And Contreras wasn't the only guy with a desk job to jump at thechance. He says that his local Excel group includes "a half dozendoctors, law-yers, and CPAs."
In the two and a half years he's been with Excel Communications,Contreras has moved into its highest ranks. By bringing in more than50 long-distance customers, he's become an executive director. Thecompany pays him a percentage of his customers' long-distance billseach month. (Contreras must maintain 20 customers to keep his statusas a senior representative.) Contreras has also sponsored 27 reps,each of whom has gathered at least 3 customers and sponsored morereps, and so on down the line. In total Contreras estimates that hehas about 2,000 reps in his "downline." The commission he earns onthose reps and their sales helps him bring in about $15,000 a month."In a year or so, I'll probably do this full-time," he says.
For many would-be entrepreneurs looking for a shortcut to companyownership, the choice comes down to network marketing or franchising.But buying a franchise requires an investment of anywhere from$10,000 to $1 million. "Everything I do is aimed at Joe and MaryLunchbucket," says John Cummuta, CEO of Financial IndependenceNetwork (#295), a publisher and marketer of personal-financeinformation products in Boscobel, Wis. "And I mean thataffectionately. This is their first venture into entrepreneurism.Network marketing is so cheap to get into that some call it the'people's franchise."
"That's what's so exciting," echoes Troutt. He makes no bonesabout the fact that many of his reps are just earning spending moneyby signing up friends and family. "You take my Mama Nadine. She wantsto make an extra $100 a month to play bingo." But the company saysit's attracting more professionals like Contreras every day,including a few state senators and a former attorney general. Excel'smost recent rep survey re-vealed a 60-40 split of men to women, aratio nearly unheard of in a field that attracts many women who'vebeen shut out of traditional sales.
personal transformation is a powerful theme in network marketing.Gouldd brags about the schoolteacher who's become an ace sales rep onthe side. Equinox's start-up story is the story of Gouldd's ownrecovery from what he describes as a "toxic overload ofpollutants"--the inspiration for his line of environmentally correctcleaning and body-care products. Cummuta points to the folks he'shelped get solvent. He says, "I'm an evangelist for no debt." His ownhistory of living high off the hog provides a moving testimonial.
For his part, Troutt likes to point to the beautician who was ableto buy a house after working as a rep for Excel part-time for a year."A lot of people live paycheck to paycheck," he says. "This is aboutchanging people's lives." Multilevel marketing has certainly changedTroutt's life. After Excel went public, last May, Troutt became abillionaire, at least on paper.
But Troutt was once as skeptical as anyone about the channel.Before he started Excel he'd founded an oil and gas company and aconstruction business. He had no experience with network marketing.Troutt was nearly convinced that to succeed as an unknown reseller oflong-distance service, he'd have to do what the big companies did:hire a conventional sales force or a fleet of telemarketers, andadvertise like crazy. That was in 1988, a few years after theAT&T breakup. The challenge was not so much how to compete in acommodity market--AT&T's rates at the time left plenty of roomfor rivals. It was how to acquire customers as quickly as possible sothat Ex-cel's volume would enable it to buy cheaply and establishitself as a player before the dust settled on all the upstarts bornof the divestiture.
Troutt took his ambitious sales projections and studied hismarketing options. He was introduced to Steve Smith, who for threeyears had been trying to set up a direct-selling plan at a regionallong-distance service in Houston. "That company didn't see the powerof network marketing, and I don't think Kenny was real im-pressedwith it either," says Smith. "It's a different thing." It took aboutsix months to win over Troutt, who says now, "I saw how easy it wasto sign up long-distance service. Anyone could do it, a collegestudent or a retiree."
The concept wasn't entirely new in telecommunications. It's alittle-known fact, for example, that Amway has been distributing MCIservices since 1983. But by its own account, Excel was the firstlong-distance provider to take network marketing in-house. Thatstrategy allowed the company to stay competitive with MCI andAT&T while sparing it combat with cheaper regional players. Excelnow has 4 million long-distance customers, and it got them allwithout spending a dime on consumer advertising.
Recently, in the wake of deregulation in the energy industry,Smith (Excel's executive vice-president of marketing) has beenapproached by companies that want to tap Excel's 700,000 reps to sellutilities in the home. "I think you'll see more consumer servicesbeing sold this way," says Smith. Thomas Wotruba, professor ofmarketing at San Diego State University, agrees: "Network marketingis part of a broader trend, which includes direct marketing and TVmarketing, toward offering convenience to the consumer. We're goingaway from in-store retailing toward having stores come to thecustomer."
Still, there's no denying that the direct-selling industry remainsplagued by serious problems of ethics and image. The classic blindads promising overnight wealth haven't gone away, and it's hard topolice revenue claims made by far-flung reps. Excel's "businesspresentation" meetings for recruits are one-hour professional affairsheld at swank hotels and restaurants. But many multilevel marketers'initiation meetings still have the creepy feel of Invasion of theBody Snatchers. The relentless recruiting of new reps is aneconomic imperative--many reps drop out or don't sell much--but it'salso a big reason the industry remains dogged by allegations ofpyramid schemes.
