How has Quixtar succeeded?

Quixtar Incorporated: A Young Organization Dealing with a Mature Organization’s Problems



Introduction

On September 1, 1999, Quixtar Incorporated, with the help of its sister company, Amway Corporation, launched Quixtar.Com, and received over 2 million hits. On this day, Managing Director Ken McDonald only anticipated, perhaps, 200,000-300,000 distributors would make the move to Quixtar.Com.(1) How can a new Web site do this with absolutely no advertising? With unlimited support from a multi-million-dollar corporation, Amway, and assistance from the likes of Microsoft, Fry Multimedia, and C-E Communications, a virtual mall was created with Amway distributors, now known as Independent Business Owners, already in place. In its first 200 days alone, Quixtar generated $250 million in revenue, and later saw a record sales day of $12 million in August of this year.(2) Quixtar.Com, even as a young organization has skipped the problems of the first phases of an organization’s life cycle, and has moved immediately into the elaboration stage. Teamwork, as I will discuss, was an accepted concept among its members and employees, many of whom just made the transition from the old business of Amway to Quixtar Inc.

Things were changing quickly for this company from the start. More and more people entered into owning their own online businesses through Quixtar.Com, especially the younger generation, who became turned on by the new products that the corporation offered. With the onslaught of new people, came control issues, and Quixtar’s reputation was at stake. How can this young organization take advantage of the best of Amway’s structure, which was handed to it on a silver platter, and has Quixtar done it?


History

In 1959, Rich DeVos and Jay Van Andel developed the Amway business model, allowing distributors to run their own businesses using the corporation’s products. Listening to old Amway motivational tapes, I heard about business owners struggling with the misconceptions brought about by bad word-of-mouth advertising. Word-of-mouth was the only form of legitimate advertising for these business owners, and disgruntled, former distributors used that to their advantage. I’ve talked to former Amway distributors, and the products sold were not the factor that made them leave their businesses behind. The reason they left was due to distrust in other distributors in their personal network. The fingers were pointing to the corporation for the lack of control they had over distributors, but how could they take some of that control back without hurting their most valuable resource, the distributor? The distributors were the means of Amway’s boundary spanning, and the number of people who qualified as one was endless, being that qualifying meant that one was of age and not currently incarcerated.

Entering into the Information Age, and the emergence of the Internet as a means of commerce, caused a stir among Amway distributors and executives. The Internet would be a way to speed up distribution between buyer and seller and eliminate much of the red tape involved from the paperwork that currently had to be juggled by each distributor. To live up to the complexity of the Amway system, the Web site created would have to incorporate an already stable network of distributors and an e-commerce vehicle worthy of attracting potential future distributors and buyers. The corporation, which managed to entice many successful entrepreneurs into its system, thrived on taking risks. Distributors that took hold of the system and made it successful took the risk to give their time away to help other people run their own Amway businesses, and live life below their means until the residual income came flowing in to them. I say this of Amway because, if it were not for this large group of entrepreneurs, Quixtar.Com would have never been successful, and possibly would not have ever been created. Vice President of sales and marketing, John Parker, said, “ ‘We had a group of IBOs that, I think, saw the vision and were helpful in terms of working with us to provide input on how to best make the site and the business work.(1)’” A combination of the personal network relationships and the Internet infrastructure was necessary to maintain the strength of the system, and not many rules could spell out how exactly the team of developers was going to do this. There was a lot of uncertainty and ambiguity in this decision process, so they knew that there had to be some flexibility to promote the free-flowing of ideas. The only thing that was certain was that not taking advantage of the Internet was not an option. With only six months of development, Quixtar.Com was a reality.

Amway existed along with Quixtar for a short time, and then closed its doors to the U.S. and Canadian market once Quixtar could hold its own.


Mission and Goals

What does Quixtar do? McDonald said, “‘What we do is create an opportunity. The independent business owners share that opportunity with clients and members, then we send hundreds of millions of dollars in bonuses and incentives to those IBOs.(1)’” Trust, risk-taking, and promotion of the entrepreneurial spirit that exists in America’s free enterprise system are some key values of the corporation.
For business owners, a virtual office is available, and new information on upcoming products and services that will be offered by the corporation are also at their fingertips. Calculations of business volume through their networks are also available. The customer support team, employees of Quixtar Inc., is also available for any questions needing to be answered. The Web site also provides access to over three million goods and services, which are shipped directly to IBOs or their members and clients. The products can be shipped to straight to the door of the buyer, eliminating the physical handling of all products by IBOs, who are all linked into their network by a number in the Web site’s system. Exclusive products can now be placed onto a replenishment schedule, which allows personal-use products to be automatically processed at a desired date of each month, and can be changed as often as necessary.

