What are the Quixtar Opportunities?
I get mail every week from curious Quixtar prospects who want to know more about the business opportunity. Most distributors (IBOs - Independent Business Operators) are taught to not give out too much information when contacting prospects.
"Your site is invaluable. All the
questions I asked about Quixtar were
"There was even less information in the
Quixtar plan we saw tonight
"Fellow worker met me here last Thursday to introduce me to Quixtar.
I was kind of curious first search and there you are top of the list now I
know way more after visiting your site." - Site Visitor
"I am questioning Quixtar very much
because I am not understanding how the money is
Quixtar is a MLM, Multi-Level Marketing opportunity. It is similar to a franchise except most franchises are granted exclusive territories or locations. However, in MLM a franchiser can usually recruit new franchises to add to their sales volume.
The goal of any MLM is sell some sort of product or service through non-traditional channels and recruit others utilizing personal contacts and then leveraging the distributor's reputation as a way to generate acceptance of the business opportunity.
MLM's and Quixtar are supposed to work on the three pronged approach to sales:
In Quixtar there are two ways to physically distribute the products. In the old Amway business, everyone paid their downline their bonuses and also had to pick up product from their upline. Quixtar started paying distributors directly and offering direct shipment to each distributor's home, but a few groups within Quixtar still work by the old Amway methods. One such group is World Wide Dream Builders. This method is called "Standard fulfillment". The new Quixtar method is called "Direct fulfillment".
In Quixtar there are "Lines of Sponsorship" (LOS). Every distributor (Independent Business Owner - IBO) is sponsored into the business by another IBO. The progressive line of people is call a "line of sponsorship", or a "family". Below is a graphic naming some of the larger Amway/Quixtar lines-of-sponsorship. These families are also know as "AMO's" (Amway motivational organizations) and are independent companies from Amway/Quixtar usually owned by a diamond distributor or above.
How Do Quixtar IBOs Make Money?
The Quixtar product business is supposed to be the primary business opportunity for IBOs, but Lines of Sponsorship also promote the two complementary businesses of "Speaking" and "Tools" otherwise known as "Business Support Materials" (BSMs).
The Quixtar products business sells Amway branded consumable products, name brand consumer goods, and pays referral fees for purchases from the Quixtar Partner Stores. IBOs are paid commissions on these sales according to a pyramided compensation scheme.
The business differs from traditional franchising because IBOs are allowed to recruit others into business. You will be a sponsor to those people you recruit. People you recruit are your "downline". Those people sponsored by those you recruit are "in-depth". The people above you in the chain are your "upline". The example below shows an IBO with a business that has three legs. Leg 2 goes three deep.
Quixtar pays IBOs commissions for sales of the Quixtar marketed products. Total wholesale commissions can range from as low as 3% on some Partner Store purchases to as much as 50% on some of the Amway core line products. These commissions are split among numerous people. Additionally an IBO could earn the retail markup on retail sales to normal customers. Many groups however place little effort on retailing and heavily promote "self-consumption" of product.
The chart above shows the profit potential on the various Quixtar product lines with and without retail markups. Due to the already high prices of many Quixtar products, it is difficult to find many people who want to be plain retail customers.
Additionally, it is difficult to retail products since Quixtar competes directly with its own distributors. Quixtar offers non IBOs wholesale prices via its "Memberships" and people can shop the Quixtar website without going through a distributor.
Therefor most Quixtar groups tend to promote "buy from yourself" since retail sales are time consuming to acquire, and retail customers do not buy the line of sponsorship's motivational tapes and seminars. An IBO's bonus is calculated on the sales volume running through his group. Each product has a point value (PV) and a Business Volume (BV) assigned to it. Each IBO is paid according to the bonus schedule. For an introduction to how this works, read this page on Quixtar Basics.
It is very important to remember that "width" is the key to profitability in the business. Depth provides volume to qualify for high bonus levels, but without "side volume" to take advantage of the high bonus level, an IBO's bonus will be small. In order to be a legal business, IBOs must also have retail sales (purchases by customers) which can come from Quixtar "Members" and "Clients". These rules are however quite easy to circumvent. According to FTC case precedents, at least 50% of rewards paid need to come from sales to those outside of the compensation scheme to not be considered an illegal pyramid. See this page for more in-depth explanation. You can simulate various business structures and their profitability with this handy calculator in Microsoft Excel.
Various achievement levels in Quixtar are named after precious stones and metals. An IBO achieves the "Platinum" level by having volume of at least 7,500PV points for 6 out of 12 months. This is considered the first leadership level in the business. A Platinum IBO qualifies for the 25% bonus level. There are other leadership levels such as Diamond, and Emerald. A Diamond had six Platinum qualifying IBOs in his direct group. An Emerald has three qualifying Platinum legs.
