What do makeup, skin care, supplements, essential oils, health products, diet products, clothing, home goods, and natural products have in common (besides being bestsellers in the MLM world)? On this episode of the MLM.com Podcast, Steve Hooper and Nancy Tobler join Kenny to discuss what makes a great product for the direct selling channel. Why do innovative products and niche products do so well? Why are MLM customers so passionate about the products? Listen in to learn about how direct sellers can strategically use consumer feedback, education, and quality assurance to enhance the market power of their products.

Full transcript

Kenny Rawlins: Welcome to the MLM.com Podcast, brought to you by InfoTrax systems. I’m your host, Kenny Rawlins, and today’s episode is the first time we’re doing a three person podcast, and I’m joined today by Steve Hooper who’s the Vice President of Product Management at InfoTrax Systems and Nancy Tobler who’s the Editor in Chief at MLM.com.

So today we’re going to be talking a little bit about that the history of the direct selling space and specifically about how products play into that history. And I think, in the past few years, a lot of attention has been brought to business claims and people getting too focused on the opportunity, and one of the responses is “Hey, we’ve got really great products in this space and it’s a space that’s founded upon bringing great products to people.” And so today we wanted to kind of go back through some of the history of the direct selling space and talk about products and their role in the opportunity and in the marketplace, and kind of where we see the product going. Steve and Nancy have both been associated with the MLM space for a long time, so I think it’ll be a fascinating discussion. So, Steve prepared a little bit of history and I thought maybe we’d start there, Steve, with you walking us through how we got to where we are.

Steve Hooper: Thanks Kenny, I think this is the perfect topic to discuss because it’s difficult to ever overstate the importance of product and product strategy within a direct selling company. We go back and look at the success of companies, most importantly the long-term success, and we’ll see they’re built on great products and on the loyalty that product kind of brings to a customer base. So those things are important to talk about. And maybe we step back in time and have a little bit of a history lesson, because we need to appreciate where we came from and then look to the future as we continue to evolve in the point of technology and education and intellectual distribution.

So, step in any point, but a quick history lesson. We use this word, “direct seller,” but if we go back in time there were hawkers and peddlers and traders and itinerant merchants and caravans. These are all parts of an ancient tradition that originated in a basic need that people had, to exchange goods and to communicate. It evolved to doorbells and catalogs and purchase orders and all those things, but as you look at how direct sellers established ties—it was first with their neighbors and then they began to travel even with geographical barriers. But what we started to see at this early onset is that they needed accessible routes to facilitate trade, and there was a barter system.

We can go back to 2000 BC, one of the cultures where direct selling was heavily influenced was that of Babylon. And in Babylonian law there’s the code of the Hammurabi, and it protected the general welfare and the integrity of the Babylonian direct seller. Think of your policies and procedures today. Do you ever agree to this? It says the, “peddlers shall swear the oath of God if enemy cost him trouble in his travels.” And it also said that “the merchant who sells goods must be aptly compensated.” So, we’ve had this history of peddlers and traders and it goes and it evolves through history. Think of the other societies that grew, be it Athens or Egypt—the caravans that we had going on—we can think of the travelling merchant as cited even in mythology. Ulysses has listed this mythical hero—he posed once as a merchant or a direct seller. He went into the king’s palace and he had ornaments that he placed on his arm and the King’s daughters were so engrossed with these, with everything that was in his pack. Shakespeare wrote about a direct seller. He wrote The Winter’s Tale and it was inspired by a girl peddling flowers.

So, we have these models, or this historical reference, and then we kind of bring it forward into, if we use America as an example, into early America. And if you think of an immigrant population, they began filtering into the American territories in the 18th and 19th centuries, and many of them became direct sellers. They took treks on trails that were marked by nature or by our Native Americans—those who had possessed the land here—and those trails evolved into major roadways, eventually Turnpike’s, and you then saw this influence on trade. And that kind of brought us to where we start looking at some of the opportunities, be it land or water, that we see that this culture of direct selling is something that we really began to share as a people. And so now we look at, what then did it evolve into? And I think we could maybe point even to where direct selling started. Really, we think of it being pioneered in the US with the establishment of Avon, that was in 1886, and you think of the success of that motto, and what was that motto? It was getting a lower sales and distribution cost, and a greater interaction with the customer. And so, you had this in the initial Avon product portfolio that then swelled. I mean it was cosmetics and personal care, and then you saw their companies jumping into household goods and accessories and other products over time.

