Quixtar Ada-tudes: A View from the Top : S x 3: A new approach to product

S x 3: A new approach to product

Friday, February 09, 2007 by Jim Payne
Category: Quixtar Strategy, Products

At Quixtar and with support from our parent company, Alticor, we need to focus on three things from a product perspective. I know these words are not Harvard MBA words but they get the point across ...

SIMPLIFY -- As a company we have had a history of launching many different products. This is good and bad. Variety is good, however, last year we had 25 product launches, but, how do you support 25 programs with an integrated marketing plan? We need to better focus and simplify in this area.

SIZZLE -- The key here is we want to maintain the high level of quality products that we have always been known for --- however, we want products that IBOs want to sell and the consumer wants to buy. To do that, we need to improve the overall value of our product portfolio.

STREAMLINE -- Our own internal processes need to be streamlined so we can develop integrated and innovative marketing programs that give the IBOs tools needed to sell products and make retail profit.

You'll hear more about our product plans from Ray Alexander, Quixtar's director of marketing, in the coming months.

Comments

Tex said: February 9, 2007 9:29 PM | #

What does the "5x3" stand for?

Editor's Response:

Hi Tex,

It's actually 'S' x 3 and is intended to represent the the Simplify, Sizzle and Streamline in Jim's post. It does look a little like a 5 though, doesn't it? Sorry for the confusion!

Anna Bryce
Managing Editor -- Opportunity Zone

Jeffrey said: February 10, 2007 2:19 AM | #

Please do not start dropping massive numbers of products in the name of simplification. Another company in Michigan recently did this and later realized it was a mistake. That company was General Motors. They dumped the Oldsmobile division because they didn't think it was bringing in enough sales for GM and they didn't know where to go with it to revive it. After it was all over, they found out that GM was losing a minimum of 100,000 sales per year because most former Olds owners were not buying other GM products. They jumped ship and went somewhere else completely. If you start dropping products, many customers (even some IBOs) will not stick around to buy what's left. They'll just go back to the Super Center stores where they can buy everything in one stop. (I'm still miffed about losing the Cinnamon oral rinse. Even though, according to marketing, the mint outsold it 50 to 1, Quixtar is still losing sales because of it. Bring it back, just don't make it so hot this time.)

--Jeffrey

Tex said: February 10, 2007 5:18 PM | #

Anna,

Thanks, I was a bit tired when I saw that, thanks for the clarification.

Anonymous said: February 10, 2007 7:03 PM | #

I wish that you would follow the plan that Rich and Jay had in the beginning of this great company. That was to have the best product for the best price. I have noticed in recent years that the new items coming out were pricey and I know that will push the sales totals higher. Sam Walton went for the lower price and went to the top.

I liked the men's Grooming Gear products which were replaced with the expensive Tolsom. Could there also be a less expensive line.

I thought this would be something to think about as we want this business to grow in the coming years.

Truman

Eric said: February 10, 2007 11:55 PM | #

I too, have written the corp about pricing and product offerings that went unheard.

It is within the best interest of IBO's everywhere to have the ability to extend an offering to all people from all financial standings.

One particular product I liked, that was removed, Glister with the smooth minty taste. I tried the new version and did not like it too stingy to the tongue.

On that note, the 72 hour antiperspirant/deodorant non aerosol spray. I have never liked having aerosol cans blast away the cold coating, the slimy mess of a roll on, or the gelled powder of a stick. EWW

As for following current trends, the simplified appearance of two color containers or packaging is well accepted by the one true focus in retail business today-women the buyers for about 99.9% of all house-holds.

Look upon companies such as Target and Ikea and some of the other retailers who were slow to catch the trend. They are racing at best possible speed to catch up.

I have seen companies come out with many things they have sat down with manufacturers to create as exclusive must haves. Even an old staunch IBO such as I have said, "WOW!". I think I need that for that space in my ......

I am guessing the whole point is to get the razzle dazzle out and show the GOODS. Everyone wins in the long run.

One more thing- manufactured in the U.S.A.

Tex said: February 11, 2007 11:51 AM | #

Truman,

I'm not sure how you measure "the best product for the best price". Are you suggesting when they sold Double X (I have heard it was named for what it originally cost, "X" being the Roman numeral for 10, so Double X originally cost $20), they were selling the best product for the best price?

$20 was a fair amount of money to spend on anything in the 1950's, and the American Medical Association (AMA) didn't even support taking vitamins for the average person until about 2003, the first time the AMA advocated taking a multi-vitamin.

Since vitamins weren't even on the radar screen 60 years ago, how easy do you think it was to sell this product? Double X now costs about $52 at IBO cost, and synthetic vitamins can be purchased for much less, so are you suggesting Double X should be sold at the same price as, for example, Centrum?

This is probably not possible, if you are knowledable about how Double X is made, as it is much more involved a process than Centrum, but you also get a lot more for your money.

Some people don't view the cost/value equation favorably, and will continue with their Centrum. I do see the value, and will continue with Double X.

If you sold it at cost manufacturing cost, you either wouldn't either get any PV/BV or would be asking the corp to sell it at a loss, in order to pay you, which also makes no sense.

Much more significant is the issue that Rich and Jay never had in mind, which is the fact Emeralds and above typically make much more profit in terms of the system (tapes/CD's, books, and functions).

Rich correctly had a big problem with this issue in 1983 in his "Directly Speaking" tapes, which are available on the internet, and that issue has not been solved in the following 24 years, to this day.

You (generic term for all IBO's under the Platinum level participating in one of these systems) are losing a lot of money that is contributing to the vast majority of your Emerald and above's bottom line than the Quixtar profit they receive, and keeping you from having a net profit for a much longer time than necessary.

Without honesty in the tool profit area, particularly with the presence of the internet, this issue will become larger and larger, making the product price issue insignificant in comparison.

You can always find someone who is not as price as you are, and prefer the higher quality/convenience/helping with a friend's business, which make your own purchases more than competitive with stores.

It seems everyone is interested in themselves (including Q, the higher pins, and you), which is human nature, but who is going to be interested in the overall business model for the typical IBO?

This would be a great opportunity for Jim Payne (or one of, or both Steve Van Andel/Doug DeVos) to step forward and do something meaningful, such as require anyone on the IBOIA to disclose their tool profits in order to serve.

You may then begin to see REAL leadership serving on the board, rather than folks interested in preserving their own tool profit empires.

Helena said: February 12, 2007 1:29 AM | #

I agree with Jeffrey in regards to dropping numbers of products in the name of simplification. My customers as well as IBO's are dissappointed with some of their favorite products that are discontinued such as Featherlight Maximum Foundation. They are not satisfied with dampening the sponge & using Flawless Powder foundation as a replacement for a 'creme' foundation. (Hopefully Artistry comes out with a new creme foundation!) Also, I really would like to see Dry Chlorine Bleach back!!

Helena

Pierce said: February 12, 2007 2:33 AM | #

Personally, I think too much emphasis is put on the tapes and cd's. This only helps make look anti Quixtar advocates appear to have a point. Even as a strong beleiver in Quixtar it appears to be a racket to me. Think about it. Upon entering the business you're told the best thing to do is to go to a function such as FED. You go and pay $100 for the whole weekend which is a good deal compared to other financial seminars. Then, you come home and they're pushing tapes and Cd's. But, everything you here is the same thing you just heard at the function. You end up paying twice for the same information. I have a big problem with that and seriously question a system where the same people making money off the functions , and the same people making money off cd's/tapes are the ones pushing you to buy them. And of course "if you don't buy them you're not going to go anywhere because you're not completing the nine steps". Furthermore, the cd's /tapes can usually be summed up to be a lot of useless stories and bragging surrounding maybe a halh hour of good, solid, useful information. I'm sorry , just the way I see it. I feel that it has become more of a business tool business than a wholesale /retail business.

As far as the prices. I don't care what you say. They need to come down. I'm sorry but you will be hard pressed to convince a Walmart shopper to switch to exclusives with the difference in price. I recently purchased Satinique shampoo and conditioner(small size),Satinique shaping creme(two bottles), Tolsom aftershave splash, and a bottle of Tolsom shaving creme.My total was around $70 after the tax, shipping, and shipping tax. Do you understand what a person can get for that amount of money else where?

Please don't get me wrong. I am an advocate of the business, but I feel we have a few issues we need to work out and until we do we're leaving ourselves vulnerable to critics. That is what gave Quixtar/Amway the bad name in the first place?

Mike said: February 12, 2007 2:37 AM | #

TEX,

Get over it. This blog is what, a week old and your rants on tool profits are already old. Instead of spending so much energy trying to fix everyone else’s business why don't you just focus on how you want to run your business and then get busy. Build a large community of shoppers and then your opinions will have credibility.

Mike.

Anonymous said: February 12, 2007 7:06 PM | #

Pierce,

It would be interesting to see Jim's response on this, but I think if you're trying to "convince a Walmart shopper" then you probably need to sit and consider what the appropriate target market for Quixtar products is. IMO it's not the average "Walmart shopper". Ferrari doesn't try to sell Modenas to the guy checking out Hyundais.

Tex said: February 12, 2007 11:59 PM | #

Mike,

Why should I "get over" THE issue that is the major source of the negative reputation A/Q has?

Why should I "get over" THE primary source of income for the higher pin levels, even though this is not openly discussed with most prospects or IBO's?

