clinical dose of a clinically studied ingredient in its supplements. What makes it acceptable is that they are honest and open about it with consumers. Disclose and grow rich. The truth yields trust yields profits. Or

TRUTH → TRUST → PROFITS

4. Cost Transparency

Note that I used the term cost, not price. When consumers buy dietary supplements, they can see the price. What they can’t see are the costs behind it. 

As the name suggests, cost transparency involves itemizing the costs incurred in making your supplements (in $) on the label, online product pages and other consumer touchpoints. The following list is not exhaustive:

  1. Ingredients (ex-flavor)(you can break these out individually if you like)
  2. Flavor system (if applicable)
  3. Packaging & label
  4. Manufacturing (e.g. blending or encapsulation)
  5. Testing & certification 
  6. Shipping
  7. Profit (though not technically a cost, it is helpful for consumers to see)

So why would you want to share your costs with consumers in the first place? A better question is, why wouldn’t you? 

Supplement prices transmit crappy economic signals.

As I mentioned above, the supplement marketplace is far from alone in suffering from information asymmetry. (I’m reminded of this every time my wife comes home with another skin cream. 😠) Still, it’s definitely got a worse-than-average case of it. At the risk of oversimplifying, this can largely be explained by the fact that the barriers to entry for supplement brands are relatively low and industry regulations (or lack thereof) are such that many of them indulge in misleading practices largely because they can get away with it. As a result, the economic signals transmitted by supplement prices are generally pretty crappy. This causes consumers to waste a great deal of time and money. 

Cost transparency to the rescue.

As a supplement brand, when you get a quote from a contract manufacturer to make a product for you, it usually consists of a single number. If you’ve ever been fortunate enough to get a quote with the costs itemized, you know how much more helpful it is. It makes you feel a lot more comfortable about doing business with them.

Indeed, a regular (non-itemized) quote transmits regular-strength economic signals. But a cost-transparent quote opens up the signal floodgates; it transmits economic “super-signals.” Alas, this is a rare treat. I can count on one hand the number of contract manufacturers that have provided me with an itemized quote. Some will do it (those are the ones I work with), but it’s not the norm.

Now imagine if you were to itemize your costs for consumers in an honest and open fashion that they could understand and appreciate. This would allow you to send them economic super-signals. In turn, they could send super-signals back to you. Both parties  could uncover unmet needs that they would otherwise be blind to. It’s a win-win. That’s cost transparency in action.

Above-Board Brands are the master of the super-signal.

It gets even better. Indeed, it’s not just the supplement brands and consumers who benefit from cost transparency. Those economic super-signals eventually reverberate throughout the entire supply chain, back and forth between brands, contract manufacturers, ingredient suppliers, distributors, retailers and so on. This encourages, and indeed puts pressure on, the members of the chain to innovate and create value, which ultimately elevates and expands the marketplace as a whole. The result is that we all get more out of this. This is one reason why Above-Board Brands can be such a powerful force for change in the industry.

Here’s a rudimentary example. Let’s say an Above-Board brand creates a pre-workout supplement in the form of a powdered drink mix. Upon reading the product label, consumers see that the flavor system makes a rather large contribution to the selling price. In response, many request an unflavored version. The brand decides to do so and passes the cost savings along to consumers in the form of a lower price. Of course, depending on the level of engagement a brand has with consumers and its supply chain, the possibilities for creating value can go far beyond this. 

You might be saying “Our contract manufacturer won’t provide us with a complete breakdown of costs like you described.” In my experience, there are manufacturers that will provide it, but it may come at a cost (the pun was unavoidable). Remember, transparency begets transparency. Openly explain to them what your brand is trying to accomplish. If you still can’t come to a reasonable agreement, take your business elsewhere. 

One thing I’ve learned is that if you experience difficulties at the beginning of a business relationship, there’s a good chance you’ll experience them throughout. It’s usually best to nip it in the bud.

Draw a picture.

You can find plenty of examples online showing how cost transparency can be communicated effectively using infographics. Everlane uses a simple one. Here is one for petrol (gasoline) and here is one for a t-shirt. Oh, and check out this one for a Nike shoe. (I especially like the last two.) While these particular infographics are better suited for online product pages where space is less of an issue, each contains elements that can be adapted to fit the confines of a supplement label. Where there’s a will, there’s a way. 

5. Ingredient Transparency

The internet has made it clear that consumers want supplement brands to share more of what they know, and don’t know, about the ingredients they put in their products. Above-Board Brands don’t wait for them to ask. 

Similar to cost transparency, ingredient transparency involves disclosing the typically undisclosed details about every ingredient in your supplements, such as who produces it and where, along with a certificate of analysis (COA) and possibly other documents. This information should be made readily available to consumers online.

Also like cost transparency, ingredient transparency elicits economic super-signals that reverberate up and down the entire supply chain, ultimately benefiting consumers and everyone else. For an Above-Board Brand, it’s a no-brainer.

Changing ingredients? Tell them!

Importantly, whenever its ingredients change, an Above-Board Brand lets consumers know. (“Supplement Facts, not fiction.”) For instance, if you decide to get an amino acid or botanical extract from a different source because it will reduce your COGs, explain this to consumers and indicate how it might impact the product’s efficacy and/or other aspects of the user experience. This should go without saying, but a lot of brands neglect to do it, often intentionally. If you’re uncomfortable disclosing such information, it’s likely because your decision isn’t in the best interest of the consumer. In which case, it’s not in the best interest of your brand.

