College of Business Dean Explores Melaleuca’s Success Through Innovative Business Model

The following article appeared in the Idaho State Journal. It was written by John Ney, Assistant Dean of Idaho State University’s College of Business. He also serves as the college’s Director of Professional Development and as an Assistant Marketing Professor.

I am very lucky because I have a job that I love! I serve as the Director of Professional Development and teach in the College of Business at Idaho State University (ISU). One of my favorite roles is helping students land internships and jobs that lead to fulfilling careers. It is so rewarding to hear from students when they land that all-important first job after they put so much time and effort into obtaining their college degree. We have learned that the best way to find a job upon graduation is to get an internship first. Every semester the College of Business has over 100 students who work as interns in their field of study with companies all over the region. A key enabler to this is ISU’s excellent Career Path Internship (CPI) program www.isu.edu/career/cpi-program/ where ISU pays the student’s wages to work in the business world and help them gain professional experience in addition to their learning in the classroom.

While some of our students seek job opportunities all over the world, many are interested in employment right here at home. Therefore, it makes sense to do my due diligence on companies based in southeast Idaho, especially major employers like Idaho Central Credit Union, Farm Bureau and the Idaho National Laboratory.

One of the companies that students often ask about is Melaleuca. Since it is the largest company headquartered in eastern Idaho, it offers a stream of positions suitable for ISU College of Business graduates. In fact, many of the roughly 4,000 employees at Melaleuca, including several executives, are ISU alumni.

In researching the company, I’ve had the opportunity to interview CEO Frank VanderSloot, Chief Marketing Officer Scott Hollander, and several other Melaleuca executives. These conversations have given me a better understanding about this consumer goods manufacturer, which reached $2 billion in annual revenue last year.

One of the questions students have asked about Melaleuca is, “Is it an Multi Level Marketing (MLM) Company like Amway?” After careful analysis, I can answer, “No, Melaleuca’s model is nothing like multi-level marketing.” Melaleuca has created a business model that is altogether different than the MLM category. While teaching marketing at ISU, I have examined numerous business strategies and product distribution models, and the differences between Melaleuca versus the MLM industry are quite different.

Multi-level marketing is so named because it centers on promoting, distributing and delivering goods or services on multiple levels. In other words, it hinges on a company selling—or marketing—products to people who sell it to other people and so on down the line. This marketing model is universally recognizable by its army of distributors who buy inventory and attempt to resell it for a profit.

Melaleuca, on the other hand, creates, advertises, distributes, and delivers goods via a direct-to-consumer model. To do that, Melaleuca manufactures its own products. It avoids stores, advertisers and middlemen, relying instead on word-of-mouth marketing from existing customers. Melaleuca sells directly to the end consumer. There are no third-party stores or any distributors in Melaleuca’s model—just a single transaction between the company and the individual customers who buy the products for their personal use.

The company has disclosed that roughly 80 percent of those who shop with Melaleuca each month are strictly customers. They just want the products.

For those who mistakenly believe MLM refers to multiple tiers of compensation, I would point out that many industries incentivize referrals by offering commissions to multiple people for their role in an individual sale. For example, you’ll find variations of multi-tiered compensation plans in financial services, insurance agencies, and automobile sales—none of which are MLMs. After all, the term is multi-level “marketing” and not multi-level “compensation.”

According to Hollander, Melaleuca’s value proposition is a result of superior household products based on high-quality, natural ingredients and scientific discovery. Equally important, the company’s promotional and distribution strategies avoid retailers, mass media, and middlemen, which lowers the price point. And because it offers quality products at reasonable prices, customers not only see value in shopping at Melaleuca, but they refer others as well.

I was interested to learn that Hollander came to Melaleuca from a senior marketing position at Procter & Gamble. He said he never would have left P&G to work for an MLM.

In fact, what drew him to Melaleuca was the appeal of working for a different kind of company. He was intrigued by Melaleuca’s direct-to-consumer business model, cutting-edge innovation, and track record in the ultra-competitive consumer goods industry. Among Melaleuca’s core values, he said, is researching and developing products that outperform the world’s most popular brands, protecting the environment, and helping customers live healthier lives.

From the signs I see, Melaleuca’s model is working. It has increased annual revenues in 30 of the last 32 years, and it’s growing faster than ever before.

When current students approach me about a potential employer, I often refer them to my former students who now work for Melaleuca. It gives them a chance to have an open conversation with someone who relates to their situation and works for the company. One example, is Sekhar Dehal, a recent ISU graduate and former student. Sekhar is currently a financial analyst at Melaleuca and someone whom I encourage students to reach out to for an employee perspective about the company. I recently spoke with Dehal, and he told me about his experience there: Melaleuca takes care of its employees, its international markets present great career opportunities, and its future looks bright.

John Ney is the Assistant Dean of Idaho State University’s College of Business. He also serves as the college’s Director of Professional Development and as an Assistant Marketing Professor. He earned his Master’s degree from Gonzaga University and Bachelor’s degree from the University of Idaho.