Does USANA have products with consumer value?
If an alien visited Mill Creek Junior High to watch its (the alien's) first and only basketball game, the alien might conclude "ALL BASKETBALL PLAYERS ON EARTH ARE SHORT AND WHITE." That headline would get a chuckle out of those of us on earth who have experienced March Madness.
Well, Minkow (who is somewhat of an alien to direct selling) visited USANA and somehow got fixated on one or two products and has conveniently forgotten the dozens of other products in USANA's line. His headlines reflect the small sample size of his study, and his conclusions have left those of us on earth chuckling a bit. Fortunately, I actually spent a year of my life studying this is exact issue (at USANA no less), and here are the facts:
1) The USANA HealthPak 100 -- delivers convenience -- not necessarily the lowest price. Believe it or not, it is expensive to package the vitamins in daily dosages and USANA charges a premium for the convenience of the pack. USANA's HealthPak 100 was never designed to be a retail product (in other words it was not designed to be resold), but rather to be purchased direct from the company. Fortunately, USANA has a Preferred Customer program which allows those who would otherwise be 'retail' customers to place their order from the company, be serviced by the company, and still allow their friend or family member to earn commissions on their purchases. Welcome to network marketing in the 21st Century.
2) USANA actually spent tens of thousands of dollars to conduct a pricing study. They acted on the information they collected (from current, previous and non-customers) and dropped their prices considerably in the spring of 2000. It was called the "Price Value Initiative" and it was a painful era for the company (by the way -- it was a calculated pain pill the company took and I believe it has paid off in the long run). For those who want to build a retail business and mark up the products, you would choose to use one of a dozen products packaged in bottles and made available at much lower prices than the HealthPak 100 and with plenty of room for a retail mark-up.
3) Pricing is a positioning tool, not just a measure of value. The world is full of brands for which consumers are willing to pay a premium. USANA has made an effort to get out of the commodity pricing of nutritional supplements by increasing quality and packaging services around the supplements. So even if its costs were lower than its competitors, it would use its price to establish in the minds of consumers the quality of its brand (and the brand includes the bundle of services that accompany what some might call the commodity in the package -- this bundle includes educated sales associates, personal selling, 800 call center, customer service and support, conferences and workshops, quality control, etc., etc...). USANA is not looking for the customer who wants to buy their vitamins at Wal-Mart for the best possible price -- they appeal to the discriminating consumer who is willing to pay for panache -- and there are hundreds of successful, profitable, companies who have built a business in other channels, with different commodities.
Is USANA perfect -- I don't know, I haven't been engaged for a few years and I'm not able to say whether or not they have remained vigilant in their pricing research, or if they have invested in the 'bundle' of services that strengthens their brand.
The GOOD NEWS: USANA has tons of research and significant consumer feedback to prove to any analyst, any judge, any regulator, or any customer that they care about delivering value and made difficult business decisions to respond to customer pricing concerns.
The BAD NEWS: I know of many direct selling companies who have not been so sensitive. This is an opportunity for improvement for the industry, and I invite all companies to engage in a rigorous analysis of their pricing to make sure that there is a legitimate consumer value proposition.
Direct sellers must constantly balance the value they are able to deliver to the end consumer with the business costs entrepreneurs must incur each month to qualify as a legitimate 'distributor' of the company's products.
Well, Minkow (who is somewhat of an alien to direct selling) visited USANA and somehow got fixated on one or two products and has conveniently forgotten the dozens of other products in USANA's line. His headlines reflect the small sample size of his study, and his conclusions have left those of us on earth chuckling a bit. Fortunately, I actually spent a year of my life studying this is exact issue (at USANA no less), and here are the facts:
1) The USANA HealthPak 100 -- delivers convenience -- not necessarily the lowest price. Believe it or not, it is expensive to package the vitamins in daily dosages and USANA charges a premium for the convenience of the pack. USANA's HealthPak 100 was never designed to be a retail product (in other words it was not designed to be resold), but rather to be purchased direct from the company. Fortunately, USANA has a Preferred Customer program which allows those who would otherwise be 'retail' customers to place their order from the company, be serviced by the company, and still allow their friend or family member to earn commissions on their purchases. Welcome to network marketing in the 21st Century.
2) USANA actually spent tens of thousands of dollars to conduct a pricing study. They acted on the information they collected (from current, previous and non-customers) and dropped their prices considerably in the spring of 2000. It was called the "Price Value Initiative" and it was a painful era for the company (by the way -- it was a calculated pain pill the company took and I believe it has paid off in the long run). For those who want to build a retail business and mark up the products, you would choose to use one of a dozen products packaged in bottles and made available at much lower prices than the HealthPak 100 and with plenty of room for a retail mark-up.
3) Pricing is a positioning tool, not just a measure of value. The world is full of brands for which consumers are willing to pay a premium. USANA has made an effort to get out of the commodity pricing of nutritional supplements by increasing quality and packaging services around the supplements. So even if its costs were lower than its competitors, it would use its price to establish in the minds of consumers the quality of its brand (and the brand includes the bundle of services that accompany what some might call the commodity in the package -- this bundle includes educated sales associates, personal selling, 800 call center, customer service and support, conferences and workshops, quality control, etc., etc...). USANA is not looking for the customer who wants to buy their vitamins at Wal-Mart for the best possible price -- they appeal to the discriminating consumer who is willing to pay for panache -- and there are hundreds of successful, profitable, companies who have built a business in other channels, with different commodities.
Is USANA perfect -- I don't know, I haven't been engaged for a few years and I'm not able to say whether or not they have remained vigilant in their pricing research, or if they have invested in the 'bundle' of services that strengthens their brand.
The GOOD NEWS: USANA has tons of research and significant consumer feedback to prove to any analyst, any judge, any regulator, or any customer that they care about delivering value and made difficult business decisions to respond to customer pricing concerns.
The BAD NEWS: I know of many direct selling companies who have not been so sensitive. This is an opportunity for improvement for the industry, and I invite all companies to engage in a rigorous analysis of their pricing to make sure that there is a legitimate consumer value proposition.
Direct sellers must constantly balance the value they are able to deliver to the end consumer with the business costs entrepreneurs must incur each month to qualify as a legitimate 'distributor' of the company's products.
Labels: Consumer Value, Direct Selling, FDI, Minkow, Nutritionals, Pricing, USANA
posted by Sydney and Emma at 1:40 PM
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