BUSINESSWEEK ONLINE : MAY 29, 2000 ISSUE
COVER STORY Direct Focus: Flexing Its Marketing Muscle Direct Focus Inc., Vancouver, Wash. PRODUCT Bowflex exercise bench and Nautilus weightlifting equipment SALES $138 million WHAT'S HOT Pitches its Bowflex and other fitness machines straight to consumers through TV infomercials If you've ever stumbled in your late-night channel surfing on solemn-looking specimens working on something called the Bowflex exercise bench, you're acquainted with Direct Focus Inc. (DFXI) The company spent more than $20 million advertising the Bowflex over 50-plus cable channels last year. In spite of all that hoopla, Brian R. Cook, 50, CEO of the Vancouver (Wash.)-based company, wants to distance Direct Focus from its biggest breadwinner. ''This is not a story about the Bowflex,'' Cook advises. ''This is about the direct sales model.'' Indeed, by bypassing retailers and taking his message about the wonders of the Bowflex directly to consumers, Cook has put Direct Focus on the fast track, landing it at the top of Business Week's list of Hot Growth companies. Sales and marketing expense is his single largest cost category. Last year, it ate up 37% of revenues, vs. 28% for the cost of the products. The formula is simple: run an ad or infomercial that frequently repeats the 800 sales number, and follow up any prospect who doesn't order on the spot with videos, sales kits, and phone calls. The 800 number also lets Cook track marketing effectiveness. He knows, for instance, that a recent 60-second Bowflex ad, which cost $3,600 to run at 9:15 p.m. EST on the ESPN sports channel, generated 97 inquiries and 9 sales, worth a total of $12,800. A 30-minute infomercial that cost $30,000 to run at 1 p.m. on a Sunday on the CNBC financial network generated 79 sales, worth $98,000. Says Cook: ''We collect data, we analyze it, and we do what it tells us to do.'' That mantra has helped Direct Focus' 376 employees sell $138 million worth of Bowflexes, which go for $1,200 each, and other products over the last four quarters. That compares with sales of just $5 million in 1995. And the machine keeps pumping. In this year's first quarter, the company's revenues jumped 64%, to $43 million, while earnings doubled, to $8.9 million. ''They really do seem to be better at this than the average direct marketer,'' says Stephen Brink, a money manager whose firm, Mazama Capital Management of Portland, Ore., owns 250,000 Direct Focus shares. It wasn't always so. Direct Focus got its start back in 1986, when Cook and two partners formed a company to sell the Bowflex, which was supposed to be easier to use and store than other exercise benches. Cook, a former accountant, quit his new-product development job at a restaurant chain and started knocking on retailers' doors. But getting stores to carry the Bowflex was tough and sales never took off. ''We decided we had to control our own destiny,'' Cook says. Pitching the potential in direct marketing, the company raised $2 million in a public stock offering on the Toronto Stock Exchange and began buying advertising time on cable channels. The stock now trades on Nasdaq. Cook also hired a new head of marketing away from Soloflex Inc., a competitor in the niche. After a couple of years of building Direct Focus' data base and sharpening its marketing skills, sales began to take off. But Cook knows that the fitness wars are littered with casualties. Soloflex' sales are down to about one-tenth of what they were a decade ago. NordicTrack, another former fitness highflier, went bankrupt and was sold two years ago. So Cook is trying to add new products. In January of last year, Direct Focus paid $18.8 million for Nautilus International Inc., a famous name in weightlifting equipment. Cook is testing new products like high-end mattresses and nutritional supplements that utilize the Nautilus name. That should give TV junkies years of new commercials to watch. By CHRISTOPHER PALMERI _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Hot Growth Companies TABLE: The Revenge of Brick and Mortar WWF: One Rock-'Em, Sock-'Em Company Direct Focus: Flexing Its Marketing Muscle Meade Instruments: Back from a Black Hole Diamond Technology: Attack of the Killer Apps Children's Place: Hey, Good-Looking Albany Molecular Research: All R&D, All the Time SERENA Software: Keeping All Systems Go U.S. Concrete: Breaking the Cement Mold What Happened to the Class of '98? TABLE: The 1998 Winners...and the Losers TABLE: Hot Growth Companies, 2000 (.pdf) ONLINE ORIGINAL: Somera: Top-Notch Profits from Old Tech Gear INTERACT E-Mail to Business Week Online

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