The Proactiv Dermatologists Break the Billion-Dollar Barrier—Again

(Bloomberg Businessweek) -- After 35 years as business partners, dermatologists Katie Rodan and Kathy Fields still do everything together—including give interviews. “Last week a woman recognized me,” Fields says. “She said, ‘You’re Katie Rodan!’ I said, ‘Close!’ ”

They’ve reached street-level celebrity thanks to their smash-hit skin-care line, Proactiv, which sells about $1 billion in products a year through mall kiosks and infomercials featuring the likes of Katy Perry and Justin Timberlake. Their latest line of treatments, called Rodan + Fields, reached $1.5 billion in sales last year—largely through consultants who sell to their friends and contacts, like social-media-era Mary Kay ladies.

Friends from medical school, they came together in the late 1980s over a shared frustration from their private practices: Available acne treatments were typically useful only after pimples appeared. They formed a partnership and created a three-step treatment system to prevent clogged pores and began shopping it around. Through an unlikely series of connections—a father’s co-worker’s wife—they were picked up by Guthy-Renker LLC, a direct-sales business. “They were the only company interested in us, but it turned out to be the very best thing, because it allowed us to craft a message: three medications, full face, low-strength, every day,” Fields says. “If it sat in the store, people wouldn’t have understood.”

S. Tyler Hollmig, an associate professor of dermatology at Stanford, where Rodan and Fields are adjuncts, says skin products tend to be either well-marketed potions with little science behind them or great products that consumers don’t use correctly. Proactiv Co. and Rodan + Fields LLC break the molds. When students interact with the two entrepreneurs, Hollmig says, “they are looking at a legend in the field.”

Rodan and Fields started developing targeted regimens for other common skin problems, such as brown spots and aging, shortly after launching Proactiv and in 2002 released them under Rodan + Fields. Estée Lauder Inc. acquired the brand a year later, and for four years the pair watched it flounder on department-store shelves. “Customers were coming to us not because Esteé Lauder did any great marketing but because of word-of-mouth,” Fields says. “So why were we rewarding the department store, giving them 50 percent of the margin?”

They bought back Rodan + Fields in 2007, hired a tech company to build an inventory system, and decided not to require consultants to buy stockpiles. As social media gained in popularity and ubiquity, so did Rodan + Fields. Today there are more than 200,000 sellers worldwide.

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