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Ep. 91 - The Methodical Approach to Scaling Your Business with Dr. Kourosh Maddahi

Dr. Kourosh Maddahi is an entrepreneur and one the most well known dentists today. For the past 33-years, he has created smiles for many of Hollywood's top stars. 

He has been featured on Oprah, CNN, Entertainment Tonight and has appeared as a Dental Expert on CBS, NBC, ABC, and the Doctors. He is also the founder of startup, Lumineux Oral Essentials, a dentist formulated and certified non-toxic oral care brand. 

He is also the founder of Lumineux Oral Essentials, a dentist formulated and certified non-toxic oral care brand. 

In This Conversation We Discuss:

  • [00:00] Intro
  • [01:22] Dr. Kourosh’s Ecommerce journey
  • [06:54] Most brands have similar “origin stories”
  • [07:35] Sponsor: Postscript postscript.io/install
  • [08:23] The progressive growth of Lumineux
  • [13:45] Owning your customer relationships
  • [17:28] Sponsor: Klaviyo klaviyo.com
  • [18:07] Pros and cons of Amazon
  • [22:36] Selling people what they want
  • [23:15] Sponsor: Gorgias gorgias.link/honest
  • [24:03] Lumineux’s early ad spend budget
  • [26:04] What your motivation should be for a CPG business
  • [26:49] Getting started with your marketing message
  • [29:00] Growing a DTC CPG brand is not easy
  • [31:31] Where to find Dr. Kourosh and his products

Resources:

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Transcript:

Dr. Kourosh Maddahi  

You want to create something (a product) that doesn't really exist or exist in a flawed way and you found a better way that you can make it.

Chase Clymer  

Welcome to Honest Ecommerce, where we're dedicated to cutting through the BS and finding actionable advice for online store owners. 

I'm your host Chase Clymer, and I believe running an online business does not have to be complicated or a guessing game. 

If you're struggling with scaling your sales, Electric Eye is here to help. To apply to work with us visit electriceye.io/connect to learn more. Now let's get on with the show.

All right, everybody. Welcome back to another episode of Honest Ecommerce. Today we're welcoming to the show another amazing founder, Dr. Kourosh Maddahi, the founder of Lumineux Oral Essentials. Welcome to the show, doctor. 

Dr. Kourosh Maddahi  

Thank you so much. Thank you for having me.

Chase Clymer  

Oh, I love having founders on. And I would have to go back and look, but I think you might be the first doctor I've interviewed. So you get that title.

Dr. Kourosh Maddahi  

Oh, wow. That's great. Thank you. (laughs) I'll take it.

Chase Clymer  

So I guess let's just get into it and start at the beginning. Obviously, I'm assuming. In the beginning, did you assume that you're going to start an Ecommerce business alongside your practice or how did this idea evolve?

Dr. Kourosh Maddahi  

Yeah, so I have been involved in creating companies before. So I created a digital marketing company. I had created a background check on a doctor's type of company. So creating companies I have done before.

But I had never thought of creating anything in the Ecommerce world or creating something that would be a consumer packaged goods --CPG-- company. [I] never thought that would be in the personal care type of products for consumers. 

And how the whole concept came about is that I've been a practicing dentist in Beverly Hills, California for 33 years. And I kept having problems and issues with the treatments that I was providing to my patients, in terms of the products that were out there. So one of the main issues was the chronic inflammation and bleeding gums. 

And there were many patients that we couldn't really handle: the bleeding gum aspects of it or [if] they had dry mouth. And we couldn't really handle it. And I started to look into the different products that are out there. And I use the ones that are FDA-approved, to the major brands, to natural products. 

And no matter what I was using, there seemed to be something missing, something not working. And I really got into the whole concept of looking at the products and their ingredients. And all I was trying to do was help my own patients. I wasn't thinking about packaging [or] anything for anybody else. 

So I started my journey and started to look into the ingredients. And I started to talk to different researchers. And then there was one particular colleague --his name was Dr. Nowzari-- who happened to be the former chairman of the Advanced Perio, which is a gum surgery department at USC - University of Southern California. 

And I asked him about "What do you give your patients?" and he was talking about sea salt with water. And I was quite amazed by this sea salt. "But Barry, you're a famous gum surgeon in Beverly Hills and you give sea salt water to your patients? Well, what's the science behind it? I've always known about sea salt and all that. But what was the science [behind it]?" 

And he started to tell me about the 10-year study he did and how he was able to treat homeless kids in Manila that were suffering from gum disease by having them drop sea salt on their gum twice a day. And he followed them for 10 years and the disease had stopped yet the bacteria was still there. 

