The Game with Alex Hormozi - Breaking Down Rihanna's $1B Brand: Savage X Fenty | Ep 806

Episode Date: January 14, 2025

Welcome to The Game w/ Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Welcome back to the game. Today I'm going to do something brand new that I'm really excited about. And this is a podcast first episode, which is a business critique. Something that I don't share as often as I probably should is that I spend a lot of my time looking at what significantly larger companies are doing and trying to think like, what can I do that they're doing to make money? What I want to do is break down Rihanna's Savage X. Fenty. The big thing here is what is she doing that has created this massive wealth? So if you didn't know this, Rihanna is now worth $1.7 billion. And the vast majority of that is not from her music. It's actually from her companies.

And so she has a skincare slash makeup line. And she has a lingerie slash activewear slash loungeware line, which she's started. She's done a lot of really clever moves that I think are worth breaking down. Notwithstanding, I think the most impressive one is actually her membership offer altogether. So let's dive in. I think there's five things that I kind of identified that I thought are worthwhile for us as business owners to kind of examine. The first one is she partnered with somebody who basically managed all of her deficits. And I think this is something that took me way too long as a business owner to kind of like wrap my head around. I always wanted to do everything. I wanted 100% of the pie. But when I look at the wealthiest people in the world, none of them, like Markmore, none of them have 100% of their business. And so that's such an interesting lesson. Like literally none of them have that. And so, that means that if I have a business that I have 100% of that, it means that I'm fundamentally don't, I'm not capturing as many stallions as I otherwise could

helping achieve this big goal. Because I have this kind of working thesis on the hypothetical maximum size of a business. It's limited by the collective intelligence and experience and knowledge set of the people contained within it. Now, that means that in the beginning, if you're a smart entrepreneur, then you can bring a lot of things at the table.

But over time, you can only really live one lifetime. You can only learn so many things. Being able to attract people who can help you and sometimes partner, because sometimes people who bring a lot to the table want a piece of the pie and the best people often do, you need to be comfortable with that. And I think it's something that's going to be a really long time to make. And this is just like a great reminder. And so if you don't know, she partnered with LVMH. And so LVMH is a conglomerate owned by Bernard Arnault, one of the richest men in the world, a cent-a-billionaire. And he's also, and I think this is unique, He's a centibillionaire in a non-tech, non-technology sensibillionaire.

And so he owns many brands that you have heard of, so Lou Vuitton, Christian Dior, Giovanni, I think I was pronounced it wrong, Hennessy, Tiffany, and like a hundred other ones that you've heard of, right? Birkenstock, they actually bought Moe, which is a champagne company. I think they have Don Perrin, you know, they have a bunch, right? They have a lot of stuff. The thing that they brought to the table, which basically enabled this from even being a thing, is that they brought brick and mortar distribution, number one.

Number two, they brought retail and online sales experience. And then third, they brought manufacturing expertise globally. Right. So they have 118 factories. They have 6,000 retail locations in aggregate. And so they know how to move product and they know how to create product. So basically click to close from thread to someone's hands, they're vertically integrated. They know how to do the whole thing.

Rihanna trying to relearn that from day one was really unlikely. But the fact that she was able to go from basically zero to a right now, I think it's valued at around $2.8 billion in two, three years is just gives testament to how much the value of having a good partner that manages your deficiencies is. And so I want to be clear. Somebody's either got to have money you don't have, they got to have time you don't have or some sort of experience that you don't have. And I would say I would put this kind of basis, some sort of experience or asset rather. Maybe I should alter that because I've always said money, time, experience. I might have to add asset to that list. I think I might have to add asset. Huh, there you go. We discovered that live. They have to one of those four things that they can bring. And also, LVMH brings a nice brand boost to, because it's largely luxury goods. And so that's a really good association for Rihanna. Now, the second big thing that I think that she did really well. I thought this was really clever, was that she serves a really good market. So she picked a growing market in a number of different kind of categories. So if we measure a growing market by Cager, so compounded annual growth rate, Loungeware is a 23% plus annual growth rate. So just to put that in context, if she just keeps the same market share, it would double in between four and five years. So like pretty impressive.

