June 01, 2015
Propelling Young Company Growth on the Global 100
by Andrea Tortora
IN THIS ISSUE:
- 2015 DSN Global 100 List
- Introducing the North America 50
- 2015 DSN North America 50 List
- 2015 Profiles
- Propelling Young Company Growth on the Global 100
- DSN Celebrates 6th Annual Global 100 Ranking
- Frequently Asked Questions about the Global 100 Ranking
- By The Numbers
- Join the $100 Million Club
Many of the young companies on the DSN 2015 Global 100 list are in the midst of a revolution.
Twenty-three companies on this year’s list are less than 15 years old, and 12 of those increased their net sales by more than $50 million in 2014. Powered by technology, innovation and the passion that fuels relationship marketing, these upstart firms are poised to take direct selling into the mainstream for product distribution. What’s driving their growth? Several things:
- Stand-out products backed by data
- Customer acquisition models focused on continuity and repeat buys
- Digital technology in the field and in the back office: Social commerce is modernizing direct selling, especially when used alongside a strong brand proposition. High-end operations systems ensure seamless transactions and allow businesses to collect, analyze and act on big data related to customer wants and needs and emerging market sectors
- Wrapped around all of this is innovation: in leadership, training, product and systems development, and thoughtful company cultures focused on inclusion and personal development
The ways in which the Global 100’s young guns execute their strategy varies, but each is striving to break the mold and get it right. Plexus Worldwide CEO Tarl Robinson sums it up well: “Every day we come in and fix something,” says Robinson, whose company increased its net sales by 93.75 percent from $160 million in 2013 to $310 million in 2014, making the 7-year-old company one of the fastest-growing companies on the Global 100 list. “It is an accumulation of several things that add up to momentum. Getting it done properly on several items is what adds up.”
Stand-out Products Backed by Data
Success in direct selling starts with having an outstanding product, and the young, fast-growing companies on this year’s Global 100 list are no exception.
Addison, Texas-based Nerium International is a shining example of this. The company launched in 2011 with just one product: Nerium Age-Defying Night Cream. A year later, it hit $100 million sales and landed at No. 86 on the Global 100 list. The company remains committed to manufacturing anti-aging products rooted in science, and its board of directors includes dermatologists and top skincare science researchers. Fast-forward to 2015, and it is one of the youngest companies to ever crack the top half of the list. With 2014 net sales of $403 million, an 84 percent increase over 2013, Nerium is No. 40 on the Global 100 and the 21st largest in North America.
“We have a society that has neglected themselves and they need to be educated,” says Founder and CEO Jeff Olson. “I think we legitimately are filling a void. The direct sales model allows us to deliver products with education. And vanity doesn’t care about the economy.”
Rodan + Fields Dermatologists is another anti-aging skincare company using science in big ways. Founded in 2008 by the dermatologists who created the Proactiv acne treatment, Rodan + Fields strives to bring physician-grade skin care to everyone. CEO Lori Bush believes using a disruptive go-to-market strategy in the premium skincare market gives her firm broader appeal. The social commerce model is making big gains over department store brand competitors.
At No. 50 with $330 million in 2014 net sales, Rodan + Fields grew by 68.30 percent over 2013 sales of $196 million. That makes the company No. 7 in 2014 percentage growth. The different approach and brand prestige drives growth, Bush says. For example, the new Acute Care line uses manufacturing technology from the semiconductor world. Tiny liquid cones act like micro needles that melt into wrinkles, Bush says.
Six-year-old Viridian Energy is baking data directly into its product offering. The company includes a tool in its e-newsletter that gives customers access to their meter usage, along with personalized savings insights as well as equivalency data and a “green” score. At No. 51 with $349 million in 2014 net sales, Viridian grew by 30.71 percent over 2013 sales of $267 million. Chief Strategy Officer Cami Boehme says studies show that consumers with usage data can save up to 3 percent per month on their energy bills.
Acquiring Repeat Customers
As distributors share information about product advancements, these young company success stories are finding that the direct selling model can quickly turn customers into raving fans. The most successful companies seek out the right people to represent their products and give them the support and development they need to grow.
