Elf’s CMO on how the company fosters innovation

This article on Elf Beauty is part of our Vogue Business membership package. To enjoy unlimited access to our weekly Technology Edit, which contains Member-only reporting and analysis and our NFT Tracker, sign up for membership here. Elf Beauty has become a standout success story, having seen 21 consecutive quarters of growth and reaching $1 billion in sales in fiscal year 2024. Parent company of the eponymous cosmetics brand — in addition to Elf Skin, Well People, Keys Soulcare and Naturium — is known for splashy marketing campaigns, which often take risks in terms of tone and technologies, says Elf Beauty CMO Kory Marchisotto, who joined the company in 2019. This past weekend, Elf Cosmetics became the first beauty brand to serve as the primary sponsor of an entry into the Indy 500 race (with car driver Katherine Legge), mirroring this sponsorship with appearances on Roblox and Snapchat. Its provocative “So Many Dicks” ad campaign this month highlights the lack of diversity in corporate boardrooms. Earlier this year, it became one of the first brands of any kind to introduce an experience on Apple’s mixed reality headset, the Apple Vision Pro, building what it had learnt in its Roblox world. It also was one of the first brands to create a channel on streaming platform Twitch — called ‘E.l.f you’ to focus on inclusivity in gaming — and set TikTok records for a music video designed to educate consumers around what ‘Elf’ stands for: ‘eyes, lips, face’. “If you want to instigate bold change, you need to take bold action. And it can’t be something that people just pass by and potentially miss. It has to be a bolt of lightning,” Marchisotto says. She has found that driving growth through innovation requires a hefty tolerance for change. “As long as you don’t get caught up in, ‘This is the way things are,’ and you’re always open to, ‘This is the way things can be,’ you can have a daily state of evolution — which is critical for all technology.” Elf, whose roots are as a discount brand, now finds itself competing in the colour cosmetics category with both mass-drugstore brands and prestige brands. It’s also competing with the massive innovation budgets of conglomerates Estée Lauder and L’Oréal, at a time when the lines between categories are blurring, the trend-to-product development pipeline is accelerating and lower-priced brands are gaining traction. While it’s now easier to colour outside the lines, there is more competition for eyeballs on social platforms with both large scale and indie players, meaning that unexpected, first-of-their-kind marketing campaigns can help carve out attention. “Everything is moving towards fluidity. We used to have very clean lines that were easy to navigate — there’s mass and prestige; there’s commerce, e-commerce and social commerce — now everything is seamlessly blending, so the key part is to understand: are there borders and boundaries? And if so, how do we break them down and where, if any, are those borders and boundaries going to be broken down on the road ahead?” Marchisotto says. During its earnings call last week, the company announced that its market share had grown 305 basis points (BPS) in the past fiscal year. Meanwhile, leader L’Oréal’s shares fell more than 7 per cent in February after reporting lower-than-expected sales and a decrease in demand in Asia, with sales for the full year at almost $45 billion. (Sales improved during the most recent quarter, according to an April earnings call.) In May, Estée Lauder lowered its full-year forecast also due to lower sales in China. On the heels of Elf’s landmark earnings announcement, Marchisotto sat down with Vogue Business to share what she’s learnt about evaluating new technologies and how the company encourages teams to embrace new ideas. Start with a signal While innovative platforms and form factors present unknown risk, Elf doesn’t enter them blindly. Instead, the company looks for clues that its audience will be receptive, and tries to avoid those that don’t seem like the right fit. Elf was one of the top brands requested on Roblox, according to the brand, so it opened its ‘E.l.f. Up’ experience last November to encourage people to develop entrepreneur skills; this includes four themed shops inspired by Elf Cosmetics products. Since launch, it has attracted 11 million plays. Similarly, when it created a viral ‘Eyes, Lips, Face’ dance challenge on TikTok, the brand had already noted that millions of people had used an Elf Cosmetics hashtag without the brand’s participation. “It always comes from a place of an audience either calling for us. We go where we’re needed,” she says. The company treats its Roblox experience as an ongoing “test-and-learn platform” that helps create a fluid line between the digital and the physical, as Elf’s consumers don’t tend to draw strong lines of differentiation, Marchisotto adds. This month, it added a racetrack to coincide with its Indy 500 sponsorship, alongside a corresponding Snapchat campaign. The intention is to continue updating projects on Roblox, and potentially add direct commerce, meaning the option to buy physical products directly within the world. (Walmart has been a first mover on this capability.) “When you sign up for a platform like that, we’re signing up for the long term, so we’ve got an incredible marketing calendar slated to continue to build on,” Marchisotto says. Already, it’s borrowed from its Roblox experience to create a shoppable experience on the Apple Vision Pro, which was unveiled in February. Similar to its Roblox presence, Elf developed three gamified environments inspired by its most-popular products. This strategy also means that some trending tech topics aren’t worth pursuing. Elf hasn’t seen enough demand for blockchain-based products or rewards, for example. Instead, it has built a loyalty programme that lets members scan receipts from other multi-brand retailers to receive points, and people are responding really well, she says. “We’re putting our energy into really understanding, what do they really fancy through this programme? And then how do we make sure that we’re constantly evolving to best meet what that desire is today? If we started to see signals that said, ‘We would like to pay through digital currency,’ then we would shift our thinking towards that direction.” Have ‘yes’ energy Marchisotto says that part of the brand’s strategy in exploring platforms and ideas is creating the cultural conditions necessary for innovation to thrive, which means working to maintain a “startup” mentality at a 20-year-old company and making sure everyone is invested, literally, in the company’s success. This is helped, in part, by the company’s rare structure of providing equity to all employees. Since the company’s initial public offering more than seven years ago, it has granted at least $150 million worth of equity to its employee base. “Everybody in this organisation has permission to be an innovative entrepreneur, and that starts with our compensation model,” she says. “This is a passionate team of owners, and that is a fundamentally different starting point.” This has trickled down into how the brand works with tech platforms, where Elf has developed a reputation for trying new things. After its successful TikTok dance challenge, it created a TikTok reality show, a TikTok movie, participated in TikTok Super Brand Day and was one of the first to test TikTok Shop. “These platforms really love working with Elf as a beta. We have a lot of ‘yes’ energy, and innovation also comes from ‘yes’ energy. We’re willing to try because, for us, experimentation is fundamental to who we are.” Be flexible and human The next frontier for Elf includes exploring how generative artificial intelligence can enable its employees to become more efficient, freeing them to do what only humans can do, including creative and strategic thinking. She predicts this approach will be coupled with what she calls “radical humanity”, where as more people become isolated and lonely, the more important it is that leaders act with empathy. In practical terms, Elf is piloting an internal AI system called ‘E.l.f.gpt’ that allows the company to, as she says, “fish from a safe pond”. It is currently testing across multiple disciplines, including creative and social teams. This humanity includes the need to be humble and realistic; the company’s virtual try-on offerings, she says by way of example, still have room for improvement. With any change, flexibility is key. “The reality is that people want what they want, when they want it, where they want it, how they want it. It’s up to us to figure out how we best serve your unique needs, wants and desires that are going to evolve over time? We need to evolve with it.” Sign up to receive the Vogue Business newsletter for the latest luxury news and insights, plus exclusive membership discounts. Comments, questions or feedback? Email us at feedback@voguebusiness.com.

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