March 01, 2011
Rodan + Fields: Exit Retail, Enter Direct Sales
by Jennifer Workman Pitcock
Support for Consultants
Rodan + Fields Dermatologists skincare line launched in high-end department stores in 2002 and quickly became a top seller. In 2003, The Estee Lauder Companies Inc. realized Rodan + Fields’ value and bought the brand, which continued to thrive. By all measures, Rodan + Fields exemplified success. So why did this company decide to pull its products from department stores and re-launch the brand as a direct sales company?
The answer is simple. Rodan + Fields founders Dr. Katie Rodan and Dr. Kathy Fields saw a trend among consumers who were unknowingly doing their own brand of marketing for the company. With that boost, Drs. Rodan and Fields seized the opportunity to reach the public in a more meaningful way. And the people responded, developing an even greater personal connection with the products and the company.
A Storied History
Dr. Katie Rodan and Dr. Kathy Fields bring their science-backed skincare directly to the public, becoming the first prestigious skincare brand to exit retail and enter the direct sales market.
Drs. Rodan and Fields met as dermatology residents at Stanford more than 20 years ago. Rodan + Fields Dermatologists is actually their second business venture together. The two women are the co-creators of Proactiv® Solution, one of the most successful skincare brands in the United States.
When Drs. Rodan and Fields went to pitch Proactiv to companies, executives were impressed. However, as Allan Kurtzman, then President and COO of Neutrogena, explained to them, Proactiv wasn’t going to work on a mass-market shelf. He told them “you can’t put a $40 regimen next to a $6.95 spot treatment and have it sell.” He also told them they needed a way to communicate and connect with their audience, and suggested an infomercial format.
That turned out to be brilliant advice. Through infomercials, the women were able to come into people’s homes and explain the brand, appealing on an intellectual and an emotional level. Proactiv quickly became a top-selling acne treatment that has won numerous awards in the beauty industry by following that marketing strategy.
From House Call to Wakeup Call
Drs. Rodan and Fields began Rodan + Fields Dermatologists because they felt this approach to skincare should be extended beyond acne to treat other common skin conditions. They launched the line in department stores because they believed the products could best be explained to customers one-on-one. Stores were delighted with Rodan + Fields’ numbers. However, the doctors weren’t seeing the kind of adoption they believed the products merited.
“The doctors were finding that the majority of people who were coming in for the product weren’t coming in because of anything the department store did,” explains Rodan + Fields President and General Manager Lori Bush. “It was word-of-mouth that was sending people in for the products. The doctors began to believe that there was much more potential if they could break out from behind the glass counter.”
In 2006, a PR initiative demonstrated that direct sales could be the perfect vehicle for the company. So Rodan + Fields held a “House Call” event in a Southern California home. Attendees were thrilled to have a better understanding of the products. They liked the brand’s message so much that many wanted to become more personally involved.
Then a local television affiliate ran a piece on the House Call. “The phones lit up at the station,” says Bush. “But callers weren’t merely interested in where they could buy the products. They wanted to know how they could hold one of these events. They were asking, ‘How can I get involved?’ ”
Dr. Rodan acknowledges that the company was reaching out to attendees in a way that crossed the usual seller-buyer boundaries. “People loved the product and philosophy so much that they wanted to be part of the team,” she says. “Because of this passion and enthusiasm, our customers literally pulled us out of department stores and into the direct selling business.”
The doctors approached Estee Lauder about transforming Rodan + Fields into a direct marketing company. Estee Lauder was interested in the idea, but ultimately determined that they didn’t have the infrastructure to allow the brand to realize its fullest potential. So Estee Lauder sold ownership rights back to Drs. Rodan and Fields while retaining a vested interest in the brand.
In 2008, Rodan + Fields became the first prestigious skincare brand to exit retail and enter the direct sales market.
Philosophy and Products
So what is it about Rodan + Fields that created a desire in its customers to partner with the company?
The company’s philosophy—that great skin can make a real difference in people’s lives—resonates with its users. “Our best advertisements are our consultants because the beautiful results are literally written all over their faces,” says Dr. Rodan. “I’ve yet to meet a person who didn’t have some issue with her skin at one point or another, especially with age. With less than one dermatologist per 30,000 people in the population, successful self-treatment can be difficult to achieve.”
The company’s level of credibility also turns users into consultants. Drs. Rodan and Fields are highly respected dermatologists in the beauty industry and in the field of dermatology. “As practicing dermatologists we have hands-on knowledge of the needs of our patients and formulations required to impact skin. We fill those needs by offering products that combine medicines with elegant skincare to both heal and prevent future skin issues,” says Dr. Fields.
Mimi Field, who handles the company’s PR, agrees. “It’s great that I’m not just talking about the products to editors. I also have these wonderful resources in the doctors,” she says. “They’re called upon because of their authority as dermatologists. So that is helpful to the consultants in establishing the products’ credibility.”
Furthermore, Rodan + Fields maintains a relationship with beauty magazines, which is unusual for a direct sales company. But because of their exposure with Proactiv and their establishment as well-known experts in the field of dermatology, the doctors were able to develop that connection. “We’re in contact with the beauty press all the time,” Field says. “We meet with them several times a year to showcase new products.”
Like many high-end department store lines, Field estimates that Rodan + Fields is featured at least once a month in magazines—in effect receiving free advertising and increasing the brand’s visibility.