WorldVentures, a company dedicated to creating experiences for people through travel, grew $157 million last year, taking the company from $195 million to $352 million. That speed of growth also landed the Plano, Texas-based company on Inc.’s 2014 33rd annual list of the fastest-growing private companies, the Inc. 5000. Skincare and nutritional products company Jeunesse Global also achieved a ranking on this same list, growing $162 million from $257 million to $419 million.
At Plexus, Robinson set out to create a compensation plan that would help erase negative connotations of direct selling. Plexus offers two starter packs: one at $99 and one at $199. If those who join don’t create their own business at the very least they have a three-month supply of great products.
“How do you do it with tact and class so that you don’t burn your 10 best friends and can still pick up the phone and call them if it doesn’t work out?” he says. “That is what we are driving at.”
For Robinson, making Plexus a stand-out growth leader is about getting back to what the direct selling business is based on—empowering people to achieve success with real products that add real value to people’s lives.
When SEACRET Direct, a maker of luxury anti-aging and skincare products containing Dead Sea minerals, expanded to markets like Colombia, Argentina and India, sales per location were actually higher than in the United States, says CEO Izhak Ben Shabat. “It is because of the awareness of looking good and having the ability to look good,” he says. “Maybe someone can’t buy a new car or a new house, but they can buy something to make themselves look and feel better.” The 4-year-old company increased its net sales 104.20 percent last year, reaching No. 79 on the Global 100.
SEACRET, which embraces a hybrid compensation that integrates a party plan environment with multi-level compensation, leverages technology to share stories and successes and to interact with consumers. Yet, Ben Shabat says face-to-face interactions remain critical for forming long-term customer relationships. “We don’t believe in social selling on the Internet,” he says. “We want that physical environment so people can connect and understand what they are buying. That is how we create loyal customers and loyal agents.”
For Rodan + Fields, the key has been using technology to create connections while bringing the online and offline world together in a social way. Bush calls this a “distributed e-commerce platform.” Here’s how it works: The products translate what dermatologists would do in their practice to create non-prescription, non-medical formulations anyone can access. A direct selling model creates micro-entrepreneurial opportunities for consultants who sell to a distinct customer class in a continuity program supported by consultants and the corporate office. All transactions go from a consultant’s personal website to the Rodan + Fields back office. Corporate ships direct to customer homes and handles returns and billing. By handling all transactions electronically, “we know where the inventory is,” Bush says. “The vast majority of sales (65 percent) go to our preferred continuity customers.”
Putting Technology to Work
Technology undoubtedly is playing a significant role in the growth of the young Global 100 companies. Upstart direct selling firms are harnessing technology in new ways to keep pace with customer expectations and to power their products, their IT systems and ultimately, their growth. Many companies are using technology to bring customers together in non-traditional group demonstration settings, such as “parties” held entirely on Facebook. Others are launching new web platforms and making extensive use of digital marketing tools for their fields.
At No. 18 with $918 million in sales, Stream grew by 5.66 percent over 2013 sales of $867 million. Kerry Brown, Chief Marketing Officer, says technology improves services and creates the best customer experience. For example new mobile features include an app that helps customers swap content between phones and tablets, a low-cost international calling app, and an online Device Assistant tool that shares everything a user needs to know about a device.
At It Works!, a seller of herbal skincare and beauty products, technology is being used to teach distributors how to be thoughtful while using social media. At 14 years old, It Works! is No. 31 on the Global 100 list with $538 million in 2014 net sales, up 17.98 percent from 2013. The “100 Day Social Adventure” is not about building through social platforms but knowing which buttons to push, says CEO Mark Pentecost.
A focus on creating cutting-edge, in-house technology to manage front and back office operations goes hand-in-hand with big growth numbers at companies like Ambit, Nerium and Isagenix. Jere Thompson Jr., CEO of Ambit, credits their continuing growth—a $300 million increase last year from $1.2 billion to $1.5 billion—in large part to their emphasis on their tech systems (see page 88 for a story on Thompson).