Kenny Rawlins: I think one of the points that you bring up is something that I’ve heard a number of guests that we’ve had on the podcast bring up: we talk about direct selling as a market and in a sense, it is, but in another sense, it’s not. You don’t have Avon and Tupperware competing against each other, they’re selling different products, this is a distribution channel. And I think we’ll get into that more, that it’s not a specific category of product. It’s a specific distribution model that enabled people, so we are tied together in that we’re fighting for similar legislation and protection and making sure that the model can survive, but not everybody in direct selling is a competitor with every other direct selling company.

Steve Hooper: Yeah that’s where that product falls into play, because in order for it to be successful it really has to be something that a customer will be loyal to or passionate about, that they’re willing not only to take and to use as part of their wellness regimen or personal care, but something that they’re also willing to talk to with their friends. And so, you’re right, we don’t really compete. It’s a question of what products do people become passionate about and willing to kind of share their voice.

Nancy Tobler: Yeah, I think it’s interesting that Avon—early on he was selling Bibles or books and he found that if he added perfume to them, women were more excited about the perfume than they were the book. So, it’s also a channel that is very sensitive to, just like you said, Steve, the connection to the consumer. The consumer is passionate about it or excited about the product, and that’s what creates the dedication to the brand.

Steve Hooper: So carry that into the next step, because we go from Avon—and think of everything that was going on in the world at that time—we’ve got World War One and what transpired there, and then you’re sitting here on the brink of World War Two and we’ve got women stepping into the workplace like never before, we have a need, even maybe more so, for convenience, for education, for distribution, and this is one where there were no barriers. No matter your age, no matter your race, no matter your gender, your level of education, you could step into a role of a direct seller, and it was one who was going to go out and peddle or hawk or share or tell a story. And as we looked at those direct selling models, and then you get into that era Nutrilite started. I think it was in the 1930s, and in about 1945 they introduced multi-level compensation. And so, this notion of a business, not just my business, but my ability to also receive compensation from helping others by training them in their business and supporting them, I was able to then grow a more dynamic business. And so, we had a soft transition or introduction from direct selling to direct selling and downline compensation for the first time. And look at the people that stepped into the industry then. What companies came out of that? Tupperware. Tupperware’s a household name. It’s not only a company, but Tupperware defines that brand, globally. We had Amway step into the marketplace and start really with the folks on those household goods, and then getting into personal wellness, you can look at Shaklee. We just start now looking at what companies and opportunities that people found without, again, respect to any barriers.

Nancy Tobler: I think it’s really interesting. I’m thinking of the Mary Kay story, she’s there in the 60s, just a little bit later than what you’re talking about, but the idea that there’s not a glass ceiling. And she had worked in corporate America and really felt that the glass ceiling was an impediment to her move forward and she said there’s no reason for that. And so, she started her own company, in a way to break that glass ceiling—way before we ever even had words for the glass ceiling! So, it’s interesting, I think, that the product has a message. I think Shaklee is another one where early on before an environmental movement really ever even had a toehold, you had Dr. Shaklee saying “We’ve got to stop poisoning the environment! We’ve got to use products that are non-toxic!” And I don’t even think he labeled them organic but they were, in a sense, organic products, as well. So, I think there’s just some really interesting things that came out because the environmental movement had started when Shaklee came along. You have Rachel Carson who wrote the Silent Spring in the 40s.

It’s interesting how direct selling picks up on a small chunk of the market that is thinking a different way, or using products in a different way, or wants the world to be a different way, and it takes hold. I think it’s a wonderful thing about the product history.

Kenny Rawlins: It’s not just a distribution channel of goods, which it certainly is, but it’s also a distribution channel for education, for information… and so you get these like-minded people who care about something, and now they have a community that they’re a part of, there’s a way of sharing information and a lot of times, that ends up translating into more mass adoption. So, you take what Tupperware’s done, and like you say, they’re now a worldwide name associated with a certain type of product.

Steve Hooper: It’s like Shaklee. Shaklee created, in essence, this brand for vitamins and nutritional supplements and those things. We can look at others.

Nancy Tobler: I still remember taking alfalfa tablets. [laughs]

Steve Hooper: Yeah! Or think of the Cambridge diet. Protein shakes really came into play. A.L. Williams created the whole brand of term life insurance. So, we look at these companies, like you say, the product is out in the marketplace, but people don’t know about it, they don’t know that it’s affordable, or how it can be introduced, and that’s where the direct seller takes on this role, and we come in, and as an industry we’ve established these very large product categories that did not exist before.

