Network marketing tie to propel BTI's growth
Triangle Business Journal - by Matthew Burns
RALEIGH -- BTI, the fast-growing long-distance phone service, is hooking up with International Heritage Inc., an equally explosive network marketing company, to make a major push into the residential telephone market.
The two companies have set up a federally licensed intermediary, International Communications, to handle the business and are planning a national rollout of the partnership in March. That's when IHI's army of independent sales representatives will begin buying and hawking BTI services nationwide.
The move is a dramatic shift for BTI, which has built itself into one of the nation's largest long-distance companies over the past 14 years by selling primarily to small and medium-sized businesses. And it pits BTI against network marketing powerhouse Excel Communications Inc.
Details of the pact are still being negotiated, but Dawn McIntyre, IHI's vice president of marketing, said that the company would guarantee BTI a certain amount of business every month. IHI will get a cut of the profit based on how much revenue their sales reps generate above an established minimum.
IHI plans to sign up its more than 50,000 reps nationwide for BTI service immediately -- effectively doubling the number of customers BTI now serves -- and will give the reps a discount rate as an extra incentive. Sales to others would include the flat-rate pricing structure that many phone systems now tout to attract customers.
"This gives us a value-added product to provide to our reps ... and it gives them a more traditional consumable product to sell," IHI President Stan Van Etten said. The company sells mostly high-end wares such as Lenox china, Waterford crystal and Mont Blanc pens.
BTI last year began providing some residential service through a direct mail campaign across North Carolina. Tony Copeland, BTI's vice president and general counsel, said the IHI agreement will complement that effort.
Although BTI has spent millions in the past few years to buy switches nationwide, Copeland maintains that the residential market "isn't the primary focus of this company." He declined to say how much residential business BTI does now or how much revenue the company expects from the IHI deal.
But BTI stands to benefit tremendously from the venture, said industry observers, who have watched Excel boom by using independent sales reps to sell long-distance. The Dallas-based company, which went public last May, reported making $113 million on $776 million in sales through the first nine months of 1996.
"Excel is proof that network marketing can be successful," said Eric Strumingher, a telecommunications analyst with Chicago Corp. "(BTI and other phone companies) see they can get good market penetration without investing a lot upfront."
Van Etten said BTI's range of services, including paging and wireless communication, and competitive prices should give IHI an edge in battling Excel and other long-distance companies, like AT&T and MCI, which are rushing into the network marketing arena.
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