At skin-care brand Rodan & Fields, a team of direct sellers showing off their bare faces on social media to shill product has helped fuel a billion-dollar business.
The company, launched in 2002 by dermatologists Katie Rodan and Kathy Fields, follows a multi-level marketing model that turns its customers into brand consultants in order to promote products through social media, primarily through invite-only Facebook groups. Rodan & Fields handles all of the transactions, while consultants — who pay a starting fee, as well as an optional monthly fee if they want a personal website — get a cut of sales. It also sells product in an online store, but Diane Dietz, CEO and president of the brand, said those sales only make up 3 percent of overall revenue.
Social commerce and consumer success stories are what primarily drive the brand’s growth, which has recently seen a big uptick. The company says it generated $1.2 billion in sales last year, an increase of 80 percent year-over-year. In April, retail analytics and research firm Euromonitor named it the No. 1 skin-care brand in the U.S.
Those who haven’t been invited to join a Rodan & Fields consultant’s Facebook group might be wondering where it came from.
“We have very low awareness,” said Dietz. “It’s the unicorn that no one has heard of. We don’t do a lot of PR, we don’t advertise. We focus on the partnership with our consultants. It’s interesting to me that we’re still unknown.”
While Rodan & Fields has gone through a recent growth spurt, it didn’t pop up overnight. The company went through a few iterations to get to where it is today: It was owned by Estée Lauder from 2002 to 2007, and sold in department stores before the founders bought it back in. In 2007, it shifted to the direct-sell model, tapping brand consultants to recruit new customers by emphasizing the results they’ve seen from the different skin-care products. Those products are clustered into categories based on skin type and focus areas (sensitive, anti-aging). The brand now has 200,000 enrolled consultants.
Direct selling takes the idea that real-life influencers can sell products better than a corporate brand can, and builds its business off of it. This model isn’t new. Beauty brands like Mary Kay and Avon paved the way by sending items to real-customers-as-sales-people who host product parties in their homes. But the rise of the influencer, particularly in the beauty space, and the reach granted by a platform like Facebook has struck a chord.
“Digital platforms helped this model take off at an unprecedented level,” said Jessica Ramirez, retail analyst at the firm Jane Halli and Associates. “And this touches on the word-of-mouth verification of beauty influencers, which has become so important in a crowded market. Skin care is personal, and people are always looking for assurance online that something will really work.”
But Rodan & Fields has been using real results and a direct selling strategy for years. Dietz attributes the sudden growth, at least in part, to the company upping its product launch cadence. Previously, new products only came about every few years. She learned that, by holding focus groups with consultants to learn about what customers were asking for, the brand could make decisions faster.
Most recently, it launched LashBoost, an eyelash-enhancing serum that sells for $150 a tube and promises longer-looking lashes in four weeks. After launching a year ago, the product has hit $200 million in sales. Dietz said that the “real results” photos posted by consultants have solely sold the product, as the brand has done no other marketing around it.
Ramirez said that when following a multi-level marketing model, a brand is only as good as its product. People are sometimes wary of Facebook friends with an agenda to sell them something, as such business models have been pegged as pyramid schemes.
“While word-of-mouth can drive growth, it can also kill a brand if the product doesn’t live up to its promises,” she said.
Look at Lularoe: The multi-level marketing brand for leggings has also hit $1 billion in sales, but somewhere along the way, the quality of its product plummeted, and it was hit with a lawsuit earlier this year for selling leggings as “thin as wet toilet paper,” rocking its seller community.
If Rodan & Fields wants to continue its growth, eventually, it might have to explore more traditional marketing methods to raise awareness.
“This model lets a brand grow without a ton of overhead,” said Meaghan Werle, Kantar Retail’s e-commerce analyst. “But eventually, you want to go into traditional marketing to sustain growth. You can’t turn every customer into a consultant.”