Web 2.0 companies YouTube, eBay, Twitter and Flickr are examples of a "viral loop," according to journalist Adam L. Penenberg. With technology, a business can start with next to nothing and achieve wealth very quickly. It begins with creating something people want and making them happy so they'll spread the word to their friends.
Startups, nonprofits and corporations can all harness the power of technology to create a viral loop, writes Penenberg in "Viral Loop: From Facebook to Twitter, How Today's Smartest Businesses Grow Themselves."
Read the excerpt below, and then head to the "GMA" Library to find more good reads.
CLICK HERE for the video "The Power of a Viral Loop."
Tupperware and Ponzi Schemes — the Original Viral Models
Party Plans, Referral Networks, and Sizzlemanship
Half a century before anyone heard of Facebook or MySpace, and Silicon Valley was famous for prunes, Tupperware, the kitschy plastic food-storage-container company, was tapping into vast social networks of women to gen-erate a massive viral loop. It all began in the midst of the Great Depression, when Earl Silas Tupper was inventing all sorts of trivial contrivances—from the sublime to the outright kooky. There was the nondrip ice-cream cone, the fish-powered boat, plastic eye shields for dyeing eyebrows, fake fingernails in red, blue, gold, and pearl, plastic garter hooks to hold up stockings, "Sure-Stay Hairpins," and a "corset with muscles" to give women faux flat tummies. A tree surgeon until he declared bankruptcy in 1936, Tupper created the "Knee-Action" Agricultural Harrow and the Gypsy Gun, a pump that sprayed creosote to rid trees of gypsy moth eggs. He designed a medical device for the nonsurgical removal of the appendix "thru the anal opening" and an instrument he claimed would kick off "menstruation in women who have delayed monthlies or who are pregnant." Somehow he found time to produce flour sifters, dish rack pans, knitting needles, a tampon case, a portable necktie rack, a self-standing toothpaste-and-shaving-cream dispenser with self-closing cap, and the "Kamoflage comb," which was a combination nail file and comb dressed up as a fountain pen. None of these sold particularly well, and if it weren't for a greasy, smelly, rubbery chunk of black polyethylene "slag," the name Tupper would have faded away.
During World War II, that slag, a by-product of smelting, was cheap and plentiful, while resin—the core ingredient of most plastics at the time—was scarce and expensive. The U.S. and British militaries used polyethylene in radar installations and to insulate cables. Tupper, who worked at a plastics factory in Leominster, Massachusetts, creating prototypes for DuPont and sealing gas masks with plastic filler, figured he could make something out of it. One day in 1942, he discovered something quite remarkable. When stripped to its essence, this malodorous chunk of petroleum waste emerged as beautifully translucent material unlike any plastic of its day: it was un-breakable, flexible not brittle, and it didn't chip or retain odors (even vinegar or onions). It handled extreme heat and cold, and when squeezed, it sprang back to its original shape.
Back then, American consumers were wary of synthetics. Plastic buttons cracked, tortoiseshell eyeglasses warped when laid too close to the radiator, Christmas toys broke out of the box, combs' teeth snapped, shower curtains putrefied into sticky clumps, and mixing bowls smelled like oil refineries and split, shattered, or peeled. The public's view was well expressed in The Plas-tics Inventor, a 1944 Disney cartoon starring Donald Duck, who bakes a plane from melted plastic and takes it out for a test spin. It works perfectly?.?.?.?until it rains and the plane turns into a gooey mess.
Tupper christened his discovery "Poly-T: Material of the Future" and by the end of the war, his factory churned out a steady stream of plastic mer-chandise. He was fielding orders from American Thermos Bottle Company for 7 million nesting cups, from Camel for three hundred thousand cigarette cases, and from Canada Dry for fifty thousand bowls to offer with its soft drinks. Time magazine estimated his annual revenue at $5 million. The Mu-seum of Modern Art in New York included two of his bowls in a special exhibit of useful objects. House Beautiful dubbed his designs "Fine Art for 39 cents."
