Friday, August 31, 2007

Hornet's Nest on Pricing

It appears that adatudes is trying to respond to my post on pricing. Here are some quotes from their blog posting (shown in a previous posting here).

These and other Quixtar brands are premium priced and designed for a specific target market seeking prestige, quality and performance.

This "target market" is disappearing. We used to live in a one-income society. It now takes two incomes to live the average lifestyle. It is continuing to get worse. People cannot possibly think about getting the best, when they are more worried about making mortgage payments. For IBOs, its ok, because we are working towards being in the top 5%, but most of our customer have little hope of that, unless they are already there (and are thus only 5% of the population).

NUTRILITE products are the world's leading brand of vitamins, minerals, and dietary supplements.* With total quality control of its plant concentrates from seed to tablet, NUTRILITE is the only global vitamin and mineral brand to grow, harvest, and process plants on its own certified organic farms.** NUTRILITE supplements often deliver more key phytonutrients per serving than the competition.

No argument there. Nutrilite has great vitamins. The best. However, it is priced well higher than its competitors. When things get tight, people will switch to Centrum in a heartbeat. And customers, even worse.

The ARTISTRY brand's high-quality formulas, elegant packaging, and technologically advanced product innovation have placed ARTISTRY among the world's top five largest-selling prestige brands of facial skin care and colour cosmetics.*** It's priced competitively with others in this distinguished group, which includes well-known brands like Clinique®, Lancôme®, Estée Lauder®, and Chanel®.

Since I don't wear makeup, I can't comment on this much. I imagine it is the same thing as Nutrilite. Its the best, but when things get tough, this will be one of the first things to go, unless it is your main source of PV. The big difference with Artistry is that it has competition that is priced in the same range.

Home brands like L.O.C.® Multi-Purpose Cleaner and the SA8® laundry system are often priced lower than the competition on a cost-per-use basis. When comparing apples to apples, home products meet or beat the competition on product performance, cost, or both.

This is the real price advantage, and quite a bargain. This is the real Amway. The success of yesterday. The problem is, they last so dang long, that you will be using your first box of SA-8 for the next couple of years. Not really repeat business towards your 100PV each month. This is where all my customers come in. They buy the cleaning products. The problem is, they contact me every year or two to replenish. To have 10 customers a month, I would need around 2,000 real customers, who would purchase cleaning products about once a year or two.

XS™ Power Nutrition products include sports drinks, protein shakes, energy bars and energy drinks that have all of the “energy,” and none of the sugar of other energy drinks. XS products are priced very competitively with many other sports nutrition brands.

Here, Amway is competitive. Not a great deal, but not overly expensive either. However, this is the exception. The reason so many IBOs are so focused on XS, is because it has good PV, a decent price and is consumable, you can use it every month. From what I understand. Alticor specifically focused on making this product line competitive in the market, but they don't seem willing to do the same with any of the other product lines.

The ATMOSPHERE™ Air Purifier, as seen by the 44 million viewers of ABC’s hit TV Show “Extreme Makeover Home Edition,” purifies with advanced technology that automatically monitors the quality of the air in your home - effectively removing up to 99.99% of the contaminant and pollutant particles that are drawn through the system, down to sizes as small as .01 microns.

Notice they did not say anything about price. You buy an expensive air filter and then are on the hook for two expensive filters about once a year.

The eSpring® Water Purifier effectively removes greater than 140 health-effect contaminants and destroys more than 99.95% of bacteria, viruses and cysts with a patented dual technology filter cartridge. It is more cost effective over time and consistently outperforms bottled water, pitcher filters and faucet filters.

Wait, didn't they say earlier that When comparing apples to apples...? They are comparing an under the sink unit with pitchers, bottled water and faucet filters. Why don't they talk about cost and compare with other under the sink models? How about the average life time of the enclosures for the water filters? You also are on the hook for an expensive filter replacement once a year.

Thanks to the value provided by our products and by the IBOs who sell them, Quixtar is the leading online retailer of health and beauty products, according to Internet Retailer magazine* for the fourth consecutive year. That means we sell more health and beauty products online than Avon, Sephora, Clinique and anyone else.

I don't think they are actually the leading online retailer of health and beauty products since no one retails. I heard somewhere that only about 3% of sales are "retail" sales.

Ultimately, the market decides the value of the products sold by any given company. Quixtar's product pricing reflects the high esteem with which our products are held.

In other words, the market has decided that are products are too pricey unless you have hope that you might get a kick-back. That's why 3% of our sales are to the 5% that have money to burn.


Amway and Quixtar - an opportunity for anyone said...

a retail sale is a sale to an end user. I've heard certain leaders proposed burying the products, but I believe that most IBOs are "end users" - they are retail sales. The price paid is irrelevant.

Ed Manley said...
This comment has been removed by a blog administrator.
Tom Morris said...

Isn't the legal issues from California stating just that. There are no customers outside the "pyramid"

Anonymous said...

Just an FYI - the last thing most women will give up is their skin care and cosmetics (and their haircare products, cuts, color, etc...) so we probably have more loyalty to Artistry than any other line (except maybe XS!).