In their first seven years, Heidi and Orville Thompson built home- and personal-fragrance company Scentsy into one of direct selling’s top-line players. What began in a 40-foot metal shipping container on a Meridian, Idaho, sheep farm in 2004 led to meteoric growth by 2011 when they hit $535 million in revenue. The next year Scentsy climbed to $560 million and ranked No. 23 on the DSN Global 100 list.
| Scentsy Founded: 2004 Headquarters: Meridian, Idaho Top Executives: Co-Founders Orville and Heidi Thompson 2016 Revenue: $456 million Global 100 Ranking: 42 Products: Personal fragrance, kitchen, bath and home decor |
Orville Thompson & Heidi Thompson
Back then, the Thompsons recall, they really didn’t know the strength of the Scentsy brand or where it was headed. The company had moved to a new home office on an Idaho campus of 73 acres, and then a wave of competing retail pressure hit them broadside. A bold product move followed by a harsh re-evaluation of the business, and two years of struggle and hard work, brought Scentsy back to its core identity one employee, one product and one consultant at a time—and the company is now stronger for it.
But for 10 consecutive quarters, starting in summer 2012, Scentsy’s sales dropped while the behemoth Glade, owned by S.C. Johnson Company, and others introduced copycat retail products. Scentsy’s sales sank 13 percent annually over the next two years.
In response to this encroaching competition, within and outside the direct selling channel, Scentsy made a bold move to offer its consultants more options to help build their businesses. In 2012, the Scentsy Family umbrella expanded to include two new brands: Velata kitchen products and Grace Adele fashion accessories. Though profitable, both brands had created a distraction and contributed to a decline for the company as a whole. It took Heidi’s simple question directed at executives, about how Scentsy’s strategy tied back to its values, to flip the switch. Once recognized, Scentsy regained its brand and confidence by taking slow, steady and deliberate actions to return to its cultural authenticity. Revenue has now posted up for 10 consecutive quarters. Revenue for 2016 was $456 million and projections for 2017 are upward of $480 million.
While current revenue is not what it was in Scentsy’s early growth heyday, the Thompsons say they understand their business better today. They like the direction the company is headed and the stable pace at which they are growing. Revenue doesn’t have to skyrocket to make them happy. They say there’s great freedom in not having to answer to shareholders or bump up numbers to attract private equity. They can prioritize corporate authenticity over short-term profits, which the Thompsons believe is the best path to success over the long haul.
Attaining this kind of contentment hasn’t been easy, and it all started with Heidi’s question during a 2013 planning meeting. “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?” It proved to be the pivotal moment for Scentsy, CEO Orville Thompson says. “It hadn’t sunk in to executives that we were declining, that this wasn’t just a blip and that we were actually in a trend.”
Ideas were flowing, markers flying. Competitive advantage, winning, numbers, improvements, and ways to get their share—those topics crowded the whiteboard. But Scentsy President Heidi Thompson grew frustrated. “I kind of blew up—in my nice way,” she says.
“All the things we just wrote on the board were things the Consultants weren’t even going to care about or even know we had implemented,” Heidi says. It was as if the connective tissue that held the mechanics of Scentsy’s business together—the heart that made it successful in the first place—was lost. The management team just didn’t get it. Heidi fired off some difficult questions. Where is our culture suffering? Where are we missing connecting to our sales field? Why aren’t we listening to them? Where is the heart? “We needed to get back to the heart—us being active and listening to the field,” Heidi says.
The Thompsons now theorize Scentsy’s approach to business growth had slipped into a decidedly single-minded pattern. They had omitted the cultural markers that made Scentsy great in the first place—simplicity, authenticity, generosity, warmth and inspiration. They graded themselves poorly that day and erased the whiteboard.
“It hadn’t sunk in to executives that we were declining, that this wasn’t just a blip and that we were actually in a trend.” — Orville Thompson, Co-Founder and CEO, Scentsy
In so doing, they chose to look at decision-making differently. No longer are ROI, advantage, experience and positive outcomes with other companies the only deciding factors. They make room for intangibles like Heidi’s intuition and instinct.