Poly-T should have been ideal for food storage, except Tupper didn't have a lid to fit his thin-lipped containers. Before the 1940s, most American families had iceboxes; then came electric refrigerators, putting the ice-making industry out of business. To retard spoilage, consumers stretched shower caps over leftovers, which left an unpleasant aftertaste, or wrapped them in tin foil. It took a while, but Tupper, modeling his airtight seal after the inverted rim of a paint can, filed a patent application for an "Open Mouth Container and Nonsnap type of closure" on June 2, 1947, and Tupperware was born.
By 1949, Tupper's fourteen-piece "Millionaire's Line," composed of bowls and tumblers, was available at Bloomingdales, Gimbels, and Detroit's J. L. Hudson, at the time the tallest department store in the world. Despite a national media campaign that included newspaper ads, magazine articles, and prominent department store displays, sales of his eponymous tubs were disappointing. Consumers didn't know what to make of the "Wonderbowl" in pastel shades of blue, pink, and pearly white. They fumbled with creating an airtight seal to "lock in freshness," and some, complaining the tops didn't fit, even returned them, according to Bob Kealing, author of Tupperware Unsealed. A lot has happened since the late 1940s, when Tupper's business was in danger of being tossed out like a Chinese take-out carton, to today, when 90 percent of American homes own at least one piece of Tupperware and the company reports billions in revenue.
[ PATIO PARTIES ]
Tupperware's unlikely savior was Brownie Wise, a single mother from Dearborn, Michigan, who worked as a distributor for Stanley Home Prod-ucts, a direct seller of detergents, mops, household cleaners, and floor waxes. In 1948, shortly after Tupper introduced his product to stores, Gary McDonald, a young salesman working for Wise, was browsing J. L. Hudson when he realized these plastic containers would be ideal for home demonstration. He could see that customers didn't buy them until someone demonstrated how to put the tops on, then explained that they were for food storage and that leftovers wouldn't spoil. You could even toss a sealed bowl in the air and not a drop of salad dressing would spill. "Yank it, bang it, jump on it," they said. What's more, the product had no natural competitors other than zippered "grease-proof, stain-proof and mildew-proof" plastic bags, which were sold three bags for $1.98 at hardware stores, compared to the three-piece Wonder Bowl set, retailing at $1.39.
McDonald brought a sample to Wise, who at first didn't know what to make of it. She had never seen a bowl you could squeeze, and she had a hell of a time getting the lid on, accidentally knocking it off the table. To her surprise, it bounced instead of breaking, which would become one of her marketing mottos. After spending a couple of days trying to figure out the magical vacuum seal, she realized "you had to burp it like a baby." Wise added Tupper's wares to her product line.
The thirty-four-year-old Wise had gotten her start with Stanley Home Products when a salesman knocked on her door and botched his sales patter. I could do better than that, she thought. Because her secretary job at Bendix Aviation Corporation barely covered her ailing son's medical expenses, she moonlighted evenings and weekends. Within a year she became one of Stan-ley's top earners and quit her secretarial job. The secret of her success: "patio parties," where she peddled household wonders like the ashtray with a brain, Atomite ("the cleaner with ATOMIC like action"), and truckloads of Tupperware.
In the years leading up to and following World War II, there was a gra-dual shift toward modernity. Technology had been screaming forward for more than fifty years—the invention of electricity, the automobile, the air-plane, the light bulb, the telegraph and telephone—there was even talk of flying to the moon, and the United States was ready to reap the benefits. Colonizing space was a theme of comic books and radio shows like Flash Gordon. In 1938 Orson Welles's radio broadcast of War of the Worlds, based on H. G. Wells's sci-fi novel, set off panic as rumors of a Martian invasion swept through some communities, multiplied by the sheer force of word-of-mouth distortions. The theme of the 1939 World's Fair was "The World of Tomorrow." It featured a special exhibit called Futurama, which envisioned Earth twenty years ahead. In the span of two decades—from the 1930s to the 1950s—airplanes like the Lockheed Vega, which Amelia Earhart crashed into a watery grave, went from being constructed of little more than wood, glue, and baling wire to sleek steel jets; television was replacing radio as America's favorite entertainment choice; the acoustic big band swing era gave way to electric rock 'n' roll; medical advancements yielded a cure for polio; and psychologist B. F. Skinner postulated that people could be conditioned into creating social utopia. Earl S. Tupper's "Poly-T: Material of the Future" fit in perfectly.