So I started to look into sea salt. And then as I researched the different salts, I found that the sea salt has the highest level of minerals, which is 86% mineral. And that became the signature ingredient. 

And then I researched some more, organic aloe vera, and some organic mints such as wintergreen, mint, and peppermint, and these types of things and I came up with one formulation that I mixed in my own conference room. 

And I started to give my patients that mouthwash. And what was so amazing is that after a week of using it and coming back that gum color, the bleeding, all of that had changed. And I said "Well, this is interesting." So I borrowed some. 

I gave it to some of my friends and they started using it on their patients and they had similar results. And that was the initial journey. So somebody suggested "Wow. This is so good. Why don't you create this mouthwash and sell it?" 

And I had no idea how you would do that. So my first idea was... Maybe I'm just gonna test it, I've got to bottle it, and maybe put it on Amazon

That was my first thought process, "Let's test it on a platform that already [has] people [going] there. So getting the whole... Finding a manufacturing [company] that does low volume mouthwash, and then finding a company that also formulated for mass production, because I didn't want any preservatives in it. I didn't want any artificial color. 

And I wanted to basically have a type of a product that was both safe, which means that it is certified non-toxic and also effective. And what I had found was that the major brands have a lot of clinical research behind it. And the natural brands have no clinical research. 

So I started to do some research and joined up with a University, --the University of California at Irvine-- and their research department and we started to the blind studies with our mouthwash. And we found that as you're going head-to-head with the FDA-approved mouthwash, you had similar sort of results of plaque reduction, bleeding went down and all of these different things. 

And they said, "Well, this is great." So we start with that one mouthwash, we put it on Amazon, and after a while we see that more and more people are using it and a number of people are leaving amazing reviews. And that was the initial foray into the Ecommerce world and selling products.

Chase Clymer  

That's an amazing story there. It rings true that oftentimes, people stumble into building out their own brands through just realizing they have a problem in either their work or their personal life, and there isn't a product out there that solves that problem for them and they just do it themselves. 

And through organic word of mouth, it grows into something more than possibly the original idea ever was. And I also want to applaud you for testing the product on Amazon. I tell a lot of people that they should do that, to see if they have product-market fit. So you did the right thing just from the get go. 

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By the way, we're powering our text messages with PostScript, the #1 text message marketing app for Shopify stores. Check out the show notes for a link to install PostScript for free today. 

Chase Clymer  

The question for you I would say would be how long were you kind of testing the waters on Amazon with this single product before you decided, “We should go all in.We should probably build our own standalone website and push this forward and see what we can do.”

Dr. Kourosh Maddahi  

Yes. So with the single mouthwash, I was testing it for a year. And while I was testing it for a year, I started to look at other applications. 

So if you divide the entire population into categories of oral care products, you could divide them all into 4 categories: Either people want healthy gums, healthy teeth... Either they want whiter teeth or they want less sensitive teeth or they want to relieve their symptoms of dry mouth. These are the 4 different categories. 

So what I did next was... I'm a cosmetic dentist,  so I'm very much into keeping teeth white. And what I saw also as an opportunity is that since the explosion of Starbucks, the amount of staining on people's teeth had increased tremendously. 

So people are drinking more coffee. They are drinking more tea, and green tea, and green juice, and some of these red juice, and juicing, and all these things... And blueberries, and blackberries, and red wine. 

And there were more and more patients that were coming to my office with teeth that were stained or after whitening, the teeth got stained very rapidly because of all of their normal habits. 

So I started to create other products... So for whitening --instead of using peroxide which causes sensitivity to the teeth and gum-- I use coconut oil or sage or lemon peel oil. And for sensitivity, we increased the amount of data sea salt minerals in our mouthwash and therefore dry mouth, I used it. 

And besides my other ingredients, also coconut oil, grapeseed oil, and cayenne pepper oil. So what I did was after the first year, I introduced my second product with a toothpaste, which was the whitening one. 

So again, we were testing another concept, and then the whitening concept got started to catch on much more rapidly than the first one. So we were doing quite well with our first mouthwash, but the whitening concept whitening without the sensitivity seemed to be something people were looking for. 

So during my 2nd year, I came up with the whitening and the sensitivity. And then in the 3rd year of Amazon, I came out with the dry mouth. One major problem that we ran into with Amazon was that we were also trying to get into some of the retailers. 

And I hired somebody who started to contact brokers and get into some retailers and distributors. And what we found is that many people or many of these retailers also had an Ecommerce site. 

And they will buy my product and then compete with me on my Amazon page. And it got to the point that there were maybe 14 other sellers on my Amazon page. 

