Archive for February, 2009

Three things important to Start Up

Been thinking about the Start Up Process as i’m about to launch a new business when i get back to Ireland. Currently i’m in India so Rather than write im going to try Video Blogging about it.

Xocai is a Scam

I had the interesting experience of attending a Xocai “Pre-Launch” seminar recently. The idea was that i’d meet up with two old friends we’d listen to some fast talk about a new investment opportunity and then have tea and lunch to catch up. The Presentation was very stereo type of an American time share presentation. The 45 Min Presentation took 3.5 hours! and somehow they danced around without mentioning the business model or the profitability ratios. Kinda like this:

I tried to pull them up on the fact that they hadn’t mentioned the numbers and they told me i was on a “different level to most” and they’d be happy to take all the time to answer the questions after the presentation. Everyone else was told they didnt need to understand the business or the numbers. The presentation talked about the benefits of the Xocai product (which i agree seem valid), how the lady bring the product to Ireland in front of us is an ex-retired millionaire who was one on the UK rich list (although she let it slip she worked six days a week in her shop 6 months ago – not exactly a millionare lifestyle?) and how great being rich is. They show’d incentive scheme’s without mentioning the numbers and said if you want to drive a AMG Merc and take cruises like the once on the slides they’d show you how – It’s all part of the bonuses built in.

AMG Merc

AMG Merc

They finished the presentation with a 20min clip of a successful entrepreneur humorously talking about his life and how great being rich is – was this somehow affilaited with Xocia? No – i would bet the guy has never even heard of the product, but people in the room licked their lips and signed up immediately – because if they didn’t things were moving so fast that they’d be further down the pyramid. It sounded too good to be true – i nearly put my name down but wanted to see the numbers first.

Xocai – The Product
Xocai is a dark chocolate which is very high in AntiOxidant’s, can be eaten by Diabetics and is marketed as Healthy Chocolate. Although none of the literature actually states it – there is a clear message amongst the group that this chocolate is a hunger suppressant and a catalyst for weight loss; i’m not an expert about this area but 7% fat and 3% sugar still isn’t something i’d call a diet food. In truth the product itself is very impressive, only catch is it costs about 150Euro RRP a box.

What is MLM
At 150Euro RRP a box finding distribution for such a product is extremely difficult. So they use a process called MLM to bring the product to market. MLM is not a scam, its can be a very practical marketing method. MLM (Multi-Level-Marketing) more commonly known as network marketing is a system of bring a product to marketing by referral marketing and appointing agents in a downline, similar to a franchise operation where the franchiser receives a commission. I would be a fan of the concept, as are Donal Trump and Robert Kiyosaki. The pretense of MLM that makes in not a pyramid scheme is that no money may be earned from recruiting alone (“sign-up fees”), though money earned from the sales of members recruited is one attraction of MLM arrangements.

Is Xocai a Pyramid Scheme?
Xocia just about avoid the official description of a Pyramid Scheme by insisting that each “distributor” buys at least one box of chocolate per month. However it was made very clear in the Xocia presentation that the way to make money in this business was to focus building a pyramid below you and the example given was that if you get 4,000 people in a pyramid below you and each buys their one box of chocolate…

So why is Xocia not a viable business opportunity?

After the “45min presentation” that took 3 and a half hours i sat down with the American Millionaire Lady so that someone could finally explain the business model and the financial’s of the project.

First question – how much does the product cost and how much does it sell for? Erm $110 per box to buy and, erm, we recommend a 50% mark up.
Gross or Nett Mark Up?
Erm, what do you mean?
Well for example i’m VAT registered and most people in the presentation would not be. Does the VAT then errode my Profit?
No you just add that to the price.
Well Doesn’t that mean i’m then 21.5% more expensive than the next person? What if i bought 100 boxes do i get a discount?
Erm, The guy who knows the numbers and accounts isn’t here today i’ll find out for you.
Why the 7 day wait to get the product, can i stock the product at my warehouses for next day distribution
No i don’t think so, they are distributed from the UK at the moment.

Then the conversation really turned down hill. It was explained that anyone can be a distributor so rather than selling the product to them what i needed to do was to sign them up to the for lack of a better term “pyramid”. The distributor then gets paid a finders fee for bringing them in. After all the new person then buys wholesale rather than retail and since you only need to buy one box why would anyone really buy retail? The minimum order is one box of product and with the Entry $40 fee its still cheaper than retail price for the same box!