By 1949, Wise dispensed with other products in the Stanley line and es-tablished "Poly-T parties." Many of her dealers grossed $100 a gathering and Wise distributed $1,500 of Tupperware a week (worth almost $14,000 today). Within a decade, Wise and her army of Tupperware ladies would move tens of millions of dollars' worth of merchandise every year via the Tupperware home party, the greatest viral network of its day. It worked like this: a new dealer relied on her social network of sympathetic friends, neighbors, and relatives to schedule a gathering. The party hostess invited women from her social circle to attend—a form of word-of-mouth virality. Meanwhile, the dealer hit up other friends to host parties, with each hostess tapping her particular social network, and the pool of buyers grew with each additional social circle. What's more, the dealer identified hostesses with the right attributes to join in selling Tupperware.
In Laurie Kahn-Leavitt's PBS documentary Tupperware, Lavon Weber, who hailed from a small rural community, recalled that a neighbor living half a mile away offered to get her started in Hugoton, Kansas, "and we dated two or three parties there that day. And then my mother said she'd have a party, and some of my sister-in-laws [too]. I'd go to church and people would say, 'I hear you're selling something,' and I said yes. 'Well, I'll have a party for you.'?" Multiply this by thousands of women, and that offers a glimpse of its rabbit-like growth.
[ REFERRAL MODEL ]
Tupperware as a business grew in multiple ways. Both the pool of buyers and the number of parties increased exponentially, each forged via social networking, while the number of sellers also expanded virally. More parties not only begat more buyers; they begat more sellers, who begat more buyers, and so on. The more Tupperware sold, the more people would sell Tup-perware products. It was like having thousands of salespeople on commis-sion instead of a few dozen working the phones at corporate headquarters. "Three people must gain" at every party, Wise wrote: the dealer through sales of Tupperware "and the booking of future parties"; the hostess, who acts as a subdealer "and upon whose hospitality and initiative, the success of the party plan depends"; and the guests, who "enjoy a sociable get-together." This viral marketing plan made perfect use of a part-time labor force of able-bodied, sociable, stay-at-home women. The seller earned a commission, the hostess basked in her role as queen bee, and attendees played party games, received gift bags, gossiped about husbands, kids, and neighbors, and had a small stake in helping one of their own sustain a busi-ness. Meanwhile, partygoers brought home a product that, at the time, had cachet. It was a win-win-win for everybody.
The first home party in the United States can be traced to the 1920s and was introduced by WearEver Aluminum Cooking Products, which found it an efficient strategy for reaching women in sparsely populated rural areas where there were few stores. Cultural historian Alison J. Clarke, author of Tupperware: The Promise of Plastic in 1950s America, posits that direct-selling schemes blossomed during the Depression because mass unemploy-ment allowed a displaced workforce to pursue casual labor with "minimal capital outlay, formal skills or professional qualifications." A door-to-door salesman from Maine working for Stanley Home Products stumbled on the concept in the 1930s when he knocked on the door of a minister's wife while she entertained potential donors to the church. She told him to return another day, but before he left she proposed a deal: in exchange for a cut of sales that she would donate to the church, she would gather her group again and the salesman could demonstrate his wares. It acted as a powerful referral from a trusted source and solved his big-gest problem: access. The public held door-to-door salesmen in low esteem. Itinerant sellers were known to harass housewives, dump second-rate mer-chandise, and move on, and the sleazy traveling salesman became an arche-type. In Flannery O'Connor's short story "Good Country People," a peripa-tetic Bible salesman trolling the South seduces a woman and runs off with her artificial leg. The public outrage over pressurized sales tactics, with shifty men knocking on the doors of unsuspecting women, led local governments to pass so-called Green ordinances, named for Green River, Wyoming, the first city to enact it, which banned door-to-door solicitation. These salesmen were the equivalent of the spam that deluges email in-boxes today or the telemarketers who ring up at dinnertime to pitch a product, service, or cause over the phone. (They, too, invited regulation, namely the CAN-SPAM Act of 2003 and the Federal Trade Commission's National Do Not Call Registry.)