So much faster than GDP growth at a nationwide level. So if your market's just stable, it's going to grow at GDP, which is, you know, two to three percent. Whereas here at 23%, you're talking double-digit, multi-double-digit growth rates. Now lingerie, which is the kind of the,

I think the entry product, the wedge product that she started with is a slower grade rate in a much smaller market. So lingerie is about an $80 billion market. Activeware is just under $600 billion. It's $567 billion market. So much bigger in active wear, right, versus lingerie. And so she got into both of those. But I think the real genius behind this, besides those obvious picks, is that she came into it,

she was able to actually find a unique angle, which I thought was kind of interesting. I think a lot of celebrities who try to create their brands, sometimes they fall on flat ears, because they're not authentic to the celebrity. It's clear that it's a money grab. Now, to be fair, I don't think there's any issue. I don't think people have a problem with people making money. I think people have a problem with people making money in a way that's not authentic to the brand

that they grew to love, right? For her, she ran into a problem. So A16Z has this framework that I like a lot, which is that they want to find a founder who has lived with the problem for five to 10 years. And so Rihanna is a mixed ethnicity, and she's super diverse background, and she has a super diverse audience.

And one of the things that she realized was that nudewear, or like nude underwear, there was only like one color of nude, right? And she was like, wait, there should be a color of nude for super pale girls and super dark skin girls and everything in between. And so she came out with 40 shades of nude. And that was kind of like one of the big kind of pillars or brand builders that she was able to build this, this whole business on. She picked a growing marketplace. She picked a unique entry point. She found a pain point that she knew from a pricing perspective

if we're following the $100 million offers framework, right, which is pain first, purchasing power second, she priced it at actually really, really good prices. And so I think this was a really smart strategic decision, which was probably a huge discussion with LVMH, right, because they're obviously luxury. And, you know, she could have priced this higher, but I think it would have been a mistake brand-wise, and I think she did it beautifully. The next piece is easy to find. So this is the asset she brought to the table in her deal with LVMH is that she has this massive audience globally, and so she could bring that distribution to the table so they were very easy to find for that target avatar. And then finally, the growing, which I kind of covered first,

She went after a marketplace that overall the demand for these types of products is going up year over year. So that's the second thing that I think she did really well. Now, the third thing is that she has a brand. Now, rather than just say yes, she has a brand, I think it's probably more relevant to talk about what she did differently to build her brand. So Rihanna has a gazillion followers across her channels, but I think Savage X Fenty, what she did that was brilliant about it, she did a Whisperty shout launch, which is the same framework that I have in the $100 million leads, And so she whispered it with just having one company that she was following, which she hadn't posted anything. So it was all this curiosity.

And then when she teased it, she gave kind of an idea of what the product line was going to be about. And then obviously she made her shout component when she kind of officially released, you know, the first line. She's been platform specific with her content. She's made native content for each platform. So IG, she does way more aesthetic, high-fi, high production. And the only BTS stuff, so behind-the-scenes stuff is on stories for her. YouTube stuff, she does more like try-ons and fashion shows and so people kind of get to see it being used. In TikTok, she talks more about the product, more UGC stuff, more casual, right? And so she's very

platform-specific with the types of content she's making on Savage Ex-Ventie for those platforms, which I think was wise. But I think it's also worth highlighting here that, you know, the corporate brand is significantly smaller than her personal brand, but it's catching up. And the reason it's catching up is that she's leveraged affiliates in a really big way, which is the fourth big thing that she did. So like if you know obviously leverage is a huge a huge talking point for me at acquisition.com. I think supply and demand and leverage are the two greatest greatest forces in business. And so from a leverage perspective, leverage big lever number one she did was she did the partnership, right? She got to tap into existing distribution, existing branding, existing

manufacturing prowess and existing retail and online sales knowledge. All of that she got to tap into day one, right? Now what she brought to the table was obviously her initial boost of distribution. But what I think was really clever is that she didn't stop there. And I think this is where a lot of celebrity brands make big mistakes, right? They want to make it about them rather than about the customer, about the audience. And so if you make it about the audience, then you bring in more champions. Like the best brand, in my opinion, in the world that leverages influencers is Nike. Right. Like if you want to compete with Nike, it's like you've got to compete with, you've got to compete with LeBron. You've got to compete with Michael Jordan. You've got to compete with so many

different huge, massive goat brands that other people don't, don't, you know, like if you're just, like, man, I'm a influencer and I have my own, you know, shorts, but I can't get them to grow. It's like, yeah, because it's just about you. And there's only going to be a certain amount of audience that's going to mess with you, right? Like, now, obviously that can grow over time, but what she did is like, she's got the Hadid sister. So she's got Gigi and Bella Hadid. So she got supermodels, right? And they have a very specific look. She's got Demi Moore, an older, right? She's much older. Demi's like 60 plus, right? And she is a different look. And then you've got like Izzo, who's younger and has a different body shape, right?