I have already fixed the tool issue in my business, but unless the overall problem is solved, my business will probably NOT be big enough to keep the overall Q business big enough to continue.

The size of my business has nothing to do with the facts, and therefore no impact on my credibility. Nice try.

Skip F said: February 13, 2007 6:26 PM | #

Way to go Tex...you are exactly right!

There are more people out here that agree with you than anyone wants to admit. Given the chance, I would bet that most IBO's would discontinue their involvement with systems at the drop of a hat if Quixtar gave us the same support and leadership Rich and Jay gave us years ago. Actually, it was their integrity that separated Amway from every other business. Really, thats why this business appealed to me. Problem is, many IBO's never have had the good fortune to experience Rich and Jay and what they brought to the business and what they intended this business to be. Too bad so many IBO's missed out on Rich and Jay because they were told by their uplines not to go to Amyway/Quixtar sponsored events.

It does look like the corp is moving back to taking control and getting us back to what made us great. Putting Jim Payne at the helm was a brilliant move. He was around when Rich and Jay were running things years ago and you can bet that he has the same values and vision for the welfare of this business. Praise God! With any luck, in a few more years we won't have to utter the word systems any longer. Looks to me like they are self destructing anyway...Not to worry! Quixtar can and will fill the void nicely.

I have never once had a negative prospect complain about the company or the products. The complaint was always directed at bad experiences with systems by the prospect or someone they know.

One of the best talks I ever heard was at an Amway sponsored event. The topic was " What Do We Leave In Our Wake" as we build our business. It is obvious that some could care less how they build this business as long as they can make a fortune in tool $$$ for as long as they can. These people leave in their wake negative former IBO's and prospects that will never again want anything to do with our business or products. This isn't fair to the new IBO and those of us who depend on the continued success of our business.

Let's let Quixtar be our system! I'm fired up with all the great new things QUIXTAR is doing and planing to do in the future!!!

Tex said: February 14, 2007 2:30 AM | #

Skip,

Thanks for your support, but let's also agree all you are doing is agreeing with the plain facts I also support. However, it is encouraging to know I am not the only "voice crying out in the wilderness".

I have been "banned" from qblog, quixtarinsideout, and thetruthaboutquixtar sites, because they couldn't handle the clear facts, and would either be more interested in whining or unsuccessfully try to deny the facts. I am currently posting on the joecool18 site, as well as Kia and Beth Dornan's sites. I put the word "banned" in quotations because if any site will not allow me to speak the truth, I don't want to be on their sites, as it is a waste of time, so the feeling is very mutual.

Just to be clear, I think 95-99% of the system content is great, but the remaining 1-5% has to be corrected. We do it by critiquing the tapes/CD's during monthly training sessions.

There are certain principles that have some practical merit, but have been taken to the extreme, in order to serve the purpose of isolating IBO's and ensuring the tool profit information is not spread throughout an organization, such as the "no crosslining" and "no negative downline" rules.

I also have personal experience with going off the standing order parts of the system and the upline going "silent", which has been noted by many others on various blogs. The rules against this notion are merely ink on paper, and have zero practical meaning.

The real problem with the system is the excessive COST of the system, the net loss that results to most IBO's when the Q profit is factored in, and the distorted incentive the higher pins have to push tools instead building the Quixtar products and services business. I also hope you are right about Jim Payne, but his earlier statement regarding Quixtar's alignment with the IBOAI does not give me much encouragement, but I am willing to keep the pressure on and give Jim a little more time, as this is a difficult problem that has festered for at least 24 years.

However, I would prefer fixing it in weeks or months, not years. The internet is far too effective at spreading information, and it doesn't matter whether the information is accurate or not, as many folks don't know the difference, and could cause far more of a negative reputation for Quixtar than is deserved.

I have many copies (original, legal ones) of both the Compassionate Capitalism books as well as the full book/VHF set, and these are central to our training. There is one particular quote that Rich had where he stated something to the effect of "whover owns the tools is in control of the business", and although he wasn't talking directly about the Amway/Quixtar business in the context of the discussion, it does apply. After all, it IS the business he probably understands better than any other.

Rich and Jay both have other outstanding books and recordings that we also use, and I would encourage any IBO to purchase them for their use.

Take care, and keep up the pressure. Just like the upline teaches, if you keep hitting a rock with a hammer, it may not seem like it is doing anything, but keep hitting anyway, and after a while the rock will shatter. I have had experience with this principle in other situations, and if you are supporting the truth, eventually you WILL prevail. However, as noted above, I don't believe we have the luxury of years to keep the business reputation from being damaged to a point that would be critical, if not total failure.

Jim said: February 14, 2007 12:57 PM | #

You can change the marketing strategies and product line-up, but you won't change the end result: bad reputation. Since the Amway families are skimming enormous amounts of profits from the company (they're billionaires, aren't they?) the product pricing is terrible. If the prices were competitive in the open market and the money was shoveled downstream to the distributors (instead of going to the Devos and VanAndel checking accounts), the company would ultimately be more marketable and profitable.

We live in a different day and age than when the company was founded. Now, people are very price conscious. The company's products must be competitively priced in the open market. One of the sources of criticism is that Quixtar relies on self-consumption from its distributors rather than retailing. To stay legal, the company needs to focus primarily on retailing. Since the products are so far out of whack, no one can retail them. The only reason why people buy them is to participate in the pay plan, which is exactly why the company is getting hit with a class action lawsuit in California (and will likely lose unless they settle). Talk about transparency...give me a break. This company is anything but transparent.

Mike said: February 14, 2007 2:34 PM | #

Jim,

"now, people are very price conscious"?

Have you heard of:

1. Whole Foods

2. Porsche

3. Nordstrom

4. BMW

5. Apple

People will always spend where "they" perceive value. If you don’t see value in the Quixtar plan or products then don’t participate or shop! You won't be missed. As far as profits for the founding families, it is their company...who tops the Forbes rich list? is it Bill Gates, one of the founders of Microsoft or the employee in cubicle 47? Go ask your boss if he is "skimming" profits from your company.

Give me a break Jim...

Beth Dornan said: February 14, 2007 2:41 PM | #

I can see where you might be a bit skeptical about the talk about transparency. This is, after all, coming from a company that was silent for years while others criticized its business.

And I'm guessing you didn't think your comment would be posted because of some of the content. It was posted because we're serious about having a conversation with those interested in our business -- fans and detractors alike.

I'd suggest you watch what we're doing for the next few months and see if you think differently after you see what's happening here in the Opportunity Zone and at Quixtar.

If you watch the posts here in Ada-Tudes and elsewhere in the Zone, you'll see a focus on improvement to our business and a clear intent to improve IBO profitability through changes to the way we support IBOs, including products, pricing, training, and selling tools. And yes, a focus on retailing and helping new IBOs be more successful sooner by retailing and earning retail commission on sales to customers.

We intend to not just talk the talk but walk the walk and you'll see and hear more about what we're doing throughout the next year.

You've already heard through these blogs more about company strategy than we've ever communicated publicly. It's an unprecedented level of transparency for us. We think it's a good thing, and while we respect the perspectives of others to disagree or be skeptical based on previous views, we're staying the course and we welcome all to track our progress through these blogs.

Skip F said: February 14, 2007 3:14 PM | #

In case people are not aware of this, the FTC at this very monent is getting ready to implement many restricitons that will be placed on all MLM businesses.

These new restrictions could pretty much put an end to systems and how they have operated in the past. Do we need systems anyway?

Years ago, Amway supplied regionals and other smaller meeting throughtout the country. If Quixtar stepped up to the plate and offered these meetings again and if they made tapes,cd and dvd's etc available like they did years ago we wouldn't need systems. Really, what we lack most right now are corp sponsored meetings open to all IBO's. Lets start working together as one big Quixtar team instead of so many different teams as Jim P mentioned.

I wouldn't use the NBA as an example as Jim did. Have you notice the increase in the fighting the last couple of years in the NBA.

Lets all be part of the Quixtar Team and work together for the good of all!

If IBO's have the right spirit of the business they will be helping their downline becasue it is the right thing to do. Not because the upline might make some tool money.

Problem solved! Thanks FTC!!!

Jim, (not Jim P) would you like to be responsible for the world wide operation of this great business. Would you like to spend your money fighting the FTC and other entities that would like to put an end to our way of doing business. There has always been an asault on the way we do business by the "brick and mortor" establisment. The MLM conpamy with the most resources will be the survivor. Thanks God Quixtar has the resources so they can preserve the business many of us depend on.

I have confidence the founding families will always do what is best for the future of this business. Just sit back and take stock of how far this company has come since 1959. Even with all it's problems, Quixtar is the class of the industry...

Anonymous said: February 14, 2007 4:36 PM | #

A few comments to Jim (the comment poster that is, not JP). You say "Quixtar relies on self-consumption from its distributors rather than retailing." If the person doing the consuming is doing so out of legitimate desire, then that IS retailing. There's a common misunderstanding about mixing retail and wholesale pricing with what actual retailing and wholesaling is. If it's being sold to an end user, then it is a retail sale, doesn't matter if the end user is an IBO or an "outside" customer. In recent years the FTC has been fairly clear about this.

