Amway Up

Quixtar lawsuit! Long overdue? It’s called BSM or “business support materials”… you know, the books, tapes, and conference tickets that no one technically needs. Think of it as a kind of “parallel business” to the Amway structure. Finally, “class” met “action” and the lawyers talked.

In normal commerce, companies like Coke and Pepsi can’t share the same directors. That creates a conflict of interest because they essentially compete with similar products. If one person was a high executive in both companies, that person might be called an “interlocking directorate”.

But, in MLM, the game is different—it’s not if a leader is in similar companies, but non-similar/overlapping companies. Most MLM’s forbid their business members (or distributors or IBO’s) from being involved in another MLM. But BSM is like a kind of second MLM, creating a potential “conflict of interest”… at least that’s the way I see it.

BSM… the tools, the tapes, the books… They are great, actually. And some of them are worth the money you spend. I have no regrets, which is why I’m not filing any claims in the current class action Pokorny case against Quixtar. The mentality of wealthy people on hours of CDs taught me what my own father couldn’t: So much is possible if you can free your thinking and look at the big picture. It’s not the value of BSM that’s the problem; it’s the money structure.

The commitment of an MLM leader is to “train” new business partners in the downline. How does the leader get paid time? The MLM business will succeed if the training is valuable. One fast-growing Amway leader did this for a while, providing many tools free of charge to his business, and his MLM network erupted in success. But, BSM is different—because the leaders sell the books and conference tickets, they make money from BSM, whether the MLM succeeds or not.

So, what is there to make sure that the “training” and “tools” and other “business support materials” actually work? That’s a good question. Taiwan has a solution: Nothing. BSM is illegal in Taiwan, as it should be.

In America, BSM is “voluntary”… but BSM sellers in the upper MLM levels may tend to say, “Well, if you don’t want to listen to me [when I tell you to buy my books and conference tickets] then I’ll just spend my time with someone else.” So, the “voluntary” rule needs to be enforced.

Point seven of Pokorny’s current settlement, according to MLM Attorney, has been summarized as Amway promising to:

Maintain and enforce quality control over BSMs. The standards must prevent BSMs from making misrepresentations about the Amway business;

..but that was already supposed to be happening in the first place! So, according to this report, in the class action settlement, Amway would be promising to do what it’s already promised to do—!? ” I promise, I’ll keep my promises this time.” Sound like election season?

It should be no surprise that Amway can’t figure out how to develop and enforce good policy. Dick DeVos of the Amway family couldn’t even get elected governor in Michigan when running against the failing Democrat incumbent, Granholm. Maybe his reputation proceeded him.

But, why is BSM profit so important to MLM leaders anyway? If MLM was working, the second source of income from the same network wouldn’t even be necessary. See, new MLM distributors face a financial choice: either buy product samples for customers or buy teaching materials to find more business partners. If the MLM business was a viable retail business, product samples would be the only “business purchase” distributors would need to make. Try one and you want to buy it! It works with Apple. Try Microsoft Windows and you don’t want anything to do it. BSM, effectively, is only necessary to perfume the pig. Quixtar doesn’t need to “enforce” rules that limit BSM… they need to give the pig a bath.

What would clean-up MLM? One simple, basic rule from the FTC.

Years ago, the Federal Trade Commission decided to investigate Amway. A LOT of people ran away from the MLM, just like sponsors ran from Rush for no reason. After the investigation, the FTC agreed that MLM was a good business model… but it needed a simple rule to keep it from being somewhat of a “cloaked pyramid”: You must have customers… retail customers.

What keeps an MLM different from a pyramid scheme is the fact that MLM’s don’t allow people to use expensive products as an excuse to run some what of a “monetary chain letter”. MLM is okay because they have genuine customers. But, customers, it seems, is exactly what Amway’s pricing scares off. This is likely why a price reduction is another item mentioned in the Pokorny settlement—and why the settlement is a step in the right direction, but is doomed to fail with its plan to spray Boss™ on a smelly swine.