And then they were not really sticking with the whole concept of the MAP, which is minimum advertised pricing. [They] will go underneath my selling price. And that created problems in terms of Amazon for me. 

So in this 3rd year, we started to even though I had a website, it was a Shopify website, you learn selling really much. And we were really advertising on all of.... It was basically Amazon and some independent stores in the retail market. 

But we started to develop our website. So 4 years into it, we really went after the website and the development of the website, and advertising on Facebook, Instagram, Google... Those types of things to build the website. 

And from where we started in terms of selling maybe $2000 - $3,000 a month on our website. After 3 to 4 months with more advertising, we went to $30,000 a month. And then slowly to $100,000 a month. And currently we do about $2 million dollars a month on our just website alone.

Chase Clymer  

You just taught a masterclass on how to scale a business the right way.I really want to applaud you. This is going to be a fantastic episode. And I can't wait for people to listen to it. 

So I want to break down a few key things that you did over that journey. So the first thing you did is you launched a product, you got some feedback, you did some more research, and then you launched another product under the same brand. 

So now you can cross-sell to people, it's easier to acquire, it's easier to sell someone another product after you've already won them as a customer instead of trying to go out and find more clients. 

So you're raising your lifetime value right off the rip. And you've rinsed and repeated that a few times you now have four products that you believe is what you kind of landed on there at the end. 

And then it will actually become a sort of 10 products because each one of them mouthwashes also came with a toothpaste and then there was a toothbrush and then there were whitening strips.

Dr. Kourosh Maddahi  

Yeah. So it became 10 products at the end.

Chase Clymer  

Absolutely. And that allows you to cater to the needs of your customers and let them get exactly what they want. 

Dr. Kourosh Maddahi 

Yeah.

Chase Clymer  

So in year 4, when you decided to go all in on your own website, your own Shopify store, other than people competing with you on prices, was there anything else that you were running into with Amazon, where it was  "Alright, we need to really own this customer relationship if we're going to grow this business?"

Dr. Kourosh Maddahi  

Yeah. so believe it or not, owning that customer relationship is a key part of it. So if I were to break down in terms of our own website. I would say 20%... 15% to 20% of our income comes from email marketing , to our existing customer base. 

So imagine just making 20% 15 to 20% when you're getting into millions of dollars. 20% is $200,000 to $400,000 of your income is just from email marketing. And I couldn't do that on Amazon. So they're theirs. 

Also, the aspect of, if you go and you create your own website, you also have unique customer service. So we also outsource our customer service. So that people would answer the customer --all of the customers-- or whatever emails that were coming in. We started in-house and then we outsource that. 

But the key part of it was... Again, [from] the feedback that we were getting from our customers, we were constantly improving our product, improving the user experience. So it's a very methodical way of going step-by-step forward and building it. But having that customer relationship is unbelievable. 

And also the statistics that you get on the back end that... What is the age group or who are these people, where are they located... There's so much more information I was getting from my own website, I couldn't really get out of Amazon. 

But one thing that Amazon provided to me, that gave me the fuel to actually expand it, was that I saw that we had a 40% recurring customer that we're purchasing our products. So that's 40%. 

And we also saw that on Amazon, we were doing Prime... The other thing that I found out through Amazon was that their return... People not liking the product, their return rate was less than 1%. 

So, once I found out that I have had less than 1% return over a period of time it was 3 years with multiple products. 

Once I found that I had a 40% recurring customer, I said "Okay, so that means that if I have my own store and I get a hold of these people, I am going to have a loyal customers that I can test multiple other things with either products or types of advertisements or types of emails, types of messaging, which will then give me the fuel as to how I could expand my retail business. 

So today we are in 4500 stores and 2500 of them are Walgreens and some of the reasons why we got into these retail stores was because of our success both on Amazon but more important than getting on our website.

Chase Clymer  

That's amazing.

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Chase Clymer  

I just want to break down the pros and cons of Amazon quickly for the listeners that are thinking about kind of launching a product there and testing it. I hear people say if you're going to try Amazon, maybe try it under a different brand name. 

Then what you're going to run on your own website, just so you're not competing with yourself, if you really want to get that product-market fit, figure it out. 

But essentially, when you test things on Amazon, Amazon owns the customer. You are just selling through their marketplace. That's not your customer, it's Amazon's customer. They're selling your goods for you so you don't get any of that analytic information other than the few key notes that were shared just now. 

But what you can do on a website that you own like a Shopify store is you can create a superior customer service interaction. That's what you have to do to outclass Amazon with their customer service, you can create your user experience to be so polished and dialed in for your target customer, where Amazon's all cookie cutter. It's the same thing. 

