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Thomas Prendergast (CEO Markethive Inc.): "The MLM industry needs to change. The general public is increasingly reluctant to buy overpriced products and distributors need opportunities with products that will actually sell in the marketplace."
There’s really nothing wrong with change. Change is a burden to some but an opportunity to others and there’s a lot of change going on in the MLM industry now. One of the biggest changes revolves around the issue of whether or not companies can come up with products that satisfy government requirements for retail volume. And whether they can get their distributors to actually retail more product.
Up to now the DSA, working in conjunction with MLM companies, and their armies of distributors, have been reasonably effective in staving off regulatory scrutiny and/or disciplinary action revolving around claims that MLM distributors focus more on recruiting than retailing.
The companies can claim all they want that their distributors really do retail but we all know that there’s very little retailing going on in the vast majority of companies. It’s one thing for a company to parrot what their official guidelines say about retailing requirements but the reality is that the overwhelming majority of MLM retail very little if at all. And they also have neither the skill nor the desire to be true salespeople.
But nothing happens… companies don’t survive… unless something is ‘sold’. So what have companies done to ‘move product’?
To the objective eye, simple observation shows that most companies spend more time selling ‘the dream’ than they do their products. Why is that?
It’s because if you want ‘the Dream’, you have to sign up for autoship.
The Dream is easier to sell than products… at least from the company point of view. In fact it’s clear that companies make a conscious decision to train their distributors to ‘sell the dream’ rather than products. Just look at the relative allocation of time spent at most MLM company’s meetings. It’s obvious where their focus is.
But can the industry survive in this mode?
Maybe not.
The MLM company recruit today (at least in the US and most developed countries) is a lot smarter than back in the early days. The internet has made it extremely easy for them to not only shop ‘product quality’ but also to research MLM company reputations.
They don’t want overpriced products which they can only purchase along with a ‘dream’ that they may or may not want at that particular time. Nor are they attracted to companies which a simple Wikipedia search shows has a history of lawsuits.
One could make a reasonable case that this is one of the reasons that most MLM companies have resorted to going to foreign markets (i.e. outside the US) for most of their growth. It’s easier to sell The Dream there.
Those foreign consumers and potential distributors aren’t yet as sophisticated in evaluating MLM products and opportunities as most western consumers are. Often times (e.g. in China) they’ll buy anything that they perceive as ‘western’.
Consumers are very wary of ‘dream hype’ today. Instead, they want quality products they can afford and for their ‘opportunity’, they want companies with retailable products that consumers will reorder and upon which they (i.e. the distributor) can build a recurring revenue stream.
While a few companies have quality, affordable products, almost none have really enabled their distributors to last long enough in their business model to build ‘a business’.
Unfortunately the industry as it stands right now is geared toward success through recruiting and not retail sales. And isn’t it strange that among the new breed of true direct sales companies (e.g. especially those in the fashion and accessory niche like Rodan & Fields, Origami Owl, and others) none of them have had any problems with regulators.
Virtually all the investigations of claims of front-loading and illegal commissions based on recruiting have been against companies that use an MLM recruiting model. Isn’t that interesting?
Some companies have been a success with helping distributors build retail sales volume. One such company was TriVita, the Arizona based company in the nutritional supplement niche.
For many years TriVita did late-night television advertising, generated leads, and sold product direct from the company while simultaneously allowing distributors to purchase those leads, continue to service the customers, and pocket the profit.
The company also allowed recruiting too but if a distributor preferred to ‘buy their volume’ by purchasing customers who were already buying on a regular basis) that was OK.
Many distributors built very large, recurring revenue businesses based primarily on TriVita’s ‘customer purchase’ program.
Here at OBTAINER we have an acquaintance who was in TriVita but left the company when he could no longer ‘buy’ customers. That was several years ago yet to this day he still receives substantial income from his TriVita ‘customers’.
The point is that the industry has a well-deserved image of being a ‘churn and burn’ operation for selling dreams that very few actually achieve.
It’s nice that it takes less money to get into an MLM business but...so what? Failure isn’t fun for anybody… regardless of how expensive or cheap the lesson was. And some would argue that the low expense of getting into most MLM businesses is one of its biggest problems….people don’t treat it seriously.
But there’s another reason why MLM companies need to clean up their image of being concerned only with recruiting: if enough consumers (i.e. voters) start to complain to their elected representatives about the way we run our companies and businesses, regulators will have no choice but to step in and start mandating changes.
At some point, no amount of lobbying by the DSA or letter-writing campaigns by distributors will protect MLM companies from politicians who are getting bombarded by angry consumers and X-distributors who say they were lied to.
The logical question would be… is it possible to put non-sales oriented new distributors in a position where they can own a business that makes real retail sales?
Yes it is. TriVita did it once. They had the skill and the willingness to spend the money to generate customers on their own. But for some reason they were ‘turned by the dark side’ and gave up their successful advertising programs and their customer-purchase programs in return for what most MLM companies apparently think is easier money.
