Business roundtable; 16 Of 26

The following program is made possible through a grant from nation's business. This is business roundtable a program of current comments from leading members of America's business community. Today. RICHARD DE VOS president of the Amway corporation and Alan Bachmann vice president of the National Better Business Bureau will explore the topic ethics of door to door selling with series host. Alfred L. C. Lee Dean of the Graduate School of Business Administration at MIT. State University is a place of direct selling in our economy as been a subject of much discussion over the entire history of our country. I suppose when we think back historically about Direct Selling New England in the early days one of the Yankee pedler

came around sometimes with a pack on his back on his regular routes selling merchandise. Later succeeded by the peddler with the horse and wagon again making his run necessary rounds many times to farm areas where established type or retail stores simply weren't available is a forerunner maybe in some respects the direct selling that we have today. Mr. DE VOS What do you think of today as direct selling what is it in our economy today. Well it's an interesting situation today because direct selling in the midst of the ability of people to move to supermarket locations is still surviving so abundantly direct selling really is nothing more than the idea of giving people in the home service as opposed to making them go out and obtain products and services. Well how important is this America this small volume business.

Well it's we like to think of it as a sleeping giant direct selling is a multibillion dollar business. The figures will vary from four billion and nobody really exactly knows but it involves something over two million people in this country who are involved in the selling or the manufacturing of products sold through direct selling. What do you think of as direct sellers could you give me if you was gracious. Well Ira you mean by company name new product type yes prototype for example is a milkman delivering milk because right now we would say that a direct cell I would exclude the insurance people the dry cleaning man who calls to your home the milkman. These men by tradition are around man almost alone many truck sellers work on a rock basis too but the direct seller is the person who calls on your home offering various products and in the Home Service.

When this department is vice president of the National Better Business Bureau. You're usually the repository of much information about many different kinds and types of business and we noticed from time to time in the press and in other places that some criticism of direct selling and direct selling organizations do you get many complaints in this issue. Well we got. Thousands of complaints about their Morelos specialized for example our number two category of complaints is the home improvement swindler. Was a swindler. They'll. Call it a home and say your home has been selected as a model and we'll put on new shingles and so part of it isn't going to cost you a cent just

sign here. While you sign the contract and that contract is sold. To financing agency and any shingles are put on there. It's a very shoddy job. Another variation of the same thing is. People who have one third grade wave repaired probable drive up and say I'll put on a new macadam job with what he puts on is just oil sticky oil. That's tramped all over the house and so forth. And another category of the magazine salesman which we receive large numbers of blanks against and we have a program and that old but a lot of the firm's number along the way. And the complaints persist. Now aside

from those two fields there are the. Great majority of legitimate direct selling Thompson he's. Selling merchandise good merchandise. And. Against time our complaints are almost no. So the complaint situation has a localized in certain fields. And then there are a great body of legitimate perms against which we get many complaints. Notice you use the term legitimate companies. How would you define a legitimate company in this business anyway Mr Douglas. Well I define my company as legitimate. Only because I think we have as much a problem with those kind of operators certainly as the national BBB does or the local Chamber of Commerce. They perhaps are our

worst enemy too. We look upon a legitimate company as one who works from an established location who has a place of business. In other words if you've got a problem you can find him next week. We look on a legitimate business as one who has some money in the bank so that if the product does not live up to its claim that there is a company who will stand behind it and make good the claim of the salesperson who would guarantee the product the service or the merchandise and certainly the majority of the companies in this industry are that way and unfortunately we all are burdened with the kind that Mr Bachman is speaking of and we like him do our very best to eliminate them. With God what do you do when you get these type of complaints in terms of the types of sellers you mention the Home Improvement people learn in some cases the magazine type salesman. But what does the Better Business Bureau all over the country the local ones do about these situations.

Well we believe so but we see the best policing and we try to. Get these companies to correct the situation voluntarily. Now where that isn't possible we will go to the authorities we will gather evidence and present it to the authorities for prosecution. In other words the Better Business Bureau's are actually again and many some cases obtaining evidence and presenting it as a price correct Ernie's the case may not be. That's correct and you do this on all different types of complaints. Oh yes yes this is a general practice we try to persuade the company to correct the practice as voluntarily as a first step and then after that fails we're forced to and our evidence over to government cooperate with the government probably. The principal problem is that the shoddy operators the guy who wants to and knows the law is there. He's going to break it whether there's your rule or federal law or

