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.
Post a comment below or Discuss this post on Amway Talk
In my experience so far, I haven’t had any strong negative reactions to the name change.
So far the move to change to the Amway name seems to have proved a good one.
Amway Australia has no “retail stores” and no plans for them, and no business at all goes through the MoBE busses in the US. The China system is not “retail stores” as you may know them either.
Quixtar/Amway/Alticor mad a major error in June and again in August in 2007. They knew that most of the field and leaders didn’t agree with the move, and did it anyway.
I hope Amway Global survives with the choice, they seem to so far, but they knew and didn’t care what the damage and fallout would be. It is unfortunate that they have just tried to pass the blame on anyone else they could, and have cost all sides millions of dollars and have caused havoc to hundreds of thousands of people. Have others made mistakes since, yes, but Amway knew they would have no control on that.
Jay V. if he were alive and Rich D. should NOT be proud of the way their sons have been so brutal. It is possible that Amway will be better off, but at what cost?
In my opinion, the overall movement is to go to the China system of retail stores. Look at Australia, and the new Moble system in the US, and the fact that much of Amway’s business now goes through that system.
Rykel,
*WWDB does not show a 6-4-2 Plan.
*Guys in WWDB wear many different color ties.
*WWDB does not have an Eagle logo.
*******************
As far as “fastest-growing” being a meaningless and misleading phrase, a few things to ponder:
1) Unless you have the raw numbers, “fast-growing” is all sizzle and no substance.
From what number to what number are we looking at? In other words, if Company “A” goes from doing $5 in sales to $50 in sales, they just increased by $45 or 900%. Wow! 900% growth, THAT’S AMAZING!!!
If Company “B” that goes from doing a million dollars to two million dollars, they increased by a million dollars, or $999,955 more than Compnay “A”. But they “only” had a 100% increase in sales–“only” 1/9 of what Company “A” had.
Unless you know what the raw numbers are, “fastest growing” is a lame “stat”.
2) What exactly are we using as a measurement of “fastest growing”? Number of people sponsored, amount of PV moved, number of higher pins achieved?
Again, without the raw numbers, this “fastest-growing” phrase sounds good, but is meaningless.
3) What does “fastest-growing” mean long term? Let’s say that many people were sponsored. Great, but are any of them making any money? What is the retention rate? What do the numbers look like the following year, and the year after that?
Are these people moving Amway product, or are they moving/consuming books, functions, and CDs?
I believe in “systems” as a support for the business that they were originally designed to support.
But if the focus is “plugging someone in” and having a ton of people in an organization, but do not have product flow and do not have profitability for the brand new person being a priority, then it doesn’t matter if you sponsor a gazillion people. I am unimpressed with one’s sponsoring rate.
IBOFB, thanks for the clarification about Peter and Eva… hey, how did you do the “ü” (u with the two dots above)?? So WWD is not related to WWDB? For a while, I had the impression that they are the international representation of WWDB.
Bridgett – Maybe you do not know about this, but there is a Taiwanese group in Nu Skin which calls themselves the “642 WWDB” system and they project themselves as a continuation of the Amway WWDB.. they would mention WWDB, BWW, Dexter Yager etc. during their meetings, when discussing their “history”, even to the extent of suggesting that they can join their “compatriots” in Amway during the FEDs.. wears the same red tie, uses the same Eagle logo etc.
LOL, I always find it comical that such a group exists, and the best part? They have spun off USANA 642, Morinda 642, Herbalife 642 etc. and they are primarily Chinese-dominated.
But you know what? These 642s are also usually the groups that do the best in all these other MLMs. 🙂
So there, WWDB has even achieved results outside of Amway. In a way lah. Amazing.
Rykel, Müller-Meerkatz are not part of World Wide Group. Their organisation is called World Wide Diamonds and has no connection to WWDB.
Jeffrey – if the rollon is good, why not just use and promote the rollon?
Jeffrey – I see… not too sure if you are referring to the Body Series “Moisture Stick”? If not, then I guess I cannot comment further because we do not have an anti-deodorant stick in this country…
Bridgett – I am not biased towards a fellow N21-er and I think WWDB is great! After all, Mr Ron Puryear gave birth to Leonard and Esther Kim, Founders Crown Ambassadors Korea who braved through the most difficult times of Amway in that country… and are not Peter and Eva Muller Meerkatz of Germany in World Wide Group too?
