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May 01, 2015

Company Spotlight

Team Beachbody: Fit to Grow

by Barbara Seale

Click here to order the May 2015 issue in which this article appeared or click here to download it to your mobile device.

Company Profile

Founded: 2007
Headquarters: Santa Monica, California
Executives: Chairman and CEO Carl Daikeler; President Jon Congdon
Products: In-home fitness programs, nutritional shakes and personal care

 Carl Daikeler Carl Daikeler
 Jon Congdon Jon Congdon

With its mission of transforming lives by ending the trend of obesity, it’s safe to say that Team Beachbody’s growth trajectory has also transformed its multi-sales-channel parent company.

Founders Carl Daikeler and Jonathan Congdon launched Beachbody® in 1998 and then expanded into Team Beachbody®, the company’s muscular direct selling arm, in 2007. Team Beachbody first landed in the Direct Selling News Global 100 with 2012 net sales of $218 million. In 2013 it produced a 50.5 percent increase, achieving $328 million in sales. Last year growth accelerated even more. Team Beachbody’s sales grew more than 70 percent, reaching an impressive $570 million. And for the first time, sales through Team Beachbody were the highest in the whole Beachbody organization. That includes its original direct-response organization, which sells through infomercials, and its newest business, Beachbody Live, which certifies trainers to lead classes in commercial gyms using the company’s tough fitness programs such as P90X® and Insanity®.

Jeff Hill, Team Beachbody’s Executive Vice President of Global Sales, says the company has pumped up its sales incrementally by getting better over time at the range of activities that support direct selling, which all revolve around the idea of creating real results for real people.

“Our secret sauce is sweat combined with commitment,” Hill says. “First, people know that if they follow our proven and rigorous workout programs and couple that with the right nutrition, Shakeology®, they will get real results. We know that because they both tell and show us through their before-and-after pictures. No gimmicks. They know they can rely on it. Second, we align our compensation program, our recognition and our culture of fun yet high accountability together to capture all those high notes and create something compelling for people.”

Shaking Up Compensation

Shakeology is the company’s meal replacement shake that Team Beachbody calls a “daily dose of dense nutrition.” The company says it will increase energy, reduce cravings, shrink weight, improve digestion and regularity, and transform health. As the company’s largest revenue generator, it’s also the backbone of Team Beachbody’s compensation program.

“It’s the residual compensation driver for the business,” Hill explains. “It’s the key component in our challenge packs, which bundle one of our fitness programs and Shakeology on our auto-ship equivalent, which we call Home Direct. Shakeology is our hero product.”

Last year for the first time, sales through Team Beachbody, the company’s muscular direct selling arm, were the highest in the whole Beachbody organization.

Challenge packs are the product component for a proven marketing concept in Team Beachbody’s success: challenge groups. Led by Team Beachbody distributors, which the company calls coaches, challenge groups are groups of coaches and customers who want to participate in an accountability program. Use your fitness program-of-choice for 90 days or whatever the length of the program may be to help you get fit; follow a nutrition program that includes Shakeology; and finally, use social media to share your success and get encouragement and peer support from your coach and from others participating in the challenge. Hill says customers love the interaction, and they love showing their results through before-and-after photos.

“Challenge groups are a very organic, stair-step way for people to become acquainted with our products and also the business,” he explains. “One of the powerful aspects of them is they are great environments for customers who just want to become more fit as well as those who are interested in pursuing Team Beachbody as a business.”

Team Beachbody also loves to shower recognition on participants whose commitment yields results. They can win T-shirts; daily, monthly, and quarterly cash prizes; or a $100,000 annual grand prize.

Over time, the company recognized that a 90-day or even 60-day hard-core challenge wasn’t for everyone. So they developed others: Tony Horton’s X3; Shaun T’s Focus T25 or Max 30; and the 21 Day Fix and 21 Day Fix Extreme programs. All are available as standalones or complete with challenge packs, to help people get started, see results and possibly prepare for a more vigorous program.

“It opens the door to a new demographic,” Hill says. “Maybe someone’s not ready for the Insanity program, but they want to lose 7 to 15 pounds in 21 days. With the 21 Day Fix, they can get significant results.”

Team Building

Challenge groups also provide an environment that lets participants experience success while they help coaches build their teams.

“They tend to create great loyalty,” Hill observes. “For a select few who see a business opportunity, the challenge group creates a safe environment for those types of discussions to take place. They really open the door to a natural conversation.”

