How the Amway tools became a big business

If you are new to this series, start at the beginning, Doug Wead Amway Adventure or otherwise it will not make sense. And the follow each successive post. As many of you know, I am retired from Amway now, but my experience was a fond one and I am trying to share what I learned along the way.

And right now, that means responding to one of the newer and more prolific commentators on this blog by the name of “Tex.” This will probably be an exercise in futility, we experience and see things differently, but I am determined to learn from him and share a little of my own perspective too.

In the words of Tex: I and others have mentioned on numerous occasions the tool scam started out as being a help to the IBOs and later turned into THE primary source of income for the upline, and more significantly, results in most IBOs below Platinum to operate at a net loss. Does this sound like a moral and ethical business model to you, Doug?

They are operating at a loss at the pre-Platinum levels because they have decided that they cannot sell the product at retail, or they don’t want to. This is the problem that Eric Scheibeler raises, saying that the likely incomes at these entry levels are wrong. And it is a good point. But Amway doesn’t force people to sign up and it is certainly not the fault of the tool business.

For example, I was told to follow the corporate model in order to get my required ten customers but in the process I soon found it was pretty hard selling the products. Sure, it was possible, I could sell to relatives or friends who would help me out, but I could make more money spending my time doing something else. My sponsor, who was Dexter Yager, advised me to concentrate on sponsoring, to get to a bigger level where the income would be better, and I soon found that the only way to get that going was tapes. (Nowadays CD’s.) I indeed spent more than I was making but it was a calculated investment. The company didn’t make me and neither did Dex.

BTW, the purchase of tapes did not automatically result in growth. I had to use them and learn from them. It sounds absurd to say “learn” from them because they were not especially profound but then that is part of building a big network, it is going to appeal to the “average” person. And if it doesn’t work for the average person it will soon fail to work for the exceptional person. It is by its nature pedestrian.

Also, you don’t address whether ANY IBO’s below were making a net profit with all of these tapes, books, functions, etc. THAT is my main point. It involves tool PRICES and system PRACTICES (unnecessary long distance travel in particular).

Hmm, I’ll get to that last point in a future post. It is a good topic in itself.

At first no one made money off of the tapes, except indirectly because it helped build their groups, and more importantly perhaps, resulted in better retention. And even into the 1970’s, making tapes for your group was a drudgery which was passed off to a new diamond as soon as possible. Some ran it like a business and made a profit, but some lost money keeping it going only because it grew their group.

Then, a bright, young man, who will remain nameless, changed everything. He sat across from Dexter Yager and Bill Britt in the coffee shop of the Fontainebleau Hotel and told Yager that for a $50,000 investment he could buy the latest machinery and set up his own tape duplicating company. Dexter turned him down. Britt said, “I’ll do it.” And so the modern networking tape business was born.

According to this widely told story, Britt’s new company prospered and eventually, even Dex was buying tapes from Britt. Nobody could beat his prices. The rumor was that for awhile, anyway, Amway itself was buying their tapes from him.

It was beautiful. Large tape orders from rock stars or political campaigns were sporadic. A company could make a fortune off of them but how could they afford all of that expensive machinery that had to sit idle between elections and runaway musical hits? Well, Britt, with the steady demand from networkers, could keep them humming. And he got rich.

Soon, everybody wanted their share. Dex decided that since Britt was in his downline, he should be getting a proper share, after all, he was selling to “his” group. And so a pricing system developed and rules emerged and it all continues to evolve to this day. And it is a hotly debated subject with cries of “unfair, I should be getting a bigger cut.”

Now, here is the rub. This is what you must keep in mind as we pursue this. The tapes worked. That is, they helped recruit, and motivate and develop a culture that retained distributors, even those whom you say were not making money, could grow their group and some did exactly that. Indeed, I did that and eventually made money.

Second, and this is an important point, the “new” tape business that emerged did not take “new” money away from the distributors. The prices of the tapes were the same. All along they had been giving their money to distant, unknown manufacturers. Were those manufacturers raping the people? There were certainly no complaints about them for as long as the profit was going to a stranger far away, no one cared. But in fact, this new arrangement was only bringing the production in-house. The cost to the newest IBO was the same.

Now, among the problems this would raise would be the issue of a conflict of interest. And this seems to be at the heart of your angst. As long as they promoted tapes that were manufactured elsewhere, no one was upset. But when they started promoting tapes that they, themselves, profited from, people cried foul.

Was it foul? You can say, yes, this poor person would never have succeeded in networking so their investment was only lining the pockets of the manufacturers, who were now their own uplines. Or perhaps it was the wrong time to build, the marketplace was hostile. But then, who would have predicted the success or timing of Dexter Yager? He lived in a tenement and shared a toilet with people on the same floor. Or Hal and Susan Gooch, who had to sell blood at hospitals to get money to eat? Should the upline decide who should be allowed to buy tapes and who was only wasting their money? Sometimes, they actually tried to do this, out of kindness, but that wasn’t fair either or even legal.

I knew that many groups kept this entire process secret. But my instincts told me that this was foolish. I told everyone, everything, right from the beginning. I never sponsored a person who didn’t know the whole story. Those who made a secret out of it only hurt themselves. At least in my humble opinion.

Next post in this series? Tools or products.

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Posted in Business Tagged: Amway, Amway tools, Bill Britt, Dexter Yager, Doug Wead Amway, Doug Wead tapes, Tex

About Doug Wead
Doug Wead is our presidential historian and frequent guest blogger here on CLC. You can see more of his work here: Doug Wead's Blog

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