anything in this man's a crook. That's grand. We get all sorts of laws we still got trucks and that's why they're so tough to catch because they by intent go out to swindle I mean there's no act but that happens in every market in every field and in all professions there's always a certain element but they're caught up with more often you might expect. I don't I don't envy you the difficulty of your job because that's a tough one to do. I salute the Better Business Bureau for the fine work they do. Mr. Bass what kind of selling organizations are there in the market today that we find of direct selling organizations or other different types of direct selling organizations or do they all pretty much follow the same practice. Well they're probably break into two or possibly three classifications. One group and direct selling is what we call a party plan group. This is the kind where a neighbor invites some of her friends or relatives or neighbors in and the sales person comes in and makes a demonstration within the home. Now there are many fine legitimate companies that operate in

this way there are known and very highly respected. There are other companies who work almost specifically on calling house to house and working right down a street or an avenue and calling out every home offering their products. There is another type which is what Amway is like where are we. Do it more on a recommendation basis and that is it. We very seldom call on a home unless we have an appointment to make the call. And that is where somebody who liked our product recommends it to somebody else. This is what we call it a recommendation system. We don't offer referral incentive systems to the consumer to you know say you can get it free if you just give me a name. But it's done on a pure and simple basis so if you like my product would you mind recommending me to somebody else. I say I assume from what you've said that your type of business with the Amway Corporation as well as some others is kind of a repeat business is this right. We figure that probably close to 80 percent of our business is all repeat business. Our feeling is that if any business is any good it's got to be built around the fact that you're welcome the second

time. Maybe it's one of the first criteria as to whether you want to buy from anybody would you like to have him come back push you make your product as do some other direct sellers that by the very nature of the product is used up within a relatively short period of time. So the person is back in the market so to speak to buy it again. Some companies by the nature of the product or let's say vacuum cleaner they are not in this kind of a position where you buy one hears it up in a month or two in there they could be back so you're not alone. They place I assume quite different probably are just yak but I would assume and I believe the good look direct legitimate direct seller is a person who after he makes a sale his man will call back to make sure they are happy with the product and I think this is vital to the industry and the companies that fail to do this work a disservice to everybody in the industry because that customer free is satisfied will recommend. If he's got a problem in the first person I want to know is the guy who sold him or the company whose product he is representing it so the

customer knows where to go for service. I believe a call back either to service or to double check what you sold or to resell them some additional product is vital and many direct selling companies if not most of the legitimate ones perform this cash. What kind of products do we find generally in terms of volume are the types of products that are sold direct to the home. By PRI category I just in general I'm afraid I can answer the question in other words we do have quite a variety. All you need are in numbers are probably doing our business. I don't know you're trying to break it down. Oh I can are just in the sense of what are some of the major harsher everywhere from from the bottom to the top you know because you start with the huge companies of which are any of them on up to companies that supply containers in the kitchen on up to the all the makeup products on up to the fashion cop houses who sell frocks and dresses to the party plans systems. I don't know where you'd stop or begin I think

it covers almost the entire field of merchandise covers the whole gamut. This is a relatively new development or is this been going on for some time. Well it's not a new development in all directions has been growing. Both in number of employees and the revenue taken in. I think they're about probably two million people so directly. Some of them part time but many of them full time. And Mr. Mr. Bachmann meant to mention a little earlier that there are some problems with certain types of sellers whereas the great majority of the firms in the direct selling field are ethical good companies obviously providing a good product. But what are you doing in your industry about the problem with the unethical

Sol are you doing anything in the industry I missed Bachmann told us what the Better Business Bureau's are doing. What's the industry itself doing. Well the main spokesman and so she ation as far as the industry is concerned is the National Association of direct selling companies. Now this is a organization that tends to limit its membership. First of all by what they call legitimate companies companies that can be found companies that have a sound financial backing companies that offer good product guarantees and in fact a company can't even join the association unless they do have a very clearly stated customer guarantee policy. It's just one requirement for membership. Now our side of the code of ethics which they have and their own self policing organizations. I say these are the major areas that they're working in today to protect the consumers interests. There's a lot of talk about the consumer having a problem and we certainly are as concerned as anybody

is about protecting the consumer. That's our customer too it's you know if you don't satisfy the customer obviously in the long run you're going to sell or get it. That's for sure. When you think that these efforts that you're making through the association have been helpful. Well the association now is going into the next stages which has to do with identifying the individual salesperson to make sure that the consumer has at least a first step to make sure that this is a legitimate honest company and lost those member of people and carry a card with them for a self-identification. All of this is a part of going the next step to make sure the consumer has some safeguards to make sure she's dealing with a reputable company. I was going to. Being an entirely different kind of an organization what do you think about the self-policing of an industry of the type that Mr devices mentioned.