In January alone, the company recruited about 25,000 new coaches and ended February with more than 35,000 new coaches—a record monthly number.

The formula clearly works. In early February Beachbody CEO Carl Daikeler reported on Facebook that Team Beachbody had shipped a record 793,468 orders in January and that more than 335,000 people had signed up for the Beachbody challenge. In January alone, the company recruited about 25,000 new coaches and ended February with more than 35,000 new coaches—a record monthly number. Hill points to the early part of each year as the company’s richest recruiting time because many people start the year with resolutions to get healthier and more fit. Big numbers in the first quarter create momentum that tends to continue throughout the year.

Team Beachbody recognizes those successes in many ways. Recognition is one of the keys to success that has muscled up over the years. Hill notes that in the early days of Team Beachbody, the company recognized success with iconic items such as pins and ribbons. But in an effort to better align its recognition with its workout culture, last year it introduced a line of recognition-driven apparel. As coaches advance, they receive apparel—shirts, tops, jackets—that recognizes their success. As at many direct selling national conferences, Team Beachbody’s Summit will be packed to the pecs with recognition. In a business based on transformation, Team Beachbody’s cover models are its coaches. The before-and-after photos of Beachbody Transformation winners play a starring role at Summit to recognize their success. Many of them started their Beachbody journey as out-of-shape people who used the Beachbody program to change their bodies. They found the experience so powerful that they wanted to help others while building a business, so they became Team Beachbody coaches.

“Every time we launch a product we look at it from the perspective of can it sell on an infomercial so that it creates brand equity, which then makes it easier for a coach to sell.”

—Jeff Hill, Executive Vice President of Global Sales

“The cool thing is that you can appreciate that the external transformation is secondary to the internal transformation that takes place,” Hill explains. “They develop a higher degree of confidence and self-discipline as they go through their transformation. It’s transgenerational, as well, because often they’re instrumental in stopping the trend of obesity or poor health in their own family. Although we celebrate the Coach of the Year for top business results, the heroes of the evening are the Beachbody Challenge winners, those who have overcome overwhelming weight challenges.”

Recognition for the Coach of the Year reflects the fun-but-focused Team Beachbody workout culture.

“We can never afford to take ourselves too seriously,” Hill notes. “While we want to honor an individual’s achievements, we also want to keep things fun and light. With that in mind, the most coveted award of all is a huge WWE championship-style belt that the company customizes for that person. For example, Hill describes the 2014 winner as a beautiful, always well-dressed young woman. Her championship belt was bedazzled with bling, courtesy of Team Beachbody.

He explains, “The celebration around the Top Coach is one that reminds us that this should be fun. We’re all human, we’re all on a journey, [and there’s the] ‘I’m not all that and a bag of chips; I’ve been fortunate to earn this’ [outlook]. It adds to the culture of getting realness. Our coaches love that.”

Last year 8,500 attendees cheered for the Top Coach. But like the rest of Team Beachbody, the Coach’s Summit is growing. This year’s sold-out Summit will have 23,000 attendees.

Conflicting Channels Create Brand Equity

As Beachbody’s direct selling arm, Team Beachbody is in a unique position among direct sellers. Its sister companies, which sell the same videos through TV infomercials or certify master trainers to lead the programs in live workouts at gyms, create a dynamic that is both conflicting and synergistic.

“Our strengths are also our challenges,” notes Jeff Hill, Team Beachbody’s Executive Vice President of Global Sales. “Channel conflict is something we continually have to message and talk to coaches about. When you can buy a program from an infomercial versus a coach, that always has to be addressed and reinforced. Though we live with that conflict, it creates tremendous brand equity. People have seen the programs, they know it, and they recognize it. That makes presenting them to a customer or potential coach very simple. No explanation is needed.”

Beachbody was born as a direct response company, and today it spends about $100 million a year in media that lets consumers purchase their products through infomercials. But the transaction is quite different than it would be at Team Beachbody. Hill explains that in the direct-response business, a consumer sees the infomercial for a fitness program such as P90X or Insanity, sometimes in the middle of the night. That consumer calls a toll-free number, orders the program, the call center agent offers other products, and the transaction is completed. A few days later the purchase is delivered and the customer has to self-motivate to use it.

