This was originally posted back on August 9, 2007, however it got buried in events later that day and Part II was never written. A few folk have suggested the topic is worth revisiting, so here it is! Some changes, such as shipping cost changes in the US and the whole new setup in the UK mean not everything is as relevant to all markets and applicable as when originally written, but most still is.
I’ve been pondering for some time what kind of changes could be made to the Amway and Quixtar business opportunities to make them better. Amway and Quixtar have been pondering the same thing, and on the Opportunity Zone blogs have been asking IBOs for their input.
I believe that “improvement” needs to be addressed in three different arenas –
- improvements that can be made related to consumers (of which IBOs are a part) such as addressing product pricing and shipping costs.
- improvements that can be made related to training, and part of that is to do with BSM and BSM suppliers
- improvements that can be made related to reputation
Obviously these areas overlap somewhat and in this post I’m going to talk about a simple change that could dramatically improve reputation, yet change very little at all. What’s the change?
Recommendation 1: Legitimize Wholesale Shoppers
There’s much discussion on the internet about the concept of Quixtar as a “shopping club” and the idea of “buy from yourself and teach others to do the same”. Critics claim that the idea of just “buying from yourself” and making money is absurd. Well, I agree – however, what’s lost in the wonders of the modern world is that when you build a group, you’re effectively “buying from yourself” but your profit comes because you are selling at wholesale to other IBOs – your group. This was obvious in “the old days” when only Platinums purchased direct from the corporation. Everyone purchased their products from their sponsor who purchased from their sponsor and so on and so on. Thanks to the Amway compensation plan, just like in most product distribution channels, the more volume you purchased the cheaper you got it. This meant you effectively sold it at a markup to your downline, hence profiting.
Much the same thing happens today, but it’s all “virtual”. Amway and Quixtar handle all the logistics. That’s fine, but in terms of how our business is perceived, it can create a real problem. Let me ask you a simple question –
If you liked Amway products, would you prefer to pay full price or IBO price?
Unless you have some particular reason to need personal service from an IBO, the minimal cost of registering as an IBO means that if you like Amway products, you’d actually have to be pretty damn stupid to pay full price for them! So many people register as “Independent Business Owners” simply to get the products cheaper. Sure, they may have a dream to be a Diamond, but let’s face it, few are actually willing to do the work for the time necessary – but they may still want to buy the products, and we shouldn’t stop them.
What’s this got to do with reputation? Well, two things. First of all, if any of these shoppers happen to buy enough in a month to earn a bonus, they’re considered as “active” Independent Business Owners, and the amount of their bonus is included when calculating the average income of an “active IBO”. Any reasonable person can see that they are not “business owners” by any stretch of the imagination. The IRS or other relevant tax authorities certainly wouldn’t consider them as such – so why does Amway?
Amway/Quixtar critics throughout the internet regularly pull out the “average income” of an active IBO as if it’s some kind of declaration of how bad the opportunity is. It’s a figure the FTC requires Amway to publish –
The Average Monthly Gross Income for “Active” IBOs was $115.
But what is an “active” IBO? Here’s the definition –
“Active” means an IBO attempted to make a retail sale, or presented the Independent Business Ownership Plan, or received bonus money, or attended a company or IBO meeting in the year 2.
Just becoming a regular user of the products can be enough to earn your bonus money. Asking your mother if she wants some SA-8 – that’s an attempted retail sale. You’re “active”.
Personally I think $115/mth for that is a VERY good income. Don’t you? Now, you can’t really judge it that way, it’s misleading. The truly active are almost certainly getting paid more on average than $115 and the wholesale shoppers less, but the point is that this figure is used again and again in exactly such a misleading fashion by critics of this business model.
Another effect of the fact that nobody likes to pay full price is that the better you are at marketing Amway products to a customer, the more they will buy and the more likely it is they will want to register for the cheaper pricing. End result? The second effect of “wholesale shoppers” – an IBOs “customer volume” is minimized. This leads critics to claim that there’s no real sales to real customers, since IBOs purchase most of the products. It’s a misleading claim of course – even back in the 1970’s FTC vs Amway case, the FTC clearly understood a lot of people join or remain as registered IBOs to get the betting pricing, and as recently as 2004 the FTC stated they have no concerns about this model – nevertheless critics of Amway and Quixtar cite the lack of customer volume and low average income again and again and again.
A simple solution? Don’t call people who aren’t running a business, business owners! Call them what they are – customers of the person who sponsored them. Their volume should be included as customer volume in the “personal circle” of their sponsor, and their “bonuses” should be simply “discounts” and not included in any calculations of average income.
This simple change in description could potentially dramatically increase both the customer volume and average income of IBOs.
Many of the “critics” arguments would disappear. The concerns of regulators in a number of countries would be considerably allayed. More customers, greater income for IBOs. Yet nothing has really changed!
The next issue that arises is how to define who should or shouldn’t be called an “Independent Business Owner” – a topic I’ll address in my next post.
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