By inviting customers to his home, the Stanley salesman avoided all of this. Instead of trudging to individual households, a time-consuming propo-sition since he couldn't be assured the person answering the door would be welcoming, potential customers came to him with purses open. This intent to buy opened up a whole new value proposition. With home parties, "the buying spirit is contagious," Brownie Wise wrote in a training manual. "It is a proven fact that you will sell more to a group of 15 women as a group than you will sell to them individually." Soon the Stanley salesman from Maine was reporting impressive sales figures, and it didn't take long for word to spread within the company. Other Stanley sellers across the country approached local groups to inquire about demonstrating their products. After they hit up most of the organizations, they turned to their wives to organize parties, with the hostesses receiving either a cash commission or a gift. This selling strategy helped push Stanley Home Products sales from $3 million in 1940 to $50 million ten years later.
Meanwhile, as Tupperware sat idly on store shelves from coast to coast, Brownie Wise in 1949 ordered $152,149.13 of Tupperware, which in to-day's dollars would be $1.4 million.
[ PONZI SCHEMERS ]
WearEver, Stanley, and Tupperware weren't the first to tap viral expansion loops, but they may have been the earliest to promote legitimate businesses. Get-rich-quick pyramid schemes based on the "rob Peter to pay Paul" prin-ciple had long relied on word-of-mouth virality to expand the pool of money at breakneck speed. Organizers attracted large numbers of participants with the promise of sky-high returns on their investment—sometimes offering to double a person's money in as little as ten days. In the nineteenth century schemers bilked investors who thought they were financing silver-fox fur farms, an experimental engine that used water for fuel, technology that could extract gold from the sea, and bonds covering exotic products in even more exotic locales. Their fast-talking operators, relying on the same "splash, cash, and dash" formula, paid off as promised to the first people to contribute. These lucky early investors inevitably told their friends and family, who also invested. They too were bought off, and suddenly thousands of people were throwing money at the operators until the whole pyramid came crashing down when the operators couldn't continue to pay back investors. By then they were usually gone but not forgotten.
The biggest viral schemer of all was Charles Ponzi, an Italian immigrant who registered a business in Boston called the Security Exchange Company in December 1919. He claimed to have figured out a system to reap 400 per-cent profits by engaging in arbitrage with international postage relay cou-pons. These functioned like promissory notes that could be used by a reci-pient in one country to pay postage to another, since stamps could not be used to mail letters across borders. Because the same coupon could be pur-chased in Italy for a fraction of what it cost in the United States, Ponzi sur-mised he could pocket the difference. He printed certificates promising in-vestors 50 percent interest on their money in three months, which he later shortened to forty-five days. But he never bought more than a handful of coupons.
Instead, the penniless Ponzi used them to justify his swindle. A month and a half after starting, he redeemed his first certificates. When early adopters got back their money plus 50 percent, they spread the word. Like any con man, Ponzi knew that greed was an effective viral mechanism—not that he would have described it that way. The average investment was $100, but many invested far more than that. People mortgaged their homes and cashed in their life savings to get in on the action, while those who redeemed their certificates simply plowed their proceeds back into the company. Eager investors packed the sidewalks outside his office, and Ponzi hired off-duty police to keep order. Although money was going out to pay back those with certificates, it was coming in even faster. By February 1920, Ponzi had accumulated $5,000; a month later he banked $30,000. He quickened the pace of virality by hiring agents on commission, who spread out across New England to preach Pon-zi's sermon. The more money that came in, the more lavish Ponzi's lifestyle became. He purchased a twenty-room mansion with a swimming pool and a $12,000 automobile with a chauffeur and wore only hand-tailored silk suits. On May 1 he had $420,000, and by July he had amassed millions, all the product of a viral expansion loop, with each investor yielding two, three, or more investors. It all came to a head in August 1920, when Ponzi was arrested on charges of larceny after an auditor estimated that he owed $7 million yet had less than half that in the bank. Even then he was pulling in $250,000 a day, which would have meant his revenues would have topped $91 million in its first year of operation—almost $1 billion in current dollars—before it crashed and burned.
[ A DIFFERENT KIND OF WORKFORCE ]
Earl Tupper's company would end up surpassing Ponzi at his scheme-iest, and do it legitimately. In late 1949, as a drumbeat of orders came in to Tup-perware headquarters from Stanley Home dealers, he dispatched Victor Col-lamore, a company executive, to Detroit to meet with Wise and Gary McDonald, the salesman who first introduced her to Tupperware. "Just what in the hell are you guys doing to sell the amount of Tupperware you're doing?" Collamore asked. "You're selling more Tupperware than the J. L. Hudson department store by far, and that's the biggest department store in the world."