The potential problem with MLMs is that people may be buying stuff because of artificial demand based around the income opportunity rather than legitimate consumer demand - "buy this product and you'll be rich!" In that case you effectively have defacto payments for recruiting and the FTC will consider you an illegal pyramid or otherwise an illegal marketing scheme. By having rules in place like the Member/Client Volume rule you ensure that your products have legitimate market demand, preventing this accusation. The level of internal consumption per se is not an issue with regard to legality.

As for you claim that "the products are so far out of whack, no one can retail them." that's just ridiculous. Artistry products are generally cheaper than their competitors in the same market niche. Nutrilite products are best of breed and very marketable. These brands are the majority of Quixtar volume. Many many people have no problems at all merchandising them.

PS Tex was banned from various sites for thread hijacking, not for any of his posts in particular. It's extremely impolite and poor net etiquette to take over every conversation with your own particular obsession. It's actually irrelevant whether it's a valid issue or not.

Anonymous said: February 14, 2007 4:36 PM | #

I posted a comment on Robin's blog, but it got buried because he wrote a new one. Anyway, here is my idea for better communication on the sites: On the new personal retail websites, I wish we could have our name and contact information on the site. It would not, of course, be a home phone number or address. Rather, it would be a direct e-mail link, and possibly a voice mail phone number. This could be available to registered customers and visitors alike. On the main Quixtar website, I would also like to have my name and contact info available to my customers. This could be accessible only to registered customers that are logged in on their customer I.D. number and password. It could be placed in with their personal information. I know that it is the IBO's responsibility to keep in contact with the customer, but sometimes they might see something on the site and have a question. Sometimes a customer is not comfortable contacting the company, but they might call or e-mail their IBO if the contact information was handy. I think the customers would think a direct e-mail link would be great. I also think it would make them feel more like they are our personal customer, rather than just buying from a big company (with no offense to Quixtar.) Of course, this should be optional for the IBO because some might not want any of their contact info available. Any comments or other ideas about personalizing the sites?

Jim said: February 14, 2007 9:08 PM | #

In response to Anonymous's comment (at 4:36), purchases from one's downline for personal consumption is NOT considered a sale to an end customer. In a 9th Circuit case, In re Omnitrition International, the Court held that purchases made by distributors that participate in the pay plan does not satisfy the "sales to end consumers" requirement for purposes of the Koscot pyramid analysis. The FTC has also been on the record and had similar rulings i.e. Equinox, Trek Alliance, Gold Star.... The Court figured that if someone bought products just to participate in the pay plan, it defeated the purpose of the second prong in the Koscot analysis. Admittedly, there's yet to be a definitive answer on the subject. But it appears that the law is disfavoring commissions earned from downline volume generated by personal consumption. The class action lawsuit in California was strategically filed there because the of the Omnitrition ruling. With that Omnitrition holding, the plaintiffs have the upper hand (in my opinion).

In Quixtar's defense, how is a company supposed to distinguish between personal consumption and retail sales? I don't know.

My take on the problems with the tool businesses: Quixtar knows that a VAST majority of its product volume comes from personal consumption, not retail sales. Since the company can't legally promote recruitment over retailing, they turned the reins over to the tool businesses to train and motivate their teams and generate volume the best way they know how: through recruitment. Q turns a blind eye to the tool company practices and profits handsomely. I appreciate Beth's comments to my earlier remarks. I'm glad there's finally a forum where the public can have civil discussions with the company. This will be very beneficial for everyone involved.

Jim said: February 14, 2007 9:14 PM | #

I almost forgot. Regarding my last comment about the Amway leadership "skimming" profits and diluting the profits, I take that back. There's nothing wrong with people making money in their own business. I do have a problem with executives taking too much money when the company is heading south. Over the past few years, the company hasn't grown at all. Zero growth for any company is bad. Amway was a billion dollar company in the 80s and its a billion dollar company now. There was another billion dollar company in the 80s called Wal-Mart. Look at them now.

Skip F, what FTC changes were you referring to that will change the tool businesses? Can you post a link for me. Thanks.

Anonymous said: February 14, 2007 9:53 PM | #

If you think you can build your business on the people who buy Porsches and BMWs and shop at Nordstrom and Whole Foods (less so Apple), you are not going to have a very big business. The numbers for success in Quixtar require a far larger pool of people than shop only those kind of brands. Even Whole Food's profits (and its stock) are down right now.

Here is a simple formula for regaining some of the ground Quixtar/Amway has lost reputationally. IBOs should spend 75% of the money they currently spend on tools and functions on Q/A products instead. The other 25% should be spent on high quality, proven tools the company provides with PV and BV, priced reasonably and with royalties paid to the IBOs/speakers providing the information. It wouldn't take long for the truly worthwhile tools and CDs, and the quality speakers and builders, to rise to the top. With more of an IBO's money directed to purchasing products, and with PV/BV on all tools purchased, the overall profitability of all IBOs would rise, likely dramatically. I wouldn't be surprised if Quixtar volume alone rose rapidly by 2.5 times and if IBOs' satisfaction with the business rose in a similar manner. The only people it would affect are the tool company leadership who currently collect all the royalties. Now that income would be throughout the business and paid on the same level as their overall business.

The other thing I would recommend is more care in replacing products with newer products at far greater cost, for example, the old Whisker Whiz shaving cream with the Tolsom product. I'd love to meet the marketing man who justified the price of that product, which most of us don't believe is on a par with the old product for twice the money. Then again if he's a Porsche buyer.... (BTW, I drive a BMW and still don't see it.) Sometimes I wonder whether anyone really talks to people on the street candidly before they do some of the things they do product-wise.

It really is time for the company to get real about some of these issues, and it appears that may be happening. Quixtar is a good business with a mixed reputation. It could be a terrific business with a great reputation, but not if it is unwilling to face the truth in a few critical areas. Tex may tweak a few of you, but if he is speaking with some measure of truth, take it to heart instead of attacking him. The truth can stand up under the scrutiny and so can the business.

Chuck

Tex said: February 14, 2007 10:03 PM | #

Mike,

I agree. If "Jim" is porkchopjim from qblog and the joecool18 sites, he has been consistently proven wrong on many issues, including the ones you corrected him on above.

Beth,

It is good to hear about transparency, and we need to be the most transparent about the largest issues the most. If we dance around the issue that produces the vast majority of income for emeralds and above(tools), while simultaneously causing net losses of the silvers and below IBO's, all other efforts will unfortunately be window dressing.

Skip,

What is new regarding the FTC rules? I made comments last year, but haven't heard much lately. I am not in favor of many of the proposed rules, and would prefer the FTC not make the business too restrictive. I'm not a big government kind of guy, only as a last resort.

Anon.,

You may have considered my posts "hijacking", but when there is one single issue that is "wagging the dog", I think it is useful to point this out.

it your house burning down, and I keep reminding you of this fact, but you decide you want to take a shower, wash clothes, watch TV, sleep, eat, etc. It wasn't intentional hijacking, although I know many considered it to be. I was merely pointing out how almost any issue with the business can be legitimately, either directly or indirectly, connected to the excessive tool profit issue. If that upsets someone's sense of " poor net etiquette", so be it, but your house is burning down!

Jim said: February 15, 2007 9:46 AM | #

Tex, I think we both see the same problem but have differing views about the cause. The tool businesses aren't the cause of Quixtar's problems. Orrin Woodward is very transparent about the Team tool business. Just pick up his "Leading a Consumer Rebellion" book and you'll find that he clearly points out that money is made from tools. Platinums and above share in the profits. The problem is with transparency from the tool companies, it's the Q organization itself. It's the overpriced products and the terrible pay plan. As I said earlier, Quixtar can't promote recruitment over retailing, so it turns the reins over to the tool companies. What do the tool companies do: they promote recruitment and "buy from yourself" i.e. personal consumption. Quixtar moves the majority of its product via personal consumption. But IBOs get disgruntled when they figure out that they've been buying overpriced products with no justification. IBOs then feel that they were taken advantage of. It's hard to recruit someone to personally consume such expensive products on a regular basis. This explains Quixtar's incredible attrition rate. The more IBOs that are disgruntled and quit, the more critics you'll have out there ruining Q's reputation. In all honesty, Q deserves its bad reputation. It's done nothing to define itself over the past several years.

In my opinion, if the prices were market competitive, why would an IBO leave the business upset. If they were getting a good deal and treated like a valued customer, why would they complain. The problem always goes back to IBOs feeling like they got taken advantage of with the ridiculous prices, not the tool businesses. The tool companies are very clear that tool purchases are optional. The IBOs sign an agreement acknowledging that they understand the purchase of tools is optional.

So lets say Q gets the tool companies in line. Then what. They can't rely on retailing because the majority of their product flow comes from personal consumption. So they'll teach recruitment and get hit by the FTC. If they don't get hit by the FTC, IBOs will get in, personally consume the products, and eventually figure out that they're not getting a good deal on the products, and leave extremely upset. You've got the same problem all over again. The days of ignoring the open market no longer apply.

Skip F said: February 15, 2007 12:02 PM | #

Tex and others,

Sometime last fall I recieved an email requesting my imput on the proposed FTC rule changes for MLM's. I don't know if I was chosen randomly. I'm still not sure if the email was FTC or Quixtar generated.

The changes are being considered by the FTC to stop the Fraudulent practices of MLM' such as over stating income, exaggerated products claims and support tool abuse etc. The number of law suits and complaints involving MLM's was a high number. I can't remember the munber, I just remember it being alarming.

