May 01, 2016
Scentsy: Reimagining The Future
by J.M. Emmert
Photo: The new Scentsy Commons corporate office at Christmastime.
Headquarters: Meridian, Idaho
Executives: Orville Thompson, Co-Founder and CEO; Heidi Thompson, Co-Founder and President
Products: Wickless Candles, Accessories, Home Décor
2015 Revenue: $429 million
It’s an oft-told sidebar in the retelling of the Scentsy story: How the multimillion-dollar international party plan company began in a 40-foot metal shipping container on a sheep farm in Meridian, Idaho. But it is an important sidelight for what it represents.
Even as the company’s hyper-growth prompted its operations to move to several locations throughout Meridian, the values and aspirations instilled by co-founders Orville and Heidi Thompson remain firmly rooted in that container. And that was critically important over a recent two-year period that saw Scentsy face declining numbers and increased competition from both retail and other direct sellers. Growing in net sales in 2015 for the first time in three years—from $419 million to $429 million—by refocusing on the core Scentsy brand has revitalized the company and its field.
Founded in 2004, Scentsy eclipsed the $500 million mark just seven years later when it achieved $535 million in sales of its fragrance products. But even as sales climbed to $560 million in 2012, catapulting it into the Top 25 direct selling companies in the world, the Thompsons were seeing Scentsy’s growth rate slowing. In fact, sales dropped off 13 percent in each of the next two years.
|Heidi and Orville Thompson|
“In 2012 we were facing retail pressure and there were a lot of direct selling companies suddenly doing well,” says Orville. “As other companies started to succeed, our field was not ready for the competition. They had not dealt with that before. A lot of people were doing multiple companies and getting distracted.”
The Thompsons were worried. They looked at different options and finally came upon the idea of offering multiple brands under the Scentsy Family umbrella. “We wanted to create an opportunity in case the worst-case scenario happened,” says Orville. “So we looked at different brands. What if we could offer our direct sellers the opportunity to build one downline but represent different companies and then all flow into one downline? That was really a thesis that we had—that it would work. It was defensive in some degree, but also we thought it might have a real opportunity.”
And so in 2012 Scentsy introduced two new brands: Velata, a line of kitchen products, was released in April; five months later came the company’s fashion accessories line, Grace Adele. While both brands were profitable, the distraction caused by a multi-brand downline led to the flattening off and decline of the overall company. They were ultimately discontinued; Grace Adele in 2014 and Velata earlier this year.
The impetus for changing strategies came during the very first planning meeting held at the company’s new 168,000-square-foot corporate headquarters, Scentsy Commons, which was completed at the end of 2013. During the meeting, senior executives were asked to speak about their projects for the following year. When all projects had been listed on a blackboard, Heidi spoke to the room full of men.
“Can you guys please explain to me how each of your projects speaks to simplicity, authenticity or generosity?” she asked. “Which one of them will warm the heart, enliven the senses or inspire the soul?”
|Scentsy consultants at the company’s recent Spring Sprint.|
Amid the ensuing silence, Heidi asked Orville to wipe the blackboard clean and to write words that meant something to Scentsy. “So we wrote ‘simplicity, authenticity, generosity, warm, enliven, inspire, family, friendly, industry-leading, contribute more than you take, Scentsy spirit,’ ” says Orville. “Things that came from our ethos, our aspirations and our values. Heidi put the gauntlet down and said that unless any project builds Scentsy’s spirit, we will not do it; unless a project enhances our ethos, we will not do it. I think that was the seed of the turnaround.”
That pivotal moment in Scentsy led to a reimagining of the company strategy and a refocusing of energies on the core business of Scentsy. And while Grace Adele and Velata may have helped them through a difficult two-year period, Orville believes the Scentsy core value proposition was much stronger than they had calculated, and the ability for retail to compete more limited than they had calculated.
“Scentsy proved to be so resilient; the other brands became a distraction,” says Orville. “People realized that a Scentsy party was way easier—and they made more money. And as much as they liked the idea of Grace Adele or Velata, when they compared it to how easy it was to build a Scentsy business, they saw the contrast. It helped people realize how valuable their Scentsy business was. That is what I think fueled the Scentsy resurgence.”
Scentsy’s corporate interior including the company’s new branding.
That resurgence began when Orville and Heidi looked at putting their efforts into those things that could make Scentsy a world-class organization. “We started to identify our best-in-the-world opportunity and make it better,” says Orville. “That required a brand evaluation. What products fit and what products didn’t? What standards of quality were necessary to reflect the brand that we want—what image, what packaging, what messaging had to surround that brand in order to portray that message of best in the world?”
Chief Marketing Officer Mark Stastny adds, “Historically, companies were under the belief that they had complete control and ownership of their brand. Prior to the Internet and social media, that may have had a degree of truth to it. But with the advent of the Internet and certainly social media, companies need to recognize that they do not unilaterally own their brand. They are actually in partnership with a field or a sales organization—in our case, that is our consultants.”
Scentsy has taken an approach where it feels the brand, and the experience of the brand, is a shared ownership between Scentsy, its consultants and its customers. “Orville and Heidi from the very beginning have always believed that the brand is not something that they own or control, but that they are stewards over, and that they have to take responsibility for that stewardship very seriously,” says Stastny. “We’ve always tried to share our culture and our values with our consultants and our customers in ways that empowered them to help us evolve and represent the brand.”