And then you've got Normani, who's also a different skin tone and look and feel. And so I could keep going on the list, but she has a lot of A-Lift celebrities that she was there with Cindy Crawford, right? She brought in so many different age groups, different skin types, different beauty ideals. But I think the through line for all of them is that many of them are considered beautiful. And so whether or not you agree or not, one of the people on the list you might consider beautiful. And then that would be the brand's entry point to you. Her message around inclusion embody positivity because she's obviously gone through her weight loss and gain with pregnancy, etc., was a relevant factor in both the product line and also the affiliates that she chose to associate with.

And so what happens is there's this brand affiliate loop that gets created where the brand attracts certain influencers and affiliates who want to make that association. And then the affiliates then represent the brand and then reinforce or, obviously, if you do it poorly, detract from the brand. And so there's this loop of the brand gets reinforced. It brings in more affiliates and influencers, which if you create correctly, get the right influencers in, and then that then reinforces the brand. And then the virtuous cycle continues. Some of the things that she did, and I think this is a highlightable thing before I get to the final portion, which is going to be about the offer itself, which I think was really

brilliant, is that she tried to make it brand accretive, meaning she wanted all brands to benefit from the association. So what does that mean? So one, everyone benefits from the LVMH Association, which is probably one of the highest you know, tiered brands out there in terms of luxury, right? It's super ultra-premium. And so there's everyone benefits from that association. So that's number one. Number two is that because of the price point that she chose, because of the inclusive messaging, there's a wide percentage of the audience that would resonate with that. And so it wasn't an ask for, as hard of an ask,

rather, for her affiliates or influencers to make the association and a bonus piece that she did, and this I thought was really, really classy, is that she put on these fashion shows with these influencers. And when she did that, like she did really high-fi shows so much so that they actually got an Emmy Award. Right. And so this is brand accretive for everyone. Everyone wants an association with Emmy because the Emmy has status. Emmy is in itself a brand. And that's an association that may, I mean, think about it, people want to win the award because they want the association. Right. And so this is a way that they almost got to collectively win that association for everyone. And she made it easy for them from a tactical perspective, not only by curating the show,

obviously she had help, but beyond that, the actual promotional materials, she, you know, this is on a really tactical level, but she gives the images, she gives the links, she gives the banner, she gives the promotion. So it's very easy for them to make the asks and the gives of their audience on a regular basis. Right? So I think she did that really, really masterfully,

and it shows in the sales, right? They're doing hundreds of millions of dollars a year. Now, last piece, and this is the one that I was really excited to break down for you guys, because this is one that I'm, and maybe I'm not, maybe I'm not shopping for enough laundry. She has a bonus stack of bonus stacks, and she did something really clever here, right?

which is that she took what would otherwise not be considered a recurring product. Most people are like, oh, you know what? I buy lingerie every month. I buy active wear every month. Maybe some people do, right? But the vast majority of people, if I were to say, you know, blank slate, hey, name a membership, right? The first thing that came to mind probably wouldn't be, you know, G strings, right? And thugs, right?

It would probably be like my internet connection, my cell phone, right? My, you know, gym membership, whatever. Like these are traditional memberships, whereas this is a very non-traditional membership. And so she has done, first off, they emphasize the membership above everything else. If you look at the site, like the button just says like member add to bag. It basically assumes the close. And they do a price drop on the site where they show guest and then member and then first time guest or new member. Excuse me, new member.

And so it's like a 60% discount between guest and new member. So there's a giant incentive to take action that first day. I would bet that they're willing to lose money on that first transaction because they know what their LTV is. What are the other components that they made about this membership offer that make unique? Okay, so number one, let me just outline with it the actual offer is. So it's $59.95 a month, so just under $60 and a subscription, but it's a subscription for credit. So rather than say, oh, you're going to get a box of stuff every month, you're going to get a credit and then you can spend it or whatever you want, which is crazy. Because basically, this is just like a recurring subscription to buy stuff, right?

Which is just like getting a gift card every month functionally. But the question is, how is she getting so many people to take it? And this is where all the other benefits she's including are making this a compelling offer. Number one is that it's a discount. All right. So every member gets a discount on all products. That's not that in common, but it's up to 25%. So it's relatively significant.

To put that in context, I think like I was looking at our site. So it was like $12 in some change for some underwear, which then if you're a member, it's like $9.95. So it's, you know, $13 to $10. And then if you're, so that's, that's, you know, 25% offer. That's more than, I think, 25% off. So pretty significant. Now, back to the bonuses. So, number one is she's got the discount.

Okay, cool. The next thing is that they have exclusive sales and offers only for people who are members. So they get even more discounts from that. Number three, they have free shipping on all orders over $59.95. And so if they use the entirety of the gift card or the credit that they got that month, it's free shipping. So that's another bonus.

