Mini Scale Research: Deciem - The Ordinary

The game changer of
beauty industry
Smart at pricing strategy?

CONTENTS

02 AUTHOR’S NOTE
04 ABOUT DECIEM – THE ORDINARY
05 LET’S TALK ABOUT THE ORDINARY
06 WHY THE ORDINARY CAN BE SO CHEAP AND

AFFORDABLE

09 SO, WHAT’S THE PRICING STRATEGY

10 WHY HAS ITS COMPETITION NOT BEEN ABLE TO

MIMIC ITS SUCCESS?

12 WHAT INSIGHTS CAN OTHER BUSINESSES DRAW

FROM THIS COMPANY

13 COMPANY THAT SHOULD FOLLOW THE PRACTICE

OF SMART PRICING OF THE ORDINARY

15 CONCLUSION
16 REFERENCES

AUTHOR’S NOTE

Good day dear readers!
In this e-book, I will present about how The Ordinary, under
Deciem company is smart at pricing strategy and now become
one of the most successful skincare brand in the beauty
community. This e-book is created to fulfil the requirement of
Pricing Decision’s assessment.
Hope you enjoy reading this e-book.

Noviani Ibrahim

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Brandon Truaxe, founder of Deciem
as well as The Ordinary

ABOUT
DECIEM – THE
ORDINARY

Deciem is a Toronto-
based skincare
company, which is
founded by Brandon
Truaxe in 2013 with an
unconventional
approach. Instead of
offering the regular line
up of skincare products
such as day cream,
night cream, and
serum, Deciem offered
single active ingredient
concentrated products
that can be layered
upon each other like
acids, oils, retinols, and
vitamins. This approach
is reflected in Deciem’s
slogan, “The Abnormal
Beauty Company”.

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“The Abnormal Beauty Company”

A portfolio of products owned by Deciem comprises affordable skincare,
makeup, supplements, and haircare products created to attract a broad of
audience, mainly millennial skincare enthusiasts and consumers that looking
for functional products based on science. Deciem is also an umbrella of several
beauty brands, namely NIOD, Hylamide, The Chemistry Brand, Abnomaly,
Loopha, HIF, and the most well-known by the skincare geeks, The Ordinary.
The Ordinary has been the most popular skincare brand of Deciem due to its
unbelievable low price for a combination of well-studied, luxury yet basic
ingredients. It is safe to say that The Ordinary became the game changer in
skincare industry and helped the company’s profile to skyrocket.

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Let’s talk about
The Ordinary

Cheap and affordable skincare

The Ordinary or known as TO, is well-
known among skincare community
due to its incredibly low price compare
to other skincare brands with great
ingredients. There are no products of
The Ordinary that cost more than $20.
In fact, the majority of the products
priced at under $10 only. For instance,
retinoid, a wrinkle-fighting ingredient
in serum that is sold for more than
eighty dollars in Sephora can be
bought for only $13.90 from Deciem
instead. Other products of The
Ordinary that priced at under $10 are
Hyaluronic Acid 2% + B5 ($7), AHA
30% + BHA 2% Peeling Solution ($8),
Natural Moisturizing Factors + HA
($6), and Deciem’s top seller,
Niacinamide 10% + Zinc 1% ($7).

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WHY Most of The Ordinary’s products only contain
THE ORDINARY one or a few active ingredients which have
CAN BE SO CHEAP been proven effective to target specific skin
AND concerns because Deciem only focused on
AFFORDABLE? offering high quality ingredients which are
widely manufactured all over the world, such
as hyaluronic acid (to hydrate), vitamin C (to
brighten), and retinol (to reduce fine lines).
Many of the skincare companies tend to mark-
up their finished products very high though the
chemicals used in skincare are originally cheap
to produce. They usually apply hundreds of
percentage mark-up to their products, making a
huge gap between the retail prices and the
costs. Deciem is a vertically integrated
company and has its own factory. The founder
of Deciem, Brandon Truaxe determined to
develop the chemicals and package the
products himself in an in-house lab and offered
the customers the products’ purest forms.
Therefore, he could cut out the intermediary
and come up with the same products as other
brands at lower prices.

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In the talk of Racked’s author, Cheryl Although some people were being sceptical
Wischhover with Truaxe and Co-CEO about the products at first due to its
Nicola Kilner, Truaxe did a cost breakdown ridiculously low price, Deciem then tried to
for The Ordinary Vitamin C Powder that change those people’s mind by comparing
priced at $5.80. According to him, there are their products with health care items. Kilner
about 20 cents of vitamin C in it and 5 to 6 illustrated that if one had a headache and
cents of other ingredients. For the saw a bottle of aspirin for two dollars and
packaging, the tube is about 20 cents and the another one for two hundred dollars, one
box is about 10 cents. The product’s costs would never spend for the two hundred
are basically less than a dollar. The other dollars aspirin because he or she do not
costs included in the product’s price are the doubt that the two dollars aspirin would get
cost of formulating, testing, salaries, and rid of his or her headache.
other things. Then, the brand takes a small
net profit from the product. Page 7

Moreover, The Ordinary also does not spend
too much money for their marketing
campaign to make it fancy. They are only
active in marketing through social media
channels. Their marketing does not focus on
flowery descriptions with misleading ads
and questionable claims, but they are being
transparent about the ingredients they used
instead. Consumers can read matter-of-fact
explanations of what the ingredients do and
how to use them on their official website.
Additionally, Deciem also does not pay
celebrities to endorse their products, unlike
brands like SK-II that has Tang Wei as their
endorser to help in boosting brand
awareness.