We were interrupted just as i started to realise what was going on. “Your carrage awaits so i really must pull you away. Ronan i shall be in touch to invite you to the next level of Seminar” (she must have forgot to call / invite me though).

The trick is that once your a distributor you then must try to recruit two people in your down-line who will then buy a $110 box of product each and every month. If they don’t buy their box they cannot get commission and their up-line doesn’t get paid (so no pressure now).

Xocai – An uncomparable opportunity?

One of the things that struck me about the who experience was that they pushed the whole you can’t compare this opportunity to any opportunity. Personally i beg to differ so here is my personal comparisons of similar business models and products:

Xocai Vs the Insurance Sales Man

A very popular business model in the 80’s and 90’s was to find a keen person not very versed in business and give them amazing opportunities for wealth and magnificent bonuses. The insurance sales man starts his first month and feels great about himself, he starts prospecting his family and close friends in the first week and makes several sales. He’s gets told that if he keeps up at this rate he’ll be driving a Mercedes and enjoying Cruises in no time. But after the first month he’s prospected all his extended family and friends. In his second month he calls friends of friends, old school mates and people he remotely knows. Leaving several messages and soon gets a reputation for bring a person with an agenda at all social gatherings. After exhausting his pool of contacts he lets go his position for someone else to repeat his misfortune.

So how does this relate? You see after 3 months people will tire of having to pay $110 each month for expensive chocolate just to stay in a pyramid. In the economic climate the masses just can’t afford a 1,000 Euro a year chocolate indulgence.

What about the financials?

Yes in theory you can make money but the numbers, demand and economic climate don’t stack up to scrutiny in my opinion. At 10% of your down line commission you need to have at least 11 active users just to break even on your personal intake of chocolate for use to try an engage new down-line prospects to keep your head above water. And they have to have 11 active users to keep them NOT LOOSING MONEY, thats before factoring in your time and expenses. At some stage at all times someone is loosing money to be in the game. Eventually the pyramid collapses because $110 per month is just too expensive for chocolate for the masses to accept. Like gambling some will win, majority will loose and the one thing that is for sure is that the house takes the majority of the profit.

Xocai does have competing products

Xocai is unique! Its patented! Its a brand unlike any other. Thats what they tell you and want you to believe. But what exactly does this mean? Is Xocai the only high in AntiOxidant darK chocolate? NO ITS NOT! Here’s where the whole business model falls apart.

Xocai Subsitute

Xocia Subsitute

Photo By katnhwi

Choxi+ is a very comparable product to Xocai in that they are both Very high in Antioxdiants, both are cooked at a low heat to keep the goodness of the cocoa bean. So are they exactly the same then? Well no Choxi is Organic and Xocia is not.

But the biggest difference is that Xocai costs about £2.65 per 6g square and Choxi+ costs just £1.99 per 70g Bar
Choxi+ is available online and in Selected TESCO stores.

So in conclusion technically Xocai is not a scam, however i do believe it is recklessly deceptive sucking people who would not be as business minded or financially adepth as someone who has experience in business. Therefore i write this post not to aggravate the nice people who got involved in Xocai’s program but to protect the people who have already been hit with the rough end of the down turn and might loose it all on a pyramid scheme that is built on an unsustainable business model!

Sorry to burst the bubble but things that seem too good to be true usually are just that!

Related articles:
Xocai Business Opportunity Watch

__________update 14-02-09___________

More articles:
About the CEO Jeanette Brooks
MLM WatchDog Xocai accusations about its senior staff
Accusations about Xocai Management from the Sydeny Morning herald include this quote:

“The Xocai operation has 75,000 distributors including 620 in Australia where further rapid expansion planned by its founders, Jeanette and Martin Brooks whose past companies have a history of bankruptcies and serial litigation…”

Also i should mention that people i attended the seminar with did not leave with a similar distaste for the chocolate or experience as i did and continue to investigate the possibility of becoming involved.

Hot Links 12 Feb 09

Inspired by my love of Damien Mulleys Fluffy links section which i love to read here’s a few things that are interesting me this week.

Fas’s Jobbank had me quite inspired this week with over 120 CV’s submitted to me within a 24 hour period. It got me thinking that if a recession means that if enterprises like mine can suddenly attract the kind of talent we have applying then it will be a very good thing in the Medium / Long term. I just wish i could hire a whole bunch of them.