So, no, I am most most honoured to hear WWDB-er point of view. Perhaps you can help me by providing some evidence that the Team Approach groups are NOT growing faster than the non-Team Approach fellows?
Thanks!!
May i know what is Non Team Approach of WWBD.
Pardon my attitude showing again. It just seems like that’s what happens with the products sometimes.
I actually meant the stick, not the roll-on. Never had it break, does a great job. Might be a different formulation on this side of the planet.
Rykel–I was not talking about the roll-on. The roll-on is great. I was talking about the stick. I use the roll-on on days when I do my janitorial work, but would like to alternate days with the stick (the antiperspirant/deodorant one). I had thought that it had been improved a few months back, but it still goes on waaaay too dry and breaks off in the containers, even when it is not raised way up. Wouldn’t you think that if it wasn’t selling as good as the old formula, they would start asking why? Nope, they’ll just discontinue it “because of low sales.”
Rykel,
Don’t believe everything you read on the Internet.
Ask IBOFB why the “fastest growing” is a bunch of B.S. and meaningless in the grand scheme of things.
Perhaps you’ll listen to a fellow N21er more than you will me, a non-N21er.
Well, current strategy, at least in our corner of N21, is to NOT put folk uninterested in building the business into a team/pipeline. I’m still on the fence as to this. Putting them in a team gives them additional incentive to purchase more, and evidence it works, but it also significantly drops the profitability of those actively building the business. Amway, and governments, don’t like this!
As for Body Series antiperspirant roll-on, we have that too and it’s fabulous. Outperforms anything else I’ve ever tried but a long way.
And finally, we have nice recycled Amway paper bags here 🙂
Hi pals,
Sorry I am late to this party – anyway here are my 2 cents:
Bridget – Please correct me if I am wrong, but you seem to be saying that the Team Approach to depth is a little “foolish”… since IBOs are apparently encouraging prospects to sign up for the sake of getting the 21% (25% in USA) performance bonus, even (especially) when the prospect has NO desire to build the business?
If this is so, how would you explain the fact that TEAM/N21 was/is using this Approach, and both got great results? Were not TEAM/N21 two of the fastest growing groups in USA [TEAM] and internationally [N21 – still is!]?
Jeffrey, one of my fav product is the Body Series Antiperspirant Roll-On because it works so well (really, 48 hours!) and there is no other product in my country with similar results – so I am curious why you mentioned that it is not so fantastic? I remember Ada scientists telling IBOs that they even went out to the streets and grabbed volunteers to try out different versions of the product before it launched, and the guys had to actually *smell* the users’ armpits.. (or maybe it is a case of an USA product being better than the Asian-made brands?)
As for Amway plastic bags (cf. Jr_Brady) – We have lots of them here in Singapore and they are really good quality stuff – they are designed to handle heavyweights such as 4L Dish Drops and 3KG SA8! I think Amway Global can buy them from Singapore and help the economy of my country. 🙂
Jeffrey,
I agree with you on the ability to record partial-case lot sales at a customer level. You can record the PV and Customer Cost on CVR but you cannot generate a receipt/invoice. Example: Furniture Polish case lot is 4 cans. I’d like to generate a customer receipt for a single can. Not a big deal in the great scheme of things, but yes, it would be more convenient.
Also, let’s have Amway-branded bags! I purchased a product from a friend in another network marketing company. She delivered it to me in an attractive company-branded bag, with a flyer and brochure. I have to deliver my customer’s LOC and SA8 orders in used supermarket paper bags! The company should provide branded bags in an assortment of sizes OR attractive labels that can be affixed to generic bags.
Lastly (since we’re talking about what I want for Christmas, Santa!) how about flyers/fact sheets for the home care products? There are several useful PDFs in Retailing Support. Keep those, and add a single sheet for each product that takes the website information (Product Description, Product Benefits and Usage Instructions) and presents it in an attractive, colorful flyer/fact sheet format. My customers appreciate the extra information they can review at their leisure, as not all are computer-savvy or want to take time to browse our website.
Lastly (again), where are the pre-approved advertisements we were promised over a month ago? They were supposed to be available in late September IIRC. Do you know what they look like, intended purpose, etc.?