But even more than the brand’s credibility, Rodan + Fields’ effectiveness has made consultants out of its users. “Our Rodan + Fields products are packaged in simple straightforward regimens, each designed to fix a specific problem,” Dr. Rodan says.
The four regimens—ANTI-AGE, REVERSE, SOOTHE and UNBLEMISH—all provide clinically proven solutions that provide real, visible results. For each skin issue, the doctors have formulated a step-by-step proprietary system called Multi-Med Therapy. Each regimen is designed to deliver the right medicines in the right order to have a transformative impact on skin.
ANTI-AGE combats wrinkles, enlarged pores and loss of firmness. REVERSE takes on brown spots and skin dullness, while working to reverse skin damage. SOOTHE helps calm sensitive, irritated skin and redness. UNBLEMISH addresses acne through healing, prevention and diminishing post-acne marks.
In addition, ESSENTIALS includes additional products such as vitamins that help maintain healthy skin, and ENHANCEMENTS can be added to the various regimens to achieve optimal results.
In October 2010, to enhance the ANTI-AGE regimen, Rodan + Fields introduced the AMP MD system. The AMP MD roller is a bio-delivery, micro-channeling tool. Embedded with surgical grade, acupuncture-type stainless-steel micro needles, the roller painlessly creates micro-channels in the uppermost skin levels. It helps the skin to increase absorption of up to 500 percent. After using the roller, the ANTI-AGE Night Renewing Serum is applied. Using the serum in combination with the roller produces noticeably more effective results. Recently on NBC’s Today show, Allure named AMP MD one of the best new anti-age products of 2011.
A Different Kind of Consultant
More than 1,000 consultants signed on to Rodan + Fields before its official launch. But the company soon found that its distributer base wasn’t typical. Rather than seasoned network marketers who saw a new opportunity and signed on, most had no history in direct sales.
“Therein lies the really interesting dynamic,” Bush says. “We’d put together an MLM business plan that has a robust earning potential and discovered we were attracting people who didn’t know what to do with it. Because of our positioning and strong brand premise, we thought we’d be attractive to seasoned network marketers. Instead, people who appreciated the product proposition and the brand equity were joining.”
This provided Rodan + Fields with its first challenge. “We had to figure out how to take this passionate interest in being entrepreneurial in this category and turn that into success in direct sales,” Bush says.
One issue was brand strength. “There was the expectation that the doctors’ Proactiv legacy was going to make consultants successful just by signing up,” Bush says. This assumption was partly true; consultants had no problem creating a consumption base. “They were extremely successful in signing people into the customer loyalty subscription, but they weren’t building downlines. They were making a little bit of money, but most weren’t building the organizations that would allow them to fully capitalize on the way the plan was modeled.”
The result was a lack of dynamic leaders providing training for the company. So Rodan + Fields stepped in. “We were able to bring in some leadership from the world of direct sales and, at a company level, almost act as the upline,” Bush explains. “We know that one day they won’t want us serving in this role anymore, but in the early days, they embraced company leadership in helping them establish the how-to’s of doing the business.”
Along with leadership, Rodan + Fields developed technologies—and used existing ones—to solve some of the direct selling issues. They were especially interested in getting consultants off to a quick start. “We feel that those first 24 to 48 hours are critical. If they can get a conversation going with their personal network right out of the blocks, there’s more likelihood they’ll continue down that path,” Bush says.
The desire to get consultants off to a great start was the impetus for creating the Pulse Start-Up Wizard, which won the DSA’s Excellence in Salesforce Development Award in 2010. The moment a new Rodan + Fields consultant finishes her electronic application to join, the wizard takes her into the back office. The wizard requires the new consultant to schedule appointments and send out introductions. It asks the consultant to establish her “why” for joining the business. “Consultants have to recruit themselves every day,” Bush says. “So from that point forward, every time consultants log into the back office, their ‘why’ is staring back at them.”
Along with typical components like a personal website, storefront and back office, new consultants also get what Rodan + Fields calls a social networking widget. Consultants can use it to do things like tag and post items to their social networking sites—for instance, the weekly video vignettes put out by the doctors called Skinpact News, which are mostly product-related. “Consultants can put them out on any social networking site and introduce their network of friends to the doctors,” she says. “They’re tagged so that when someone clicks on ‘learn more’ or ‘contact me,’ it sends the inquirer back to the consultant’s personal website.”
With a year-over-year growth rate of 250 percent and a consultant base that has grown to more than 12,000, Rodan + Fields is certainly deserving of another honor the DSA bestowed upon them: the Rising Star Award. “We’ve won all kinds of awards in the beauty community, but to be recognized by the DSA was real validation that we’re on the right track,” Bush says.
Rodan + Fields plans to expand internationally, but first the company plans to focus on creating a solid domestic base. “We’ve done a prospectus on where we believe we should be going globally, but we’re not going to extend our footprint geographically until we feel like we’ve developed the United States to its fullest extent,” Bush says.
And Rodan + Fields is taking full advantage of every technological advance to do just that. Plans include building a studio in the corporate office for streaming webcasts, which will allow Drs. Rodan and Fields and other executives to beam themselves into meetings around the country.
When it comes to expanding product lines, though, Rodan + Fields will be driven by utility, not the bottom line. “The doctors are not going to create a new line because it’s spring and they feel the need to beat last year’s numbers,” Bush says. “They’re not trendy. They’re addressing real needs.”
Dr. Fields adds, “We’re proud to be the only dermatologist line in direct selling. Through our line we offer people a way to not only change their skin, but also change their lives.”