And obviously you get access to all of those analytics and you own that customer relationship. So you can build out amazing retargeting journeys through email or Facebook or what have you. So yeah, I can't agree more. 

Is there anything else that you'd like to share about making the jump over to having your own Shopify store or owning your own independent business not being relying on a big marketplace like that?

Dr. Kourosh Maddahi  

Right. So what you were talking about in terms of pros and cons. So now I have been into this business now this is almost going to be my sixth year this October. 

And I'm going to tell you in terms of profitability on Amazon, we have a better profit margin because we're not really paying for customer acquisition on Amazon. And our shipping rates are much lower through Amazon as well. 

But what we did to really increase our Amazon business also was how you just mentioned with regards to selling something that's on your website, but not on Amazon. What we did was we sold things that are on Amazon and our own website, but not on retail. 

So retailers and people that were buying through distributors could not sell certain configurations. So I want to tell you that we created a whitening kit that has a mouthwash, toothpaste, whitening strip, and a toothbrush. That's both on our website and on Amazon. 

But no, you cannot buy it anywhere else. And we created a whitening strip pack that has higher numbers of whitening strips, that is only on Amazon and on our website, but nowhere else. 

And what we found is that how we could stimulate growth on both platforms, there are people that trust the Amazon platform more than anything else more than your own website. So those people, they would get our advertisement, they would go to our website, and then they would buy on Amazon. 

We didn't want to lose those types of customers because they had loyalty to Amazon or they trusted Amazon more. But also, we had an influencer program that would give it certain discounts to people that would go on our website and would buy it on our website.

 So we could do more of [the] promotional actions on our website and then we stimulate the growth on the website, and then we will lose certain people that would go and buy it on Amazon. So when we actually changed this format that we were getting the customer, either on Amazon or on our website. 

And all of a sudden, our sales grew much more rapidly, as well. So there are ways that you can have an Amazon type of in-platform. And you can also have a website platform. And both are growing through very creative types of marketing, because there's a customer preference for Amazon and the Prime as well. 

So you've got to keep in mind that you use some of the customer experience and the interaction, some of the data that you might need. 

But at the same time, there are some people that just trust that platform better, and it's a more profitable platform when you're building a business. So [it boils down to] how [you can]slowly transition, but [still] keeping in mind, wherever the customer wants to buy, you want to sell them that product.

Chase Clymer  

Yeah. That is it. Just sell people what they want. And that goes across any industry. Any type of business, really. You got to learn how to sell people what they want. I like that idea, though. 

That's a very interesting take on having certain products only exist on Amazon and on your website and not having wholesalers have access to it or retailers. That's a very interesting strategy. 

And I hope that people that are dabbling in both markets, marketplaces and on their own personal story take that to heart and kind of build a creative way to implement that as well. 

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Chase Clymer  

I want to go back to when you were talking about once you made the investment into your own store. And you were at around $2000 a month and you grew up to $30,000 a month and then so on. 

And as you're scaling the sales on your Shopify store, you mentioned that you guys are getting into paid media and I just want to unveil what it takes to grow with paid media. 

Do you remember what you guys were spending back then to help grow the brand? Do you know how long it took to kind of get attraction with getting started with paid advertising?

Dr. Kourosh Maddahi  

Yeah, so we started truly going at the paid advertisement. And in particular with the Facebook ads at around $500 a day. And we started at $50 a day then $100 a day but our real numbers when we started to really start to see traction was at $500 a day. 

But everything that we do, we do testing. We do testing on each ad. We do testing for 3 to 7 days, we turn it off, we put some money behind it but not very much, and whatever we find that has traction, then we scale it. 

And so there is quite a bit of money that needs to be invested into the paid advertisement. And also the Amazon PPC for its organic ranking. So we would spend the pay level in terms of the Amazon PPC, but still $1000 - $2,000 a month. $3,000 a month sometimes. 

But in the world of Facebook, we started at around $50 a day, slowly scaled it to $100 a day, then to $500 a day, and we do thousand dollars a day per day now. 

And it is all looking at ROAS, looking at the amount of traction on each of our advertisements on top of the funnel, middle of the funnel, the bottom of the funnel. You really have to be very savvy, because otherwise you're going to lose a lot of money in this. 

So if I were to break down  the thought process, you cannot go into a consumer packaged goods [business] because you want to make money. You have to go into it because you're trying to solve a certain... Solving a problem. This is a solution to a problem that people can think with [and] can understand. 

You want to create something that doesn't really exist or exists in a flawed way and you've found a better way that you can make it. So the product has to be good. Once you even have the most perfect product. That's 10% of the way. 