And brand is what ultimately draws in customers. While retail competition can be a key inhibitor to a company’s growth, the low-cost alternatives are not always what customers desire. “Because we were able to establish our product as a high-quality product at a fair price, we are now getting more people coming to us looking for a better version of what they can buy at retail than we are losing people to them,” says Orville. “That retail competition is dangerous at the beginning, but if you can withstand it, it actually establishes your product category and can lead to longer-term, realistic and rational growth moving forward.”
Another dramatic turnaround at Scentsy was a fundamental shift in the creative process. As executives retired or left the company, Scentsy focused on hiring the best talent in the world. One of those hires was Lindsay Randolph, the former Global Creative Director at Disney Consumer Products.
“We brought her in and she really elevated the creativity game,” says Orville. “We said let’s get out of a business that focuses on mechanics and let’s be a creative company, and let the mechanics support the creativity rather than being a mechanical company that had a creative department.” That creativity shift began in 2014 and has resulted in a creative spirit that has since established a product pipeline that is deep.
“You can see the difference in the catalog since Lindsay came on,” says Heidi. “The difference the creative team here at Scentsy has made is obvious—the catalogs are just beautiful.”
Scentsy currently has four to five catalog seasons’ worth of product reveals in a pipeline getting developed properly. “All the i’s are dotted, t’s crossed and intellectual properties protected,” says Orville. “So we are just much more professional moving into the catalog season.”
Marketing also is greatly evolving at Scentsy. Stastny, who joined the company in 2008, is leading the charge in ramping up marketing efforts—especially social media.
“Scentsy was experiencing hyper-growth—from two times year over year to four times year over year, and at periods of time even six times year over year. When you are growing that fast, demand generation and marketing is not something you spend a lot of time on,” Stastny says. “We were trying to keep up with that demand curve. Growth continued that way so we did no more than organic marketing through our consultants from about 2008 through 2014. You get spoiled in that kind of a situation. We were just basically trying to support our consultants.”
Scentsy’s marketing efforts during that time were to take the best ideas from the field organization and then replicate those ideas and share them in ways that the entire field could benefit from them. “From a marketing perspective, that is a pretty passive approach,” Stastny says. “What we found is that we kind of peaked out on that growth curve. We spend a lot more time now looking at numbers, using data and analytics to see what is working—not just anecdotally listening to consultants the way we used to. We can actually go in and understand and know where consultants have higher levels of success and productivity over others, and where there are geographic pockets within markets that are underperforming relative to other areas.”
Stastny is helping to build a marketing competency for the first time at Scentsy that will help complement and supplement what the field is doing to market their businesses. “We view our relationship with consultants very much as a partnership and anything we are going to be doing, above and beyond what they do, needs to support and complement the efforts that they are doing. We are now able to dissect numbers, data and information in ways we never could before, which helps us to understand where consultants are doing things really well or where there are underserved areas in geographies. We are taking a much more focused approach on how we are turning the marketing knobs to try to improve in those areas, either through consultants or by trying to increase demand directly from the company, which then in turn sends people directly to consultants. Either way the consultants are going to benefit.”
Scentsy is heavily invested in Facebook, where it has 932,000 followers, and was able to reach 26 million customers in 2015. It also uses private Facebook groups to stay connected to consultants, including 4,000 of its top field leaders. Twitter is used for special messaging and, as many of the Scentsy products are visual and experiential in nature, the company also uses Instagram (42,200 followers), Pinterest (23,000 followers) and video-based platforms such as Periscope.
“We have been ramping up our efforts at the home office in Periscope to stay connected with our field organization,” says Stastny. “We found that it is a great mechanism to stay connected, and Orville and Heidi have personally invested in Periscope and have the largest amount of followers.”
Imagining the Future
Sales and training at Scentsy also have experienced changes in the past few years. Sandy Spielmaker, who formerly led efforts at two other direct selling companies, was hired to put together a full sales department—the first ever for the company. Training is currently being developed by segmenting the field into different cohorts and then putting training on where people are in their business.
One of those cohorts Scentsy executives are most excited about are the millennials who have come into the company. “There is a massive youth movement,” says Orville. “We are seeing young, vibrant, fearless, excited people coming into Scentsy. They represent the later part of the millennial group that is willing to roll up their sleeves and go to work for their ideals rather than just focus on what is different about them and everyone else. We missed that group that was coming through our sweet spot demographically who were idealistic and are picking up those who are pragmatic.”
Back to the Beginning
Scentsy reimagined its strategy—from brand to creativity to marketing—and is now focused on its interaction with the field through enhanced training and development. That is the last step of its reimagining: to have the training and development and leadership that support the massively improved product development process.
However, all strategies will always lead back to the values established by Orville and Heidi. And while the spirit of that container holds the key to their success, the opening of Scentsy Commons was incredibly important in transforming the mood of Scentsy.
“When you have a family-owned business that is in rented space, it is tough to trust what is going to happen to that business long-term,” says Orville. “When we put down the deep and expensive roots of our campus, it is a sign to everyone that we are ghere to stay. That allowed us to recruit people we would not have been able to recruit and hire the talent we have been able to hire as a result of their subconscious trust in the company because of the campus.”