Articles

By Jay E. Leisner, President, Sylvina Consulting

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:

1. Competing with Amazon.com
2. Having enough “real” customers
3. Explaining clearly why their income opportunity is the best alternative for part-time income

What are you and your direct selling company 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.

About Amazon.Com

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.

Price

In one place, you can shop for an item by comparing prices from multiple vendors.

Quality

In the same one place, you can read consumer reviews of the products you are considering.

Time

You can choose how quickly you wish to receive your items.

Loyalty Program

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…

Personal Touch

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!

Talk to your direct selling company.  Share this article with the owners.

Ask your company to provide innovative ways for you to communicate individually, and in groups, with your customers. Customers could opt-in to receive messages from you. You could share your personal experiences with your favorite products. Even more could be done to make personal relationships stronger.

For example, during the order process for a customer, an option could be added to be able to text you to ask a quick question about a product. If you don’t answer within 5 minutes, the question could be forwarded to a corporate employee to respond immediately.

Some companies provide “chat” functionality only during regular business hours. By using the resources of representatives with corporate staff as a backup, direct selling companies could beat other companies with limited chat hours.

Do you see how the personal touch of direct selling could become 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. Ask your direct selling company to talk with its MLM software company or your software programmers about developing these types of solutions to meet your needs.

Quality

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.

Direct selling companies should set the bar high for the products or services to be sold for them.  They should not sell mediocrity.  Instead, the products or services to sold should havfe raving fans (raving in a good way).

Customers and representatives should be encouraged to submit product reviews which the software would make available – just like Amazon does – to customers during the ordering process.

Go even further. While customers and representatives are placing their orders, the MLM software could make upsell suggestions based upon the purchase history of similar customers.

Loyalty Programs

There are two types of loyalty programs. One type rewards personal loyalty. The other rewards referral loyalty. Your direct selling company will need to decide whether to offer one or both of them.

Personal Loyalty

Like all other companies, direct selling companies should have strategies to encourage placement of multiple orders.  Unlike Amazon, a direct selling company should be focused on increasing orders placed with it, not on increasing orders placed with many companies through one platform.

Your direct selling company should have a loyalty program that specifically encourages and rewards placement of multiple orders with your company. A good loyalty program rewards best customers.

Referral Loyalty

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 your company have such a program? The simple answer is, “It depends.”

Will customers refer other customers? What’s in it for them? What can be given to them that they don’t already get? The answers depend on your company’s business model, products, and a few other factors.

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 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.

What To Do About This

Here are my recommended strategies for direct selling companies to have more real customers:

1. Don’t encourage people to join your company as independent representatives just for product discounts.
2. 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.
3. Don’t charge zero to be an independent rep with your company.
4. Sell products or services that people will buy even if they are not earning any money through your compensation plan.
5. Charge customers a fair price for your products or services.
6. The price could be the same as the representative price, or it could be higher.
7. Have a fully developed pricing strategy that addresses how to price for representatives and customers.
8. Use sticks or carrots to increase customer sales.
9. Be careful in how you incentivize sales to customers over sales to representatives, or vice versa.

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:

1. take a part-time job
2. work for a temp agency
3. work more hours at your day job if they’ll pay for them
4. drive for a ride-sharing company
5. respond to “help wanted” ads
6. start your own business
7. 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 company’s story. As an independent representative , don’t forget to teach your team members to share these details when they talk about your income opportunity:

1. The harder you work, the more you will earn. No job can provide this benefit.
2. 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.
3. 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.
4. 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?
5. If you already have a job, there’s a good chance you really don’t want to have another one.
6. 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.
7. You can decide on a daily basis how much time you are going to spend and when you are going to spend it.
8. 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!
9. 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.
10. 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!

Conclusion

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?