Impressed by what he heard, Collamore hired Wise to act as a distributor for Tupperware and directed her to build a sales team to cover the entire state of Florida. She jumped at the chance, especially after Stanley founder Frank Stanley Beveridge told her she would never land an executive posi-tion in the company because it was "no place for a woman." In the late 1940s the glass ceiling was knee high. Women made up a third of the na-tion's workforce but only 5 percent of them held professional positions. The majority trudged through low-pay, mostly dead-end jobs—stocking shelves in retail stores or working as cashiers, earning dismal wages as secretaries (as Wise had), teaching school, working man-sized shifts at factories, or simply staying at home.
Cultural and demographic shifts created an ideal environment for Tup-perware's ascent. As the 1940s swept into the 1950s and a painful recession gave way to a burgeoning economy, a diaspora ensued. Nineteenth-century pioneers had traveled westward to settle a vast, inhospitable continent, and a century later postwar baby boomers moved to suburbia; more than 80 per-cent of U.S. population growth in the 1950s occurred there. And they had money, with an average family income of $6,500, not quite double the na-tional average.
With these new homes came a desire to stock them with blenders, stoves, ovens, vacuum cleaners, and other appliances. In 1950, 9 percent of Ameri-can households had television; by 1959, 86 percent did (almost 44 million homes). About 1.7 million washing machines were sold in 1950; by 1960, 2.6 million. Lawn and porch furniture sales tripled to $145 million over the same period. By the middle of the decade the United States had, for the very first time, more white-collar than blue-collar workers. And, of course, there were the kids. Between 1948 and 1953 more babies were born stateside than had come into the world over the previous thirty years. Dr. Benjamin Spock's Common Sense Book of Baby and Child Care, first published in 1946, became a perennial bestseller and instructed a whole generation of baby boomer parents, while cloth diaper sales went from $32 million in 1947 to $50 million a decade later (disposables didn't hit the market until the 1960s). Toy sales shot up from $84 million in 1940 to $1.6 billion in 1960, a twenty-fold increase. Into this thriving consumerism stepped Tupperware, a brand that combined status and frugality with family values. "Get rid of your shower caps!" Brownie Wise urged. "Turn your leftovers into makeovers!"
Shortly after relocating to Florida, Wise encountered problems. Patio party dealers from Michigan who moved with her found that territory they had been promised was already covered by preexisting Tupperware sellers intent on protecting their turf. The same thing was occurring in other states, with the company's original network of dealers fending off these interlopers, undercutting them on price, offering fatter commissions, trying to blackball them in their communities, and even threatening to run them out of town. Although a young company, Tupperware was faced with the cannibalization of its existing business, a challenge confronting many on the precipice of change—today, for example, newspapers in the age of the Internet, film and camera companies such as Kodak and Polaroid, the music and movie indus-tries. It hobbled Wise's push to populate Florida with handpicked distribu-tors, and led to six months of infighting, until finally the company shaved her territory into a 650-mile swath from Miami to Savannah, Georgia, that she could run any way she saw fit. Despite all this, Wise booked more than $14,000 in sales in her first two months.
[ GROWING PAINS ]
But then Wise confronted another issue that can vex fast-growing compa-nies: scaling. Wise's network of dealers, who operated in six fast-growing sunny cities in Florida, sold so much Tupperware the factory couldn't keep up. Earl Tupper was fanatical about quality, and every polyethylene pellet that arrived at the plant was tossed in a jar and heated to 180 degrees along with a saltine cracker. Hours later, if the cracker retained even the slightest whiff of plastic, the entire car of polyethylene was rejected. This quality control extended to the manufacturing, too, with samples checked at every machine during every shift. Were bowls leak-proof, were there any irregu-larities, were the colors precise? A high percentage of Tupperware fresh from the factory floor didn't meet Tupper's exacting standards, with whole rooms stuffed with barrels of rejected Tupperware destined to be razed, re-liquefied, and re-formed.