As a result, Deciem is able to keep all of
The Ordinary’s products price low. The low
prices appear to be inducing people to
experiment with skincare products that they
never know they wanted or needed
previously.

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SO, WHAT’S THE
PRICING STRATEGY?

Based on the explanations on how The
Ordinary’s products can be so cheap, I can
deduce that Deciem is using cost-based pricing
strategy for The Ordinary skincare line. The
Ordinary’s objective is to offer familiar and
commonly overpriced ingredients to consumers
at an affordable price. Following this objective,
the strategy that Deciem used to keep the prices
low is to focus simply on the ingredients that
work. Furthermore, The Ordinary does not use
any marketing campaign to attract consumers.
Rather, they simply explain what their products
do without deceptive claims. Their costs only
consist of the cost of producing and testing the
products. In The Ordinary’s website also stated
that the brand is positioned to lift pricing and
communication integrity in skincare. This is in
line with their catch line, “clinical formulations
with integrity”.

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WHY HAS ITS COMPETITION NOT BEEN ABLE TO
MIMIC ITS SUCCESS?

Before the first launch of Deciem’s The Ordinary, most of the skincare companies put
products that give vague promises and could cost fortune on the market. However, Brandon
Truaxe decided to challenge the beauty industry by launching high-tech skincare products
that cost one-tenth or even less than his rivals. The brand managed to sell at low prices
because they do not spend on fancy packaging and extravagant marketing, yet still able to
make a huge profit. According to Truaxe, The Ordinary accounts for roughly 70 percent of
the business.
Deciem also communicate a lot with their consumers by educating them about the
ingredients they used in their products mainly through social media. For instance, they
have an Instagram account named as The Ordinary & Deciem Chatroom where they
initiate a discussion with their followers about their products, educate their followers about
how to layer their products, and suggest regimens for every skin concerns so that the
potential buyers have a good insight on which products they should purchase. This concept
of educating consumers is sparking the consumers’ interest to know more about their
products and making the consumers more confident to purchase their products. After the
breakout of The Ordinary, more brands are doing the same concept as The Ordinary such
as The Inkey List and Garden of Wisdom.

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Besides, even though most of the articles said that Deciem do not use any marketing
strategy, but the unique names of each of The Ordinary’s product can be deemed as their
marketing tactic to some extent. To explain, all products of The Ordinary use scientific
terms with percentage of concentration as their names like Lactic Acid 5% + HA and
Glycolic Acid 7% Toning Solution. Because of the confusing names and not a lot of people
know the scientific terms, interested consumers will spend more time searching and trying
to understand the ingredients. The consumers then end up fall into this low-key marketing
trick. Moreover, many trusted aestheticians that have many followers use their social media
platforms to review The Ordinary’s products willingly because of the transparency,
influencing their followers to try out the products they reviewed. This further increase the
demand for this brand’s products.

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WHAT INSIGHTS In order to decide which strategy to use when
CAN OTHER setting prices for products, businesses should
understand what their business goals is and
BUSINESSES DRAW understanding customers’ needs is very
FROM THIS crucial to stay relevant in the market. Like
COMPANY? The Ordinary, they set their prices low
because their goal is to provide affordable
Understanding business goals and skincare to consumers, but still able to
customers’ needs are very provide products with luxurious ingredients.
By keeping this goal in mind, they tried to cut
important when setting prices the costs that considered as unnecessary, and
only focused on giving the best ingredients
with low costs that work. The company also
communicate with their consumers
effectively and always provide reliable
information about their products. Being
honest is the key to keep the consumers’
loyalty.

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COMPANY THAT SHOULD FOLLOW THE PRACTICE
OF SMART PRICING OF THE ORDINARY

Kylie Cosmetics by Kylie Kylie Cosmetics

Jenner, a media personality is one of the Kylie Cosmetics’ Silver Series makeup brush set
growing beauty brands. The brand started by
selling Kylie Lip Kits, a set of matching liquid Page 13
lipstick and lip liner to create the Kylie pout in
2015. According to Forbes, Kylie Cosmetics
sold $54.5 million worth of products in Ulta
after its official launch in the first six weeks.
Forbes also reported that the Kylie Cosmetics is
worth an approximate $900 million.
Even though Kylie Cosmetics as overall is
successful, there is one product that fell flat
after its launch which is Kylie Cosmetics’ Silver
Series makeup brush set. The makeup brush set
that consist of 16 pieces makeup brushes is
priced at shockingly $360. Kylie Cosmetics
received a lot of backlash due to this extremely
high price that does not fit her fans or
consumers’ budgets. Moreover, consumers and
beauty experts that have tried the makeup
brushes insisted that the quality and
performance of the brushes is not high enough
to justify the price tag despite that Kylie
claimed the brushes are real brushes, not
synthetic brushes. Kylie was also bold to
compare her makeup brush set with other
brush lines from established brands such as
Kevyn Aucoin, Artis, and MAC. It is irrelevant
for Kylie, as a new creator in the beauty
industry to compare her brush set to other
prestigious brands’. After numerous bad
reviews from the shoppers and the beauty
community, the makeup brush sets then failed
to sell out on the market.