There’s another company on the horizon now too which appears to have a product that people will purchase at retail and a method of assisting new distributors to acquire new customers.
That company is Valentus.com. The reports that we hear are that their product is very good and that sales are good and growing rapidly. According to one Valentus distributor we know (the guy who used to be with TriVita), part of the reason that Valentus distributors’ downlines grow is the ‘power-line’ concept they use on their website(s). This particular distributor is supposedly in the process of presenting some other ideas on lead-generation to Valentus.
For now, Valentus has had good success using an automatic Powerline concept with people who inquire about their product or opportunity on their website..
Powerlines aren’t new. They just work a lot better when the company makes a good product. In the case of Valentus, anybody who requests information about the company is automatically put into a constantly growing powerline where they can visibly see their downline growing.
That new prospect is constantly reminded how their potential downline is growing. If the prospect wants to take advantage of those potential sign-ups, they can sign up first. If they don’t mind being passed up, they don’t have to sign up but they can still buy product.
Valentus doesn’t have a complex product line. They’re in the coffee niche and reports are that their product is not only cost-competitive but it also tastes good.
The coffee niche of MLM is definitely not saturated. Coffee is still a huge business… and it’s a simple product with broad appeal that everybody understands (the Steinkeller Brothers, formerly of Organo Gold proved that).
The point of this article is that MLM companies would be well-advised to start paying more attention to successful retailing. If they don’t, and the consumer gets angry enough, regulators will step in… and it won’t be pretty.
Thanks to Art Williams for most of this article.
Thomas Prendergast
CEO
Markethive Inc.
Appendix:
Terms mentioned in the title image
Functional Silos (Typical issue within MLMs): An individual business function that tends to act as a stand-alone function, often formulating its own strategies and work plans in parallel with other business functions. This expression is used when describing an organization whose functions tend to be less communicative and collaborative. Companies with functional silos may have greater difficulty in creating strong, competitive products because they may fail to recognize the benefit of cross-functional teaming
Cultural / Customer Alienation: To simplify a complex equation, most MLM company cultures refuses to build an array of Social Media profiles (Facebook, LinkedIn, Twitter, Google+, Youtube, Skype, Email, Texting, Whatsapp, phone, , chat windows, etc. (The full array); So as to go to their “customer” instead of making the customer come to them. We all know the frustration of having to seek access to the company and being told to only use their back office chat between certain hours. I say, Be Like Amazon! The customer must be in the companies DNA!
The Data Management platform (DMP dashboards): Put simply for another complex concept, it takes complex data, tracking data, Google trends, Alexa rankings, purchasing data, profiles, logins, sales, returns and delivers it in understandable charts and graphs so the data manager, marketer, owner, staff, etc. can quickly ascertain what actions are working and which ones are not, so as to be able to take the right actions in a timely affair. Sort a like what the Markethive dashboards do.
Customer Centricity Definition disconnect: Personally, when I have asked many a Network Marketing enterprises owners and principles what is “customer centricity” none of them have a clue. In sharp contrast Jeff Bezoz not only knows what it is, it is in his DNA “Put simply, “creating and delivering a positive consumer experience, prior to the sale, the point of sale, the process of the sale, the delivery of the purchase, after the sale and into the future”. Basically, the company must operate a totally symbiotic fusion within the system and seek out and handle their potential, current and former customers with an empathetic culture, thereby turning their customers into raving fanatics for the company. Kapish?
Support issue: Support as illustrated above, should operate with empathy, 24 hours a day from multiple communication ports with authority to solve and delight the customer with a what ever it takes to please said customer before the interaction is concluded. In todays networks, Internet and advanced communications, a happy customer will tell maybe a few hundred, whereby, a pissed of customer will file rip off reports, scam complaints and tell millions.
Failing to grasp or understand data analytics: When you look at the forest what do you see? Without the assistance of a dynamic interface delivering live data results across all aspects of the business, marketing and sales efforts, analysis is far short of being timely. Yet in the MLM industry, most companies only look at current sales volume and new distributor registrations. Failing to ascertain true trends and addressing dynamic actions to the immediate changes. Doing so, builds a nimble and dynamic experience for customer, prospect and employee.
Sales before the customer: MLM distributors are guilty of this and the mother company does nothing to address it. Focusing on the sales, not the customer, is a gross mistake and will always result in fatigue and worse failure. This is an issue the company should invest heavily into, thereby turning up the level of sales exponentially. In the words of Dale Carnegie, a pioneer in the self-improvement movement, "The only way to influence the other fellow is to talk about what he wants and show him how to get it." Customer-Focused Selling is a selling technique that emphasizes a genuine dialogue between the salesperson and the customer. Before talking product and/or service, a customer-focused salesperson strives to uncover a customer's underlying personal and/or professional needs and may even help the customer identify and phrase these needs. Then, instead of delivering a standard sales pitch about a product or service, the salesperson presents a tailored solution that meets the customer's needs, using the customer's language.