Niall Harbison had a great idea this week and turned it around amazingly fast. went from concept to launch in less than a week. The idea is simple, tell the program what you have in the fridge and it will give you a recipe to turn it into a fancy meal. That’s dinner sorted for me from now on. Also Available on Twitter follow @Twecipe. All this in the same week he changes the Ifoods brand to Look and Taste The guys on fire.

Alan Launched

I confirm the date for my first U-18 DJ performance, of only 4 headline U-18 gigs in 2009 playing at Teenage Kicks @ Leisureplex on March 6th for Spin1038

Peter got screwed by Budget Rent a Car and didn’t lie down and take it.

Xocia did it’s pre-launch in Ireland, i was invited along – it was like a bad time share presentation, 45min presentation took 3.5 hours. I am planning on writing a blog post on this but out of respect for the person that invited me have agreed to give them a week before i publish it. In the mean time let it be said that the Business Model is completely flawed, its not a sustainable business and there is no such thing as a business that makes you money without you needing to understand the business itself. If you partake in XOCAI YOU WILL NOT MAKE MONEY only the top few of the pyramid will – if something seems to good to be true it is. I find it terribly unfair on those without the experience to run the numbers correctly.

Saw an interesting site Costume Shop Finder

, nice idea.

And Lastly Zatori Results announced that we’ll be launching a new business, the clock is on ETA 4 weeks. Its going to be very sexy.

Audio Branding

Audio Branding is the term given to the marketing art of associating brands, products or companies with music or sound to increase sales.

Its one of subtle aspects of marketing that is often over looked and when got right is deadly effective while be almost unnoticeable. Audio branding can be broadly divided into two area’s – Inclusive and exclusive.

Exclusive Audio Branding is a very unique and interesting execution of a brand strategy. My favorite example would be Aber Crombie and Fitch who’s stores are designed to exclude a large percentage of the population hence prolonging their popularity as an “in” product with a very fickle age cohort. If you walk into the A&F store across from the Trump Tower in New York you are likely to be instantly greeted with 3 sensations.

1. Sight – The First thing your eye’s will see is a ridiculously attractive model – often a male with their top off. Then your eye’s adjust to the fact that it’s very dark akin to a nightclub atmosphere.

2. Sound – Pumped out of every corner is a very loud vocal house music with a touch of electro thrown in. If you not in the cohort that hits the trendiest of clubs that plays this music then you will find this a very surreal and uncomfortable place to be in and look for the door.

3. Smell – The signature A&F aftershave is pumped into the air to make you very aware that this is no ordinary store.

So why would a brand go to such lengths to keep certain customers from buy?

Well actually it makes sense. There is nothing uncooler to the teenage / early twenties age group than a brand leakage that leads to having “older” “uncool” and in general people who don’t fit into their image of the brand. As soon as the 16 year old sees their parent or teacher supporting a brand it takes the brand away from them.

The message is clear, if you don’t like dark atmospheres and very loud night club environments then the A&F brand isn’t for you – please don’t shop here! Counter Intuitive but very very effective. Others thrive on being in the environment and spend even more time in the store & money on the products to become a part of the happy, dancing and attractive image that is A&F

So what is inclusive Audio Branding?

Have you ever wondered how effective music is on making sales? Did you notice that supermarkets play slow mellow music so that you take your time shopping hence increasing your impulse buying and total spend? My favorite example is from Martin Lindstrom:

In one experiment over a two-week period, British researchers played either accordion-heavy French music or a German brass band over the speakers of the wine section inside a large supermarket. On French music days, 77% of consumers bought French wine, whereas on German music days, the vast majority of consumers picked up a German selection. Intriguingly, only one out of the 44 customers who agreed to answer a few questions at the checkout counter mentioned the music as among the reasons they bought the wine they did.

The facts are incredible, people make feeling judgments and their feelings are influenced by things around them.

Is audio branding deceptive or immoral?

No! The idea of influencing a decision is what marketing is all about. We sell not to deceive but to enhance the customer experience. Whether you choose to influence or not with it, sound will influence. Some may say its noise pollution, but i would strongly disagree based on the fact that by having no sound at all this will also effect and influence customer decisions.

In conclusion audio branding is an important part of marketing, to ignore it won’t go away. For those shops / cafes who play a local radio station with no regard to its effects on customers – be it positive or negative there is an effect; worse still the outcome is usually based on a decision made unknowingly. Since there is a profound effect make a conscious decision and consider the auditory marketing as important as any visual marketing aspect.