Case study: e.l.f. is changing the cosmetics industry, $1 at a time

Posted 02 November 2009 19:29pm by Meghan Keane with 4 comments

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Through a mix of social media, word of mouth and user generated content, women around the country have slowly been learning the secret to buying cheap cosmetics online. It comes in the name e.l.f. The brand (which stands for Eyes Lips Face) has been selling cosmetics online for five years at absurdly low price points. For a long time all their products could be found for $1 each.

Designed by Scott Borba, the man behind Hard Candy and Neutrogena Men, e.l.f. cuts out the marketing budget — and markup — that most cosmetics companies attach to their products. And the results have been astounding. This week, e.l.f. is making a large push into Target stores and online. The company is on track to reach over $20 million in sales this year.

With price points at $1, $3 and $5 an item, that's a lot of lip gloss. How did they do it?

The company shies away from traditional media buys. Through a series of social media pushes and at home parties, e.l.f.'s business has exploded over the last few years.

With a marketing budget of $0, traditional media buys weren't really an option. But e.l.f. found that happy customers provide excellent marketing themselves. Tapping into the testimonials that were already out there, e.l.f. — together with interactive marketing firm Esultancy (no relation to our brand, Econsultancy) — launched AskElf.com. The site keeps track of the latest makeup trends, offers advice on cosmetic choices and has a live chat to answer customer concerns.

"I create marketing out of air," says e.l.f. CMO Ted Rubin. "I give away nothing other than promotional products."

e.l.f. also taps into its user base with Make Up At Home parties, where women can try out and learn about e.l.f. products. They also do frequent giveaways, blog daily, put out a newsletter and participate in co-promotional efforts with different brands and bloggers. For instance, the company is currently working with ExploreModeling.com on a modeling contest called "The New Face of e.l.f. in 2010, Beauty At All Ages."

Tapping into the enthusiasm of its customer base has worked so far. Rubin says the company averages 60-80 posts per month from bloggers and media outlets. Over the last year, they have increased e.l.f.'s social media presence, and now garner over 12,000 Facebook fans and 32,000 Twitter followers. e.l.f. YouTube videographers have over 2.3 million followers. EyesLipsFace.com gets over 200,000 monthly visits according to Compete.com.

According to the company, e.l.f. cosmetics are selling four times ahead of plan in Target stores.

The economy has been a big help. They launched a limited run at Target last year, but there weren't many products available and they were hard to find.

According to Rubin, Target wasn't that interested in e.l.f. products a year and a half ago. But the economy has changed the perception of value brands. Now that customers and brands are focused on price, e.l.f. has received more attention. Says Rubin: "There never was and isn't today a competitor that sells anywhere near our price point with our quality."

But as far as lowering the price point of cosmetics or putting big name competitors out of business, Rubin doesn't see that in the company's future:

"I think we'll be acquired by them before we drive down their prices."