Every business is affected by technological, cultural, political and lifestyle changes. Direct selling companies are no different. To survive and prosper, they must change to adapt to change.
Today, direct selling companies face 3 big challenges. These challenges are:
- Competing with Amazon.com
- Having enough “real” customers
- Explaining clearly why their income opportunity is the best alternative for part-time income
What are you doing to win the day?
Competing With Amazon
Amazon.com is a mighty gorilla. It is the largest Internet-based retailer in the world by total sales and market capitalization.
Amazon has become the “go to place” for shopping. Amazon provides a superior shopping experience, because it addresses each of the four attributes most important to shoppers.
In one place, you can shop for an item by comparing prices from multiple vendors.
In the same one place, you can read consumer reviews of the products you are considering.
You can choose how quickly you wish to receive your items.
Did you know that Amazon Prime is a customer loyalty program with more than 80 million subscribers who pay an annual fee?
This loyalty program includes many benefits that customers like, including free shipping for two-day delivery and in some metropolitan areas, free same day shipping. Included are other subscriber benefits, such as Prime Video, Prime Music, Prime Photo Storage, and in some areas, free restaurant and grocery delivery services.
How Your Company Can Compete With Amazon.Com
Top athletes compete in the sports they do best. If they are great basketball players, they don’t compete in baseball (unless you are Michael Jordan, and you probably remember what happened when he tried it).
Similarly, direct selling companies should compete in the areas in which they can win. Here is how you can win…
Direct selling companies are in the relationship business, the personal relationship business.
When shoppers purchase from a direct selling independent representative, they feel they are purchasing from a friend, because the transaction is personal. To compete with Amazon, direct selling companies need to find ways to make the purchase process even more personal.
Can you really do that? Yes, you can!
You could provide innovative ways for your representatives to communicate individually, and in groups, with their customers. Customers could opt-in to receive messages from their independent representative. Representatives could share their personal experiences with their favorite products. You could do even more to make personal relationships stronger.
For example, you could provide a method during the order process for a customer to be able to text her representative to ask a quick question about a product. If the representative doesn’t answer within 5 minutes, you could forward that question to a corporate employee to respond immediately.
Some companies provide “chat” functionality only during regular business hours. By using the resources of your representatives with corporate staff as a backup, you could beat other companies with limited chat hours.
Do you see how you could make the personal touch of direct selling even more personal? Amazon can’t compete with that. No way! You win.
All it takes is using technology to make the shopping experience more personal. Talk with your MLM software company or your software programmers about developing these types of solutions to meet your needs.
Today, customers expect to buy products with great reviews. They don’t want to buy lemons.
How will they know if your products are good? Sip on that thought for a minute, then keep reading.
Begin by setting the bar high for the products or services your company will sell. Don’t sell mediocrity. Aim to sell items that will have raving fans (raving in a good way).
Encourage all of your customers and your representatives to submit product reviews which your software will make available – just like Amazon does – to customers during the ordering process.
Go even further. While customers and representatives are placing their orders, your MLM software could make upsell suggestions based upon the purchase history of similar customers.
Use our best products for direct selling list as your guide for new product additions.
There are two types of loyalty programs. One type rewards personal loyalty. The other rewards referral loyalty. You will need to decide whether to offer one or both of them.
Like all other companies, direct selling companies should have strategies to encourage placement of multiple orders. In our special report, 20 Secrets of Successful Direct Selling Company, secret #13 is “Make your M.O. = multiple orders.”
Unlike Amazon, your company should be focused on increasing orders placed with it, not on increasing orders placed with many companies through one platform.
Do you have a loyalty program? Was it designed for your company? How is it working? If your answer is “not so good”, let’s talk at 503.244.8787.
Referral loyalty programs reward customers for referring other customers who make purchases. While multilevel compensation plans provide financial rewards for referrals, they don’t address the sleeping lion (customers who may refer customers). Can you have such a program? The simple answer is, “It depends.”
Will your customers refer other customers? What’s in it for them? What can you give them that they don’t already get? The answers depend on your business model, your products, and a few other factors. Contact me if you want to discuss your options in developing your loyalty programs.