Her common phrase, “I don’t know why, but here’s what we should do,” can still frustrate him, Orville says. He may disagree, think it’s unfair or arbitrary, but she’s pretty accurate, he adds. Now he makes an effort to understand and respect that intuition “implicitly.”
“You have to respect intuition, and you have to understand why letting that intuition surface is important,” Orville says.
Peeling Away Distraction
When a company is young, energetic and growing, massive change happens fast. This atmosphere attracts a certain type of executive interested in riding the wave. Once a downturn sets in, enthusiasm wanes and jobs can get harder.
Roughly one-third of the people in that 2013 meeting are no longer with Scentsy, replaced in recent years by different voices—some from outside the direct selling channel and others representing the old guard of party plan. There were new ideas, experimentation and even a foray into remote team management. (It didn’t work.) New hires stayed and new hires left, but the Thompsons believe it’s been a worthy struggle and has convinced them of one thing—culture beats strategy every time. And it began showing in the company’s bottom line as well.
“We needed to get back to the heart—us being active and listening to the field.” — Heidi Thompson, Co-Founder and President, Scentsy
“It’s a fight when you hire a lot of new people who have their own ideas. Allowing those ideas to be implemented without sacrificing culture was a huge challenge,” Orville says.
Years, initiatives and proverbial feathers in executives’ hats had piled on much distraction for the management team. Changes had to be made. “We said we are going to live by our Scentsy brand and what we are about, or we will die by it,” Orville says.
The past four years have been spent peeling away distractions and setting their business clock back to 2010. Umbrella companies Grace Adele and Velata ceased operations in 2014 and 2016, respectively. Consultants sold product at deep discounts during six-month transition periods, and Scentsy offered a 100 percent return for products if consultants wished to cut ties. Not a single consultant took the offer. “Making things right was the most important thing to us,” Heidi says.
“If you violate the cultural contract in a trial, then the trial breaks you. If you validate the cultural contract during a trial, then it brings you together,” Orville adds.
Having no activity requirement had created an explosion in Scentsy’s consultant base, taking the numbers up to about 200,000. As a way to whittle away at the inactive consultants, the company instituted such a requirement in 2014. Nearly half of its consultants fell off, but revenue increased immediately. The management team succeeded in deepening the home office/consultant relationship by injecting energy into limited-time offers and creating excitement and engagement with new marketing tools, training and resources.
Today, the company holds steady at approximately 120,000 consultants, who are provided with realistic expectations of the job. These consultants stuck around, the Thompsons say. They worked hard, and they attracted others who wanted to do the same, including millennials, some of whom are second-generation Scentsy consultants, making good in the “YouEconomy.”
“Real opportunity is much better than believed opportunity that will never transpire,” Orville says.
The Real Work
The Thompsons say they aren’t chasing anything anymore. There’s nothing to prove, and they aren’t trying to impress. Hard-won stability has shown them that.
The real business improvements Scentsy is now looking for include asking questions such as: How do you create a training program that fundamentally helps someone increase their dollars per hour as they go about their business building a downline? How do you create a better product that has a better value proposition, so customers buy it with less effort from our consultants? How do you create a corporate culture that more easily attracts highly talented people, who get along and do good work?
Business growth is strategic now, and the executives can be happy with single digits, they say. Maintaining an overall growth rate of between 2 percent and 10 percent is their sweet spot. They have the resources to pursue interesting projects, can handle the growth and consultants who work hard do well. Get much above single-digit growth and the business heats up too much, Orville says.
Strategic Growth
There are four legs to Scentsy’s current growth strategy, and they focus on consultant needs.
First, they are upgrading and integrating home office-led training tools to equip consultants to train their own teams for business growth. Scentsy’s Sales Engagement Department works with leaders at the superstar directors level as well as with those who aspire to attain it to set goals and better engage teams using new train-the-trainer tools. “This is really where a lot of our growth, our excitement, is coming from,” Orville says.
