Melaleuca, Inc. - A Short History
Melaleuca, Inc. was first founded in 1985, as a nutritional and cosmetic company. Their headquarters are currently located in Idaho Falls, Idaho, USA. The founding of the company in 1985 involved the dissolution of a previous company, titled “Oil of Melaleuca, Inc”, which specialized in the sale of tea-tree oil. When Frank L. VanderSloot took charge of the company in 1985, he commenced with a massive restructuring of the company’s focus, marketing plan and target demographic which was extremely successful.
The company was listed as being one of the Inc. 500′s “Fastest-Growing Companies” from 1990 to 1994. Today, the company is rapidly expanding to incorporate many different products, services and marketing arenas into their company’s agenda. In 2009, their sales reached around $887 million USD. 
A large part of the company’s expansion plan involves the creation of Melaleuca Security, a facet of the company that will focus on providing low-cost security systems and features to homeowners. Their mission is to help balance the market against ADT, which currently holds approximately 51% of the home security market. The company’s general mission statement is as follows:
“At Melaleuca Security, we are less interested in selling you a security system and more interested in helping you create a secure, safe environment for your family—your ideal comfort zone.” 
Since they already has an established customer base, their plan for introducing a line of home security system services could potentially be projected to be very successful. However, there are several features that do provide added benefits for consumers who are already loyal customers. This is because it is also established to be a business that has the potential for growth through its consumers, who have business opportunities to make a commission-based income.
Melaleuca Preferred Customers
In order to encourage its customers to become involved, the company currently offers what they call their “Preferred Customer” status. This type of status allows an existing customer to upgrade their status, as well as have the potential to enter in the Independent Marketing Executive program.
In order to become a Preferred Customer, an individual is required to fill out an application form, which also includes a fee of $25.00 for the initial enrollment application. The cost of being a Preferred Customer is $12.00 per calendar year, though the customer must commit to additional requirements of the Preferred Customer program. 
They have a point system, which requires Preferred Customers to purchase either 35 or 75 “Product Points” per month. These points equate to about $1.00 each, which means that a Preferred Customer may meet their points requirement by continuing to purchase either $35 or $75 worth of products from them on a monthly basis. In order to ensure that a customer will meet their points per month, Preferred Customers are requested to create a special “backup order”, which will be mailed and charged to their preferred method of payment. This helps to avoid a customer’s Preferred Customer status from being compromised. 
For this enrollment in the Preferred Customer program, a customer will enjoy several benefits.  This includes:
- 30% – 40% Discount on their Product Retail Prices
- 100% Satisfaction Guarantee on all their Products
- Personal home Delivery of their Products
- $100 in “Loyalty Shopping Dollars” after the first 5 months as a Preferred Customer
- A 10% bonus in “Loyalty Shopping Dollars” for every consecutive month
- Access to “MyMelaleuca Training”, a resource for helping people to sell their Products
- Additional discounts on online retailers such as Barnes & Noble, Eddie Bauer, Cabela’s, Office Depot, and other retailers through “Melaleuca Marketplace and Services”
- An $11 per-month discount on a Security Subscription
Melaleuca Independent Marketing Executive
Melaleuca’s Independent Marketing Executive program is an add-on program to the Preferred Customer Program. In order to be a part of this program, an individual must pay an enrollment fee of $29.00 . This fee includes the $25 application fee that is required in order to become a Preferred Customer. Once an individual has enrolled in this program, they receive an extra 7% Commission on Service Points. 
In relation to Melaleuca Security, a Independent Marketing Executive receives 15 Service Points (which are not the same as Product Points) per month, per customer who is a Melaleuca Security Subscriber. This means that a Independent Marketing Executive will earn an extra $1.05 per customer that they recruit to be a Security Subscriber. 
Pricing Structure: Melaleuca Security compared to ADT
Since the company’s goal is to provide affordable Home Security protection, they have developed a pricing structure that is considerably less than the current Home Security Industry leader, ADT. However, as stated before, there is a discount for individuals that are enrolled in the Preferred Customer program. Regardless of this, the monthly cost of a Melaleuca Security Subscription is still considerably less expensive than ADT. A general comparison of Melaleua’s Up-Front Equipment prices and Monthly Service Rates to ADT is as follows:
As you can see, their projected prices are significantly less than ADT. In addition to this, they also offers Interactive Video, a feature currently exclusive to their Security company. However, these costs represent the quoted rate for Preferred Customers. Though there hasn’t been a lot of information about the equipment price differences for Preferred Customers and Regular Customers, there is a change in the monthly service rate.
For customers who are not currently enrolled in the Preferred Customer program, the monthly cost of having a Melaleuca Security Subscription will be an additional $11.00 USD per month.
This brings the total monthly cost for Basic Security for non-Preferred Customers to $35.95 per month. Even so, this is less than ADT’s monthly cost of $40.99 per month for their Basic Security customers. 