Uh oh…here comes my broken record. They seriously need to fix the receipt function so that we can sell XS, paper products, sport drinks, and other case-lot products in eaches. I don’t know why they are dragging their feet on this. It might take all of 2 days to fix it. PV on a case lot not sold is still zero PV. Also, we need to be able to make a receipt out for a non-registered customer. I have customers in their 70’s and even 80’s that are very resistant to registering.
They also need to break case lots up. Someone from the corp. says that doing that is not cost effective. The pricing on some of those products are already out-of-whack, so a few extra cents added on to get an eachie or two isn’t going to be a big problem.
Some of the product lines need to be updated. We need an anti-perspirant deodorant stick that really works. And how about a “maximum performance” antipers/deod stick in the Tolsom line? The ink wasn’t even dry on the papers sealing the deal when Proctor & Gamble bought Gillette before P&G started dumping money into the brand and revamping it. We need that with both the Body Series and Tolsom lines. They are great lines, they just need some pizazz.
Actually I just did a post on some other major issues with the “save money” approach – ABOs – Please stop selling Amway as a way to save money
What I think we should be doing, and which was actually trialled for a couple of years in Europe, but not properly implemented, is an ability to sponsor downline of members or registered clients, but they don’t get any financial benefit unless they do some necessary steps to be considered “active”. Still have to do some thinking on the various requirements, implications and scenarios though ….
Just so there isn’t any confusion, I am aware that the “go-getter” may not be the person one personally sponsors, but could be two, three, four, etc. in depth.
I am just against sponsoring any Tom, Dick, or Harry, and using the “saving money” as the main selling point, and the “I’ll do all the work for you” as the other selling point.
I completely believe in helping people. However, I just feel that the quality of people as IBOs/ABOs takes a nose dive if you are using lines and a mentality to attract people who are either
a) not interested in Amway as a viable business opportunity
or
b) “unmotivated” people who are attracted only to saving money, and having someone else do all the work.
IBOFB,
To answer your question about our Platinum leg, my husband and I built that leg. On top of what we did locally, we flew and drove all over the country showing plans and doing merchandising clinics for that leg.
However, if it weren’t for the person who we personally sponsored, being a “go-getter” himself, we wouldn’t have had people to work with. 🙂
We were able to build that leg because people were registering with the intent (at least initially) 🙂 to make money with this business.
My issue is not with “building depth” and it is not with building organizations of people.
My issue is with sponsoring people who really have no desire to WORK the business, in order for the Sponsor to get in to their sphere of influence, in order to get to their name list, and using the line:
“I’ll build lots of volume in your business and you’ll get a bigger discount off of your personal use!” as a way of getting them to become an IBO/ABO.
I think THAT is a very poor, ineffective, lame, and stupid way to sell the business opportunity.
Ummm … Bridgett … the idea isn’t to do it alone, it’s to find someone on their list, or their list’s lists or their lists lists lists etc etc that will work with you while you teach them – and eventually will work alone. That gets you the 4% bonus (minimum $850 or so) plus a leg towards Depth, Emerald, Diamond, and other bonuses.
And it’s certainly not fair to call it “lying”, there’s plenty of examples of it happening, the Kagan’s I outlined earlier being just one, and if I recall correctly, don’t you have a 25% leg that you didn’t build yourself?
From a network builders perspective, it doesn’t matter to me if the person who goes Silver or Platinum is personally sponsored by me or 30 folk in depth.
rdknyvr,
Well…I’d like to be a little bit more diplomatic and avoid the L word. 🙂
I’d say that it is highly IMprobable that I’d be able to/want to build $20,000+ worth of continuous volume, all by lonesome, ‘underneath’ someone so that they can get 25% back on their personal purchases. For what, the 4% Leadership money?
There are FAR more easier ways to make $850 in this business than doing THAT! 😉
Bridgett, on your last point, that’s what I was trying to get at with my comment above. Not to mention that the “networkers” are lying.
One thing missing from all of this, is a significant group of people who wish to sell the product but not sponsor anyone.
These people should be able to have products which are cost-competive (competitive, not necessarily the leaste xpensive. I prefer to have quality, not dollar-store crap)
as well as not have “networkers” competing with them by selling the “buy a discount and I’ll build a whole group ‘underneath’ you , so that you can get up to an additional 25% off!!” bill of goods.