A hot topic for me was their nutrition supplements. Normally, when calling Amway’s product information hotline, the support staff have an answer to every question. But one time, things were different. The elderly mother of a close friend wanted their vitamins, but she couldn’t afford them. It’s funny, though, at that time, though the wholesale cost of the monthly supplements was “only” $50, but their profit margin was so high that Amway treated my commission like it was a $70 sale! I didn’t want that. I just wanted to help a friend. “So, you’re telling me that this old lady can’t buy what you claim are the best vitamins in the world so that I can have a 7:5 BV:cost ratio?” For the first time Amway’s product information representative was speechless. Maybe I was talking to the wrong department.

Why are Amway’s prices so high? It’s probably more from the fact that the DeVos and VanAndel families are so filthy rich. I’d be curious to know whether they empathize with George H. W. Bush’s ignorance of the price of milk. See… if Amway’s prices ever became normal, BSM would go out of business because everyone would want to buy Amway’s stuff—and “training tools” wouldn’t be necessary. But don’t expect the family business to make that connection. Amway didn’t create BSM, after all… they just looked the other way while it was going on… making rules which, so it seems, they must now “promise” to enforce. In other words, if Amway agrees to the Pokorny provision of enforcing BSM rules that they already had, Amway could be indirectly admitting that it was designed to be a “puppet” rule from the beginning.

And what do we hear from DeVos and VanAndel in their older training talks? Maybe something like, “Do good, and good will happen to you.” That’s every bit as lovely as motherhood and apple pie—morals without shrewdness.  Fifty years ago we called it “Horatio Algerism”. See, that’s why the Amway families let BSM get out of hand. They don’t actually understand that there are bad, greedy people in the world who don’t want to follow the rules—and they have dark reasons why. And that’s why Dick came off as a jellyfish when he tried to knock out Jennifer Granholm in the debates. My father used to describe such people as, “Out of touch with reality.”

What is reality for a business? …Customers. That’s reality.

If you ever have the chance to visit the Amway worldwide head quarters in Ada, Michigan—and see their museum—be sure to stop and smell the flowers outside. At the bottom of the flag poles are ten plaques that were purchased by Amway from a world fair building in New York. They are called the “Ten Pillars of Economics”. One of them—I won’t spoil it by saying which—says that customers are the basis for all business… and that if there are no customers, then there can be no payroll.

Inside their lobby is some abstract wire frame art, expressing ideas to the same effect. Jay and Rich are depicted at the bottom, above them are the Amway factory workers, then the distributors and IBOs, and at the very top are… customers.

But, if you look at most literature, including the FTC regulations, where are customers mentioned? I think customers get a cameo… kind of like how abstinence got a two minute cameo in my high school sex ed class when Planned Parenthood gave an hour talk about their contraceptive products. An IBO shows you “the plan”, says, “Yeah, there are some customers…” and then draws a “non-pyramid triangle” showing that most of your revenue is based-on “buying from your own business”.

The FTC requires some “retail customers”, just to make sure it’s not a pyramid-whole-sale buying club. If you don’t have customers… none of that big, fat downline underneath you profits you one red cent! Seems like a good rule, doesn’t it? How many customers does the FTC require? Oh, about $200 in sales. Whooopie! If you can prove profitable with only $200 in sales in one month, I’ve got some old Hurricane-proof swamp land in New Orleans I’d like to sell you.

Thank you, FTC, but, just like any other beltway bureaucracy that’s as out of touch with us common Muggles, you guys at the Trade Commission didn’t quite get it. You see, that “retail customer” rule is more of a hoop to jump through so the pyramid lovers with “Egyptian nostalgia” can get back to selling their BS Materials.

What can be done about all this? Taxes. There are, after all, only three things you must do in life—other than see the Amway “business opportunity” at least twice—birth, death, and… taxes.

