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Scrapping the Buy From Yourself and Teach Others to Do the Same Model

August 15, 2008

When I was in INA, IBOs were taught that the business was simple: Buy From Yourself And Teach Others to Do the Same (BFYATODS). They would proclaim from stage, “This is not like your parent’s Amway! You don’t have to go door-to-door selling soap! With thousands of products from thousands of manufacturers, IBOs just have to redivert their spending habits from Safeway, CostCo or Walmart to a place that pays them back! Just buy from yourself and teach other to do the same to earn a 6-figure income in 2-5 years!”

There’s just one problem. Without a significant amount of retailing1, the BFYATODS model constrains the size of one’s business to the number of IBOs in the organization. If IBOs aren’t being encouraged or taught to retail products, the only way for products and money to flow is from personal purchases. With product prices generally being higher than the competition, doing this month after month can put a strain on an IBO’s finances. When they quit, IBOs stop buying products, and as a consequence, volume in an organization shrinks. I firmly believe the BFYATODS is the reason why Amway’s worldwide sales has hovered around the $7 billion dollar mark for the past decade. People are leaving as fast as they come in2.

It’s obvious that being a business owner means eating your own dog food. What Amway, INA and other Amway Motivational Organizations (AMO) have utterly failed at is teaching IBOs how to effectively retail products to outside customers! Carl’s Jr., Burger King and McDonalds franchises don’t make the bulk of their money through self-consumption. They get it from selling to other people!

Amway IBOs need to scrap the thinking behind BFYATODS and start retailing. Not only does this bring in immediate profits, but it sets the example for other IBOs to follow suit. If you are making money selling products, they can make money selling products.

Amway Global appears to be taking steps to encourage more retailing. They still need to lower product prices quite a bit and better position its products vis-a-vis the competition. In fact, lowering product prices will force IBOs to retail because the bonus potential from each product will be reduced. An organization wouldn’t be able to sustain itself from self-consumption alone, as it does so today. Assuming that they do this and IBOs and AMOs follow suit, I believe that you’ll see a return to the Amway of yesterday, where distributors are actually selling products.


1 Of course there are IBOs that are retailing. However, the vast majority of them are not and are still being taught the BFYATODS method of building the business.

2 ibofightback disputes my use of the $7 billion dollar sales figure. See his comment below and my subsequent reply.

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21 Comments leave one →
  1. August 15, 2008 11:11 am

    Oh good grief. I’d made the mistake of thinking you were actually a reasonable intelligent and “balanced” blogger with regards Amway, but then you come up with this malarky –

    Amway’s worldwide sales has hovered around the $7 billion dollar mark for the past decade.

    Completely and utterly false and i’ts been debunked AGAIN and AGAIN and AGAIN. Why have you claimed it? Who are you “believing”? Or do you know it’s not true but are saying it anyway?

    Do I have to explain this one again? Or are you smart enough to work it out for yourself?

    Her’s a hint – Amway

    I don’t even bother reading the rest of a post when I find folk just posting known BS.

  2. August 15, 2008 12:22 pm

    If I made a mistake in my calculations, my apologies.

    When I joined the business, the number that was frequently used throughout my time was that in 1997, Amway made $7 billion dollars. When I came back to this debate, the most recent figure I could find was also $7 billion dollars. I see now that they changed the way they reported income in their annual statements.

    So, it appears there is growth in the overall business. Where is this growth occurring? In North America, I don’t see as much growth now as I did ten years ago. So, I conclude that the growth must be coming from overseas. How are things different there than in North America? Is there more an emphasis on retail sales than personal consumption? If so, this only serves to prove my point.

    Why don’t you comment on the rest of my post, instead of picking on one inaccuracy?

  3. Mike permalink
    August 15, 2008 1:37 pm

    Amthrax, there was teaching on doing retail. Here is the jest of a session by Larry Winters.