On top of that. So to reduce risk, remember, let's think through the value equation, right? You've got a dream outcome. You've got perceived likelihood achievement, which is reduction of risk, like the likely that they get what they actually want, that we've got time delay, and then we've got effort and sacrifice, ease, convenience. If we're thinking through this, right, the free shipping is a time, is a dream outcome thing. It's actually, in some ways I think people probably consider free shipping probably an ease thing more than anything.

I don't know why, because free shipping is kind of like an amorphous. Like it takes on, there's so much association with shipping costs. I won't get into it, but it definitely removes a negative. The next one is for reduction of risk, it's a 90-day fit guarantee. So probably traditional people, I probably should look it up, I'm guessing it's 30 days. For members, it's 90. So the likely that you get what you want is super high. You've got three months to return it. So that feels good. Now, on top of that, now, I'm not even getting to the big, the cahuna. The cahuna I'm going to tell you in a second,

all right, and it's the last one. The next one is they get a cross-discount on her skincare line and her makeup line. So I get 15% off that as well. So that's one of the benefits when you start having conglomerates is that you can start off in cross-company promotions, which then just cross-sells customers, which is a great way to just make more money, right? It's basically being affiliate of one another. The next thing is that she gives an annual gift to everyone on their birthday, which I think is super clever. I talk about this.

Actually, you know, it hasn't come out in my emails yet, which if you're not subscribed to the email, you should be. It's a one-minute read. They're literally just money-making tactics. And so this one is she's giving a gift at people's birthday month. And so what's really interesting about this is that people are in kind of like their peak emotional state. They're thinking about their last year. They're thinking about themselves a lot, like their birth month, their birth week, their birthday.

I have obviously contrary views on people who celebrate this a lot, but people do, right? If you give a gift in that moment, it's like it's almost like you're a friend, right? Like who gives people gifts on their birthday? They're friends. What more valuable position could you have in a prospect's mind than their friend? Right? I think it's really, really clever. And of course, it's a reminder.

And when are people going to spend money on themselves? On their birthdays? When is there a special occasion that someone might dress up in lingerie? On their birthdays? When do you think someone's going to start a new fitness routine? On their birthday? I think it's a brilliant idea on many, many levels, and obviously the nice thing with, you know, like underwear or something like that, it costs almost nothing, right? Now, the next thing is they get early access. So I see this as a speed or time delay thing, right? So they get early access. It's exclusive for new products and new drops. So some stuff that sells out fast because she has such a large audience, they get access to it as a member, which is great. Okay. Now, I'll give you one more and then I'll give you the Kahuna. So the one more is they give a free gift after your fifth purchase. So they probably three.

figured out because they're smart people that their churn was probably right after the fifth month. They give a bonus right before or after the turn point. Now, research typically suggests that you do, you add this additional value prior to the turn point. And I think part of that is because if that's the turn point, then there's a, like if that's the average turn, then there's people who are doing it before that, right? And so you want to capture before the turn point. In this instance, there's kind of this idea of like trying to get someone to stay until after. I don't know, but I'll just say this. wherever they gave the gift is likely right around the trip, either right before or right after.

And if you're not sure, at least having something around that point, it's probably going to benefit at least half the audience in terms of the people who are likely to turn. I'll just leave it there. So they have that. Now, here's the Kahuna. Here's the big boy. And this is the one that I thought,

I was like, I hadn't heard of this. Now, maybe some of you have heard of this, but I had it. Which is they make the recurring membership skippable. All right, now hear me out. Now, some memberships say, yeah, you can skip this month, but they wove it into the membership and they're very deliberate about highlighting it. Now, the reason that I think this is so interesting

is that because the nature of the subscription is that it is not, and the people aren't trying to buy, I mean, maybe some people are trying to buy stuff every month, but a lot of people aren't. Between the first and the fifth of the month, they will then personalize a basket of things based on your preferences. So they have a lead magnet,

a Mondo lead magnet, which I'm obviously a Mondo fan of, which is to get more traffic to convert, trying to get someone to buy immediately, they just say, hey, you know, they ask them like seven questions and then they ask for their contact information. So they ask, hey, you know, what type of stuff are you looking for? What colors do you like? What size are you? And they kind of go through this questionnaire, right? And then it finishes with, you know, asking for their information. And after you have that commitment and consistency bias and you kind of the cost of your time,

you're like, ah, screw it. I might as well create the account. But on top of that, they give a cookie right at the end for creating the account, which is they immediately give a discount on purchasing. So all of this is with the intention of obviously driving conversions. And so they give an immediate discount. And what do you think the likelihood of somebody who just selected went through a seven question questionnaire and as a discount is on buying? Probably pretty decent or at least higher than somebody who's called. They collect this data up front and then that allows them to personalize the shopping experience

every month thereafter in addition to whatever they're buying on a regular basis. And I'm sure they have some algorithm that waits those preferences. Now, back to the credit. So they present this box of personalized goods and they say, hey, would you like to buy some or all of these things. Now somebody can look at that box and pick and choose what they want, and then they can also take that credit and then buy other stuff. So you're not, you're not fixed to that box. It's almost like they give you an inspiration box to like kind of like wet your appetite to buy stuff. And it's almost just like a reminder, hey, buy from us. Hey, buy from us.