A few of the changes and restrictions the FTC wants to put on MLM's is income source and varification, and a 1 or 2 week waiting periord before a new person can be registered after seeing the plan. There are more restrictions but I can't remember exactly how they were worded.

I did get in touch with the FTC to try to pry some info out of them but they aren't saying anything until the final ruling is completed. It sounds to me like there will be changes in some form soon.

I quess I knew it was just a matter of time before something like this would happen considering all the negative press the MLM industry has received over the years.

Had Amway/Quixtar and other companies been able to control the bad behavior of it's sales force this would not be happening. But of course in our case, we all know that Rich and Jay did their level best, to no avail, to stop the abuses years ago. Now it appears it might be out of Quixtars hands.

If the offending IBO's still don't clean up their act we will not have a business in the future. This is the part that really irritates me. The system leaders are so in denial they just can't stop. It's almost like a disease. They can't accept that it is the system abuses that is bringing all this on the industry.

At any rate, this is what I know about the FTC situation. It sounded to me that there is going to be a ruling sometime this year.

Maybe the good news in all of this is that it won't have be Quixtar that gets the grief for the changes that are coming. Let the FTC make the necessary changes! And they will!!

Tex, I guess you could say this is the last resort....

Skip F said: February 15, 2007 3:42 PM | #

Jim,

You are flat wrong when you say the biggest reason for the attrition rate is pricing. Sounds to me you are still part of a system.

I have been around this business for 30 + years. At our peak we had over 15,000 pv after breaking 3 platinums and held that personal pv for many years. We have well over 100 on our front line.

I can tell you that while there was some complaining about some of the pricing, which we could deal with, the overwhelming reason people were negative about Amway/Quixtar is the system deception and abuses. Don't get me wrong, I would like to see some of the pricing reduced, but that is not our biggest problem!

I know what I'm talking about. I was involved with systems twice and both times my business was almost ruined. I can tell you exactly what goes on behind closed doors at system leadship meeting but I won't get into that in this forum as it is too disgracefull.

I say again. Quixtar could be all the system we need. They have the resources to make even the largest system look second rate.

I think Quixtar is moving in that direction. It just takes time to turn this big ship around without causing a shipwreck.

Anonymous said: February 15, 2007 6:42 PM | #

"Jim" possibly is "Porkchopjim" the quixtar critic who has never been in the business. PCJ already knows what I am about to post, but chooses to ignore it. Here it is again for the sake of others who are not aware of it -

Jaunary 14, 2004, James A Kohm, Federal Trade Commission -

"Much has been made of the personal, or internal, consumption issue in recent years. In fact, the

amount of internal consumption in any multi-level compensation business does not determine whether

or not the FTC will consider the plan a pyramid scheme."

Unequivocal.

Jim said: February 15, 2007 6:47 PM | #

Skip F,

You're not understanding me. Quixtar can't provide the system! The majority of their products are purchased for personal consumption. Quixtar cannot teach recruitment ("buy from yourself") over retailing. If they did, their sales would drastically be reduced because the majority of IBOs out there don't retail. Period. Why don't they retail? I think you know the answer. Pricing. When you were hitting 15,000 PV, was it from your downline predominantly retailing the products, or were they "buying it for themselves." Guess who taught them that: the systems. It's more profitable to recruit distributors than to retail, so that's what the tool businesses teach. Quixtar doesn't want to run the systems game. As a company, they can't promote recruitment over retailing because that's in clear violation of anti-pyramiding statutes. Since they can't promote recruitment, they need the tool companies to do it for them.

So my main point is this: let's assume Q gets the tool companies in line. You still have the same problem with the attrition rate and negative critics. Since people can't retail the products due to pricing, they'll turn to the "buy from yourself"/personal consumption model (recruiting) and you end up with the same problem. People will quit when they find out that how hard it is to recruit people to consume overpriced products. Such a business has no long standing power. Speaking of long standing power, how do you attribute the zero growth? Is that the tool company's fault? Or is the product offering from the company? If Q wants more retailing, they need to streamline their product offering and empower IBOs with competitive products. Pricing is the problem. Quixtar is the problem.

Anonymous said: February 15, 2007 7:32 PM | #

I agree with Skip F about the cost of products and the system. I also used to be involved in my upline Diamond's system. I had over 300 tapes and I think less than 5 of them had ANY product training on them. If I asked my upline Diamond a question, his first response was, "Have you got your tickets to the next function?" My questions were almost NEVER answered. If anyone would try to build the business from the info at the functions, maybe after 200 or 300 years, they MIGHT be at 1500PV. I walked out of a major function 3 years ago and I've never looked back. That function was a total waste of money. I also got off standing order tape and I don't feel like I've missed anything. In fact, a very large number of the Diamonds on those tapes aren't even in the business anymore. That right there says that the system is phoney-baloney.

As far as product cost goes, I always show cost comparisons when I am showing the business to a potential IBO and even show cost comparisons to a potential customer based on our RETAIL prices. Sometimes, due to concentration, we're much lower on a cost-per-use basis. Sometimes we are higher, but the quality is so much higher, that you could never buy that high a quality product from the store, especially Wal-Mart or Sam's. Much of the stuff at those stores is sheer junk. You cannot save your way to financial independence.

Here is a quick example of one of my cost comparisons (according to the Quixtar rules of conduct)

SA8 with Bioquest vs. Tide H. E. Powder

SA8 6.6 lb. $22.75*, 100 loads, 23 cents per load

Tide H.E. 70 oz. $7.79, 31 loads, 25 cents per load

Your savings with SA8: 3 cents per load or $3.00 for 100 loads

* SA8 retail price

Quixtar prices from current Choices Catalog, SA-2317

Tide prices from Dahl's Foods, 8700 Hickman Road, Clive, Iowa. as of 2/15/2007.

(The wholesale cost of SA8 is $18.85, which translates to a 7 cents per load savings over Tide.)

According to the rules of conduct you have to compare "apples to apples" (that is, the same type of products, here being laundry detergent vs. laundry detergent), the place you got the prices, and the date. That way, anyone can verify that they are true.

I have two pages of cost comparisons that I show. It is types on the computer to look professional.

Compare the Formucare with what is at the store. Our Formucare Extra-Strength Non-Aspirin Caplets are nearly half the cost of the comparable Tylenol product. There's also a savings using Glister Oral Rinse vs. Scope Mouthwash. Our hand sanitizer is less expensive than Purell. Pursue Disinfectant Cleaner costs less per use than Lysol. The list goes on and on.

Anyone that says our prices are too high, simply does not use the products. Or does not use them according to label directions.

The one thing that is too high, though, is the shipping costs. But, as an IBO building the business (building the business are the keywords), you can write that off as a business expense. Someone that gets into the business simply for personal use would not be allowed to do that.

And on a final note, Skip F., I respect you for building an incredible business. I would venture to say you are extremely profitable.

--Jeffrey

Jim said: February 15, 2007 11:07 PM | #

Enough of this "porkchopjim" nonsense. I have no idea who you folks are referring too. And no, I'm not a quixtar critic. I am actively engaged in the business. I am simply discussing my thoughts about where the company problems lie, which is the purpose of this blog. Simply because I don't blame the tool business for Quixtar's terrible reputation doesn't make me a critic. I blame the product pricing. The tool companies are very transparent about the money. If an IBO attending a function can't figure out that the speakers are making money, something's wrong with the IBO, not the speaker.

As for the reference to the FTC letter from James Kohn, it's an indication of the FTC's thinking, but it's not a binding authority. It's anything but "unequivocal." You can't hide behind an opinion letter and claim it as the gospel truth. In the FTC opinions, a different tune is being sung. More importantly, in the 9th Circuit court of appeals, which is obviously a separate authority from the FTC (and more controlling), the court specifically held that commissions earned from one's downline via personal consumption did not satisfy the second prong of the Koscot analysis (that commissions be earned from sales to end users.) This holding was not from an opinion letter, it was from a judge, which makes it the law. That's "unequivocal." Do you think that decision in the 9th Circuit has anything to do with the class action lawsuit that was recently filed in California? I most certainly do. It's called a strategic filing. Since there is good law already established in the 9th Circuit (law that specifically prohibits earning commissions from downline consumption of products), the plaintiffs picked the sweet spot in which to file their lawsuit. Unfortunately, I think they've got a compelling case.

And no one's answered my question. Assuming Q gets the tool companies in line, then what? The majority of Q product flow comes from personal consumption. As a company, they can't legally promote recruiting over retailing. They can't promote "buy from yourself." So what'll they do. They'll either promote recruiting, or take a huge hit in revenues, which they're already doing. If they promote recruiting and "building large teams," people will personally consume the products instead of retailing, and figure out that they're getting hosed on the product pricing, and leave disgruntled. Until they fix the pricing, they'll never have the brand loyalty. If the product prices are so fair and competitive, as illustrated by the anonymous writer, what explains the lack of growth and massive attrition rate? But before anyone answers that question, please address my question regarding what Q will do once they get the tool companies in line. And if they can do that, what will happen to their revenues?

Anonymous said: February 16, 2007 12:49 AM | #

Pardon my math error on my cost comparison. It's 2 cents per load difference, or $2.00 per 100 wash loads. Not much difference than Brand-X, but it shows we are cost competitive. And when you add it up over time, it's a lot. My wife and I have used only SA8 for 32 years, and she used it before we got married.