It was obvious that the pricing strategy she used for the makeup brush set was gross-
margin pricing, which is often heavily influenced by the profit goals of an organization.
However, it was not relevant when the audience she targeted to is majority a middle to low
income consumers. As a result, the product could not stay long on the market.
As a lesson, Kylie Cosmetics should first understand their target market whether the target
market is mostly teens, working people with high or low incomes, or professional makeup
artists before she plan to sell the product. Then, she could determine her business goal.
Since the majority of her target audience consist of millennials and Generation Z, she
should make the price affordable for these groups of people by focusing on the quality of
the product and cut the unnecessary costs like how The Ordinary do. A business should
make a pricing decision based on who it aims to appeal to, not solely think about earning
huge profit.

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CONCLUSION

A good pricing strategy is one of the keys to become
successful in business world. Setting the prices too low, valuable
revenue will be missed out, setting the prices too high, valuable sales
will be missed out. Pricing strategy takes into account all business
factors such as target audience, brand positioning, revenue goals,
and product attributes. In The Ordinary’s case, they used cost-based
pricing while setting price for their products. Hence, all of their
products can be cheap and affordable. They also appeal to the
increasing demand for simplicity and complete transparency on the
market by using ingredient-centric products. In this day and age,
consumers are more educated and wiser while making purchase
decision. Because of their transparency, consumers can know exactly
what they are applying to their skins. This created a trust between
the consumers and the brand, and it could transform into loyalty.
Even myself love brands of integrity that can explain how their
products can solve my acne problem instead of giving me uncertain
promises.

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REFERENCES

DCIEM - The abnormal beauty company. (n.d.). Octoly. Retrieved from
https://go.octoly.com/insights- brands/deciem#:~:text=The%20Ordinary's%20goal%20is
%20to,not%20work%20for%20their%20skin.

Fairley, J. (2018, January 23). How Brandon Truaxe turned The Ordinary into a gamechanging
beauty brand. You Magazine. Retrieved from https://www.you.co.uk/how-brandon-
truaxe-turned-the-ordinary-into-a-gamechanging-beauty-brand/

Mpinja, B. (2017, December 28). Meet Deciem, the industry-changing company behind The
Ordinary skincare. allure. Retrieved from https://www.allure.com/story/everything-
you-wanted-to-know-about-deciem

Spruch-Feiner, S. (2018, November 28). A spike in single-ingredient marketing is changing
how shoppers — and brands — approach skin care. Fashionista. Retrieved from
https://fashionista.com/2018/11/single-one-ingredient-skin-care-products

Syme , R. (2018, January 30). The cult skin-care brand whose secret ingredient is being dirt
cheap. The New Yorker. Retrieved from https://www.newyorker.com/culture/on-
and-off-the-avenue/the-ordinary-cult-skin-care-secret-ingredient-is-being-dirt-cheap

Valle, G. D. (2019, March 7). How Kylie became the wealthiest member of the Kardashian-
Jenner family. Vox. Retrieved from https://www.vox.com/the-
goods/2019/3/7/18254738/kylie-jenner-forbes-self-made-billionaire-lip-kits

Wilson, N. (2017, December 24). Kylie Jenner’s $360 brush set proves to be another scam on Kylie
Cosmetics. Media Milwaukee. Retrieved from https://mediamilwaukee.com/opinion/kylie-
cosmetics-makeup-brushes-value-cost- price

Wischhover , C. (2016, September 22). Deciem might be the most thrilling thing to happen to
skincare in a long time: Reddit skincare geeks are obsessed, so you know it’s good. Racked.
Retrieved from https://www.racked.com/2016/9/22/12993276/deciem-skincare-reddit

Wischhover, C. (2017, December 15). All your questions about The Ordinary, answered: The
buzzy beauty brand has big plans for 2018. Racked. Retrieved from
https://www.racked.com/2017/12/15/16777444/the-ordinary-cheap-skincare-deciem-
brandon-truaxe

Wischhover, C. (2020, March 18). Deciem fueled the skin care boom. Then it almost went
bust: The inside story of how the beauty company and its controversial founder changed
an industry forever. Vox. Retrieved from https://www.vox.com/the-
goods/2020/3/18/21165135/deciem-the-ordinary-skincare-brandon-truaxe

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