    How to build your business, 1. Change your buying habits. 2.Spread cataloge around (I guess that was the retail part of the speech.) In standard Winter’s fashion, he meantions this over and over and with varing inflection in his voice…

    Another nugget from Winters. “If you can not afford to go a function, then sell something and that is how…”

  4. August 15, 2008 4:11 pm

    In 1997 Amway reported sales “at estimated retail”. With Alticor they changed to actual revenues. “estimate retail” is approximately 32% higher than actual revenues.

    This is well covered in the sales data section of the Amway Wiki article on Amway as well as numerous posts on QuixtarBlog, numerous posts on The Truth About Amway and also in numerous comments on for example Orrin Woodward’s and other TEAM blogs where they were also trying to twist the data and ignore the change in reporting methodology.

    I didn’t comment on the rest of your pst because I’m damn SICK of having to deal with people posting FAlSEHOODS as FACT and didn’t even bother reading the rest of your post.

    Now I have. It’s a myth that the BFYTODS model is as ubiquitous as you think. Has retail been poorly handled and emphasised? Absolutely. Has the “BFY” idea been over-emphasised and abused. Absolutely.

    But then I look at my experience when I joined – 10 years ago – where every monthly training session there was a “door prize”. Every customer receipt you put in the hat was an entry in the draw – ie have customes! Our “100% user” recognition required (and still requires) using a massive 25 products – not everything. There was, and still is, special recognitions for doing “10 faces” in a month with Artistry. Our organization spent a deal of money buying the rights to a weighloss program tailored to using A/Q products – designed for marketing to customers. I’d here double diamonds on stage talking about how they still deliver products to their customers.

    Do folk ignore it? Yup. Do folk do it badly? Yup. Has Amway and the systems been extremely slack in supporting the area? Yup.

    One issue as I see it is that Amway stepped back from doing training in the 80s, but a rule remained (and remains) in place that you couldn’t produce product related training material without getting it approved by Amway. As was made clear in BERR vs Amway UK, Amway never dedicated the resources to that task. In Europe it could typically take up to 2 years to get a single piece of BSM approved. An inspiring, motivational story tape required no such approval.

    So it was a screw up all around.

    As for pricing, it’s another issue I’m getting sick of discussing. For the main products we’re trying to market, Nutrilite and Artistry, the pricing overall is fine. IMO, some products need tweaking (eg Omega 3), but virtually the entire Artistry range is cheaper than the competition. So how can folk keep claiming there’s a price problem?

    Because they’re not in the same business as Amway – the Health & Beauty business.

    If folk stop trying to sell it as a way to “save 30% on what you’re buying now” (and I see that in my org too) then we’ll all be better off. Despite the protestations of many TEAM folk, I’m not in the toilet paper and diaper business and neither is Amway.

  5. rdknyvr permalink
    August 15, 2008 4:21 pm

    Amthrax, you’re correct in saying that Quixtar/Amway North America revenues have been flat for a decade. You would also be correct in saying that using year 2000 dollars, revenue has in fact been slipping, and unit sales have been dropping. If all Quixtar had done for the past 7 years was keep up with basic growth in US GDP, North American sales would be closer to $1.4 billion, instead of struggling to stay at or above the $1 billion mark. That perspective is not disputed by the Corp.

    Fortunately, the Transformation process is turning that around, although I personally would not be surprised if revenues dipped BELOW $1 billion for a couple years as IBOs and systems are forced to deal with a shift to non-IBO customer retail sales.

    Overall, Alticor sales have grown year over year due to healthy growth in most of their international markets. Interestingly, two of the highest growth international markets — China and Russia — are markets where the Systems are high constrained or absent in their formal sense, ie. how they tend to operate in the North American market.

  6. August 15, 2008 7:45 pm

    1. It’s clear that the systems approached retailing in different ways. In INA, it was definitely not something that was heavily promoted when compared with the sale and use of tools. That’s not to say that retailing was not promoted; it just wasn’t heavily promoted.

    It’s clear that ibofightback’s experience has been different. That doesn’t make my opinion or experience any less valid.

    2. Pricing is an issue that I will be discussing in the future.

    3. I like rdknyvr’s response because it was written without any personal attacks to myself or the other commenters.

  7. August 15, 2008 9:23 pm

    I have moderated a few comments to keep the discussion on topic.

