Party plan companies have always generated a large percentage of their sales from purchases by retail customers. Retail customers, by definition, are non-participants in the income opportunity.
Network marketing companies, on the other hand, traditionally have sold their products mostly to distributors. In fact, some network marketing companies don’t have even have retail customer prices. Others publish retail prices or mention retail sales, but do little to promote, require or enforce them.
While for many years I have stressed the importance to network marketing companies of having retail customers — not just for risk aversion from the FTC and State Attorneys General, but more importantly to strengthen the business model for independent representatives and the companies they represent, many have pointed to the successes of network marketing companies without retail customers as evidence of “no worries here.”
Like a smoldering fire that burns something only every now and then, the regulatory flames have been kept to a minimum. Only a few companies, like Burn Lounge, have been shut down for selling high-priced products to representatives that customers rarely purchased.
During the recent Republican administrations, the focus was on removing or not enforcing regulations. There are indications that the regulatory environment may be about to change.
In the last week, I have had three conversations regarding the importance of having retail customers purchase products sold by multilevel marketing companies.
For many network marketing companies, moving in this direction would be quite a shift. If you are operating (or about to operate) a network marketing company, I suggest that you include sales to non-participants in your business model. For further information on how to do this, contact us.
Jay Leisner, the President of Sylvina Consulting, is a top compensation plan and direct selling expert, a trusted adviser to new and established network marketing and party plan companies. For more than 30 years, Jay has enjoyed assessing and improving party plan and network marketing companies across the globe.
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