License to Steal

One start-up increased sales by using an already established name for mass marketing.

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What's in a name? According to the folks who bring you Vidal Sassoon hair dryers, about $84 million a year

Let's talk egos for a minute. Specifically, yours.

One of the truly wonderful things about starting your own company is that you get to name it whatever you want. Most people take the direct approach: Fred's Barbershop, McDonald's. Or they name it after something they're particularly fond of, like an apple, or what they aspire to be: International So-and-So.

But no matter what route they choose, very few people are willing to change their company's name or the name of its products once they are under way. The name may be dumb, silly, or unknown by all but the founder's family, but it's theirs.

It's a matter of ego.

And that brings us to Helen of Troy Corp., a company in El Paso that you probably have never heard of. After more than 10 years in business, the company did something that you probably wouldn't. It changed the name of virtually everything it sells. Fame, fortune -- and only a tiny identity crisis -- followed.

The son of a beauty-industry wholesaler, Gerry Rubin, now 44, started Helen of Troy after visiting an industry trade show in the late 1960s. People there said wigs, which had been hot for a while, would likely keep selling. That was enough to convince Rubin to open a wig shop in El Paso, his hometown. Soon he had six stores.

But wigs gave way to the "natural look" of the 1970s, and as sales fell, Rubin began selling hair dryers and styling tools to salons. By 1978, the retail shops were gone, and Helen of Troy, in the words of company president Aaron Shenkman, was left with "a nice little $6-million business [net margins were about 4%]. We were," says Shenkman, "making a living.'

But making a living is one thing, and growing is something else. The problem for Helen of Troy -- which by then owned 25% of the national market for professional hairstyling tools -- was that there was no room to grow. The market was flat, competitors strong, and new products hard to come by.

"Obviously," says Rubin, "retail was the place for us, if we wanted to grow.'

The problem was, Rubin wasn't the first to see the attractions of the mass market. By 1980, companies such as GE and Gillette dominated the hairstyling aisles. Gaining a place on the shelf meant spending a minimum of $25 million a year on advertising, and Rubin didn't have anywhere near that kind of money. Helen of Troy's net worth was $1 million.

Rubin was caught in a classic catch-22. He couldn't break into the market without money, and he couldn't get money until he broke into the market.

Rubin spent a long time thinking about this, and the more he thought, the less he liked his choices.

Choice number one: he could stay in the professional end of the business and have a nice "little" $6-million company forever. That was certainly safe -- but dull. The only excitement would come from the explosions that periodically rock Helen of Troy's headquarters when the junkyard across the street forgets to empty cars' gas tanks before it compacts them.

Choice number two: he could enter the retail market by making private-label hair dryers. While making products for someone else meant he could expand sales with little risk, it also meant little profit. "In essence, we'd be importers," says Rubin. "That's a business where you compete for pennies."

Or choice number three: Rubin could scrape together as much money as possible -- the company would go public a year later and raise $1 million -- and gamble on gaining a toehold of his own in the retail market.

But this option was even riskier than it first appeared. Assuming he could break in -- and retailers made it clear they were not exactly pacing the aisles waiting for another hair dryer to sell -- a move into the mass market would jeopardize Rubin's core business. Hairdressers sell image. And what kind of image would they have if clients saw that the Helen of Troy dryers and curling wands being used on their hair were available at the local K mart? If Rubin entered the mass market -- where success was a long shot at best -- there was an excellent chance that hairdressers would take their business elsewhere. The upshot? Helen of Troy could end up with nothing. No retail business, since the big boys were likely to fend it off. And no professional business, since miffed salon owners might shop elsewhere.

The more Rubin considered his choices, the more unhappy he became. He seemed completely boxed in. Then his father passed along a trade-magazine article that convinced Rubin that he did indeed have a fourth choice. He could, in essence, change his company's name.

What Rubin Sr. had read was this: Vidal Sassoon, a London barber who had become known as hairdresser to the jet set, had decided to license his name. Sassoon had already put it on a line of shampoos and was setting up a company to endorse other items.

When Gerry Rubin heard this it was as if God had decided to speak directly to his company.

"This was the way to break through," Rubin recalls. "We wouldn't have to spend millions creating a name; Sassoon had one. We wouldn't be offering retailers another me-too hair dryer, we'd be going in with a designer line. And we'd be able to protect our professional line as well. We'd use the Vidal Sassoon name for the mass market, and reserve Helen of Troy for the shops.'

He had found truth.

There were, however, two problems. By becoming a licensee, Rubin would be known -- if he were known at all -- as a man who sold Vidal Sassoon products. Helen of Troy, a company he had spent 11 years building, would be dominated by a product that carried somebody else's name. And the change would happen almost immediately. Projections (which proved true) showed that first-year sales of Vidal Sassoon products would be greater than Helen of Troy's entire professional line.

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