Second, they are strengthening international markets. The company operates in 11 international markets with others in the pipeline ready to launch when the time is right. Last year, Scentsy moved Dan Orchard, general manager emerging markets, to Europe to oversee and direct international operations. The company is now seeing the benefits of having a team on the ground to focus on the unique needs of the European and Australian markets and to provide necessary resources. Markets like France are taking off, executives say.
They also are pleased with Scentsy’s ability to translate its culture to other English-speaking foreign markets. The Thompson’s authenticity, however, may never attract or appeal to some people or cultures, and that’s OK by them. “There’s no need to sacrifice who we are for international expansion,” Orville says.
Third, Scentsy is using predictive analytics to enable strong customer relationship management systems that will help identify customers and potential consultants who best align with its brand. “We can look and see what types of people like Scentsy best. Why do we do well in suburbia? Why do we do well with military wives? Why don’t we do well in big cities? Is it a product, a process, the people?” Orville says.
Over and over again, their segmentation research tells them that family is central to everything. They see this power of the family as one of the biggest factors attracting consultants and customers to Scentsy.
Last is the development of symbiotic, real-time marketing tools that at once help consultants market Scentsy products and the business opportunity, while also helping the home office use data analytics to appropriately market products on behalf of consultants.
“If you violate the cultural contract in a trial, then the trial breaks you. If you validate the cultural contract during a trial, then it brings you together.” — Orville Thompson
“We heard from consultants that the party landscape was changing. The demand for doing parties online, through video, mobile or a combination of an in-home event and an online party are just a few ways that creative consultants are introducing customers to Scentsy. Our goal was to make it easy for consultants to have whatever kind of ‘party’ a customer desires,” says Julie Cabinaw, vice president of marketing technology and innovation.
In 2016, Scentsy launched social selling tools that directly integrate a consultant’s Facebook and Pinterest accounts to their Scentsy account. Once personalized and shared, an image links to a corresponding product page and the customer is just one click away from ordering. The company also launched Party Page, a customizable and flexible social and mobile-friendly platform where consultants create content to share with hosts and guests through email or social media.
Results showed 95 percent of beta tester consultants would recommend the tools. Additional statistics also demonstrated that the tools were effective in generating results: There was a 5.6 percent conversion rate for Facebook shares communicated this way and a 29 percent better than average Consultant website conversion rate. The number of parties per month increased 10 percent. Thirty-nine percent utilized Party Page. Party value in terms of sales rose 12 percent above those who did not use Party Page. There was a conversion rate of 7 percent for Party Page shoppers, a 60 percent better than average Consultant website conversion rate. In fact, Scentsy’s efforts won them the 2017 Direct Selling Association’s Excellence in Salesforce Development Award.
Product Development/Manufacturing
Another past DSA award-winning Scentsy program, IdeaShare, connects the company’s home office to consultant wants and needs. Scentsy Bath Bombs and Scentsy Go, an on-the-go personal fragrance delivery system, were born of this tool and later developed by the company’s product team.
Scentsy manufactures 205,200 products daily at its Idaho facilities and has escalated hiring to meet customer and consultant desires. It recently added 100 employees to hand-package bath bombs, so the product would float in water rather than sink when used by customers. Machine-packaged products can be more densely packed and thus sink. The company worked through a nonprofit to give those jobs to a group of refugees.
There is a concept in Scentsy’s product development that respects the relationship customers have with fragrance and innovates the company’s method of delivery so customers can enjoy it multiple ways.
“When we come out with new products, we don’t need home runs because Scentsy wax and warmers are extremely powerful, effective, popular and growing in every market. What we need are other products to expand the customers’ ability to take fragrance into other parts of their life. So a 10 percent contribution to our revenue would be spectacular,” Orville says.
“We are not trying to impress shareholders,” he adds. “We are not trying to just make money. We are not trying to attract private equity. We are not trying to angle for a strategic partnership buyout. We are focused on being the best that we can be and helping our consultants be the best they can be. That is a very satisfying place to be, and what we are finding is that it is more successful as well.”
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