But from a logic perspective, if you figure that you're going to buy from her at any point, right, then you're probably going to want a discount. And so as long as you have the wherewithal to just hit skip every month except for the months that you want to buy stuff, then you don't have to pay any more for being inside of this membership discount option. Now there's, but wait, there's more, there's one more thing. So what are we on? We're on like 10 bonuses that she has here. So here's bonus 11. All right. So bonus 11 is that she has a community and an app online where she shares exclusive content behind the scenes, fashion shows, to that hardcore following. She's actually combined in the element of community really thoughtfully into a physical

product membership, which I still think is one of the most underutilized opportunities for any business owner, especially a physical product. But like if your thank you page or your email that has the product doesn't say, hey, by the way, join our community where we have all these exclusive benefits, most times you would pay to get the feedback that you get from a community. Right? You would pay to get that kind of brand loyalty. You'd pay to find out what customers want. Get feedback on how to make your products better. Be able to have a hot audience where you can pull things and get immediate feedback on your ads, on your, on your marketing, on the products to design layouts, anything that you can think of, you can get that, and you can get it proactively.

Like, how, like, so valuable. And this, and like, obviously, I think every business should have community, but she's leveraging it really well within this business. And they're smart business owners, which is why they're doing it. She's leveraged media, which obviously costs nothing to distribute on top as yet another added benefit. And the cool part is if you skip, you still get the benefit, right? And so she has basically 11 benefits for being a member, and it's so beneficial that they add it on the checkout page. And underneath, from a disclosing perspective, I'll just read it to you.

She says, after your first purchase, you'll be billed $59.95 each month to unlock a member credit and other rewards unless you skip the month between the first and the fifth. Member credits never expire, cancel any time, and then you can learn more. They never expire, which I'm sure is a legal thing,

because she got dinged by regulators for that, which I won't get into regulators just creating alternative taxes for anybody who's just making more money. that is beyond the scope of this episode. But anyway, so they have those disclosures. And all in all, the big five that Rihanna did really well is that she partnered with someone

who had already had the distribution, the retail knowledge, and the manufacturing knowledge. She picked a market that had a high cagger, so compounded annual growth rate, and her messaging was aligned with it, an authentic, which leads to the third, is that she overnight built a 20-year brand of positive sentiment.

that was, and she picked products that were authentic to her. Fourth, she leveraged affiliates exceptionally well to create even more leverage on her brand and create a brand to affiliate kind of positive reinforcing loop and made it brand accretive for them. So it was actually a gift of their audiences to make this association rather than an ask. And so they got to associate with them. So they got to associate with her. They got to associate with LVMH. They got to associate with the Emmys.

They got to associate with high-fi fashion. All of those things are brandic creative. And she priced it in a way that I think, catered to the vast majority of her audience, and it was around a pain point that she well understood because she was a mom, she was pregnant, she did have different body sizes, and her background is diverse, and her audience is diverse, and so she attracted to affiliates to kind of hit each of those verticals. And then finally, I think she has a bangin offer in what would otherwise be a very non-traditional membership structure, but she stacked this thing full of 11 bonuses and a really

unique monetization model that I think we can all learn something from. So that is a Mosey business breakdown. I hope you guys enjoyed this. If you did, tag me because I'm going to do more of these, because I actually really, I loved this. I loved making this for you guys. I think this is fun, taking the theories, making it practical. There's many things I'm going to take some stuff from this business, especially from that stack of like, okay, what elements of community can I add in here? Is there a way that I can add some sort of skipability to any of my memberships to make it, to increase the likelihood having some dramatic same-day discount. So she gives them that discount and they don't get billed that 59 up front. They get billed on the next month. So they get the discount today

and they get the billed the month later. Basically paying someone to enter your continuity. Like a lot of really clever things. And obviously she has some smart people on her team. And that's why they're, I think, well, between both of her brands, I think she did 600 million last year. Mama don't create a almost $3 billion brand without having some some intelligent on.