Mike said: February 16, 2007 11:04 AM | #

Jim,

Obviously you’re a "price" guy, and that’s fine. If price motivates you to buy and become loyal (until a cheaper price comes along) then great, however in my opinion you will have to change your perspective if want to take advantage of this opportunity. Quixtar does not promote itself as the "Walmart of the web" nor should it. You’re assuming that most shoppers think like you.

I liked this quote:

"we see people as we are, not as they are."

The real question is do you WANT to make this work? If so focus on the items that you can feel good promoting and don’t worry about the others, just try not to make buying decisions for other people. Try upgrading how you shop and the items you buy...I think you will be glad you did.

Best.

Mike.

Anonymous said: February 16, 2007 2:56 PM | #

This is my first time ever entering this blog or any other one for that matter.I have just read this whole blog on the 3 s's. WOW! I am thinking this is not a good place for prospects or new IBOs. There is more truth then fiction in the contents of this blog. I often wonder just who is making all the product changes. I do not believe it is based on the opinions of those of us who are retailing. I have lots of experience in selling, but most people coming into this business do not. It seems to terrify them. Some are willing to sell high end, most are not. I never seize to be amazed at the Artistry changes, especially their substitution recommendations and complexity of the product lines I suppose the appeal is more to the big city fashion industry. What about the everyday working class ladies who want to look great at a reasonable price and can buy from the catalogs passed around in their offices for considerbably less? Bottom line, I retail for profit. I consume big time. I have been a system person, unrelated to my upline, for a long time. I am in the process of reevaluating the pros and cons, including the expense involved. I am without a personal upline that really cares one way or another about my success both blood line and systemwise. I pretty much am isolated and stand alone. My goal is to once again be a Q-12 qualifier, as tough as it is, it is a job. I am glad to be able to communicate with the corporation through this blog and hope you all understand that for the most part, there is a huge number of frustrated IBOs that simply want not to be considered negative and cut off by leaders who just don't want to hear about these obvious frustrations. "Be positive or be quiet," does not identify or solve the challenges that we are dealing with. Like it or not, "It is what it is."

Marilyn

Anonymous said: February 16, 2007 8:50 PM | #

I would like to add one more comment before this series goes away. My complaint has never been with the prices of the "eaches." My complaint has been with the packaging; not the containers, but the numbers we have to buy. I would love to buy more Seismic drink, but with the other products I need, it is simply too expensive to add a case of Seismic on. I had the same challenge with the Active 8 box drinks. We had to buy 27 boxes. Why not put the Seismic in cases of 12 or even six? The same goes for paper products. I have repeatedly called, e-mailed, and written to Quixtar, but it has fallen on deaf ears. Is it inconvenient for the company to split cases up? Yes, but how much money does the company make when the product sits on the shelf in the warehouse? My wife and I would buy much more than we do (and we buy a lot--close to 300 PV each month), but when my regular order is closing in on $200 for one week and I need paper towels, drinks, peanut butter, ketchup, and cereal, I have to admit that we will pick up an "each" at the store. Every time an IBO or customer does that, it is a lost sale for Quixtar. Take that times 50,000 orders, and we are talking a lot of volume. Quixtar Marketing department, are you listening? Splitting those items up would help us a lot.

--Jeffrey

Anonymous said: February 16, 2007 10:47 PM | #

Jim - the FTC letter was a "staff advisory letter" and thus is "official". Since the FTC is primarily responsible for deciding what is and what isn't an illegal pyramid, their opinion is rather important. I'm not a lawyer, but regarding the 9th circuit opinion, I believe that was non-binding dicta. It was an appeal and the 9th circuit sent it back to the lower court but it was settled by the parties first. The 9th circuit opinion was also contrary to numerous other cases. Finally though it just comes down to common sense - *If* there is legitimate demand for legitimate products, what difference should it make if the shopper is getting discount pricing or not? The issue the FTC, and anyone else for that matter, should be concerned about is whether IBOs are buying products because they want them or not. It's apparent from some internet reports by former IBOs that some IBOs are buying them because they feel directly or indirectly pressured to do so to make some arbitrary "quota" or to "buy" a pin level. That's artificial demand, not legitimate demand, and apart from breaking Quixtar rules, also does indeed risk charges illegality. It's also stupid business for anyone with a clue about economics and business!

Jim said: February 17, 2007 8:27 AM | #

Mike,

I appreciate your comment. But I disagree with your disregard for the pricing issue. You can't simply dismiss Quixtar's pricing issue by saying, "They're not trying to be Wal-Mart." Wal-Mart focuses exclusively on price, and guess what, they're growing. Wal-Mart is the standard. To not head in that direction is to miss the boat.

And please, someone answer my question. I want to know what someone out there thinks about this. Let's assume Quixtar gets all the tool companies in line. Then what? How do they get away from the "buy from yourself" problem (which generates the majority of its volume)? Remember, legally, they can't promote recruiting over retailing. Q has benefited handsomely from the tool companies promotion of team building.

Anonymous said: February 17, 2007 5:50 PM | #

Jim, recruiting without retailing produces no volume. Recruiting people who register as IBOs who do nothing but buy products *is* retailing. Go and look up what "retail" and "wholesale" mean. Ask the IRS, look at state tax laws. A retail sale is one not made for the purpose of resale. A wholesale sale is one made for the purpose of resale. An IBO purchasing something for personal use is a retail purchase, even if they are getting "wholesale pricing". It's a common issue of confusion. So your "problem" isn't such a problem. You've believed too much of the spin of the anti-mlm crowd.

Having said all of that, it's my understanding that the majority of "systems" these days have renewed emphasis on merchandising (sales to outside customers). Quixtar itself requires in it's rules for IBOs to have outside customers in order to receive bonuses. If people aren't doing that, and are faking it or lying about it, report it to Quixtar.

Oh - and Walmart last year announced it's first same-store sales *decline* in more than a decade. All companies face challenges and have to adjust strategies, whether it be pricing or product quality. Economists in general predict that as people become wealthier, quality demand increases. I don't buy A/Q products for their price, I buy them for their quality. If you don't think their worth the cost, why are you trying to promote them to others?

Anonymous said: February 17, 2007 6:05 PM | #

I am Porkchopjim (PCJ). No connection with Plain Old Jim (POJ) above. Sorry, POJ – you shouldn’t take heat for me.

For Anonymous – the ‘unequivocal’ FTC letter that states the amount of self-consumption does not by itself dictate how the FTC views a pyramid compensation plan had a couple of more paragraphs than just the one cited. The legitimate example of a high internal consumption MLM plan was a ‘buyers club.’

A few question for the Quixtar Corporate representative here, if I may – as I have been recommended by other IBOs to ask directly instead of arguing amongst ourselves:

1. Considering that Quixtar specifically prohibits the use of the term ‘buyers club’ in describing or presenting the business opportunity, does Quixtar endorse IBOs referencing a ‘buyers club’ to explain the level of self consumption present in the specific business organizations they have established – which is clearly the intent of using the FTC letter as a reference?

2. When an IBO states “I get paid to use my own products” – does this accurately represent the Quixtar Business Opportunity? If IBOs do get paid to use their own products, what other forms of compensation are available to IBOs for buying products or anything else not directly resulting from the sale of products?

3. Given the ‘First Circle’ initiative, and also given that IBOs are free to construct whatever business structure they desire as long as it remains within the Quixtar business rules, does Quixtar endorse or recommend that the individual IBO increase volume by ‘changing their buying habits’ – i.e. increasing self-consumption – as the primary means of increasing volume to reach profitability vs. retail sales to customers?

4. As the supplier to independent contractors who have the right to sell Quixtar products and recruit others to also sell products, is it Quixtar’s intent to promote the business operations that focus on retail sales to customers not involved in the Quixtar Business Opportunity, or is it Quixtar’s intent to promote business operations that focus on the recruitment of new members who receive financial reward from the consumption of goods by new members?

5. Is the business strategy of “Buy from yourself and teach others to do the same” – including those strategies that include the minimum amount of retail sales to qualify for compensation from downline consumption and sales – a recognized and endorsed method of implementing the Quixtar Business Opportunity?

I appreciate your consideration and response.

Anonymous said: February 17, 2007 6:09 PM | #

To anonymous, if the level of products IBOs are consuming genuinely represents an actual demand and not an artificial one to generate ‘volume’ – then, in my opinion, Quixtar should be quick to increase any retail sales requirements, or at least graduate the level of compensation allowed for self consumption based on the level of retail sales, which would have two immediate effects. First, much of the criticism of compensation based on self-consumption (which begs the pyramid scheme accusations) would be abated. Second, sales would increase dramatically – as the original demand would not have gone away, and the requirement for increased retail sales would add additional demand.

Tex said: February 17, 2007 9:54 PM | #

Jim said: You can change the marketing strategies and product line-up, but you won't change the end result: bad reputation. Since the Amway families are skimming enormous amounts of profits from the company (they're billionaires, aren't they?) the product pricing is terrible. If the prices were competitive in the open market and the money was shoveled downstream to the distributors (instead of going to the Devos and VanAndel checking accounts), the company would ultimately be more marketable and profitable.