Isagenix, at No. 27 with $725 million in 2014 net sales, grew by 61.80 percent over 2013 sales of $448 million, making it No. 10 in 2014 percentage sales growth. Isagenix now employs more than 100 people, nearly a quarter of its corporate staff, in the IT part of its business.
In addition to technology, Isagenix Co-Founder and Executive Vice President Kathy Coover believes the company’s strategic shift from being overly product focused to now emphasizing opportunity and personal growth to potential consultants and customers has helped increase that bottom line. Coover says, “Now people lead with their vision. They say things like, ‘My goal is to help younger people create financial freedom so they can live their dreams. Are you interested in taking a look?’ And then they show them the product line. That shift has really helped.”
After two years of amazing growth at Nerium, the company slowed things down and spent close to $20 million on in-house operations. Olson says his firm wrote 1.5 million lines of code as it created a seamless global operation system. “We didn’t want to outgrow our platform in the middle of big growth because that can be harmful,” Olson says. “Now we can go to any country and any currency and operate under one rhythm.”
Innovation is all about diversity and looking at things in new ways. Many of the fastest-growing young companies on the Global 100 list are innovating in the areas of field development, leadership training and culture.
Plexus set out to create a culture of partnership, one that eschewed the “us versus them” attitude. “We didn’t want any lack of cooperation from the field or corporate,” Robinson says. “We’ve worked hard to create that environment.” This includes driving the point home on a daily basis and coaching people as individuals. Robinson says he knows the culture is working as he sees top leaders make advisory board decisions that may hurt their sales in the short-term but will benefit the entire field and company in the long run.
By approaching field development from a transformation scale, Rodan + Fields educates its teams while reinforcing positive selling behaviors. A group of experts in behavioral economics, motivational psychology and game theory are creating tools that teach and drive growth. In game theory offering certain intrinsic rewards at the right time can be more effective than financial rewards, Bush says. An example is an online social badge. Direct selling is similar to game theory in that as one’s skills improve, he or she moves up in the ranks. People develop different strengths and capabilities at different points in their development.
“If we can make a plan to reinforce the right behaviors at the right time and open up, unlock, and reward new ways of doing things, [then we are making a difference],” Bush says.
Nerium embraces what Olson calls the “one rhythm” approach, and he carries it through every level of the company. A lack of leadership leads to fracture. When there is a void, the field will come up with its own systems. Olson says his experience in the industry taught him “what to do as much as what not to do.”
Everyone is on the same page at Nerium, from training, to communications and the operating system. “We have one rhythm, one way of doing things across all borders,” Olson says. “This makes it easy for our partners to transcend geography and time zones. We’ve made a model to plug into.”
More Opportunity on the Horizon
With stand-out products, strong customer bases, advanced technology and a spirit of innovation, these young, fast-growing companies are likely to continue shaping the face of the Global 100. And, given the attributes inherent in the direct selling distribution model, they have the opportunity to do so regardless of which way the economic winds blow.
The underlying motivators and reasons people join direct selling change with the economy, but people continue to join. “In the soft economy, people were at risk of losing their income from other jobs and sought out alternatives,” Bush says. “Today, our consultants are powerful, educated women leaving the workforce to focus on their families who also want to retain part of their professional lives.” Scott Hammond, Ph.D., a clinical professor of management in the Jon M. Huntsman School of Business at Utah State University, has consulted with some of the world’s largest and smallest network marketers, including Amway. He says direct selling opportunities are often sold as inflation-proof. The state of the economy doesn’t really matter:
- Direct selling firms generally grow in a down economy as people “join” seeking to supplement or replace income due to a loss of their job or overtime hours.
- Direct selling firms grow in an up economy because customers have money to buy product, and new recruits have greater belief and confidence about trying something new.
- Direct selling firms grow in a turbulent economy because people seek to take the peaks and valleys out of their economic ride.
What really drives people to direct selling companies is the need for affiliation. “New recruits are seeking friends, colleagues, peers, mentors and guides who will help them through the ups and downs of starting a business,” Hammond says. “They want to build the kinds of relationships that you don’t always get in a traditional job. They want a membership that guides their activities and validates their contribution.”
As young companies continue to tap into that spirit of belonging, we expect to see more advance through the ranks of the Global 100.