The chart above shows that about 29% of the Quixtar bonuses go to those above Platinum and 71% is kept at or below the platinum level. Quixtar paid back to IBOs about 31 cents of every sales dollar. One hundred PV in personal volume generates about $62.50 in bonuses for the Platinum and levels below. About $25.53 is paid in bonuses for those above Platinum.
How Do You Make Money From the BSMs?
All groups sell motivational, promotional and training supplies to their downline IBOs. All materials can be purchased at the option of the IBO. These materials include subscriptions to the private web sites, tapes, CDs, literature, seminars and weekly meetings.
For one group, the weekly tapes cost $12 with an additional leadership tape for $6. There are three major functions where tickets cost $90 each. Weekly promotion meetings cost $5, and monthly seminars cost $25. The web site costs $30/quarter (+$24 one time charge), and voice messaging is about $20/month. The chart below shows the annual cost of all these optional system products for singles and couples.
Most if not all groups pay commissions on BSMs only to those at Platinum or above. The more BSMs a qualifying IBO sells to his downline, the more he gets paid. There are few public details about the tools plans and you should ask to see the commission schedule and contract from your line of sponsorship.
Just as in Quixtar, IBOs can increase their income by sponsoring others who also attain Platinum and who will also earn money from the selling business support materials. Some will argue that the BSM business is not actually a MLM. This type of system can no doubt be called a "chain marketing scheme" since the participants have the right to franchise other participants. The graphic below shows endless "chaining" that can take place as new participants achieve Platinum and finally obtain qualification to participate in the system income.
A Quixtar IBO needs to have at least 100 points to qualify for the first bonus level. This contrasts the BSMs business. Most groups has a significantly more stringent requirement of having at least 7,500 Quixtar points, for 6 months (Platinum) in order to participate in the BSMs business.
Ask your sponsor for a copy of their latest BSM's bonus plan. I can bet you they will not give you a copy of the commission schedule or the BSM contract, even if there is one. They might give you a BSMAA however this is not a contract for participation in the BSMs business. It is only an agreement to arbitrate out of court with Quixtar appointed arbiters and also is an agreement to silence if you ever get cheated in the business. In Quixtar each and every IBO is entitled to see a prospectus for the business, SA4400 and the rules for the business. It seems strange that a supposedly "legitimate" business opportunity like the BSMs business has no such prospectus and commission schedule.
The Quixtar Products Plan
Stacking plans promote a plan showing two legs. I attended an open meeting and the following plan was shown. The first leg is what they call a tap root leg. This is a leg that your upline will help you build or build for you. The second leg is one the IBO is responsible for building.
The taught structure is to have 50 IBOs in the "tap root" leg with at least 15 buying the motivational system. The second leg is to have at least 15 IBOs with 5 buying the motivational system. This would result in a total of 75 IBOs with at least 20 buying the motivational system. In reality, the profitability of being in such a taproot leg is very low. 93% of these IBOs would have less than $100/month returned to them on their $250+/month purchases. As explained above, when there is no width to your business there is no leveraging of a high bonus percentage on side volume.
The speaker, at the open meeting I attended, said one could earn $2,000-$3,000/month with this two legged structure shown above. Using this structure and 100PV per IBO, this IBO would earn instead just about $600/month. Quixtar reported the average IBO generated 38.5PV/month. Using 38.5PV with the stacking model, the IBO would earn just $365/month. If everyone in the IBO's downline had almost four times the average Quixtar sales meeting the 140PV goal, this IBO would earn just $1,113,/month. A Q-12 bonus is only paid when a group has at least 7,500 PV points for 12 consecutive months. With the Annual Q12 bonus the amount increases to $1,971/month, still shy of the $2,000 - $3,000/month claimed. Use this Quixtar bonus calculator in Microsoft Excel to calculate bonuses for those at Platinum and below.
An analysis of three tap-root leg teams showed they only developed 4000PV with 456 IBOs, or just 9PV per distributor. Their model owever hopes for 7500PV of volume from just 66 IBOs who should be averaging 113PV/month.
IBO Profitability - Below Platinum
Let's assume we have a Platinum group of 76 people and it qualifies for the annual Q12 bonus. The minimum gross bonuses paid to this group of 76 people will be $66,250/year. Since each IBO below the platinum has no width, they will only earn an average of $62.50/month ($750/year) on their Quixtar purchases of $250/month.
IBOs fully plugged into the training system will pay as singles about $1970/year. Couples would pay about $2,640/year. IBOs fully plugged into the system, without sponsoring anyone outside the tap-root leg, and without having any retail sales will lose at least $1,200/year as a single and $1,890/year as a couple.
From the stacked 2-leg model, 20 fully plugged in singles would be paying $39,400/year for the system and 20 couples could be paying up to $52,800/year. This contrasts with the best case bonuses paid to the non-Q12 group of $56,205/year. With this model, anywhere from 70 - 93% of the Quixtar bonuses are consumed just by the system itself.
The histogram below on the left shows the skewed earnings distribution for those below platinum. The majority of IBOs (93%) gross less than $100/month. The diagram below on the right shows the net profit the top 20 earners in the group when factoring an average of $2,000/year in system costs per IBO.