Several of Wise's orders were delayed, with customers wondering if they would ever receive what they had paid for. The display cases she ordered for her sellers didn't arrive, nor did stationery. Dealers in Fort Lauderdale and Hollywood, Florida, were forced to either drive to the Miami airport to pick up errantly shipped orders or pay to have them redirected. December 1950, in particular, lacked holiday spirit, with dealers unable to get Tupperware to their customers in time for Christmas. This also meant her twenty dealers didn't receive their commissions, which Wise covered out of her own pocket. Her frantic calls to the company went unanswered, and Wise briefly considered quitting. After another delayed shipment, she made a fateful decision.
As Charles Fishman, one of the last journalists to interview Brownie Wise, recounted in the Orlando Sentinel in 1987, she picked up the phone and called long distance to the Tupper Corporation, demanding to speak with Mr. Tupper. She didn't even know if there was such a person—she just assumed there was. Suddenly his voice came over the crackling line.
"This is Brownie Wise!" she shouted. "In Miami!"
"I know who you are," Earl Tupper said.
She told him her order was late. Again. "I wonder if you know how se-rious a problem that is?"
Tupper knew how much Brownie Wise contributed to the company's bottom line. While many direct sellers distributed Tupperware, no one ap-proached her sales volume. After getting off the phone, he straightened out her orders, then called back, asking if she would visit the factory in Massachusetts for a meeting.
"I'm busy," she retorted. He would have to come to her.
There they were, two pig-headed savants bickering over who would do the traveling. Eventually they agreed on a summit in Long Island with other top freelance sellers. There they convinced Tupper to distribute Tupperware exclusively through the home party plan, and in May 1951 he pulled his merchandise from all stores.
[ SOCIAL NETWORKING AND "SIZZLEMANSHIP" ]
It was a bold gamble, but Wise had shown what was possible when you combined the power of social networking with "sizzlemanship"—a word Wise had invented. Within a year, Tupperware distributors brought in wholesale orders of $2.2 million, and Earl Tupper rewarded her with a new Cadillac. In 1953, Wise was overseeing a network of three thousand dealers, managers, and distributors, with sales growing 115 percent. By 1955, sales volume hit $30 million and Wise's network of sellers had grown to twenty thousand. Wise became the first woman to grace the cover of Business Week, accompanied by her quote: "If we build the people, they'll build the business." Meanwhile the Tupperware party seeped into the public con-sciousness. Producers from I Love Lucy approached the company with an idea: Lucy would host a Tupperware party with the usual disastrous conse-quences. Wise turned them down flat. "Oh, no!" she cried. "I won't allow it. It won't help us." She was afraid Ricky Ricardo might end up with a bowl of spaghetti on his head.
For seven years, Wise was the effervescent face of the company while the tart-tongued Tupper toiled in relative obscurity. That was fine by him—at least in the beginning. They were polar opposites. Wise was a people per-son, a hands-on manager who kept a typewriter on her bedside table in case she thought of a memo to write in the middle of the night. She organized frenetic sales conferences in Florida called "jubilees," where "some 600 women dug dementedly in an acre plot for buried prizes," as Business Week described it, and sang, "I've got that Tupperware feeling deep in my heart." For prizes Wise gave away cars, diamond rings, mink stoles, and TV sets. She cajoled, encouraged, and enlightened her growing sales force, all the more amazing because she had no formal education in running a business.
As for Tupper, he never had much use for people, preferring the sanctity of his laboratory. The first time he attended a jubilee, he watched from the back of the auditorium, then snuck outside. When Wise caught up to him, he confessed that just the thought of her up there in front of so many people made him sick. Like Wise, he was demanding, a perfectionist who painted his factory floors white to illuminate any dust. While she became a celebrity engaging in glitzy displays of razzmatazz, he remained a solitary figure in the background, personally designing and overseeing the manufacture of every product. Together they made up far more than the sum of their parts, and like many legendary companies, owed their rise to their opposing perso-nalities. Steve Wozniak built the Apple personal computer, but it took Steve Jobs to market it. At Microsoft Paul Allen was instrumental in pushing for new products and technological innovation, while Bill Gates had the greater business vision. And Earl Tupper was just another kooky inventor until Brownie Wise came along.