Melaleuca Security also offers a pricing structure that is based off of their cost for additional security equipment that can be added to their system. This is also compared to ADT’s prices, since ADT offers many of the same types of additional features that can be added to their systems. The comparison of the cost of extra features is as follows:
Melaleuca Security System Components and Features
Melaleuca’s Security system incorporates many different components and features in order to provide a high level of home security. The Basic System components are included in the cost of equipment stated in the “Basic Security” package that has a monthly cost of $29.99 for Preferred Customers. The total cost of equipment for the Basic Security Package is stated as being $120, as compared to ADT’s stated cost of $374. This includes the following components: 
Basic System Components
- Control Panel/Keypad
This aspect of the Basic Security system has the master controls for the Security system. Its primary function is to turn the Security System ON/OFF by use of the keypad.
- Interior Siren
This siren is designed to sound when there is a potential security breach in your home. It can also be used to alert any intruders that they have triggered the security system.
- Backup Battery
The Backup Battery is used to ensure that the Security System functions even if the power is out. This is an extremely useful feature, as it increases the system’s level of protection.
- Telephone Jack
By having your Melaleuca Security System connected to a telephone line, your system will have 24/7 Access to Central Station monitoring.
- 3 Door/Window Sensors
These specialized sensors will be triggered when a door or window in your home is either opened or closed. This can help to alert you of potential intruders in your home.
- Motion Detector
A motion detector can be installed in an area where you want to have constant monitoring of any movement. If any movement is detected, the motion detector will be triggered, and will alert you of the movement.
- 1 Yard Sign/4 Window Decals
Advertising that your house is protected by a security system can help deter potential burglars from attempting to break in to your home.
- Expandable Capacity
The Basic Melaleuca Security System allows you to add up to 40 different wireless devices that can be constantly used to monitor the security of your home.
Basic System Features
- 24/7 Monitoring
In order to ensure that your home is protected around the clock, Melaleuca Security allows for 24/7 monitoring by their central station operators. This can help you to be certain that your house is being protected, even when you are away.
- 2-Way Voice Intercom
The 2-Way Voice Intercom feature included in Melaleuca’s Basic Security System allows the central station operators to listen inside of your home during a security event, as well as speak directly to you through the intercom.
- Emergency Buttons
For instant help, the Melaleuca Basic Security System includes separate buttons to summon Police, Fire Station Attendants or an Ambulance to your home. This can help you to feel safe, knowing that you have one-button access to emergency services.
- Backlit LCD Display
To ensure that you will be able to see your Control Panel and Keypad even in the dark, Melaleuca Basic Security System incorporates a backlit LCD Display. This will allow you to easily key in your code to arm/disarm the system, even during night hours.
- 1-Button System Arming
In order to increase the simplicity of using your Melaleuca Security System, the Control Panel can be armed with the touch of a single button.
- Voice Annunciation
The Melaleuca Basic Security System has a Voice Annunciation feature, which can tell you when doors are opened. In addition to this, it will also tell you which doors have been opened in your home.
- Multiple Codes
In order to make the Melaleuca Basic Security System easier to use for multiple-person households, the Control Pad can support several different User Codes. This will allow each member of the household to have their own special security code.
- Remote Telephone Access
In order for you to have true 24/7 Access to your Melaleuca Security System, there is support for remote telephone access. This means that you will have the ability to arm, disarm, or check the status of your system from any telephone outside of your home.
Melaleuca Security Exclusive – Interactive Surveillance Video
A special feature that will be available for their Security customers is the Interactive Video Service. This feature allows for the installation of up to four video cameras either in the interior or around the exterior of a home. These cameras can be programmed to notify the homeowner if there is any movement that is detected by the cameras. In addition to this, the footage from the installed security cameras can be viewed on a cell phone or even a personal computer.
Due to the customizable notifications of the Interactive Video System, it is possible to program the system to alert you if you do not detect movement by a specific time. This means that if you are expecting your children to return home before a specific time, the system will let you know if they have not returned. This is also a great way to ensure that you have 24/7 access to check up on the condition of your home while you are away on vacation.
The Interactive Video feature can be incorporated into an existing security system, or can be added to Melaleuca’s Basic Security System. Since the Interactive Video comes with a stand-alone package, having an existing security system monitoring your home is not a requirement to use this service. The stated cost for having Interactive Video in a home is $29.99 per month. 
In order to reward individuals that are currently enrolled in the Independent Marketing Executive program, they have designed a commission structure around the addition of Melaleuca Security to existing Customers. The Independent Marketing Executive is offered an incentive to convert their recruited Preferred Customers to become protected by a Melaleuca Security System. This is accomplished with a specialized commission structure, which can help a Independent Marketing Executive to increase the revenue that they earn from their Preferred Customers.
In order for a Independent Marketing Executive to begin earning commissions from their Security customers, it is essential that they qualify for the Melaleuca Security Commissions program before their customers. This ensures that they will actually begin receiving commissions from their subsequent generation Preferred Customers.