Two-thirds of this group (15 out of 20) will be losing an average of $88/month, while two people earn a net of $31/month, and 2 people net $133/month. One IBO in this group will net $730/month assuming no Q-12 bonus is paid. This group of 20 people has a combined gross income of $3,070/month, yet $3,333/month in expenses. The top 20 earners, as a group, still have a net loss of about $250/month and still have not been in any way compensated for their time.
Certainly many businesses start up with losses, and this business is no different. The stacked business model however relies on recruiting more money losing IBOs (and no hourly compensation) rather than teaching a break-even business model. An ethical business model would teach IBOs to have sufficient personal sales to cover their own expenses. A break even business model would have personal sales at least four times the expected expenses. (the inverse of the 25% bonus level) If the business model taught has $2,000/year in expenses, the only ethical business model to teach would be one with 8,000BV/year (333PV/month) in retail sales. The current model teaches just 150PV per month or less than half the break-even point.
are brainwashed into spending a fortune on peripherals while consuming Amway products.
They either lose their shirts or begin making money by getting enough people underneath to
do the same."
We can see from the Quixtar business model that the average IBO is programmed to lose money. The lack of emphasis on retail sales ensures that majority of system consuming IBOs will be losing money.
Where's the Real Money?
It costs about $0.50 to reproduce a cassette audiotape, which is sold for $6 or more. Further more, most of the tapes are just recordings of their meetings, which IBOs have also paid to attend! In this case 92% of the tape price is profit. At an open meeting I attended they collected about $250 from their IBOs to attend the meeting. The room rented for only $50. The cost to host my website is only $120/year; the same cost as one IBO pays for access to some line of sponsorship websites. Assume the web site maintenance costs $30,000/year. This is easily covered by the $25 set up charge for 1,200 new IBOs yearly. The lines of sponsorship probably net 100% profit, or $120/IBO/year on their websites alone. The voice messaging is possibly the least profitable item they sell since it must be sourced from another company. I speculate that added all together the BSMs are at least 80% pure profit to the line of sponsorship leaders. The graphic below shows the profit potential from each IBO 100% on the system assuming the tools are 80% profit.
The annual profit available from a Quixtar IBO's product purchases of 150PV/month, to those above platinum is only about $450/year when counting those bonuses above the 25% level. I suspect a single IBO buying the complete system however would generate about $1,575/year in gross profit to the line of sponsorship leaders. I suspect a couple buying the same system would generate about $2,100/year. Line of sponsorship leaders could earn at least three times more from an IBO on the system than they would from their product sales. It would seem there is a greater incentive to sell their system then there is for the Quixtar products. It is quite easy to see their emphasis in selling the system when you listen to them speak.
A Quixtar group at 7,500 PV would generate about $18,000/year to those above platinum. Assuming this group had just 20 IBOs (10 couples, 10 singles) consuming the full system, and an 80% profit on the tools, the profit to the system leaders on the system alone would be almost $37,000/year, or double that from the "Quixtar opportunity".
There is also a significant income from new IBOs and prospects. System leaders could expect to net at least half again the income of its "active groups" from purchases by new IBOs and prospects. Many prospects are encouraged to attend a seminar or a major function. There are many who buy the recommended starter kits for about $235 even though the actual cost to sign up for Quixtar is only about $50. The diagram below shows my estimates of the net income from Quixtar, active IBOs, and one time purchases by new IBOs and prospects to the leaders for each Platinum group.
In the final analysis I suspect that the line of sponsorship Business Support materials business is at least three times as profitable to the system leaders as their supposed main business of moving products for Quixtar. There is of course nothing wrong with making a profit. I suggest you only be aware of the money being made and their motivations for wanting you to consume their BSM's. Is their motivation to make all IBOs businesses profitable? Is it their goal to make their own business more profitable? Given the amount of money, involved I would suspect they have other motivations than what is best for the average IBO. It would seem if these items were really needed to help IBOs build profitable businesses, that they would be as inexpensive as possible.
I've heard it said on their tapes that there is profit built in on tapes so that the leaders can recover some of their costs in the case of lost tapes. A leader could afford to lose a lot more tapes if they only cost him $0.54 instead of say $6.50 (when you include the sales tax).
IBOs will argue that the cost of the system is inexpensive when compared to the cost of going to college. No doubt IBOs can learn many inter-personal skills from the books sold in the business. Prospecting people for the business is also a way to practice these newly learned skills. The majority of what can be learned from the business can also be obtained for nothing at your local public library in the self-help, motivation, and sales sections.
"Two-- you dropped a hundred and fifty
grand on an education you coulda' picked
You can practice these skills with everyone with whom you come in contact. The advantage here is that every new person you meet will be an individual and not just a prospect that can be exploited in what I believe to be a pyramid scheme funded by the profits from the BSM scheme.
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