Tex said: There are plenty of examples of companies repairing bad reputations. For example, many Japanese companies were considered to make junky products, but they tightened up quality control to the point Japanese cars and electronics, as examples, are considered some of the best in the world. Just because the “Amway families” are making a lot of money does not automatically mean they are “skimming enormous amounts of profits” and “the product pricing is terrible.” They are in business to make money. That is the definition of business, and they have provided an extremely valuable service to IBO’s by making their products available. This does not mean we automatically accept the status quo, however. We should constantly be aware of any quality or pricing that is not competitive in the marketplace, as these issues affect our ability to retail and register new IBO’s. However, we have done comparisons with similar products at Walmart and grocery stores, and there are plenty of products that compare quite favorably with these other outlets, who by the way ONLY are places to get stuff for our retail dollars, but are not a source of a business income.

Jim said: We live in a different day and age than when the company was founded. Now, people are very price conscious. The company's products must be competitively priced in the open market. One of the sources of criticism is that Quixtar relies on self-consumption from its distributors rather than retailing. To stay legal, the company needs to focus primarily on retailing. Since the products are so far out of whack, no one can retail them. The only reason why people buy them is to participate in the pay plan, which is exactly why the company is getting hit with a class action lawsuit in California (and will likely lose unless they settle). Talk about transparency...give me a break. This company is anything but transparent.

Tex said: You are right, we do live in a different day and age, but not everyone is price conscious. It is good to be competitively priced in the open market, but remember your income comes from the product prices, so lesser prices probably mean less profit for Q and less profit for you. If it weren’t for the overpriced tool systems, it would not be difficult to make a net profit with a little retail and a couple of IBO’s consuming and having some of their own retail. Your point about “the company needs to focus primarily on retailing” is not supported by the retail rules. While each IBO has the choice to have a large, small, or no retail (but no retail results in no downline volume bonus), there is no requirement to be focused primarily on retail to stay legal. I find several products that are quite easy to retail, and are supported by the price comparisons noted above. Do your own research and you will probably find this is true for you as well. The class action lawsuit in California has much more to do with the upline, especially the tool system owners, than it does with Q, but the principle of suing those with “deep pockets” (lot of money) applies here, lawyers are quite familiar with this tactic.

Mike said: "now, people are very price conscious"?

Have you heard of:

1. Whole Foods

2. Porsche

3. Nordstrom

4. BMW

5. Apple

Give me a break Jim...

Tex said: Bingo.

Beth Dornansaid:

I can see where you might be a bit skeptical about the talk about transparency. This is, after all, coming from a company that was silent for years while others criticized its business.

Tex said: Many of us are still skeptical. Talk is cheap, we are looking for action. As Dexter is fond of saying, “RESULTS, RESULTS, RESULTS!” I enjoy the quotes I have heard and learned in this business; most of them can be turned around and used in an honest manner.

Beth said: And I'm guessing you didn't think your comment would be posted because of some of the content. It was posted because we're serious about having a conversation with those interested in our business -- fans and detractors alike.

Tex: This would have been a huge error, as you would have lost a lot of credibility. That comment probably would have shown up on another blog, with the complaint you wouldn’t post it. I realize you have to draw the line at some point, but if you want open and honest communications, the line must be drawn only when abusive, inaccurate and untrue statements are made, not when honest opinions are voiced. ONLY by taking in all facts will progress be made, in my opinion.

Beth: I'd suggest you watch what we're doing for the next few months and see if you think differently after you see what's happening here in the Opportunity Zone and at Quixtar.

Tex said: Looking forward to it, including the first mention of a timetable, thanks for it being months, not years. We have been waiting over 24 years for substantial changes, so the ball is clearly in your court. Good luck, and know there are many IBO’s pulling for you, especially when it comes to tool profit transparency.

Beth said: If you watch the posts here in Ada-Tudes and elsewhere in the Zone, you'll see a focus on improvement to our business and a clear intent to improve IBO profitability through changes to the way we support IBOs, including products, pricing, training, and selling tools. And yes, a focus on retailing and helping new IBOs be more successful sooner by retailing and earning retail commission on sales to customers.

Tex said: Tools and retail, I agree these are the two biggest issues, in that order.

Beth said: We intend to not just talk the talk but walk the walk and you'll see and hear more about what we're doing throughout the next year.

Tex said: Excellent.

Beth said: You've already heard through these blogs more about company strategy than we've ever communicated publicly. It's an unprecedented level of transparency for us. We think it's a good thing, and while we respect the perspectives of others to disagree or be skeptical based on previous views, we're staying the course and we welcome all to track our progress through these blogs.

Tex said: This is true, and refreshing.

Skip F said: In case people are not aware of this, the FTC at this very monent is getting ready to implement many restricitons that will be placed on all MLM businesses.

Tex said: I made comments to the FTC last year, I thought they were going to have more hearings in Washington DC, and perhaps throughout the country, what do you know about “getting ready to implement”? My impression is we are still several months, if not a year or two, from an FTC ruling.

Skip said: These new restrictions could pretty much put an end to systems and how they have operated in the past. Do we need systems anyway?

I didn’t see the systems addressed very much in the proposed ruling, although my comments were directed towards this topic. I believe ANY business or organization needs a system, the question is how much does it cost and who makes how much money from the system, and how transparent are these profits?

Skip said: Years ago, Amway supplied regionals and other smaller meeting throughtout the country. If Quixtar stepped up to the plate and offered these meetings again and if they made tapes,cd and dvd's etc available like they did years ago we wouldn't need systems. Really, what we lack most right now are corp sponsored meetings open to all IBO's. Lets start working together as one big Quixtar team instead of so many different teams as Jim P mentioned.

Tex said: I would have no issue with this. Alternatively, the various tool systems could be open to an IBO in any other system, as you could usually find any type of meeting much closer to your location if this was implemented. As Randy Haugen is fond of saying (I love these quotes, as mentioned above), “We all have the same plan”, which is true to a certain extent, but only if all IBO’s were made aware of the tool income. As it is now, we don’t have the same plan, as we all have the same Q plan, but since most IBO’s are not aware of the level of tool profits, which make up the vast majority of income for emeralds and above, we don’t have the same overall plan. THAT is no way to treat your “teammates” or “business partners”, two labels that are commonly used by upline.

Skip said: I wouldn't use the NBA as an example as Jim did. Have you notice the increase in the fighting the last couple of years in the NBA.

Tex said: I don’t mind the analogy, don’t let a few goofballs change the overall impression of a good analogy. As mentioned above, NBA teams play together with each other, just like the different LOS’s could meet with each other, but they normally don’t do that now. In fact, I recently contacted another line of sponsorship to find out about their tools and pricing, and I ran into a stone wall very quickly, as they said I needed to work with my upline Platinum, who is involved in their upline’s tool system. This is currently a VERY closed market.

Skip said: Lets all be part of the Quixtar Team and work together for the good of all!

Tex said: Yes, but let’s ensure we are treating each other as teammates, not as secret sources of massive income.

Skip said: If IBO's have the right spirit of the business they will be helping their downline becasue it is the right thing to do. Not because the upline might make some tool money.

Tex: Bingo, but don’t count on upline to decrease their income on their own initiative, as they literally can’t afford to do this, their lifestyle commitments are VERY high, as they are also fond of showing us.

Skip said:Problem solved! Thanks FTC!!!

Tex said: I wouldn’t be too confident in the federal government making the right rule changes. They may “fix” some that don’t need to be fixed, and ignore others that are the major problems, just as tool profit transparency.

Skip said: Jim, (not Jim P) would you like to be responsible for the world wide operation of this great business. Would you like to spend your money fighting the FTC and other entities that would like to put an end to our way of doing business. There has always been an asault on the way we do business by the "brick and mortor" establisment. The MLM conpamy with the most resources will be the survivor. Thanks God Quixtar has the resources so they can preserve the business many of us depend on.

Tex said: Yes, we must acknowledge Q provides a valuable service in many different areas.

Skip said: I have confidence the founding families will always do what is best for the future of this business. Just sit back and take stock of how far this company has come since 1959. Even with all it's problems, Quixtar is the class of the industry...

Tex said: Yes, they have traditionally done well, but growth has been flat for over a decade in North America and the tool profit issue has been ongoing for probably over a quarter of a century. So let’s not too teary eyed over the past successes, even though they have provided an enviable starting point going forward.

Anonymous said: A few comments to Jim (the comment poster that is, not JP). You say "Quixtar relies on self-consumption from its distributors rather than retailing." If the person doing the consuming is doing so out of legitimate desire, then that IS retailing. There's a common misunderstanding about mixing retail and wholesale pricing with what actual retailing and wholesaling is. If it's being sold to an end user, then it is a retail sale, doesn't matter if the end user is an IBO or an "outside" customer. In recent years the FTC has been fairly clear about this.

Tex said: It DOES matter if it is being sold to a non-IBO, as certain minimum outside retail must be accomplished in order to qualify for downline volume bonus (you still earn your own consumption bonus and your own retail bonus and any markup from IBO cost, the percentage based on the total volume of your group).

Anon said: The potential problem with MLMs is that people may be buying stuff because of artificial demand based around the income opportunity rather than legitimate consumer demand - "buy this product and you'll be rich!" In that case you effectively have defacto payments for recruiting and the FTC will consider you an illegal pyramid or otherwise an illegal marketing scheme. By having rules in place like the Member/Client Volume rule you ensure that your products have legitimate market demand, preventing this accusation. The level of internal consumption per se is not an issue with regard to legality.