  8. rdknyvr permalink
    August 16, 2008 7:14 am

    As for pricing, depends on who you think your target market is, how large that market space is for products at our price points, and whether the goal is to grow top line sales of units and revenue. It’s been well stated elsewhere, including Chuck’s blog, that current pricing on most core line products still assumes the IBO is the target audience irrespective of discussions about “retailing”; the IBO price is the “real” price, not the “wholesale” price. Those very few who are selling Double X, for example, at full retail, are the exceptions that prove the rule. Denying that price is a serious issue just so one does not give “critics” any quarter doesn’t change the facts. Rolls Royces are well-priced for their target market, and what is the size of that market, and are sales growing?

    Two major issues with adjusting prices to grow one’s market for a premium quality — indeed, unmatched — product. One is that current big pins will and are squealing about lower BV, and two, the Corp would have to deal with reduced revenue while retraining a largely sclerotic sales force to sell those products as Arbonne, Shaklee, others do instead of taking just the “business opportunity” approach.

  9. August 16, 2008 11:22 am

    Amthrax, forgive my tone, I just get extremely frustrated at people putting out the same Myths again and again.

    There are legitimate things that need fixing and deserve discussing, yet folk keep on promoting stuff that’s not even true.

    In my mind the North American market has failed to grow for two reasons –

    (1) Reputation, and in particular the internet and it’s amplification of the problem

    (2) A disconnect between target markets. The products in general are not “over-priced”. They are however high-end and expensive. A major problem is that folk were and are promoting the business to young, internet savvy folk. They’re great for the business model, but not the target market for most of the products.

    Number 2 causes major problems in the BFY model. Folk are buying products that are in a different price and quality category to what they were doing before. If they don’t make money fast they’ll quickly find themselves in financial trouble.

    This isn’t a problem with the model, the products, or the pricing. It’s a problem with marketing the products to people they’re not targetted towards.

  10. Mike permalink
    August 16, 2008 4:13 pm

    The issue of the target market is a very valid point. That not only being the consumer but the selecting of the sales force as well.

    Where AMO’s have failed is in trying to keep anyone that “can breath” in the business. As well as selling high priced products to those not in the market for them.

    However the reason the prices are as high, is not just to pay for raw products and manufacturing, it is to pay out bonus money to the IBOS.

  11. August 16, 2008 8:33 pm

    Mike, you’re correct about the pricing, but it’s not a bad thing.

    Something like Wal-mart works on very fine margins and low renumeration to staff. An MLM model cannot work successfully without a decent margin on the products, and that means quality over price.

    As far as I’m aware Artistry is the only brand where there’s been an independent assessment of what category the products are in, and who the competition is. When compared to that competition Artistry is extremely price competitive. To get Artistry sales to where they are (I’ve heard, but not yet confirmed, that it’s now #2 globally) in a traditional model would quite possibly require higher prices, with a lot more spent on traditional marketing and endorsements ala Sandra Bullock.

  12. Mike permalink
    August 17, 2008 2:51 am

    The advantage that Walmart has is the sheer volume of product sold. There are quartly bonus, based on each stores volume and cost of doing business.

    Some stores don’t make it, others make the maximum possible bonus.

    Where Wal-mart makes most of the money is not from the lower prices, but what they demands from the manufacturer and or wholesalers.

    Wal-Mart will match any price of a same product type from any competitor.

    As far as Amway switching to a tradional model, it would not effect the current pricing of products, due to the incomed not paid out in bonuses would go to cost of doing business. If anything the prices may be lowered due to increase in sales.

    Artistry as well as other type products and the high cost of them, just look at the target market.

  13. August 17, 2008 4:02 am

    On what basis do you think there would be increased sales? Nutrilite is already #1 in sales by a long way, and Artistry reportedly now #2 in it’s category.

    Clearly the strategy of using independent agents is working.

  14. Mike permalink
    August 17, 2008 2:49 pm

    On the basis that more will be aware of the product other than being introduced via independent agents.

    As far as Nutrilite being #1 one and Artistry being number #2..on what list do they reside?