The other 90% is the promotion, marketing, advertising, partnerships and things like that. And how do you do that? How do you come up with the correct packaging? How do you come up with the correct name? How do you do correct testing? 

So again, once you have a product that works, testing that product, and talking to people, and finding the key phrases as to how they describe your product becomes the testing of a message that you start to test at a very low level. And then as you see more and more traction on a more profitable platform such as Amazon, then you want to scale it higher and higher. 

You go to Shopify, and then you also get influencers, social media marketing, those types of things. People talking about your product, people posting about your product, people commenting about your product, you start to build a very amazing review system.

So reviews on Amazon, you gotta monitor it constantly to figure out what it is that people don't like about it. You want to be 4-star plus on Amazon. That creates a lot of things. You want to spend a little more money on the PPC to bring your organic ranking up. 

And then you want to have good customer service, and sending the products on time, and not running out of supplies, and everything. And then once you have all of these things, you slowly, slowly increase the paid advertisement. Everything is with tests and monitoring. 

And so many times, things that worked for a month didn't work after 2 months. You go back to the drawing board. You reanalyze. You get more creative in terms of your advertising. You're constantly making sure that the advertising that you do doesn't create creative fatigue. That means that people have seen it too many times. 

So you have a variety of things that are being done. But a lot of these things we did in-house. We did it very cheaply. But we had very creative people that knew how to do some of these things. So it becomes a real company, it becomes a real organization. But it all started with the thought of creating a product that wasn't really out there.

Chase Clymer  

I just want to point out one thing that you didn't mention in that amazing synopsis of how to grow a direct-to-consumer, packaged good brand. You didn't mention it being quick. And you didn't mention it being easy.

Dr. Kourosh Maddahi  

Yeah, there is nothing quick and easy about this. If anybody thinks that they're gonna become rich fast with these systems or they look at these courses and think that they're gonna build an Amazon business and they're gonna have a lot of money, they're in for a big surprise. 

So even if you're doing well, that competition can come in or other things can come in. I own my own brand so nobody can really compete on my own product. But if you can imagine, if you are getting a product just on Amazon,  there are other similar products to it on Amazon. 

How much more difficult that's going to be? 

And if you do really well, other competitors are going to come because the back-end numbers of how well your business is doing, you can get through different software programs. So there's going to be competition, you can never rest. 

Direct to consumer business is a costly business because customer acquisition is expensive, keeping the customers is not easy, and also the advertisement is expensive. 

But if you build a model, and you build it because people are subscribing to your products, over time, there's nothing like it because automatically, people [are] coming in and buying it. 

And during the COVID, the pandemic, one of the things that we saw is that our sales even increased 30%, both on Amazon and our website, because people were ordering more online. 

And even as the more retail stores have opened up, we still have amazing sales online as well. So it's a great type of business in terms of the direct to consumer, but there's nothing easy and there's nothing quick about it.

Chase Clymer  

I cannot thank you enough for coming on the show. This has been amazing. It's just so action packed. Is there anything I forgot to ask you about that you want to share before we go?

Dr. Kourosh Maddahi  

No, I think we've talked about everything. I, again, say that you got to be patient. You have to be persistent. You wanna have your eye on the code and keep testing things. And don't jump into the water too fast, but continue to test until you get traction. And once you get traction, put money and investment behind advertisements.

Chase Clymer  

And if people are curious about the brand, where should they head?

Dr. Kourosh Maddahi  

Yeah. So they can go on oralessentials.com. So one of the things I did with my products, we have now 51 clinical studies. So it's a serious product in terms of all of the research that has gone into it. 

We're the only certified non-toxic oral care product in the world. And we are the only one that has been able to whiten teeth without the hydrogen peroxide in clinical testings. 

And all of these studies are also on oralessentials.com/studies. And that's where you can go and see the different products. 

We're always in the habit of updating our website. We're going to be coming out with our new website in about a month or two.

[I'm] investing heavily in terms of some video properties to explain to people why you shouldn't kill your microbiome with antiseptic mouthwashes. And so there's a lot of things [and] a lot of information that's on that website, and there will be even more on the website as well.

Chase Clymer  

Awesome. Thanks for coming on the show. Doctor.

Dr. Kourosh Maddahi  

Thank you so much. I really appreciate it.

Chase Clymer  

I cannot thank our guests enough for coming on the show and sharing their journey and knowledge with us today. We've got a lot to think about and potentially add to our businesses. Links and more information will be available in the show notes as well. 

If anything in this podcast resonated with you and your business, feel free to reach out and learn more at electriceye.io/connect. Also, make sure you subscribe and leave an amazing review. Thank you!