The number of products and services offered increases rapidly as partner stores, such as Hickory Farms, Barnes and Noble, Franklin Mint, Franklin Covey, Sony Music, Disney Store, and more continue create a link on Quixtar.Com, and offer savings and/or business volume for Quixtar’s members. The IBOs do the marketing, and the Partner Stores benefit.

Other than the Web site itself, there are business leaders within the Quixtar system who help the new IBOs with their expertise in growing successful businesses. The one thing that may seem peculiar in all of this is that Quixtar.Com states that it will not advertise, just like Amway, giving IBOs full reign to market the system and to grow their own personal businesses through word-of-mouth advertising. This system is known as Business-to-Business (B2B) marketing, where the concept of employee is not only disregarded, but against the Rules of Conduct to even imply such a relationship with the corporation.

Quixtar.Com prides itself on coming up with the concept of I-commerce, rather than e-commerce. According to the Quixtar.Com Web site, I-commerce consists of “the Internet, the Individual, a full-service Infrastructure, and a proven Independent business ownership plan.(3)” In an organization like this, how can the Corporation maintain control of what its affiliates do? Was going online such a good idea for Amway, or did that make the issue of control more complex?

Seema Williams, an ecommerce analyst at Forrester Research, said about Amway, that “[i]t’s almost as if they had spent all these years in the wrong medium.(4)” The switch to Quixtar.Com was a chance for a new, fresh start for Amway. The corporation had little control over who owned an Amway business, and, in the beginning, not much advice on how to run one successfully. The first problem still exists with Quixtar.Com, but the second one has diminished greatly over time.

As far as goals go, McDonald doesn’t point to a certain profit margin, but rather to make the Quixtar business “‘easy, fun, and cool.(1)’” He’s looking at how to best serve the IBOs and their members and clients, the most valuable resources to the organization.


Structure and Analysis

The structure of Quixtar, as I wrote before, is very similar to Amway Corporation, except now all of the information to confirm the organization’s legality can be publicly posted on the Web site without the cost of advertising. Quixtar freely shares information on its Rules of Conduct and explains away some of the misconceptions about the 40-year-old system. The newest IBO in the organization contributes the knowledge he/she brings to the team. Many IBOs do not have marketing backgrounds when they come into the business, so they must learn from other IBOs who are upline, downline, and crossline in their personal network. The corporation lends support by explaining to the new business owner on the site that it is imperative to be in constant communication with teams who are running successful Quixtar-affiliated businesses. When I first stepped into this type of e-commerce meeting, I found out very quickly that the people who invested their time in helping me were not going to hide information about the corporation from me, lest they lose the volume I could have generated for their personal businesses. The structure of this organization is horizontal, for the information flows in all directions to all levels, with very little exception.

According to the Miles and Snow strategy typology, Quixtar is an analyzer.(5) SA8 laundry detergent, L.O.C. household products, Artistry Cosmetics, and Nutrilite vitamins and supplements are just a few of the stable product lines that were already successful in the marketplace when Quixtar launched in 1999. To grab a hold of the younger generation, however, Quixtar looked for another product line which would widen their domain, so the organization took a look at the booming energy drink market. They found and purchased a company that manufactured XS energy drinks. In less than two years, this one product, now with six existing flavors, claimed the number one spot on Quixtar’s best selling items. At last count, as I was told at a business meeting by another profitable IBO, one million cans are sold every six days. The former owner of XS, as I found out at a business function, is now an IBO participating in Quixtar’s system. Nutrilite and XS have also come together and come up with a sports nutrition line. The old products are still promoted, and new products are embraced with enthusiasm.

Affiliated Companies

It is important to briefly discuss the organizations which support Quixtar.Com in its efforts. Without these other organizations, Quixtar.Com would be a dismal failure. These organizations take on the control that the Corporation itself lacks. There are at least 500,000 IBOs, and growing, right now in the U.S. Other than quantitative control as respect to business volume and growth levels, the online corporation would be lost to try to control so many privately owned businesses, as far as ethics and marketing is concerned.