  15. rdknyvr permalink
    August 17, 2008 3:38 pm

    Mike, not meaning to demean you, but do you know anything about network marketing and the Alticor businesses? It has been so widely and publicly publicized… the independent Euromonitor survey of prestige cosmetics brands marketshare for Artistry. Check out http://www.amwaywiki.com for both of those brands. IBOFB is the admin for that site, but he references independent third party sources. To have a meaningful discussion on some of these topics, it helps if everyone at the table has at least a basic understanding of general business and principles of micro/macro economics, and is familiar with the third party documentation. Alticor markets a prestige brand — Laura Mercier — through bricks and mortar outlets, and they also market a prestige brand — Artistry — through independent network marketing distributors. Artistry is in the top 5 world-wide — in that category. So they’re having their cake and eating it too, to borrow from Marie Antoinette, and that bothers me not in the least. 🙂

  16. Mike permalink
    August 17, 2008 6:53 pm

    RD, that is a long way to go to try answer a simple question. The question was to determine who is saying that Nutrilite and Artisty’s ranking was on whose list.

    From the site you listed..”Artistry as a prestige brand and ranks it as one of the top five in sales in this category, alongside Clinique, Estee Lauder, Lancome, and Chanel.[1][2] Artistry is the only direct sales brand classifed in the “prestige” category.[3]

    What does “one of the top five” mean when only four other brands are presented, then it states that Artistry is the only direct sales brand..therefore it is #1 by default.

    So let me ask this question, and of those listed above, where does Artisty rank in sales..1st,2nd,3rd,4th or 5th???

    So we will all understand what is being discussed at the table, By putting Amway products into the open market, will it effect the sales of the products…I say that sales will increase and as well as the price will decrease…due to volume.

    I am not here to debate the quality of the product. I am talking about the possible direction of Amway taking the product directly to the open market.

  17. August 18, 2008 2:39 am

    Mike, the full report is available from Euromonitor if you want to pay them the $500 for it. There’s a lot more than 5 in the “prestige” category.

    I’ve heard from a number of sources recently that Artistry is now #2 on that list, and is #1 in Germany, Japan and, I saw recently in a news report, Malaysia.

    I doubt Nutrilite would increase sales or be more profitable through traditional outlets, as it requires a certain level of customer education. Indeed I suspect sales would decrease if it went that direction.

    Artistry requires less education per se, but I imagine a personal touch works well in the beauty industry, and quite obviously the strategy works at least as well and in most cases better than the retail store strategy used by the competition.

  18. Joecool permalink
    August 18, 2008 10:24 am

    IBOfightback said: In my mind the North American market has failed to grow for two reasons –

    (1) Reputation, and in particular the internet and it’s amplification of the problem

    (2) A disconnect between target markets. The products in general are not “over-priced”. They are however high-end and expensive. A major problem is that folk were and are promoting the business to young, internet savvy folk. They’re great for the business model, but not the target market for most of the products.
    ————————————————————-

    Joe says: There are numerous reasons why the north american
    market has failed to grow. Certainly, the reputation and the internet is a factor. Secondly, not much has been done to address the issues that cause the reputation problem. (i.e. Quixtar is not Amway, perfect water helps men to fly, etc). The rise of super retailers. Costco and Walmarts have spread all over the place and quixtar prices are not competitive with the retail giants. You can argue quality, but the vast majority of customers look at the bottom line – the prices.

    The structure of the quixtar bonuses should be overhauled
    so the lower end IBOs get more of the bonus rather than 25% to the platinum who passes on 3% to the IBO who actually sold the product.

    (Aside from the tools scam) These suggestions may actually help the majority of new IBOs and actually render some of them profitable, which will help retention and repair of the reputation.

  19. Joecool permalink
    August 19, 2008 3:53 pm

    Off topic, but big news. Triple WWDB Diamond’s home in foreclosure:

    http://www.amquix.info/amway_real_estate_crisis.html

Trackbacks

  1. Knowing When To Quit « Amthrax
  2. TEAM EORO Approach… Same Old Approach « Amthrax

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