A Look Into The Future

President's Message By
Frank L. VanderSloot
President/CEO

February 2005

At Melaleuca, we watch the markets very closely and from time to time we make forecasts as to where things are going to go from here. To date, all of our forecasts have come to pass. About 18 months before the Nasdaq stock market crash, we predicted that the dot-com market was going to fizzle. At that time, no one else was suggesting it. In fact, the advice from the experts and financial analysts was that the dot-com and Internet companies were the darlings of the future. The talk of the day was about “clicks,” not “bricks.” Companies were investing millions of dollars in Internet infrastructure. The direct sales companies were rushing to get in before it was too late. We learned of new ventures like Big Planet and Quickstar.

Melaleuca was criticized for not “seeing the light.” But the frantic direction of the financial “experts” and huge investment of the masses did not make sense to us. To the contrary, it became apparent to us that the entire dot-com craze had been created with smoke and mirrors. We forecasted the crash 18 months before it happened—long before anyone else was suggesting something was wrong. And sure enough it came. Investors lost billions and almost overnight the Nasdaq lost 80 percent of its value.

You may remember a little over two years ago, at our National Convention, during my closing comments I talked about the pitfalls of personal debt. I warned that especially those with variable rate loans who had maxed out their budgets were in jeopardy of financial disaster. You will recall that I explained that as soon as interest rates start rising, many people with variable rate loans would begin to default on their loans causing a ripple of financial trauma through banks and other lending institutions. Just last month (two years later) Alan Greenspan issued the same warning. I’m not suggesting we were aware of this danger two years before Alan Greenspan was aware of it. I’m just suggesting we warned the people two years before he did. I suspect that two years ago he thought rising interest rates were a ways off and he didn’t want to scare anyone. Now he sees rising interest rates right around the corner and he felt it is time to issue a warning.

So, although I am not suggesting we are brighter than Greenspan and his numerous economists, I am suggesting that, to date, our predictions have been accurate, and that we were the first to go public with these predictions—a year before most of the “experts” or the market place seemed to have had any idea of what was on the horizon.

The accuracy of our economic forecasts is not because we have a crystal ball or because we are gifted with some power of seeing into the future. It’s just because we are pretty good with analyzing the facts that are available to us. And pretty good at reading the market place. It’s all a matter of common sense, of not following the masses, but stepping back and paying attention to what is really going on.

Observing what is taking place in the real world and in the market place leads us to make yet another prediction. Here it is: You are aware of our objective of someday having Melaleuca products into every home in North America. I am sure that that goal seems far-fetched to some of you. I can certainly understand that—given that we are only into only about one in every 230 households today. But I would like to point out a couple of remarkable trends that are occurring in the marketplace.

Do you know how Procter & Gamble and Unilever and Colgate have gotten their products into almost every home in the country? Advertising, of course. Huge budgets in advertising—especially national television. Procter & Gamble created Tide through a concept called Soap Operas. They produced their own television shows that were watched by millions of housewives. And every commercial advertised their cleaning products. That’s why they called them soap operas. Other national brands have used television to establish their brand names in every single household in North America. National television commercials have long been the medium to establish and maintain national brand names. But what’s happening now?

There are remote controls with mute buttons in almost every home. And the result is vastly changing the opportunity for the mass marketers to get out any message whatsoever. Because as soon as a commercial comes on, someone hits the mute button until the commercial is over. National brands are still spending millions of dollars on advertising, but America is not watching!

There is now new technology called TiVo, or that is one of the brand names that uses the technology. TiVo technology will automatically record your favorite shows and then allow you to play back the show, essentially skipping all the commercials. In about five years every household in North America will have this technology and there will be no one watching commercials. Since the public is beginning to tune out commercials, many national brands are looking for other ways to get their message out. They know that national TV ads are no longer effective, but they cannot figure out what to do about it. They are beginning to look to (would you believe it) “word of mouth.” But they are fumbling the concept. They are stooping to such novel ideas as sending out free products to folks that promise to tell others about the product. They are recruiting fan clubs and paying people nominal sums to say positive things about their products. Can you imagine a Procter & Gamble fan club?!?

The problem is that they now are learning that word of mouth is the most effective way to get a message to customers, but they are not willing to really share the wealth with the folks who they are counting on to tell people about their products. Neither are they able to develop a method of measuring who is doing what so they reward people appropriately.

But then again they have a much bigger problem. They do not have a real message to share.

Take a look at Wal-Mart for example:
Wal-Mart is a tremendous success story—a company that has prospered, not because of its own advertising but because of the advertising of products sold at Wal-Mart, like Procter & Gamble’s and Unilever’s products.

But the message at Wal-Mart is not quality. It is price. And therefore it never can be quality. Wal-Mart has severely pressured its vendors to lower and lower prices, making it necessary for them to forget quality and focus solely on price. Saying, “Our products are cheaper,” is a quick and easy fix, as long as no one asks, “What’s in it?” “Is it safe,” or “Is there something better?” But those questions are not bothering Wal-Mart or its vendors right now because they are much more concerned about having lost the medium to tell anyone about their products. TV ads are losing their impact! No one is listening! So even if Wal-Mart and Procter & Gamble had a better product, with no one watching commercials, how would they get their message out? So their logic is, since there is no way to tell someone you have better products, why try to produce a better product? Their solution is to just focus on price. Not quality. And that’s what makes them vulnerable!

Marketers all over the world know the power of word of mouth, but none have figured out how to harness it or reward it. That’s where we come in! While others are fumbling the ball, because they are unwilling to share the wealth, we are perfecting the concept of communicating a superior product to a marketplace that is becoming hungrier and hungrier for quality.

So here is my prediction: Based on what we are now seeing in the marketplace, I predict that the major brands will continue to lose their foothold in the marketplace. I predict that, at the expense of the major brands, Wal-Mart will continue, at first, to gain market share. And at the expense of its own vendors, Wal-Mart will continue to switch its customers from Procter & Gamble and other name brands to its own in-house label brands, thus continuing to weaken the major brands’ foothold on the market and further diminish the availability of quality in the marketplace. (You don’t have to have a crystal ball to predict what is coming!)

Clearly the company that sticks to a commitment of quality and perfects the methodology to harness the power of word of mouth to get out its message of quality will have the opportunity to not only challenge the national brands, but also to challenge Wal-Mart itself.

And I predict that Melaleuca will be that company.

Now I do not predict that this will happen overnight. It took over 100 years for Procter& Gamble to establish its foothold in the marketplace. And it took over 40 years for Wal-Mart to get its current foothold. But clearly Melaleuca is gaining popularity in the market place. People want quality at a reasonable price. They want better lives and better health. And they are learning they can find both with Melaleuca. And I predict that millions of them will.

Sometimes predictions are just a matter of common sense.

Sincerely,

Frank

Copyright ©2004 iGlide.net   All Rights Reserved