The 265,000 Team Beachbody coaches benefit from the awareness those infomercials create. Whether they’re talking to a friend who hasn’t purchased or someone at the coffee shop who strikes up a conversation with them because they’re wearing their P90X T-shirt, the infomercial has opened a door—and the person behind that door often already knows about the product. The coach can then talk about Shakeology or a challenge group, or even a different product, starting a coaching relationship with minimal effort.

“As a direct-response or infomercial company, we have in our DNA a transaction mindset that has been very successful. Then you move to peer-to-peer marketing based on trusting relationships with people that are long-lasting,” Hill explains. “Our challenge is in the cohabitation of those worlds and finding the synergy between them.”

The company’s next challenge will be to create synergy among Team Beachbody, the direct-response business, and its new Beachbody Live subsidiary, which it launched in 2012. The initiative attracts and certifies master trainers to lead live classes based on Beachbody workouts in fitness centers.

The bottom line? Hill explains, “Our goal is to be the driving force in ending the trend of obesity in the world. To do that, we have to use all the tools in our toolbox and use them well. We like the challenge.”

Pumped Up Products

Fueling that growth is the company’s product lineup—not just Shakeology, but also the well-known workout programs led by trainers such as Tony Horton, Shaun T, Chalene Johnson, Autumn Calabrese and more. Most consumers know the workouts from Beachbody’s direct response television infomercials, so coaches don’t need to explain them. All trainers were well-established fitness pros before they aligned with Beachbody. Not only do they have expertise, but the trainers also have the ability to connect with and motivate home exercisers who depend on them to get a 5:30 a.m. sweat on.

On March 2 the company launched Beachbody on Demand, which lets Team Beachbody Club members stream their workouts to laptops, tablets or mobile devices anywhere and at any time.

“Part of our strategy is to provide great products that are attractive and that we know will provide real results for people,” Hill says. “Every time we launch a product we look at it from the perspective of can it sell on an infomercial so that it creates brand equity, which then makes it easier for a coach to sell. And whereas a fitness product is a one-time sell, nutritional products are what people buy every month. We’ve been very methodical about our nutritional product offerings and focus on Shakeology as our primary product. Any new nutritional products will need to complement Shakeology.” He adds, “Our criteria are always: What is best in class? What will align with premium fitness? What will provide the highest probability of real results? We haven’t rushed to add new ones, and nutritional products are exclusive to our direct selling business.”

With so much success, Team Beachbody continues to transform and expand. On March 2 it launched Beachbody on Demand, which lets Team Beachbody Club members stream their workouts to laptops, tablets or mobile devices anywhere and at any time. The digital innovation currently gives members access to hundreds of Beachbody workouts on demand. Hill says the program will be a big part of the company’s future.

Coach of the YearAll in good humor, Team Beachbody’s 2014 Coach of the Year receives a bedazzled WWE championship-style belt to recognize her business achievements.

Growth and technological expansion have demanded investments in both people and infrastructure. Success has allowed Beachbody to attract some key staff members to manage its increasingly complex business. For example, it brought on Chief Digital Officer Bill Bradford to develop and manage Beachbody on Demand. Bradford was the driving force behind the launch of Hulu. The company has also hired Co-President and COO Marc Washington, Chief Financial Officer Sue Collyns and Chief Information Officer Eduardo Frias.

They oversee a complex business that has some 720 employees, including those in call centers in multiple sites across the globe. The company is currently expanding its California headquarters to accommodate growth.

Reflecting on the executive team, Hill notes that their chemistry is as important as their competency. “They’re not just competent, but also people of character. There’s that great chemistry of people who like working together and have respect for each other,” he says. “There tends to be an absence of ego in the group. They just trust each other to do the job.”

While Team Beachbody has focused primarily on its U.S. market, it launched in Canada last fall and says that its Canadian business is growing nicely. The company plans to announce its first country outside North America in summer 2016, but it believes that North America still holds tremendous opportunity. And Beachbody will continue to expand Beachbody Live trainer certification, currently a small part of its business.

“Our vision is to become the most respected, recognized health-and-fitness company in the world,” Hill says. “To do that, the Beachbody umbrella requires us to be in great relationships and peer-to-peer marketing, as well as have a direct-response side and be in gyms certifying people. If we create the influence we want to have, we can’t be purely in the network marketing space. As we capture the synergies of all the business, there’s enough room for everybody. That will allow us to get better and better.”