Tex said: That’s right, there are no requirements for IBO consumption, only retail to non-IBO’s in order to qualify for downline volume bonus. However, until you have at least 100 PV of total volume (IBO and retail) in your group, you don’t get any bonus.

Anon said: As for you claim that "the products are so far out of whack, no one can retail them." that's just ridiculous. Artistry products are generally cheaper than their competitors in the same market niche. Nutrilite products are best of breed and very marketable. These brands are the majority of Quixtar volume. Many many people have no problems at all merchandising them.

Tex said: Agreed.

Anon said: PS Tex was banned from various sites for thread hijacking, not for any of his posts in particular. It's extremely impolite and poor net etiquette to take over every conversation with your own particular obsession. It's actually irrelevant whether it's a valid issue or not.

Tex said: I addressed this, above. Although I should add it DOES matter if the issue is valid or not, because there is so much garbage and misinformation in most blogs, it would make your head spin if you were not very familiar with the rules and history of the business.

Anonymous said: I posted a comment on Robin's blog, but it got buried because he wrote a new one.

Tex said: This is one of the worst features of blogs, many good ideas get buried when new entries cover them up. I would recommend adatudes provide a “front page” with both accomplishments and plans for future improvements to the business.

Anon said: Anyway, here is my idea for better communication on the sites: On the new personal retail websites, I wish we could have our name and contact information on the site. It would not, of course, be a home phone number or address. Rather, it would be a direct e-mail link, and possibly a voice mail phone number. This could be available to registered customers and visitors alike. On the main Quixtar website, I would also like to have my name and contact info available to my customers. This could be accessible only to registered customers that are logged in on their customer I.D. number and password. It could be placed in with their personal information. I know that it is the IBO's responsibility to keep in contact with the customer, but sometimes they might see something on the site and have a question. Sometimes a customer is not comfortable contacting the company, but they might call or e-mail their IBO if the contact information was handy. I think the customers would think a direct e-mail link would be great. I also think it would make them feel more like they are our personal customer, rather than just buying from a big company (with no offense to Quixtar.) Of course, this should be optional for the IBO because some might not want any of their contact info available. Any comments or other ideas about personalizing the sites?

Tex said: I think this is a great idea. I think the personalized sites have our names, but not contact information. Adatudes, what think you?

Jim said: In response to Anonymous's comment (at 4:36), purchases from one's downline for personal consumption is NOT considered a sale to an end customer. In a 9th Circuit case, In re Omnitrition International, the Court held that purchases made by distributors that participate in the pay plan does not satisfy the "sales to end consumers" requirement for purposes of the Koscot pyramid analysis. The FTC has also been on the record and had similar rulings i.e. Equinox, Trek Alliance, Gold Star.... The Court figured that if someone bought products just to participate in the pay plan, it defeated the purpose of the second prong in the Koscot analysis. Admittedly, there's yet to be a definitive answer on the subject. But it appears that the law is disfavoring commissions earned from downline volume generated by personal consumption. The class action lawsuit in California was strategically filed there because the of the Omnitrition ruling. With that Omnitrition holding, the plaintiffs have the upper hand (in my opinion).

Tex said: This is exactly what I mentioned above, but you provide much better legal basis and details, good job, Jim.

Jim said: In Quixtar's defense, how is a company supposed to distinguish between personal consumption and retail sales? I don't know.

Tex said: Each IBO is supposed to self report retail sales, but we, and I suspect many other IBO’s, have been taught how to fake this reporting, so we can get the downline bonus without doing actual retail sales. If IBO’s didn’t get this money, many more would quit, because they very quickly could afford the tool system cost on their own. The net result is we are taught to lie to enable the higher pins to make much more money on tools than they do on Q profit. This is another reason why tool profit transparency is needed.

Jim said: My take on the problems with the tool businesses: Quixtar knows that a VAST majority of its product volume comes from personal consumption, not retail sales. Since the company can't legally promote recruitment over retailing, they turned the reins over to the tool businesses to train and motivate their teams and generate volume the best way they know how: through recruitment. Q turns a blind eye to the tool company practices and profits handsomely. I appreciate Beth's comments to my earlier remarks. I'm glad there's finally a forum where the public can have civil discussions with the company. This will be very beneficial for everyone involved.

Tex said: It is clear the corp has turned a blind eye to the tool issue, as Rich DeVos nailed the tool issue in the 1983 “Directly Speaking”, but then did not follow up, which means the problem has been festering and growing for well over a quarter of a century, because he probably was aware of the problem at least a year or two prior to making the recordings, and probably tried to talk with the higher pins on a personal basis prior to making the tapes, which were a last resort to try to put some light on the issue, with the hope the Directs (today’s Platinums) would take more control over the abuse, which did not happen, as they were at the point where they are just beginning to profit from the tool system profit, which really kicks in “big-time” when you get to emerald and above.

Jim said: I almost forgot. Regarding my last comment about the Amway leadership "skimming" profits and diluting the profits, I take that back. There's nothing wrong with people making money in their own business. I do have a problem with executives taking too much money when the company is heading south. Over the past few years, the company hasn't grown at all. Zero growth for any company is bad. Amway was a billion dollar company in the 80s and its a billion dollar company now. There was another billion dollar company in the 80s called Wal-Mart. Look at them now.

Tex: Good, that means we now agree. Skip F, what FTC changes were you referring to that will change the tool businesses? Can you post a link for me. Thanks.

Anonymous said: If you think you can build your business on the people who buy Porsches and BMWs and shop at Nordstrom and Whole Foods (less so Apple), you are not going to have a very big business. The numbers for success in Quixtar require a far larger pool of people than shop only those kind of brands. Even Whole Food's profits (and its stock) are down right now.

Tex said: Good point, but even folks who have to be careful with their money can do a little additional retail and then the net cost for their products is very inexpensive, even less than the retail stores. The problem occurs when the system tools are so expensive and don’t need to be, but this is the source of most of the higher pins’ income, so don’t expect them to volunteer to lower prices. In fact, if you mention this issue, they will probably ignore you, as they have done with me. However, there are many ways you could develop your own tool system. I have purchased several thousand tapes, CD’s, and books over the past several months, and have found all lines of sponsorship to be virtually identical in content. I am not saying this is the only way to put together a system, but it is very inexpensive and the tools are directly applicable to the business.

Jim said: Here is a simple formula for regaining some of the ground Quixtar/Amway has lost reputationally. IBOs should spend 75% of the money they currently spend on tools and functions on Q/A products instead. The other 25% should be spent on high quality, proven tools the company provides with PV and BV, priced reasonably and with royalties paid to the IBOs/speakers providing the information. It wouldn't take long for the truly worthwhile tools and CDs, and the quality speakers and builders, to rise to the top. With more of an IBO's money directed to purchasing products, and with PV/BV on all tools purchased, the overall profitability of all IBOs would rise, likely dramatically. I wouldn't be surprised if Quixtar volume alone rose rapidly by 2.5 times and if IBOs' satisfaction with the business rose in a similar manner. The only people it would affect are the tool company leadership who currently collect all the royalties. Now that income would be throughout the business and paid on the same level as their overall business.

Tex said: A good idea, but you are up against the “tool company leadership” who would be making MUCH less money, and their new income level probably would not meet the lifestyle they have become accustomed to, which also applies to many emeralds and above as well. This is the right thing to do, and hopefully Q’s commitments over the next few months will show progress in this direction. These are the same individuals who sit on the IBOAI as well, so this will be no easy task for Q to pull off. Please don’t get the impression I feel sorry for the “tool company leadership” or any Platinum and above making tool profits, as they have not been transparent for decades. That is the nicest way I could possibly say that, only because I made a promise to be “civil” on this site to Jim Payne.

Jim said: The other thing I would recommend is more care in replacing products with newer products at far greater cost, for example, the old Whisker Whiz shaving cream with the Tolsom product. I'd love to meet the marketing man who justified the price of that product, which most of us don't believe is on a par with the old product for twice the money. Then again if he's a Porsche buyer.... (BTW, I drive a BMW and still don't see it.) Sometimes I wonder whether anyone really talks to people on the street candidly before they do some of the things they do product-wise.

Tex said: Another good point, as far as I know, most of the products are reviewed with the IBOAI members, and these are far from “people on the street”, as evidenced by the above mentioned tool profits, which drive their priorities far above whether the products are competitively priced for the quality they provide.

Jim said: It really is time for the company to get real about some of these issues, and it appears that may be happening. Quixtar is a good business with a mixed reputation. It could be a terrific business with a great reputation, but not if it is unwilling to face the truth in a few critical areas. Tex may tweak a few of you, but if he is speaking with some measure of truth, take it to heart instead of attacking him. The truth can stand up under the scrutiny and so can the business.

Tex said: Agreed, with the key words “it appears to be happening”. So far, all talk, no action, but it is early and we have a commitment to make real changes over the next few months from Beth. By the way, my intent is ONLY to speak the truth, and if that “tweaks” anyone, so be it. Keep in mind I have used this tactic in non-Q areas to great success, so stating the truth has been proven to work. Imagine that!

