Nu Skin Situational Analysis
Introduction
Nu Skin International began as Nu Skin in 1984 with a commitment to market personal care products that feature premium, wholesome ingredients with no unfriendly fillers. It is difficult to convey the superior attributes of a product as it sits on a store shelf, so Nu Skin distributes their products through person-to-person marketing through an organization built on multiple levels of distributors and their “down lines”. These multilevel marketing (MLM) companies have flourished in recent years and Nu Skin is emerging as a major player in the MLM industry. While Nu Skin has grown phenomenally in the last few years, there are indications that it still has significant potential (www.nuskin.com).
Identifications of Problems and Issues
Nu Skin is facing many issues in today’s economy. Nu Skin has fallen into the MLM trap, with company leaders too far removed from their customers as they focus aggressively on communicating with existing distributors and recruiting new distributors. Nu Skin offers financially rewarding direct selling opportunities to entrepreneurs who want to own their own business. As a leader in the direct selling industry, their generous compensation plan is designed to provide a healthy return on time invested. Nu Skin provides its distributors with the ability to earn high commissions on a relatively small investment. Distributors work as independent contractors, becoming the ‘boss’ of their own business. This might give the appearance of a pyramid scheme, a business model that involves the exchange of money primarily for enrolling other people into the program without any product or service being delivered; however, there is a clear difference between pyramids and MLMs. The method of conducting business as an MLM often closely resembles pyramid schemes. The key distinction between these schemes and "legitimate" MLM businesses is that MLM income is earned solely from the sales of the associated product or service.
Nu Skin International began as Nu Skin in 1984 with a commitment to market personal care products that feature premium, wholesome ingredients with no unfriendly fillers. It is difficult to convey the superior attributes of a product as it sits on a store shelf, so Nu Skin distributes their products through person-to-person marketing through an organization built on multiple levels of distributors and their “down lines”. These multilevel marketing (MLM) companies have flourished in recent years and Nu Skin is emerging as a major player in the MLM industry. While Nu Skin has grown phenomenally in the last few years, there are indications that it still has significant potential (www.nuskin.com).
Identifications of Problems and Issues
Nu Skin is facing many issues in today’s economy. Nu Skin has fallen into the MLM trap, with company leaders too far removed from their customers as they focus aggressively on communicating with existing distributors and recruiting new distributors. Nu Skin offers financially rewarding direct selling opportunities to entrepreneurs who want to own their own business. As a leader in the direct selling industry, their generous compensation plan is designed to provide a healthy return on time invested. Nu Skin provides its distributors with the ability to earn high commissions on a relatively small investment. Distributors work as independent contractors, becoming the ‘boss’ of their own business. This might give the appearance of a pyramid scheme, a business model that involves the exchange of money primarily for enrolling other people into the program without any product or service being delivered; however, there is a clear difference between pyramids and MLMs. The method of conducting business as an MLM often closely resembles pyramid schemes. The key distinction between these schemes and "legitimate" MLM businesses is that MLM income is earned solely from the sales of the associated product or service.
References: Anonymous. (1991). Case 4: Nu Skin International. Federal Trade Commission. (January 10, 1994). Multilevel marketing company and three of its distributors agree to pay $1.2 million. Retrieved July 6, 2004 from http://www.ftc.gov/opa/predawn/F95/nu-skin.htm Kottler, P, & Armstrong G. (2001). Principles of Marketing. New Jersey: Prentice Hall. Nu Skin. (1997). 1997 Annual Report. Retrieved July 5, 2004, from http://www.nuskin.com Nu Skin. (2002). 2002 Annual Report. Retrieved July 5, 2004, from http://www.nuskin.com