I remember explaining to some friends in Asia that, in America, people actually trust you more if you pay your taxes. It seemed a “foreign” concept to those with a background in China… but, they’re starting to get it. That was the same warning from ENRON: They never paid any taxes. As much as We the People love to trash talk the IRS, one thing is for sure—they make it easy to verify whether something exists: It pays taxes.

The idea behind MLM is that you can help provide excellent service to your friends. The big MLM company supports you and makes your business easier. That’s great! If the ridiculously high price margins came down to normal altitude, customers would flock to MLM distributors. Why? Because the only thing at Wal-Mart that falls faster than their prices is their quality—and their gas prices only seem to go up!

If you’ve had the privilege of seeing the Quixtar plan, you’d know that a “silver/platinum” level, formerly “direct” under Amway, took about seventy-five people. What if MLM companies made their prices competitive? What if distributors could sell ten times as much with only a tenth of the hassle? What if a silver/platinum plan only took seven MLM distributors instead of seventy-five?

I’m still waiting for the RINO Conservatives, DeVos and VanAndel, to figure out that we don’t need more “regulation”—we need motivation through opportunity. Get the focus on customers… everything from the products to the pricing. Free the distributors to sell to customers. Customers are the principal source of business after all. Right? Maybe, if Amway were focused on customers, BSM wouldn’t be so necessary to perfume the pigs who don’t admit they stink.

Those books and tapes did me wonders, though. They helped get my thinking straightened-out. Of course, I knew from the beginning that they weren’t connected to the MLM at all. I just wanted to learn. Soon, when my business takes off in Asia, I’ll give much of the credit to that BSM and long talks with my amazing upline.

And… Amway really does have great products. I use no other soap here in Asia. When I arrived three years ago, I called Amway’s office in Ada and said, “Send me an IBO.” Two weeks later I had my soap. I just wish they’d talk about their products more and less about a business opportunity to help other people find a business opportunity to help other people find a business opportunity…

Pokorny shouldn’t be asking Amway to enforce the rules that were already promised to be enforced. We only need a simple policy change at the FTC: In any MLM, you only make “downline income” if you net a profit on your taxes BEFORE that downline income. Anything else is a scam… and it’s only a matter of time until it unravels from the bottom up.

2 comments / Add your comment below

  1. Jesse,

    the old Amway cd’s were very helpful in my sales career. I actually give the majority of credit of what I’ve done today professionally to the Amway business cd’s and training and not school. You’re very right on the over-priced products to the limited ROI you will receive as a business owner. If I remember you could always change the price of products for your “customers” in the IBO database. Example – Multivitams are 20 retail the IBO price is $14, you can make it at any price between the two.

    The VanAndel and DeVos quote of customers are the key is absolutely right. But they are considering their customers the IBO (B2B) instead of end users (B2C). I never had any issues with the Amway business itself. I don’t think most people do besides the prices being a little high.

    The only issue I ever had was the price and expenditures outwaying your income in the business. Going to conferences, seminars, weekly meetings away, etc. If you didn’t show up continually you were looked at differently. If you didn’t buy the books or cd’s you weren’t 100% committed. If after doing the “business” for 1-3 years or so you’re not turning a profit you need to re-evaluate things. A lot of details can be in it (heart, type of prospects, effort) but if the training and tools were not meant as a “must buy every week” type of mentality then it would be a solid business venture. People leave the business because of the experience of your upline/downline and CD’s. Not usually because of Amway itself.

    I still recommend it to anyone looking for a sales job or starting a business to learn the ropes in sales without the major overhead of running a business. You’re learning the most important thing: people. And if you’re successful, more power to you. And the people you were with were very welcoming in teaching.

    All in all, a good blog post. Is Amway perfect? Absolutely not. Is it the company’s fault? Mostly not. MLM would be very good if you could have independent third party opportunities for learning material or not being pushed your upline’s material, but it’s the nature of the beast. That’s why I recommend sharing books and cd’s with other people if someone is looking into doing the amway thing.

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