Jim said: Tex, I think we both see the same problem but have differing views about the cause. The tool businesses aren't the cause of Quixtar's problems. Orrin Woodward is very transparent about the Team tool business. Just pick up his "Leading a Consumer Rebellion" book and you'll find that he clearly points out that money is made from tools. Platinums and above share in the profits.

Tex said: I don’t have the book, and can’t find it on ebay or amazon.com. Do you know what the book says regarding the LEVEL of tool profits? I was discussing this issue with “Dave” on joecool18’s site, and he said he would get a tool profit schedule from his upline (which had to be mailed, not e-mailed). He never posted the information; I suspect the schedule, if it was forwarded, had strict rules not to share with most other people. So much for transparency, unless you are able to clear this up.

Jim said: The problem is with transparency from the tool companies, it's the Q organization itself. It's the overpriced products and the terrible pay plan. As I said earlier, Quixtar can't promote recruitment over retailing, so it turns the reins over to the tool companies. What do the tool companies do: they promote recruitment and "buy from yourself" i.e. personal consumption. Quixtar moves the majority of its product via personal consumption. But IBOs get disgruntled when they figure out that they've been buying overpriced products with no justification. IBOs then feel that they were taken advantage of. It's hard to recruit someone to personally consume such expensive products on a regular basis. This explains Quixtar's incredible attrition rate. The more IBOs that are disgruntled and quit, the more critics you'll have out there ruining Q's reputation. In all honesty, Q deserves its bad reputation. It's done nothing to define itself over the past several years.

Tex said: I think I have addressed the “overpriced products” and “terrible pay plan”. I think these are okay, although Q needs to continue to keep an eye on these issues. A little retail (in the absense of high tool prices, which we do not currently have in most cases) fixes these issues. I don’t understand the problem of most volume being personal consumption. This is simply a rule, which is not affected by who runs the tool system or how much they are charging for tools.

Jim said: In my opinion, if the prices were market competitive, why would an IBO leave the business upset. If they were getting a good deal and treated like a valued customer, why would they complain. The problem always goes back to IBOs feeling like they got taken advantage of with the ridiculous prices, not the tool businesses. The tool companies are very clear that tool purchases are optional. The IBOs sign an agreement acknowledging that they understand the purchase of tools is optional.

Tex: If the prices were lower, the major problem would remain – the excessive and hidden tool profits. IBO’s complain because they eventually realize they are being ripped off on the tools, or they don’t realize this fact, but they ARE going broke trying to build the Q business because of excessive tool costs.

Jim said: So lets say Q gets the tool companies in line. Then what. They can't rely on retailing because the majority of their product flow comes from personal consumption. So they'll teach recruitment and get hit by the FTC. If they don't get hit by the FTC, IBOs will get in, personally consume the products, and eventually figure out that they're not getting a good deal on the products, and leave extremely upset. You've got the same problem all over again. The days of ignoring the open market no longer apply.

Tex: I am not following you on this one. If the tools are much cheaper, and IBO’s actually do even the minimum retail, they would have a net profit much sooner. Tools could be much cheaper, think how much it costs to produce a tape or CD, the same “Dave” mentioned above also said he worked in that industry, and it would be about $1, which you could also verify in your local yellow pages under media duplication companies. Better yet, how much would MP3 recordings cost to cover production costs and make a bit of profit, pennies?

Skip F said: Sometime last fall I recieved an email requesting my imput on the proposed FTC rule changes for MLM's. I don't know if I was chosen randomly. I'm still not sure if the email was FTC or Quixtar generated.

Tex said: I saw the request for comments on the Q site and submitted my comments, and focused exclusively on the tool profit issue.

Skip said: The changes are being considered by the FTC to stop the Fraudulent practices of MLM' such as over stating income, exaggerated products claims and support tool abuse etc. The number of law suits and complaints involving MLM's was a high number. I can't remember the munber, I just remember it being alarming.

Tex said: I think many of the proposed rules would hurt the legitimate companies, and the others don’t care, as they don’t care if they cheat and lie, by definition. I don’t recall anything regarding the support tool abuse, however. Most of the complaints involved issues with other companies, but A/Q has had their fair share over the years, including Morrison and company, TIF, Ken Stewart, all of which can be viewed on the internet quite easily, simply google search for one of the names and the word “amway” or “quixtar”. ALL of these are directly related to tool profits, not the actual A/Q business itself.

Skip said: A few of the changes and restrictions the FTC wants to put on MLM's is income source and varification, and a 1 or 2 week waiting periord before a new person can be registered after seeing the plan. There are more restrictions but I can't remember exactly how they were worded.

Tex said: These are the ones I recall, and Q would be hurt more than helped, in my opinion.

Skip said: I did get in touch with the FTC to try to pry some info out of them but they aren't saying anything until the final ruling is completed. It sounds to me like there will be changes in some form soon.

Tex said: No surprise there, but remember we are talking about the federal government, so “soon” could be longer than you think.

Skip said: I quess I knew it was just a matter of time before something like this would happen considering all the negative press the MLM industry has received over the years.

Tex said: Remember, these are PROPOSED rules, and the final rules make not look similar to the proposed rules, depending on how successful all of the commenters are with the FTC.

Skip said: Had Amway/Quixtar and other companies been able to control the bad behavior of it's sales force this would not be happening. But of course in our case, we all know that Rich and Jay did their level best, to no avail, to stop the abuses years ago. Now it appears it might be out of Quixtars hands.

Tex said: The first part is true, but I disagree with the statement that Rich and Jay did “their level best”. I think Rich started out strong, with the “Directly Speaking” tapes in 1983, but his heart ailment that started that same year, plus the probable threats from the tool company owners to pull out (combined with a product boycott, which I believed happened, but have no direct evidence), caused the company to back down. However, in those days, most of the Amway volume was in the US and Canada, traditional tool owner strongholds. Now, not only is the truth about tool profits becoming more commonly known via the internet, but there is far more A/Q volume outside of the US and Canada, so the stranglehold is not as strong as it used to be, making Q action not only necessary, but less risky to their future, not to mention the IBO’s at less than the Platinum level.

Skip said: If the offending IBO's still don't clean up their act we will not have a business in the future. This is the part that really irritates me. The system leaders are so in denial they just can't stop. It's almost like a disease. They can't accept that it is the system abuses that is bringing all this on the industry.

Tex said: It’s not so much denial as it is pure greed, tool profit greed.

Skip said: At any rate, this is what I know about the FTC situation. It sounded to me that there is going to be a ruling sometime this year.

Tex: That would be good, but don’t hold your breath, these things have a habit of taking much longer than originally planned.

Skip said: Maybe the good news in all of this is that it won't have be Quixtar that gets the grief for the changes that are coming. Let the FTC make the necessary changes! And they will!!

Tex said: The FTC will probably do something, the question is whether it will address the real problems or make other issues that are not as important even worse. I do not have a lot of confidence in the federal government to do the right thing, if you haven’t already noticed.

Skip said: Tex, I guess you could say this is the last resort....

Tex: Yes, it is the last resort, let’s just hope it is an improvement.

Skip F said: Jim, You are flat wrong when you say the biggest reason for the attrition rate is pricing. Sounds to me you are still part of a system.

Tex said: Agreed, as stated above.

Skip said: I have been around this business for 30 + years. At our peak we had over 15,000 pv after breaking 3 platinums and held that personal pv for many years. We have well over 100 on our front line.

Tex said: 100 front line now, or at the peak? What is your level now, if you don’t mind me asking?

Skip said: I can tell you that while there was some complaining about some of the pricing, which we could deal with, the overwhelming reason people were negative about Amway/Quixtar is the system deception and abuses. Don't get me wrong, I would like to see some of the pricing reduced, but that is not our biggest problem!

Tex: Totally agree.

Skip said: I know what I'm talking about. I was involved with systems twice and both times my business was almost ruined. I can tell you exactly what goes on behind closed doors at system leadship meeting but I won't get into that in this forum as it is too disgracefull.

Tex said: Please do, or go over to http://ohana.lava.net/blogs/Joecool18 and post the information there. Many of us would appreciate that very much.

Skip said: I say again. Quixtar could be all the system we need. They have the resources to make even the largest system look second rate.

Tex said: Agreed again, and they are moving in that direction, but it is very early in the process.

Skip said: I think Quixtar is moving in that direction. It just takes time to turn this big ship around without causing a shipwreck.

Tex said: Agreed again, we need to ensure it keeps turning, however slowly it may be.

Anonymous said: Jim" possibly is "Porkchopjim" the quixtar critic who has never been in the business. PCJ already knows what I am about to post, but chooses to ignore it. Here it is again for the sake of others who are not aware of it -

Jaunary 14, 2004, James A Kohm, Federal Trade Commission -

"Much has been made of the personal, or internal, consumption issue in recent years. In fact, the

amount of internal consumption in any multi-level compensation business does not determine whether

or not the FTC will consider the plan a pyramid scheme."

Unequivocal.

Tex: Agreed.

Jim said: Skip F, you're not understanding me. Quixtar can't provide the system! The majority of their products are purchased for personal consumption. Quixtar cannot teach recruitment ("buy from you

Quixtar Ada-tudes: A View from the Top

Friday, February 09, 2007 by Jim Payne Category: Quixtar Strategy, Products

Comments

Friday, February 09, 2007 by Jim Payne
Category: Quixtar Strategy, Products