Sunday, April 01, 2007

Dateline and quixtar

The other day I was browsing through videos on Youtube and found the Quixtar segment on a Dateline NBC video. There was a guy (a motivational speaker) claiming he was making 250K per annum on the video. However, when the investigators looked up Quixtar documents all they could find was a figure of 1400 USD as the expected income for a distributor. Why this disparity?

Can another level in the supply chain create value that can justify returns worth 250,000 USD ?

Let's do some math and let's use some fictional characters. I used aggressive numbers for this analysis.

Dick and Jane have an IBO. They put in a lot of effort and recruit an army of 500 volunteers. Of these individuals, let's say a very reasonable 50% are really motivated. Of the remaining 250 say 20% have the capability to be the go-getters. So, Dick and Jane have an army of 50. Now each of these 50 make contact with say 100 people in a year. If they have a conversion rate of 10%, Dick and Jane have a base of 500 downstream consumers. Now going by the logic that Dick and Jane make money off of the commissions they get due to the consumption behavior of these 550 people below them (500+50). Let's punch in more numbers.

On average a family spends say 200 dollars on groceries and 100 dollars on miscellaneous junk available on Quixtar's offerings. The average family size being 3, the number of families that Dick and Jane can feed on is 183. So, Dick and Jane generate a total revenue of (300*183) = 54900 per month which is roughly 648000 a year. If we assume that Quixtar gives a commission of 10% to its channel, the total commission on this would come close to 65,800 of which some of it would be passed on to Dick and Jane's army of volunteers. Say a total of 40% is further passed onto downstream, Dick and Jane are now left with 40,480 USD. Either Quixstar is lying- or I must be crazy ! What kind of conversion do you need to make 250K in Quixtar? The question is can everyone make it? And even if someone does it - Is the opportunity cost woth it?
Given my knowledge of the entire process, 41k looks like the high end estimate. Is this 41 K worth it? Don't forget losing friends, getting to hear no's from a thousand strangers !
And finally, I believe our success is measured by not what we achieved, but by what we "gave up" to achieve that success. Is anyone listening (or rather reading?)

2 comments:

Anonymous said...

I tried to listen to it but could't help reading.. there is so much math in the text, being a good@math guy in the past I still have to read it second time to get a good sense of those numbers.

If a Quixtarian has to make these calculations, he would treat the 550 members coming from 550 different families, and their income go to 165000/month and so on ( I am already feeling dizzy, so not doing any more math). And I think thats the reason they show very high figures in everything they say.

I am neither saying you are wrong nor I am a Quixtarian and I have never attened their speeches... but I hate people stopping at the malls, grocery shops and talking to me as if they know me since ages and try to get my number,fix a meeting with me and when I say NO!... they bounce back at me a say I have no goals in life.. blah blah.... why do they even care......

Do you recognize me?

Girish Mallapragada said...

I do not recognize you, but I am glad we are on the same boat.