By 1958, after eight years together, Tupper tired of Wise receiving the lion's share of credit and abruptly fired her with a year's salary as severance, expunging all references to her in the company's literature. Shortly after, he sold the company for $16 million to Justin Dart of Rexall Drug Company, divorced his wife, and bought an island in Central America, eventually skipping off to Costa Rica, where he gave up his U.S. citizenship to avoid paying taxes.
[ MOVING BEYOND SATURATION ]
Tupperware prospered well into the 1970s, revenue doubling every year, achieving half a billion dollars in sales in 1976. Along the way it hit a point of nondisplacement—competitors couldn't knock it off its pedestal even with comparable products. Eventually, though, like all viral companies, it reached a point of saturation and began a steady decline. Tupper's patents expired and competitors like Rubbermaid entered the fray, but the predominant reason was socioeconomic. Women had entered the workforce and weren't around to host or attend parties, which disrupted the vast social network that had driven sales for more than a generation. The company struggled into the 1990s, losing $22 million in the United States in 1992. Then a former senior manager at Avon, E. V. "Rick" Goings, took the company's reins.
As his name implies, Goings is a fast-talker who could sell dial-up Inter-net access to an AOL customer service rep. He has been experimenting with viral strategies in the offline world for almost forty years, believing that products that require a customer education are best suited to direct selling. (Direct selling involves person-to-person contact or home parties like Tup-perware's, while direct marketing is simply catalog sales.) If you are unload-ing blue jeans, he says, direct selling probably isn't for you, since everyone knows what jeans are and what they are used for. If you are peddling some-thing in a new product niche, say, gourmet food that must be tasted to be believed, direct selling could be an apt strategy. Then it's all about what Goings calls "FNR": friends, neighbors, and relatives, "who go out and tell their friends, neighbors and relatives, and so on and so on." It works as a marketing strategy because it offers the product credibility. "In a world of friends I'm not going to tell you about something unless I think it is for your own good."
While attending classes part-time at the University of Virginia, Goings started his first viral business, a smoke detector distributorship in 1970. Be-cause forty years ago no one knew what a fire alarm was (or was even aware of the need for one), Goings opted for a direct-sales approach. He recruited college students to create fire safety crusades in their communities to induce people to buy smoke and heat detectors. Because he offered sky-high com-missions (each smoke alarm retailed for $100, and each distributor pocketed $60), it didn't take long for Goings to set up three hundred locations across the United States. The key portion of each sales pitch involved a short film explaining that most fire victims die between 10:00 p.m. and 6:00 a.m., usually from smoke inhalation.
"Customer education was extremely important because most people didn't even know they had a problem," he says. With the group primed to act, the representative would take orders, then ask, "If you knew the cure to cancer, who would you tell?" He would request from each attendee a list of ten FNRs with whom he would like to share the filmstrip. Then the presen-tations spread virally, with each purchaser doubling as a highly credible re-ferral—someone who had your best interests at heart.
For eight years Goings earned a low six-figure income, until federal law mandated smoke alarms and Sears came out with First Alert, which it pro-moted in a national advertising campaign. Goings sold his interest in the business for a few million dollars, getting out before the price of smoke alarms fell from $100 to as little as $5. He took a job at Avon and eventually moved to Tupperware. Aware that cultural changes in the United States made a referral model a hard sell, he turned the company's attention overseas. Within a few years Tupperware's home party social-networking model was exploding across Latin America and Asia, where women, like their American counterparts thirty years earlier, were expected to stay home and raise the children. By 1996, it had earned 95 percent of its profit abroad on sales of more than $1 billion, and was spun off as an independent company.
Since then Tupperware has grown into a global concern, with $2.2 billion in revenue, encompassing cosmetics, kitchen tools, small household ap-pliances, and toys. After an ill-fated attempt to once again sell Tupperware in retail stores like Target, it returned to its classic party plan roots. Today Tupperware's viral loop continues unabated. Somewhere in the world a party occurred just in the time it took you to read this sentence. Almost 120 mil-lion people in one hundred countries will attend a product demonstration this year. And all of this was accomplished without the benefit of the Internet, which makes up less than 2 percent of sales.
But the frictionless Web would prove to be a potent force for businesses that followed Tupperware's viral-loop example. And they would expand further and faster than anything Brownie Wise could have ever imagined.