Nancy Tobler: Aloe Vera. There’s another one that came through direct selling.

Kenny Rawlins: It’s stuff that you, like you said—these are things that people don’t even necessarily know they need (and I use “need” and people would argue whether they do need it or not) but they don’t know that they exist, and even if you picked it up off of the shelf at a grocery store, you’d have no idea how to use it, or what the purpose is behind it, so then it also becomes a channel of education, not just to the distributors themselves but to their customers. And one that I think we’re seeing right now is I see essential oils all over the place now in mainstream market places, where 10-15 years ago you wouldn’t have seen that, people would have had no idea what to do with them, and Young Living and doTERRA have certainly pioneered the way for that to be the case.

Steve Hooper: On MLM.com, and Nancy can speak to this, but a recent article that was published was by Mark Rawlins, he’s the founder of InfoTrax, and he talked a bit about a company’s product strategy and the importance of it, because it has to be there. They have to be products that are of value, products that are good, products that are organic or that need information. And he introduced a formula, he called it the METS, and in order for a company to have a viable product strategy, that the product needed one of these components. And either it was motivation, education, training, or support. So, think for just a minute about some of the companies that we’ve talked about. What products would need motivation and some support? A weight-loss product. Let’s look at weight loss as a whole that for someone really to be successful, I think we’ve come to see that they need that community, and the direct seller is there to motivate the individual and to give them the support they need. Because a protein shake or some weight loss pills, on themselves, how many people are able to just carry through and see the success? That’s what this is ultimately about, that consumer’s ability to have success with the product.

Kenny Rawlins: And to that point, I’m a person who has struggled with weight and losing weight, and one of the things that you read over and over again in study after study, is that the support factor is key to any sort of long-term weight loss, and support and accountability. And there are companies in the direct selling space that have harnessed that because it really is an ideal platform for that. You have your distributor, who can also serve as a health coach, as a person that you’re accountable to, as a person who can provide motivation and support. So, I think you make an excellent point. You could go into Walmart or any of these big-box stores and buy weight loss powder, buy premade meals, but they’re not providing any sort of accountability or any sort of support, like you see in this space.

Steve Hooper: And to tie back to your question about essential oils, let’s look at Young Living and doTerra, what is it that they do? They’ve come in and they now are educating people. So, if we go back: motivation, education, training, support. They’re educating people on the value of these high-grade essential oils and what those benefits can be. Where else are you going to get that education? Where are you going to be trained? And they are able to then train and use the word of a health coach, or someone else, to go in and to provide that education to an individual.

Kenny Rawlins: I think that’s an excellent point, and one of the things that I’m fascinated with in today’s environment is that that training isn’t only about how to use the product. You use the word “high-grade” in talking about the essential oils, and one of the things with globalism is the fact that we can buy so many things, so inexpensively, so easily. You do start to wonder… I’ve started to wonder, more and more, when I go onto Amazon or something, “what am I getting?” I’m a relatively new parent, and I’ve surprised myself a little bit, and I’m worried about the toys that I’m buying and the things that I’m doing. Are they going to have toxins in them? Or are they going to be unsafe? And one of the educational aspects of this channel is safety; so, both how to use the products and also what distinguishes your product from another one. And you see this all the time in like a Walmart or Walgreens or any of these stores. You’ve got two products on the shelf right next to each other, one substantially cheaper, a lot of times, and how do you distinguish, “why would I pay more for this?” And that’s one of the things that you get in direct selling that you don’t get otherwise.

Nancy Tobler: One of the things I’ve been thinking about here is, is that one of the side effects? I don’t think, if we go back through time, it was a primary motivation for why people joined direct selling, but I think one of the side effects of all of this motivation, education, training, and support, is the personal development of the person who’s learning to do that. Just thinking of women, early on, when they didn’t have a ladder to move up, Mary Kay taught them how. She taught them how to run a business, and part of that was teaching them this motivation, education, training, and support. But by teaching them that, they in turn developed those characteristics of someone who could run their own business.

Kenny Rawlins: It’s interesting you bring that up because this is one of the things, Steve, in preparing for this podcast that you talked about, in kind of the history, and you mentioned it as you were going through it just now is that there was an opportunity there for people who otherwise didn’t have the same opportunities whether because of their ethnicity, their gender, their education level, anybody could come in and try to make a difference. And I just was reading an article this morning about women in the workplace—and I won’t get into politics, but it’s related to the current Supreme Court nominee—and they were just talking about that decisions can sometimes be made in a more casual environment. And the commentary on it was that’s one of the things that women often miss out on. That there can be a casual environment—whether it’s at basketball games or sporting events or just whatever it may be, that they don’t get the same mentoring a lot of times. And I hope and I think we’ve come a long way in that, but like you say, Mary Kay, early on, provided this network for personal development and career development that was lacking.