In order to qualify for earning commissions from their Melaleuca Security customers, an Independent Marketing Executive must first supply one subscriber to the Melaleuca Security Program. This first subscriber can be their own household, or a new household to Melaleuca. To secure this first subscriber, the Independent Marketing Executive is advised to send a $120 deposit to the Melaleuca Security Company, which will go towards the initial cost of the Security System and equipment. In addition to this, they may fill out an “Early Commitment Agreement”, if they are applying before the release of Melaleuca Security System.
If an Independent Marketing Executive does not become the leader of their organization by submitting one subscriber, they will not receive commissions from Melaleuca Security Customers. Even after a Melaleuca Security Referral is submitted, they will not receive commissions on customers in their organization that subscribed to Melaleuca Security before their referral.
Independent Marketing Executives receive 15 “Service Points” per month from every Melaleuca Security Subscriber in their customer generations. For each subscriber, Marketing Executives receive $1.05, which is their 7% Commission Bonus x 15 Service Points per month (per customer). 
It should be clarified that “Service Points” are not applicable towards “Product Points”, which are a requirement of the Preferred Customer Program. This means that Preferred Customers will still have to make their 35 or 75 Product Point monthly quota by purchasing other Melaleuca products on a monthly basis.
“Open” Positions and Unclaimed Commissions
Since they do not expect all of their Preferred Customers to become Melaleuca Security Subscribers, they have introduced the concept of “Open” positions that do not earn commissions. These “Open” positions represent Marketing Executives that are not earning commissions from the generations of Melaleuca Security Customers that they had originally recruited as “Preferred Customers” and who also became Independent Marketing Executives. 
For each Independent Marketing Executive that does not earn commissions from the customers underneath them who have become Melaleuca Security Customers, their projected commission share is added to the “Unclaimed Commission Pool”. This pool is divided between all Independent Marketing Executives who have Melaleuca Security Customers. Depending on the generations and number of customers underneath a Marketing Executive, this money will be divided according to “Shares”. These Shares will allow Marketing Executives with more customers underneath them to gain a larger amount of revenue from the Unclaimed Commission Pool.
The company’s estimation is that a Marketing Executive will earn from $3.10 to $4.50 total from each of the Melaleuca customers underneath them. This includes the $1.05 for the 15 service points per customer, and is a monthly estimation. 
Melaleuca Security has set a budget that will allow each Independent Marketing Executive to earn from seven generations of customers currently underneath them. This means that if a Marketing Executive recruits two people, and each of those recruit two more people up to the 7th generation, a Marketing Executive will have 128 Customers underneath them.
If all 128 of these customers become Melaleuca Security customers, the top Marketing Executive would earn from $396.80 to $576.00 , given their current estimate that each customer will generate from $3.10 to $4.50 in income. This is a monthly estimate.
If not all of these 128 customers become Melaleuca Security customers, this means that any of the Independent Marketing Executives not currently earning commissions will have their commissions deposited in the “Unclaimed Commission Pool”. This money will then be divided over all Independent Marketing Executives in the Melaleuca Security Program, the amount of which will depend on how many “shares” each Marketing Executive currently holds.
Estimated Number of Melaleuca Customers
By current estimations, there are over 500,000 households that are currently loyal to the company. These households frequently purchase Melaleuca products. However, not all of these customers will instantly become enrolled as Melaleuca Security Customers. This is dependent on how well the Melaleuca Security Commission program is able to motivate Independent Marketing Executives to recruit new customers. 
The company currently has around 200,000 Independent Marketing Executives that are active to help grow the company.  However, as stated before, in order to earn commissions from new Melaleuca Security customers, these Marketing Executives need to enroll in the Melaleuca Security Program first. This gives Marketing Executives significant motivation to become involved in the Melaleuca Security Program, in order to claim commissions from up to seven generations of customers underneath them.
In addition to this, the structure of Melaleuca Security appears to be designed to encourage new customers to become Melaleuca Security Subscribers. This is accomplished with a competitive pricing plan, which is shown to be lower than the price of current Home Security Industry leader, ADT.
General Electric / Melaleuca Partnership
The reason why Melaleuca is able to provide Home Security systems, services and features at their stated prices is because they have teamed up for a partnership with General Electric. General Electric was rated by Forbes as the “World’s Largest Company” during the year 2009, with 323,000 personnel currently employed around the world. 
The roots of the General Electric company trace back to 1890, during which time famous inventor and businessman Thomas Edison combined several of his separate business interests. 
General Electric currently manufactures many different types of home security devices, which are used by several security companies. However, as part of their partnership agreement, General Electric will be providing the home security equipment to Melaleuca to use in their Home Security Protection plan.
Since their agreement with General Electric also involves the providing of this equipment at relatively low prices, this is stated as being the reason why they are able to offer their system at a substantially lower price than other security systems.
There are other security companies that currently make use of the same type of General Electric Home Security equipment that Melaleuca will be using. However, the partnership agreement between General Electric and Melaleuca is the reason why they are offering this equipment at a substantially lower price.