Application of Network Effect and Tipping Point in Beauty Industry

Cornell University Blog 

When we talk about network effect and its applications in class, we normally look at examples in the technology industries, including software, communication technology, or social media. Typically, we consider things like number of downloads of music or number of views of videos. We also look at the rise of well-known companies like Microsoft and Apple. However, the concept of network effect and tipping point is also widely used when it comes to marketing strategy in the beauty industry, especially for those newly founded brands or newly released products. In order to gather a group of initial users to get pass the tipping point so that there will be an upward pressure for the product to grow, two kinds of strategies are normally used by these beauty companies. We will take a deeper look at two brands in this blog – Curology and Kimtrue.

Curology is a cosmetic company that provides personalized prescription for people according to their individual skins. This whole concept sounds novel to a lot of people at the beginning, and due to this novelty, people might be hesitated to pay for the products. To tackle the problem and gather a group of initial consumers to get over the tipping point, the company offers a one-month free trial to all users as long as they can pay for the shipping fee. The lower you make initial price, the smaller is the tipping point (z’). Therefore, in this way, the tipping point for Curology is very low, making it very easy to get over. Also, unless the product is widely used, it has little value to any potential purchasers. After a short period of time, the company can get a large group of initial users and push the company itself past the tipping point and grow all the way out to z’’. After the initial free trial, many people would continue to subscribe, and the company will then raise their price for the product. In addition to this free trial attempt, Curology also starts an advertising campaign on social media like Instagram. A lot of people around me constantly see videos showing a diverse group of real users of Curology’s product or even social media influencers. They share their experiences with the products and when viewers know that a lot of people are using this product, they tend to use it as well.

Kimtrue is another example of beauty company that initiates a marketing campaign using discounted or free products as incentives. In the article, Marquet, the marketing representative of LA-based premium beauty brand, Kimtrue, states that they are giving away up to 1,000 bottles of hand sanitizer to frontline workers when they purchase one pack of the product and post a picture of how they use the product in different scenarios on their social media account. Once they do that, Kimtrue will then issue a refund, and also provide these consumers with promo codes to purchase a 3-pack, 6-pack, 12-pack at extremely low prices. This will help kimtrue increase their exposure to the general public so that more people tend to purchase the products. Also, this creates a virtuous cycle, since more people purchasing leads to more people posting, and eventually will lead to more people purchasing again. This is a combination of price cut and marketing campaign that is related to our topics of network effects and tipping point.