I think it can be very effective. And has been proved to be very effective and I think the direct selling industry is a good example of its effectiveness. I say it's not the only industry that has tried to police itself for a few years ago we were. Getting. Huge numbers of complaints against the room air conditioner industry. And. Through patience and a good deal of persuasion. They were induced to adopt a certification program. Which under which their trade association briefly would certify the accuracy of any claims made for cooling capacity and almost overnight. The complaints disappeared. And this is an industry that. Started its own problem and

it was a very serious problem. Strictly on a sort of policing basis with some help from the Better Business Bureau. Now there are and there are many examples of that. The words and you obviously are not one of those that thinks the industry can't police itself and that we need laws to take care of them knowing I not only believe but I know that business can believe so and as we well to do so. Well that's maybe the greatest thing that brings that will and is the mere fact of the desire to survive. Right now it's being purely selfish about it. So you know the reason we're so concerned about getting the bums out of our business as you are is that if we keep letting them run loose it harms our whole industry whole growth of our organizations. And I'm sure the air conditioning people they knew if they didn't do something about it it would go on. So it isn't great altruistic businessman who just trying to be goodly and tiny. He's he's trying to sort of hide it in a competitive world and

right there is good motivation I know a lot of people think well what makes you think he's going to do it just because he wants to be good not because he wants to in business. Because he knows unless he serves the customer is going to die. And that's why I always laugh when people act like you don't think you can do just as easy to do. Literally you know I don't want to stay alive in business. Well MS-DOS would change the subject here a little at this point. What kind of people do we find in general with the Direct Selling organizations around the country. Where Do We Come From what kind of people are they. Well you heard Mr. Bachman referral that a god of the two million or so people involved in selling and we were talking earlier about the breakdown. He was pointing out that there are roughly a million men and million women involved. So there are at least as many women involved in direct selling as are our men our definition of most of these people is that they are seeking additional income supplemental income you know other words they're part time people like well we don't know the percentage on that but we would certainly conclude that as far

as the women are concerned I think Mr. Bachmann would agree that at least 75 percent of the women are homemakers have families to tend to and just want to make a little extra money or fill their time a little bit more profitably. We have no percentage on that man. Somewhere over half probably our full time as far as the men are concerned. In the industry today I've noticed a great thing happening and that is that more and more of them are husbands and wives working together. That's true in our business at least that they get together and she may do the bookkeeping for him and he may do the selling but they work together to build a business. There are people who live in a town they stay in a town often but live in the same city all their life. They go to church there and they send their children to school and they pay taxes there to other words. These are people that you move around in groups to another city only once in my life have I ever talked nose to nose with anybody who did that and a lot of those are the ones who give us all the black eye. Very few householders ever found one of those. They're few and far between.

So is your experience with I guess just some call concept that these crews moving around is not a very valid concept. The great majority. President Day direct sellers who live in the communities in which they conduct their business. We talked about it in general what about your own company. You make products and distribute them in the same way a company that our household type products. Where do you find the people that you have in your organization that sell lease and what kind of people are they specifically in your company. We ran a little survey an age group I don't know if you're interested but we found that in the 20s we didn't get too many. It was until a person had tried one job after another and got a little disillusioned that he wasn't getting promoted as fast as he should. And he took a turn toward selling as a sideline or his wife got a little disillusioned with her income and she started trying selling so we find the bulk of our people in the 30 to 50 age group we have them as young as 18 as old as 80. But virtually all of our people are

husbands and wives who work and live in that community and do this on a part time basis in our business and in most of the direct selling businesses we provide people a chance to begin on a part time basis. And if they succeed at it and are doing well then let them slide into it on a full time basis. And so most of our people are good honest people working at a job someplace else at least when they come to us and then find out if they can fit this sort of thing. What do you do in the way of training is there much training involved in these kinds of people. Well some of the companies spend great sums in advance training our people are required first of all a bio training manual and yet they are required to come to sales meetings required because they can. They're free to do what they will but we provide weekly meetings for them. Some morning some afternoon some evening training sessions. We indoctrinate them thoroughly in the product its guaranties how to tell a customer how to get the best out of it. I take it these people then are in a sense the kind of independent business people.

