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August 04, 2011

Top Desk

Brand: New Thoughts

by Orville Thompson, Co-Owner, CEO, Scentsy

Since our launch in 2004, Scentsy has grown steadily, from sales of less than $100,000 in 2004 to more than $380 million last year. Within the last year alone, we moved up 31 spots from No. 64 to No. 33 on the DSN Global 100 list of the top direct selling companies in the world. Each season has seen us do some things well and some things poorly. Like most direct selling companies, we have not been immune to consultant discontent, financial concern, poor execution, bad communication or competitive pressure, yet we have grown steadily. Through it all, we constantly ask ourselves the probing questions of how and why. As insight into our success so far, I’d like to share with you Scentsy’s thoughts on brand and how it guides our decision-making.

Brand Democratization

A brand is more than a name, logo and tagline. It is the sum of the perceptions of all its stakeholders. It carries with it a characteristic spirit defined by the aspiration and values of the organization it represents. Whenever an individual engages in a behavior that produces a brand benefit, that person becomes a brand stakeholder. As stakeholders, they earn the right to a portion of the physical goods (money) and emotional goods (goodwill) produced by the brand. This right is in direct proportion to the brand benefit they create.

To illustrate this principle, I draw upon a story from history. In the 13th century, Spain’s sheep industry came under the control of a handful of the largest land-owning families. In exchange for their tax revenues and political support, the king of Spain granted these families the right to graze their sheep on all the fallow land in the country. To protect this right, the king declared farmers could not close off their ground with fences. Not surprisingly, just as a farmer was about to harvest the fruit of his labor, these enormous flocks of sheep swept in and destroyed all attempts at agriculture. As a result, farmers had no incentive to plant crops even though the kingdom desperately needed food. The king was unwise for favoring a few politically entrenched individuals at the expense of his kingdom as a whole, and he was unjust for giving one group something that belonged to another.

Entrepreneurs and business leaders often repeat the folly of the Spanish king. Rather than seeking input from new distributors, customers or entry-level employees, as one would in a democratized brand, these leaders look to entrenched managers, industry experts and senior distributors for answers. What often follow are recognition programs, incentives and policies of the status quo at the expense of new and innovative ideas. These decision-makers find themselves adopting a strategy of “emulate the status quo and hope for the best,” and then wonder why their “farmers don’t plant crops.”

Recognition in the direct selling industry is very important. The contribution of one group is recognized relative to the contribution of others. But what about the contribution of the masses who don’t reach the threshold? Are they to be forgotten? In a democratized brand, every contribution is valued, regardless of how small it is, and there is an expectation that contribution will be recognized appropriately. In hindsight, Heidi and I realize this attitude is a function of our age and mindset; we are Gen Xers.

We soon discovered our target market—Generation X and Y individuals—felt the same way. This group feels connected to brands they contribute to, even if their contribution is small. Gen X and Gen Y individuals aren’t interested in being recognized relative to others, but they do want to be acknowledged for their contributions, whether it is in selling, recruiting or evangelizing the brand to others. By seeking input from people others ignored and recognizing all stakeholders relative to their contribution—not relative to each other—we were able to create an organization full of alignment, energy, innovation and growth. Thus, our brand spoke clearly to the group of people most interested in buying our products and joining our business.

Brand Stewardship

Any brand that has more than one stakeholder cannot have an owner. Physical control of the common stock of a company does not translate into ownership of a brand, and position in the organization does not translate into moral authority. Rather, ownership and title carry with them the responsibility of stewardship on behalf of all stakeholders collectively. To the extent people are given authority to make decisions, they have an obligation to exercise that authority with wisdom and justice.

This concept is illustrated in Scentsy’s finances and, specifically, in our history of bootstrapping. Heidi and I put in a total of $60,000 paid in capital, and the company’s total liabilities have never exceeded our inventory asset. To do this, we believed every dollar of revenue came with a promise to every stakeholder we had to keep. To keep this promise, we strongly resisted any ongoing or long-term commitments. Unless we could pay cash, we didn’t purchase assets, and until we had a reliable stream of income, we didn’t take on commitments like employees or leases. Until cash flow was sufficient, we worked for free in a rent-free facility. Until we could afford software, we calculated commissions by hand. As cash flow increased, so did our ability to invest in personnel, plant and equipment. This created a mindset of frugality and efficiency that was appreciated and promoted by our employees and consultants, and adopted by our vendors. Most important, it demonstrated to the people who built our brand that we were good stewards of their contributions. They learned they could count on us to respect their involvement and compensate them appropriately.

Brand stewardship is the process of guiding a democratized brand by focusing the energy created as people interact with the brand toward a common benefit. At Scentsy, we value every interaction with our brand, even when it comes with no obvious monetary benefit, because we know brand engagement inspires long-term trust and cooperation. An example of this is how we use social media not to sell, but to build genuine relationships through fun and engaging activities. Scentsy “fans” choose to align with our brand because they like it and trust it. Therefore, they are much more likely to buy product, become a consultant, say good things to a potential customer or consultant, or share an innovative idea.

Brand Promise

Brand promise is most often thought of as a company’s logo or slogan. But for me, the fulfillment of a brand’s promise is when brand democratization and brand stewardship come together to fulfill the expectations stakeholders have about the brand. Scentsy, like any other organization, thrives when we promote behavior that recognizes the contributions of all brand stakeholders and rewards them appropriately. Alignment, energy, growth, innovation and happiness are indications of this organizational vigor, not the cause of  it.

Orville ThompsonOrville Thompson is Co-Owner and CEO of Scentsy.