One more suggestion to help people to sign up as customer and order their own order online:
AG should also provide a tool by which based on customer ID we can set the price of the product. i.e. For Customer ‘A’, it may show full retail price, but for customer ‘B’ it should show 50% off on the difference between IBO and Customer price. Right now the only 2 options available are: IBO price or Full Retail Price. This way IBOs who wants to get customer have a choice of offering certain percentage discount, if the customers agree to buy for themselves. This facility is there for people who buy from IBO and Pay them, to make it more attractive, AG should give the same facility to direct customer orders too.
What if they happen to have downline?
The member option was taken out of the US market a number of years ago. I never really saw the benefit, and like IBOFB states, there are alot of disadvantages. If I have an IBO that decides they no longer want to build the business but are interested in the products. I can have them cancel their IBOship and sign them up as clients. I can than establish how to best serve there needs and have the flexibility to create incentives or offer discounted pricing. All the while, allowing them to take advantage of the free shipping offer.
Here in Scandinavia we have IBOs and Members. Members get IBO pricing, and no points or prizes. So you have to treat them entirely as customers, you lose the 30% markup, and you can’t get their referrals and build a leg.
In other words a complete waste of time that actively works against IBO profitability. What’s more – 10 years into the market, one of the most internet friendly in the world, customers still can’t order online.
Needless to say, our LOA advice is to pretty much forget membership even exists.
The member part was simply a way to bring more volume for the company.
Member paid a fee, which they received IBO pricing, plus “points” towards prizes. Kinda like a credit card rewards. The company used the fees to pay for the prizes.
Now people can sign up a customers, for free, and it is our discretion as to what price they pay. Also with the free shipping I think it will help keep non-IBOs as customers.
RDK – I don’t see “enablement” of the BFY model a problem at all – remember, there are rules requiring customer volume! If folk are going to ignore the rules, then it doesn’t really matter what changes you make to them, does it?
Amthrax – Members still exist in other markets. The problem with Members is that it’s a fixed designation. Folk move between actively building and just being a shopper, and back again. What’s more, upline want to build networks downline of even the inactive folk. If we sign someone up as a member we can’t get their referrals and sponsor them downline of them unless we register them as an IBO. We can’t network build with them, and we can’t get retail profit – so all we get is the relatively limited wholesale markup. We have no incentive to do much at all with them! With customers we have the incentive of the retail profit, with “wholesale customers” we have an incentive of building a network beneath them to find another networker, and to perhaps encourage the original person to become active. There’s many, many, many examples of that. For just one example – a few years ago in Australia a couple called Ronnie & Jane Kagan joined. They had no real interest in building the business but thought it made sense to join to buy the products and to refer some contacts. One of those contacts went on and built a platinumship. Ronnie Kagan was a businessman and saw what he was missing out on, went active and less than 2 years later was a Diamond. That wouldn’t have happened if he was a customer or a member. And it’s one of many, many stories.
IBOFB wrote:
Isn’t this what Amway/Quixtar used to call Members? Didn’t the corporation remove that designation a year or two ago?
Two points.
First, “legitimizing” wholesale buyers only continues to “enable” the “buy from yourself and teach others to do the same” business model, which has been like a nest of termites in the foundation of this business for the past 25+ years. Not critiquing the “buy from yourself” piece — it only makes sense that you would use and be the #1 evangelist for your own products. But as benign as your recommendation seems on this point, in practice it allows and enables the corruption of our business — not ‘corruption’ in the legal sense, but in the sense that you might have a corrupt track on your hard drive.
Second, $115 per month “average” is a misleading and useless business statistic. If you want to develop useful, honest and authentic business metrics, look at the “median” income number, or at least include median measures alongside the average. Better still look at median income for the various pin or achievement levels.
Finally, totally agree with the need to change the definition of an “active” IBO. We are told that as many as 50% of IBOs never even place an order (which suggests the BFYTOTDS business model at work, or rather, not working), which adds to the meaninglessness of the “average.” A requirement for definition of an active IBO should include a basic achievement level — has registered at least one retail customer within the past year, or has personally sponsored at least one new IBO.
Interestingly, there is a new MLM just started which defines its requirement for an “active distributor” as having sponsored or retailed product within the most recent pay period, which for us would be on a monthly basis!!!
Finally excellent post, thanks for bringing it forward again, and as always, thanks for graciously accepting a difference of opinion. 🙂