Yes that is maybe the prime thrust of direct selling. To me the greatest excitement but part of me has bought direct seller is America's smallest businessman. I mentioned poverty and I really want to get back to that because that point today is that we talk about people who are on campaigns with the government giving them some money to keep them alive. The most exciting thing to me is that direct selling provides millions of Americans with a chance to be their own at a high poverty program. You'd be surprised how many people are willing to do something if we give them a chance to do something. And we provide hundreds of thousands of people every year with a chance to do that. Well let's look at another facet of this problem. You both know this. The direct selling over the years as has most of all other kinds of business for that matter has a Drac attracted some legislators either at the municipal of the state or the federal level interested in passing some laws

regulating or affecting it in some ways. We had I think historically in this country the so-called Green River ordinances which were basically municipal ordinance is requiring a license for people to sell and in some cases the fee for the license was at such a high rate that it actually prohibited any direct selling in that community. Is this still a prevalent practice. Is this pretty well died out. Knowing I think it's very probable. And. There are. Other types of regulations. So I chose periods which discourage a person from going direct selling. Some communities insist that you go down to the police department and have your photograph taken and that sort of thing as if you were a criminal and a lot of people

don't want to go through that. So they're there as much of this ordinance business and local regulation business designed to be to discourage people from going into direct selling. I think it's bad and. I think people have a right to choose the occupation they wish to follow and if they pursue it honestly I think they should be permitted to do so. But now we have a bill before Congress this rather I'd say it's been introduced in the Congress recently by Senator Magnussen that has some rather far reaching implications in the direct selling field. What are the provisions in this building. I think the major provision is that. The individual makes a purchase from a direct charge not from stores or through the mails or so forth from direct Sollars

has three days to change its mind. I don't know if any time within three days you can decide I don't want it so I can do nothing about it. Even if he signed a contract yes. Yes. I don't think that's very good legislation and the first place that discriminates against direct sellers picks them out from the whole mass of the economy and applies a special penalty to them. And it's our experience that as I said before that the direct selling industry as a whole is honest and doesn't misrepresented its merchandise and gives the public parts and title too. Now there are these fringe areas of the home improvements one liners and some of the magazine people and. I would think that the senator would

try to direct some legislation against those shouty elements. If he has the avenue on which to support at least one case I think there is considerable evidence. And not penalize legitimate business people. Why should a person who within three days be able to cancel a contract with a direct salary when he wouldn't think of cancelling a contract for the purchase of a car. Or the purchase of a home. Or any one of a number of other things it seems to me that legislation in other words you think this is rather punitive legislation directly to this specific group to cure an evil that only applies to certain you know I don't this is a group.

Mr. Vice What's your yes for the industry stand you say on this. We do not necessarily object to the idea of legislation we have ject being singled out. In other words if the Drechsler is bad but everybody else's hands are clean now I'm sure the senator knows better than that. I always get all disturbed when I wonder why the senators can't seem to pass any self policing legislation on themselves but they are able to do it for everybody else. They don't seem to be able to keep their own house in order and you know all you do is look at the last action of some other internal problems. But boy he sure knows about everybody yet. In other words in your saying that if this legislation was applied across the board all retail transactions the Direct Selling Association would not basically oppose this that's correct. I don't buy that but that's the industry stand well I don't buy that either. That's another aspect and if there has been these attempts at legislation and yet the industry's grown it's prospered Why has it succeeded. What's the basic reason behind this great success.

Well maybe the basic reason is that there are more great people in this country than a lot of people give people credit for. The senator is implying in his bill for example that people are incompetent. They're able to think that they don't know what they're signing. I get the feeling sometimes that these people must think the average American is a stupid jerk that he can't read the small print he can only read big print that he's got to protect him like a mother and holds a baby at a time. Neither would you think that in a free enterprise akin to me a person ought to have the opportunity to buy products wherever they want to. I think they ought to have that free choice not the main thing. Most of us our time is up in this department thank you very much for a most interesting discussion. Participating in today's Business Roundtable were RICHARD DE VOS president of the Amway corporation and Alan Bachman Vice Pres. Didn't of the National Better Business Bureau. I was for the program was Alfred L. C. Lee Dean of the Graduate School of Business Administration at Michigan State University.

The topic for next week's Business Roundtable is business and business men in politics and guests on the program will be Thomas R. Reed director of civic and governmental affairs for the Ford Motor Company and Donald Egon vice president for corporate communications Barrows corporation. This program was produced by the Graduate School of Business Administration and the Broadcasting Services of Michigan State University under a grant from nation's business a publication of the Chamber of Commerce of the United States. Business Roundtable is distributed through the facilities of national educational radio. This is an E.R. the national educational radio network.