Steve Hooper: I think we have come a long way, because this industry has provided a source of personal development for women.

Nancy Tobler: I think we’re still 75 percent women.

Steve Hooper: It’s 75 percent women, which tells you—what are they looking for that they are not finding out in a traditional workplace or an opportunity to have a home-based business? Or the products that they want to talk about and share, they become passionate. And then that could be again a wellness product, it could be a personal care, it could be clothing. I mean we look at these success stories of companies today and this industry—again, 75 percent women? Tells you right there that there is a fulfillment in terms of personal development, which I think you started to touch on. There is no ceiling. I don’t have to worry about this casual environment. That I can create a home-based business opportunity, and work when I want and how I want, and talk about the things that I want to talk about and share. And I can choose to make it a part time, to pay for my kid’s braces, to take my family on vacation, to do things that I want to do. Or it could be, “I want to be a business leader and I’m going to grow a business.” Mary Kay is just an amazing story and an amazing woman there.

Kenny Rawlins: I know we’re kind of wandering in and out of product and other observations on the industry but it does become a very strong meritocracy, because what is rewarded is defined in the compensation plan, and the numbers, in a sense, drive what happens there and that’s not saying that all people are in this just for the compensation element of it, because I know a lot of people—my mother included and my wife included—who have never made a dime doing direct sales, but are a part of a bunch of different direct sales organizations, because of the community and because of the product.

Steve Hooper: I think maybe we’ve stepped this into another discussion, maybe even from a business perspective, because go back and look at how were products initially sold, with the onset of—take these direct sellers who eventually set down roots and established a general store and then the need to get a factory set up and the need to get mass distribution and we had department stores that came into play. And what happened in those department stores? In the department stores there was training. You had a store clerk that was trained. Be it in a cosmetic section, in a home appliance section, they were trained on the product: how to use the products, what the benefits were between several different brands. And then we get into this mass production. But then all of a sudden what happens? We get into this—companies coming in going, “Well, we’re going to drive costs down, we want to be the sales leader.”

Look at the success of a Walmart. Now do I go to Walmart to get educated on a product? We’ve got these big-box retailers—it’s about physical distribution of product. We’re going to get product to you, we’re going to put it in your hands at the lowest possible price that we can for you. So, that’s kind of shifted somewhat the burden of education or product knowledge to the consumer, because, when, just as you said, when you go to a store today you’re looking at brand one or two. If you were to ask a store clerk, could they tell you the difference between those two?

Nancy Tobler: Yeah, probably not.

Steve Hooper: No. Would you expect them to tell you the difference between those two?

Kenny Rawlins: Yeah. I wouldn’t even ask.

Steve Hooper: You wouldn’t even ask. And so, what are they there for? They’re there for physical distribution. It’s to push product, to turn it as quickly as you can. So, counter-balance that with what does a direct seller do? A direct seller provides—and, again, Mark speaks to this, Paul Zane Pilzer was an advocate of this, he talks about intellectual distribution. The direct seller is there to tell you what the benefits of this product are, why you need it, to introduce you because you don’t even know it exists, and to show you that it is an affordable product that can help meet a need that you have as an individual. So, we’ve shifted, and again, I think of my store experiences. When I go on Amazon, I’m going out and I’m looking at reviews and I’m looking at information from other people. But then we get into why is it that I would buy from a direct seller versus an online retailer—that trade route that the internet is created that the caravans used to go across—that’s there, it’s readily available. But, Nancy, why do you buy from someone that you know, what is it?

Nancy Tobler: Well, I think the trust factor. It goes back to what Kenny was saying. I’m not sure when I buy a product on Amazon that it’s not covered in lead, it came out of a system that doesn’t test, where we are so conscious in the United States. I think another reason I buy is that—and Faith Popcorn talked about this—I think another reason we buy, especially as women, from other women, is we want to support people who are doing good things. We want to support them as a person who wants to run a home business, and we also want to support them because they are a woman and they’re a mother. It’s just a connection we create, a trust, a relationship. I’m going to buy that product anyway, I might as well buy it from you. So, I think there’s a couple of reasons why I’m more willing to buy from a direct seller than I am online, in particular.