Research and development is not done by Quixtar Inc. itself. Access Business Group and AltiCor, also owned by the DeVos and Van Andel families, make sure the quality of the products available meet the high standards set by law and, more important, the IBOs, members and clients. There is a money-back guarantee on all products, no questions asked. Nutrilite products, in particular, are made from ingredients from organic farms, and are also marked according to whether they meet certain religion-based diets.
Another organization which assists both Quixtar Inc. and Quixtar Canada Corp. is the Independent Business Owners Association International. This board of highly successful IBOs advises and advocates for other IBOs and the corporation itself, and defends the Independent Business Ownership Plan, which Quixtar owns. The role of this affiliated organization has a substantial bearing on the reputation of Quixtar and its other affiliates. More to come on this organization as the issue of control is addressed.


The IBO Culture

The IBOs are known as the backbone of Quixtar. The learning atmosphere in the culture of this group of people permeates the whole organization. I am an IBO and have been to several business meetings and functions. What I have noticed is the clan culture form of control in action. I’ve heard several times on motivational tapes that prospects sometimes would say all the owners in this system belong to a “cult.” This is highly untrue because the leaders demand nothing of anyone, but rather advise what is best to do according to what they have already learned. Making the decision to do what leaders suggest is totally up to the each individual.

Any new prospect coming into a meeting will feel out of place, so many of us will not speak too much about the business until the business ownership plan is shown. At functions, where, most of the time, there are thousands of people, we all stand up, hum, then shout “Freedom!” at the top of our lungs when cued by an IBO leader on stage. Business meetings and functions are both filled with positive messages, and negativity is highly discouraged. I’ve been told by my upline leaders that no gossip about anyone in the organization is to be passed downline or crossline. It is also not readily accepted by upline either.

Trust is essential within the IBO culture. We believe that it doesn’t matter what a person has done in the past, but what they are going to do from the present onward. I am in an education system outside of Quixtar, and it so happens that my associates, especially the higher leaders in the network, follow principles set forth in the Bible, and other sacred literature. Whole families participate in the owning of this type of business, and husbands and wives work together as partners.

Leaders mentor new IBOs and help them develop into leaders themselves. The concepts presented in meetings are simple and can be easily duplicated by any IBO sitting in the room. Counseling from upline leaders is highly encouraged. I have heard many times that IBOs are people who empower people who empower people, and so on.

Of course, if someone doesn’t fit into the molding of this clan, it is common for them to quit, rather than be pushed out by one of the team members. The one time when someone must be pushed out of the system is if trust is broken of a legal nature. This is where the IBOA and the Rules of Conduct come into play.

As for the most prominent symbol that permeates the IBO culture, it is the diamond. It stands for the level at which an IBO reaches and is considered financially free for the rest of his/her life. The other levels in the business are mostly denoted by valuable metals and gems, such as gold, silver, ruby, and emerald, with the exception of the level beyond triple diamond, which is crown ambassador.


Business Marketing and the Internet

Without the IBO culture, which emphasizes commitment to the team for the long run, Quixtar would not have generated the success it has. For a Business to business (B2B) organization to thrive on the Internet, there must be a great deal of trust among its members. Trust and commitment are also norms in the multi-level marketing industry

Sometimes people who are connected in this type of business don’t know each other very well, so they must get around other business owners on their perspective teams and communicate on a constant basis. The Internet can seem like an impersonal medium when it comes to marketing, and that can be dangerous to a company who already doesn’t have the trust issue stabilized. What can be read on the Quixtar’s Web site many times, is that the corporation emphasizes both “high tech” and “high touch,” the first being the Quixtar Web site, the second being the IBO culture each business owner can learn from. A voice mail system and web-conferencing is available through the education system I participate in, for there are too many individual instances when tacit knowledge of business ideas and issues cannot be readily expressed through the Quixtar site.
There are times that I would approach someone the wrong way, and my mentors could tell me what I need to work on to be more successful.

The competition is there within the team I’m on, but it isn’t about stealing people from another. D. Eric Boyd and Robert E. Spekman wrote, “Organizations take risks based on their belief in the cooperative nature of the relationship. Because uncertainty about behavior is reduced, the threat of opportunistic or self-serving behavior is more likely to be held in check.(6)” The competitive nature is about how much time and effort has been put in to secure success. That is honored above the number of people other business owners bring on to the team. If the seed is planted, then the right people will come along. Some business owners even have prided themselves on rejection, saying, “If they say no, just say next.” It was still time well-spent in talking and getting to know someone, even though they refused what was being offered.

External vs. Internal control

Internal control is taken care of mostly outside of the actual organization, so external control, or the reputation the external environment sees, used to be taken care of outside of the organization, too. This, however, is changing.

