Occasionally you’ll see an anti-MLMer complaining that MLM products are overpriced for what they are. They’ll say you can buy similar or identical products off a store shelf for less. They’re not entirely wrong—it’s common for MLM products to cost more than their counterparts in discount stores.
You can get an essential oil for $12 an ounce at Walmart, while a Young Living essential oil might run you $100 per ounce. Younique’s fiber mascara costs about $29 while Covergirl’s fiber mascara costs about $6. You can get decorative nail wraps for 20 cents per nail at Walmart while Jamberry wraps cost about 80 cents per nail. And you can buy protein powder online for about 90 cents per ounce while Herbalife protein powder runs you around $2.25 per ounce.
That last example—Herbalife—is the reason I’m writing this article. Bill Ackman, in his now forfeited crusade against Herbalife brought up this issue. Specifically, Ackman asked whether Herbalife’s product is a commodity and whether it’s ethical for them to charge more than their competitors. Clearly, Herbalife costumers answered no, it’s not a commodity, and yes, selling it is ethical. But these are still important questions to consider because so many industry naysayers bring them up.
All MLM companies must address this question. But the market demonstrates clearly, in MLM and ordinary retail, that consumers will pay more for a high-end product if the quality difference matters to them. If a product is similar or identical to all other products of the same type on the market, then one would expect the product to have a similar price. But often, products with identical marketing are entirely different in their formula and quality. To understand this issue, one must look closely at how much quality control and other research goes into a product. The real question is what benefits a buyer will receive when purchasing a product.
Commodities vs. unique products
A commodity, by definition, is a product that is the same no matter who is selling it. Gold, wheat, and corn are typical commodity goods. There’s little difference in quality or price between sellers of these goods. In many cases, the price for a commodity reflects both government regulation and the similarity of the product. However, many other factors influence a commodity price as well.
While commodity prices are generally set across the board, the quality of one product compared to others can influence where that commodity is sold and how it is priced. In addition, supply and demand influence the price and placement. The target market is a big factor as well. Beef wouldn’t sell in a country that is too poor to buy it, but in countries that have a high standard of living, the demand will be higher and therefore the price can be raised.
Now how does a unique product get to the market, and how is its pricing set? New products compete for a buyer’s attention. To sell a truly unique product you must explain its value to the public, either through advertising or a salesperson. The person-to-person aspect of MLM makes it possible for consumers to learn about new products and sample them. Many innovative products first came to the market through the multilevel channel.
Nicole Biggart explains the history of direct selling and the critical value of the door-to-door salesman in her book, Charismatic Capitalism: MLM provides a way to enter the market with a unique product without the astronomical costs associated with national advertising campaigns, and it provides the needed education on product use and quality.
MLM and innovative products
The thing about innovative products is that if a solid customer base emerges—people who love the product, repurchase it, and recommend it to others—other companies will develop competing products. Today’s innovation can become tomorrow’s mainstay if the product makes a meaningful difference in the consumer’s life. There are many examples of this process throughout MLM history.
Forever Living’s aloe
In 1978, Forever Living introduced a stabilized aloe product to the public to be used as a natural healing aid. Aloe was not new as a skin healing product but it hadn’t been stabilized for consumer sales—the stabilization of the product was the innovation.
Stabilized aloe could be added to other products and sold in pure form. At the time, the product was revolutionary—but as it gained market acceptance, competitors emerged and commoditized the product. Today, you can find a variety of aloe products on the shelves of any big box store. But Forever Living is still at it. How can they keep selling a product that people can buy anywhere? By focusing on product quality. Forever Living grows their own aloe; they harvest it by hand; and they process it fresh in their own facilities.
Nature’s Sunshine’s herb-based health care
In the 1970’s, Nature’s Sunshine introduced herb-based health products. As the popularity of herbal products grew, so did the outlets for purchasing them. Many companies in both the multilevel and retail markets used Nature’s Sunshine’s product line as a model for their own lines of herbs and herbal combinations and essential oils. Like Forever Living, Nature’s Sunshine continues to provide rigorous quality testing for their products—which they use as differentiation from their more mass-market competitors.
Shaklee’s green initiative
At the time of their founding, Shaklee’s mission was “Living in Harmony with Nature” and their concern for the environment has continued to this day. Starting in 1956, they were about 30 years ahead of the current “green” trend in corporate America. Many companies today build branding around the idea of being green, but Shaklee continues to push ahead of the curve. For example, in the year 2000, Shaklee became the first climate neutral certified company.
Each of these companies created product needs and preferences for buyers. Each idea was 20 to 40 years ahead of retail sales. And as these ideas gained market acceptance, they started trends. In some of these examples, one could argue that, through this process, the product became a commodity; you can buy aloe and essential oils almost anywhere. This seems to be the trend with innovative products. But each of these companies is still doing business. Their competitors didn’t drive them out of the market; enough of their customer bases stayed loyal for them to keep going. Was it unethical for them to continue supplying products after other companies started providing cheaper alternatives? If so, it seems to me that other industries are not held to this standard.
MLMs’ role in niches
The question here seems to be: Can you continue to charge “MLM prices” for a product that has been commoditized or has reached the mass markets? Can companies continue to charge the same price throughout a product’s history? Many companies (in both the MLM and retail channels) charge a higher price because of either real or perceived quality. Think Apple, Ghirardelli, Coca Cola. And we all factor perceived quality into how much we’re willing to pay for anything.
Many MLM companies continue to provide the highest quality product in their niche. While companies in ordinary retail might let their quality slide once their brand has reached a certain level of recognition, MLMs answer to their distributor bases who cannot sell a product with inconsistent quality. Many multilevel companies pride themselves on both the quality of their product and the testing they do on their product.
The area of effectiveness and quality should be important to the distributor, not just the company and the consumer. All distributors should inform themselves about their product. Distributors should also provide customers with both support and information to help them use the product. That extra service and support is a large part of why customers are willing to pay more (see Biggart’s book, Charismatic Capitalism for a history of direct selling).
Importance of quality
From my point of view, product quality matters. I pay more for many products because of the quality, and I am particularly fussy about my vitamins and supplements. Each customer has their own opinion about what products are worth spending more to purchase. A naysayer might state that an expensive product is no different from a cheap product in the same class, but that doesn’t make it true and it won’t stop dedicated customers from buying the product they want.
Besides, you can find countless examples of high-end retail products that charge just as much of a premium as MLMs. Remember the Younique fiber mascara example from before—$29 compared with CoverGirl’s $6 competitor. High-end retail makeup brand, Too Faced sells a fiber mascara product for $35! The adage “the proof is in the pudding” seems applicable here. People will use what works for them, and they always have.