Steve Hooper: Yeah, like that social interaction. Think of it, what is a home party? First of all, the word “home,” there’s something there that just pulls you right in. But, it’s a group of friends or family, getting together, sharing a social experience, enjoying interacting, and in today’s world, where does that happen? I mean between fake news and fake accounts and everything, and we put our most glamorous image on every social media site…

Nancy Tobler: Well I don’t, but most people… [laughing]

Steve Hooper: [laughing] …whereas this is friends and neighbors that are gathering and developing bonds and strengthening their community and, like you say, supporting a home-based business, getting educated, having a stronger tie than just going and buying something off the shelf.

Kenny Rawlins: I don’t mean to come across too anti-Amazon there, because I’m well aware that Prime’s day has come.

Nancy Tobler: I order off Prime, I ordered a book this morning.

Steve Hooper: I ordered last night.

Kenny Rawlins: But, I have had a couple of experiences that reinforce this notion to me. So, my wife, this past Christmas, was ordering… wanted to buy a Magna doodle. And so, she went on and bought something that was a knockoff, and it came and all of the packaging was riddled with spelling errors, the grammar didn’t make sense, it was very cheaply made, and she was like, “How did I get duped?” And you’re just seeing this proliferation of knockoff products, because Amazon has become such a force that you have to be a little bit more savvy. And then, also, we bought a lamp and it showed up from Amazon and it was in a Target box. And she was like, “What the heck, Target sells on Amazon?” and I was like no this is— they call it arbitrage, partially pricing arbitrage, where they go and find a deal where they think I can resell this in the Amazon Marketplace for more. And so, she went and looked it up, and we paid $20 more for this lamp than if she would have ordered it off Target.com. And so, I think experiences like that, more and more, are going to make people more and more skeptical. And you talk about, Steve, the term fake news. As information becomes easier and easier to put out, I think you’re going to see an increasing distrust of information, just from non-personal sources. If you don’t have an experience with that source, there’s going to be an inherent skepticism. And so, I think that is one area where direct selling will be able to continue to shine, is in educating people on products and the differentiation on the products.

Steve Hooper: And I think what also supports that, as well, is direct selling is product focused, customer focused, and you look at current regulatory—just dovetailing what you’re talking about—you have to have a consumer experience. You have to have products that consumers want. And who am I more likely to buy from? The FTC, as they look at the regulations right now, they’re looking at that consumer aspect. And this is where direct selling companies are uniquely positioned. Like you say, in a world of misinformation, mistrust—to look at the relationships that people naturally have, products that, like you said, you’re already buying, and a friend says, “Here’s an opportunity, here’s something that I’m doing and excited about.” And yes, I’m more inclined to buy from somebody that I know. Then otherwise, I’ve got a lot of education I’ve got to do myself, to go out and find out about that product and what it can do for me, go through the quality of the product that you talk about, go through the fake news, the misspellings. I mean, I ordered something online recently, as well, and you could tell —where’s this product being shipped from? I knew what I was getting, and I got the first one and fired it up and it worked, and then the next day a second one arrived in the mail. And I’m like, “Okay that’s interesting!” So, there’s still some underlying processes, and now I’m going through the effort of returning it back and being a good citizen, doing all those things. Whereas if I knew somebody that I trusted, I could just get it.

My family was traveling recently. The transmission on the car goes out, what do I do? I don’t start calling mechanics. I called a friend in the area and said, “Could you help me out? Who do you know there?” And my friend said, “Here’s who I know.” I ended up getting that transmission casing replaced for about a third of the cost than if I’d gone just to a retail establishment, and it was because I trusted my friend and was willing, on their recommendation, to go with a certain one. And I got my vehicle back yesterday and I’m as happy as could be. And so, now we start looking at—that’s why I say, I think direct selling is uniquely positioned to strengthen that customer experience and that loyalty that a customer has, because we are motivating and we’re educating and we’re training them and then we support them and we give them the intellectual distribution that they’re not going to find anywhere else.

Kenny Rawlins: I think that’s a great note to end on. I appreciate both of you joining us this morning, and it is going to be interesting to see how the industry continues to evolve.

And that does it for today’s episode of the MLM.com Podcast brought to you by InfoTrax systems. I’m your host Kenny Rawlins. A special thanks to Steve Hooper and Nancy Tobler for their time this morning, as well as their thoughts, insights, and expertise. If you enjoy the MLM.com Podcast, please rate us on iTunes or wherever you get your podcast. We want to thank Jana Bangerter for production support, and we look forward to you joining us again next time.