Clan control is used among the IBOs, so the Rules of Conduct, appropriately, spell out what happens should the trust be broken among Quixtar’s members, whether it be between separate IBOs, partnering IBOs, IBOs and their members and clients, or IBOs and the corporation. The only rule that seems prohibitory is that an IBO must not use mass communication for the advertisement of their personal businesses.(7) There has to be some sort of one-on-one personal communication between the IBO and his/her prospect. If this is violated, then it will be hard for other IBOs to gain market share within their lists of perspective prospects. One rule specifically pointed out that Quixtar’s employees are not to be recorded during business functions and meetings, so their privacy is protected.(7) When trust is violated on a legal level, the IBOA, which is composed of IBOs who have reached, at least, the Diamond level, act as both an advisory committee for the organization and an advocate for the IBO, if necessary.

The IBOs used to be the only ones who would disseminate positive affirmations about Quixtar. Now, with the help of the Internet, Quixtar can take some of this responsibility without the use of advertising. Quixtar sends out surveys and has set up a feedback option to better understand the needs of its members and the satisfaction they received from its services and products. When I first got into the business, I was told not to search engines to find out about Quixtar, and that they were filled mostly with “bathroom wall” opinions of people who quit and wanted to spout off negativity toward the corporation. I can safely send someone to a search engine now, especially Google, because Quixtar upped their rating on the most frequented ones. Quixtar also added personal web pages to the Quixtar site. These web pages are of successful IBOs who have made the business work, despite the rumors that it wouldn’t.

Also, betting that people were pessimistic about what they didn’t know much about, Quixtar started sharing, on its site, information about the organization, the background of its employees, its membership in credible organizations, and the legality of the system. They’ve even publicized the Rules of Conduct for anyone to see. Their membership in organizations such as the Better Business Bureau and Direct Selling Association build credibility for Quixtar, so the corporation has no reason to keep those facts hidden.

Quixtar also helps two charity organizations to bolster their reputation in the community. It supports Easter Seals and PayKids. The second of these doesn’t surprise me as it might some other people. PayKids is Michigan-based organization which helps recover child support from parents who don’t pay. Being a family-oriented business ownership opportunity, Quixtar emphasizes the responsibility a parent has for his/her children.



Conclusion

This organization was put together using the best of the structure from its sister company, Amway. This older, established organization literally boosted Quixtar into the later stages of an organization’s life cycle from its inception. Trust among its members was high from the beginning and they embraced risk because of that. This organization got complex very fast, being that it wasn’t anticipated that many Amway distributors would grab a hold of the new Internet-based business model. Quixtar underestimated the power of the clan culture among IBOs, but, since they were communicating across and not depending on a stringent vertical structure, the creators of the Web site were able to readjust quickly. New products, such as the XS energy drink opened up their domain to a younger crowd. The average age of IBOs used to be 33, but, from what I’ve seen at functions, it is decreasing.

Since Quixtar was born out of the old Amway system, many of the problems came with it. Amway had a hard time controlling what was being said about it and had a hard time realizing who was saying it. Using knowledge about what can be done through the Internet, Quixtar publicly released information about itself, yet was able to adhere to its “No advertising” policy. The organization turned reputable search engines and Web blogs from a negative vice to positive cure. The negative force on the Internet about Quixtar is still out there, but there are now defenders in the battle, including IBOs and Quixtar itself.





1. Seelig, Fred. “Amway Redefines Its Business.” Grand Rapids Journal. March 6, 2000. Vol. 18, Issue 10. p. 1. ProQuest. ID: 50838129. Viewed on Dec. 6 2004.

2. “Quixtar & the Opportunity.” Quixtar Incorporated. www.quixtar.com. Viewed on Nov. 29, 2004.


3. “About Quixtar.” Quixtar Incorporated. www.quixtar.com. Viewed on Nov. 29, 2004

4. Lappin, Todd. “Get Rich…Quixtar.” Business 2.0. Aug. 1 1999. http://www.business2.com/b2/web/articles/0,17863,527372,00.html. Viewed on Dec. 1, 1004.

5. Daft, Richard L. Organizational Theory and Design. 8th ed. South-Western. Mason, Ohio. 2004. p. 63.

6. Boyd, D. Eric and Robert E. Spekman. “Internet Usage Within B2B Relationships and Its Impact on Value Creation: A Conceptual Model and Research Propositions.” Journal of Business-to-Business Marketing. Vol. 11(1/2) 2004. The Haworth Press, Inc..

7. Business Reference Guide. Quixtar Incorporated. www.quixtar.com. Viewed on Nov. 29, 2004.

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