The Strength of Our Business Model

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

December 2004

As I review the many statistics that come across my desk each month, I am continually impressed by the diligence and hard work of those building a Melaleuca business. I am also impressed by how many lives are being enhanced by the concept of "helping people reach their goals." But I am impressed, most of all, by the increasing popularity of Melaleuca products and the rapid growth of our customer base. To put some of these statistics in a format that is more easily understood, we are revamping our annual income statistics sheet. The new format will come as a supplement to this month's Leadership in Action. The numbers are the same as those found on page 33 of the Leadership in Action, but the format and information explaining the numbers make these facts not only easier to understand, but also much easier to explain.

The message behind these numbers is quite compelling. (That's an understatement!) They testify of the strength of our product line and the power behind the concept of “exceptional products at reasonable prices.” A prospective customer who studies these numbers will soon realize that there is tremendous merit in Melaleuca's line of superior, more effective, and safer products. The fact that there are over 450,000 Melaleuca households that purchase Melaleuca products every single month for no reason other than the fact that they want the best, most effective, natural products in the marketplace sends a resounding message.

The fact that one in twelve of these loyal customers will eventually decide to build a Melaleuca business is also compelling. Sixty-percent of Melaleuca customers receive no financial incentive at all! And another 32% receive a tiny commission each month because at some point in their life they referred a few customers to Melaleuca. It is obvious that their primary objective with Melaleuca is to receive the product—not to work the business or receive any financial reward. This is not to say that these customers do not appreciate their monthly checks (it is much better than what they receive from Safeway or Wal-Mart), but the tiny check that they receive is clearly not their main incentive to purchase Melaleuca products each month.

The strength of Melaleuca's business model is that it is based on hundreds of thousands of customers purchasing better products each month at better value than the grocery store brands. The fact that 93% of Melaleuca customers are customers for the sake of being customers also testifies to the strength of Melaleuca's business model and assures those who decide to build a Melaleuca business a bright and exciting future.

Approximately 8% of those who have been introduced to Melaleuca products and have become Melaleuca customers eventually decide to build a Melaleuca business and invest the time and effort to reach Director status. That means they have spent at least 50 hours (estimated average) at some point in their life in introducing Melaleuca products and catalogs to prospective customers. (Although some achieve Director in a single day, we estimate that it takes the average person about 50 hours of concentrated effort, on average, to become Director.) One might spend those 50 hours in a single week or over a period of a year or longer. A serious business builder must use time wisely. Certainly one could spend a lot longer than 50 hours on unproductive activities and still not recruit 8 customers.

One could argue that a 50 hour investment does not a business make. But achieving Director status with 8 customers is a good start. Customers are precious to us. We should take good care of them. If we do, not only will they remain loyal customers but many will refer other customers as well. On average, 4 out of 10 customers will eventually refer from 1 to 7 new customers each to your business. On average only one out of 12 will enroll 8 or more customers and reach Director status.

The danger in talking numbers or percentages is that someone might make the mistake of thinking that building a Melaleuca business is somehow a game of chance or of beating the odds. This could not be further from the truth. The value of understanding the numbers is only to create valid expectations of others. The statistics indicate what you can expect others to decide to do.

But these numbers and statistics do not control you! You can decide for yourself whether you are going to invest the effort necessary to build a successful business. We can promise that 100% of those who decide to become Directors and follow through on their decision can and will achieve their goal. We can tell you that approximately one out of 12 customers will decide to become serious at building a business and become Director. We cannot, of course, predict who will and who will not. But you can decide whether you will.

Once you become a Director, the next goal is to continue to introduce customers to your product line and make sure that those customers are well informed as to the benefits of Melaleuca products over our competitors.

As a rule, sixty percent of your customers will not refer any new customers to your business. But that will not diminish their value. As they continue to buy your products each month directly from the company, your commission on their purchases will provide valuable income that you can count on each month. On the other hand, approximately 40% of your customers will eventually refer other customers to your Melaleuca business. Many will make a small commission on the customers they introduce to Melaleuca. Sure, they are just "dabbling" and many may not develop the skills to make a good product demonstration. You will want to help them. In fact, in the beginning you should request help from your enroller in making product presentations or business presentations. You will learn from your enroller, as you perfect your presentation skills. Then you will be prepared to help others.

A few will take their business very seriously and make a substantial investment of time and energy. They will be rewarded handsomely for their efforts. It is with them that you will want to invest the majority of your time.

And as the numbers show, we value and give generous rewards to those who help us find and keep loyal customers. Superior products. Reasonable pricing. Generous compensation. They all work together to create the most successful business model in the market place. Whether you decide to be a loyal customer, or a business builder, we appreciate your decision to be a part of Melaleuca!

Sincerely,
Frank

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