Having Enough “Real” Customers
There was a time in the recent past where network marketing companies sold most of their products to their independent representatives for their personal use, and this was not a problem. Back then, they didn’t worry about having customers who were not representatives.
The U.S. Direct Selling Association had lobbied hard to include in their definition of “ultimate consumer purchases” the purchases by independent representatives for personal use in reasonable quantities. A few legal cases against bad actors included mention of insufficient customer purchase activities, but there were no definitive cases that hit this nail straight on.
Even so, I started to worry out loud. In 2014, I wrote a prophetic post about the lack of retail customers. Then, in 2015 the Federal Trade Commission (FTC) sued Vemma and in 2016 it imposed a settlement requiring that Herbalife restructure its business. Both actions were taken specifically because of a lack of customers who were not representatives.
Today, direct selling companies whose sales are made primarily to their independent representatives are at risk of FTC actions due to a lack of customers who are not representatives.
If you don’t understand why these FTC actions should matter to you, read about the importance of real customers to learn why.
What To Do About This
Here are my recommended strategies to have more “real” customers:
- Don’t encourage people to join your company as independent representatives just for product discounts.
- Charge an enrollment fee high enough to be a representative that people don’t become representatives just for product discounts, but be sure not to pay any compensation upon the required fee.
- Don’t charge zero to be an independent rep with your company.
- Sell products or services that people will buy even if they are not earning any money through your compensation plan.
- Charge customers a fair price for your products or services.
- The price could be the same as the representative price, or it could be higher.
- Have a fully developed pricing strategy that addresses how to price for representatives and customers.
- Use sticks or carrots to increase customer sales.
- Be careful in how you incentivize sales to customers over sales to representatives, or vice versa.
If you’re in need of help with your strategies for your compensation plan to motivate and reward customer acquisition or customer retention, contact me and we’ll talk confidentially about your situation.
Tell Your Story
Your story must be told again and again and again.
No, I’m not talking about a “get rich quick” story, or even a get rich slow story, because that is not what most people are seeking.
I’m talking about telling the story that most people who join your direct selling company want to hear. Research has confirmed over and over that people join direct selling companies with goals to earn some part-time income. Part-time income is $100 to $1,000 a month.
What Are Part-Time Income Options?
Take a good look at what the options are for part-time income. This won’t take long. It’s a short list:
- take a part-time job
- work for a temp agency
- work more hours at your day job if they’ll pay for them
- drive for a ride-sharing company
- respond to “help wanted” ads
- start your own business
- join a direct selling company as an independent representative
Only two of these options offer residual income opportunities (#6 and #7). Only one can be done at minimal cost without a large investment and that option is the one your company offers (#7).
Your Income Opportunity Is The Best Alternative For Part-Time Income
This needs to be part of your story. Don’t forget to teach your representatives to share these details when they talk about your income opportunity:
- The harder you work, the more you will earn. No job can provide this benefit.
- At a very low cost, you are sampling an experience. If you like it, you can have more of it. If not, you can end your journey easily without financial pain.
- Being your own boss is the best way to experience personal growth and development. When you’re in charge, you grow faster than when you don’t. People who experience personal growth are happier than those who don’t.
- You will join a group of people (your upline) who care about your success. Where else will you get mentorship in a part-time job?
- If you already have a job, there’s a good chance you really don’t want to have another one.
- You will have control over your work time. Most bosses would tell you to forget about lofty idea that if you want to work for them.
- You can decide on a daily basis how much time you are going to spend and when you are going to spend it.
- If you want to grow your income further, you don’t need to quit and find a new job. You’ll just make your independent representative business bigger!
- Having a mentor is cool, but it’s even cooler to be a mentor. You can have one and be one as an independent representative.
- As a direct selling independent rep, you will have all the wonderful tax writeoffs for expenses that are taken by other businesses, but without the risk that other types of businesses occur. The good without the bad. That sounds good to me!
How will you and your direct selling company act and react in response to these challenges? Will you just stand there, or instead will you do something?
Here is something else you can do that won’t take a lot of your time or money….
Attend our 18th Direct Selling Edge Conference on October 2-3, 2017. Learn what you don’t know. When you invest in knowledge, your investment pays the biggest returns.