In an ideal world, the details of the ingredients you use in your dietary supplements might be stored on a “trustless” blockchain. Alas, the industry doesn’t appear to be remotely close to doing this. In the meantime, you’ll have to collect them the old-fashioned way. Often, this means requesting the information from your contract manufacturer, who in turn may ask the ingredient supplier, who in turn may ask the ingredient manufacturer. Each step requires the assumption of additional trust, not to mention time and frequently some frustration.

You can always take sourcing into your own hands, of course. I’ve had clients who did this. It isn’t easy, but nothing worthwhile is. The upside is that it gives you more quality control and another fact-based feather in your hat to strengthen your Above-Board Brand story.

6. Endorsement Transparency

If you compensate an influencer or any other party for endorsing your brand, disclose the nature of the relationship to consumers. For instance, how and why did you choose that individual to endorse your brand? Were they already using your products, or did you just like the fact that they’re pretty or have big muscles (maybe both)? Are you paying them with cash, a commission, in product, or otherwise? 

“But this kind of information is private!” Why? What makes you say that? Don’t think of it as divulging “private” or “sensitive” information. Think of it as a means to build an even more compelling story about your brand based on facts, not fiction. That’s the Above-Board way. Disclose and grow rich.

On a related note, if you’re a sports nutrition brand and you share the exercise or diet habits of your influencers with consumers, don’t make sh*t up. Consumers want to know how they actually exercise and eat IRL, not tales of fiction intended to fool them into buying your supplements. If an influencer doesn’t actually take three of your products every day, don’t imply that they do. The cracks in your story will eventually be seen. In fact, they already have: The influencer sees them and you see them. Don’t be part of the problem. Be part of the solution.

Finally, Above-Board Brands know that it’s better for business if they select influencers who share their values (e.g. honesty, openness, integrity), and they allow them to actively participate in achieving their mission. Good looks or big muscles alone aren’t enough.

7. It’s time to tech up.

If you follow Warren Buffett, you know that he’s fond of brands that have a “moat”; i.e., an enduring competitive advantage. 

Building a moat around a supplement brand isn’t terribly easy, which probably explains in part why Buffett doesn’t seem all that interested in investing in one. This is due to a number of challenges facing the supplement marketplace, among them:

  1. Relatively low barriers to entry ensure that there are always lots of competing brands. You can start a supplement brand fairly easily with $10,000.
  2. All supplement brands must largely choose from the same list of DSHEA-compliant ingredients to formulate their products with. (*DSHEA = the Dietary Supplement Health & Education Act)
  3. Little differentiation between brands: This is partly due to 1 and 2, but also other factors.
  4. Network effects are basically zero: A network effect occurs when the addition of another person to the network makes it better. Think Massively Multiplayer Online Games (MMOGs) and Facebook.
  5. Switching costs are basically zero: E.g., the costs of leaving Facebook for another social media platform are pretty steep if all of your “friends” are on FB. In contrast, there’s little to stop most consumers from switching from one supplement brand to the next. Most supplement users are not very brand loyal (with good reason) and tend to shop more on the basis of price.
  6. Supplements are “asocial”: They’re generally not consumed in social settings. To boot, in the case of sports nutrition, the exercise modalities practiced by most consumers tend not to be very social. (For instance, bodybuilders generally don’t train in groups. Crossfit involves groups, but “Crossfitters” traditionally have not been big adopters of dietary supplements.) This has a number of negative knock-on effects.
  7. Lack of feedback effects: When you hop on Facebook, Zuck and his team of engineers can (and do) track your every behavior. Similarly, when you get behind the wheel of a Tesla, the on-board computer collects data on your driving habits and transmits it back to Elon and the gang. Supplements? No such tech.

Build a better moat with tech.

Supplement brands need all the help they can get in overcoming the challenges listed above. Above-Board Brands know this, which is why they’re always looking for ways to incorporate tech into their business. It can help them build a better moat while elevating and expanding the marketplace as a whole. 

You can look at the most popular digital games for ideas. They allow users to immerse themselves in an environment replete with network effects, switching costs, social elements, feedback effects and more. Even if you’re not actually playing a game, you can feel like you’re participating (e.g. Twitch). Properties like these would make the supplement experience much more appealing to consumers. The knock-on effects could be tremendous. 

It’s not just the consumer-facing side of things where tech can help you build a better moat. For instance, think about all the steps you have to go through to bring a supplement to market. Many of the processes (if you can call them that) feel unnecessarily old-fashioned. There’s inefficiency and information asymmetry around every corner. 

I’m not a coder (I spent a few minutes watching a Python tutorial on Youtube), but surely there must be a way to create a digital platform that allows you to, say, get a quote from a contract manufacturer more efficiently. On a related note, I’ve been saying for years that it’s only a matter of time before supplements are formulated by AI. 

Conclusion: Come to the Above-Board side.

I hope that I’ve given you lots to think about. Indeed, every one of the 7 steps I provided above can be applied in many different ways, at many different levels. 

It bears repeating: It’s time for a paradigm shift. The world doesn’t need another supplement brand; it needs a new one, an Above-Board Brand.

Taking the high road, particularly before you have to, will allow you to capture market share from those that don’t. Jeff Bezos supposedly said, “Your margin is my opportunity.” I say “Your information asymmetry is my opportunity.”

But it’s bigger than that. As discussed, every new Above-Board Brand that comes into existence puts more pressure on the entire supplement industry to innovate and create value. (Let’s face it, it needs a BIG nudge.) This helps elevate and expand the marketplace as a whole so that we all get more out of it. Isn’t that what we want?

Fiction is friction. Take the path of least resistance. Come to the Above-Board side. ✊

TRUTH → TRUST → PROFITS

Please follow me on Twitter @Robthoburn.

Respectfully,

Rob Thoburn, 8/12/2020