Saturday, April 6, 2013

Attracting Leaders or Product Users to Your Direct Sales Business?

If you're familiar with network marketing, it's common practice for these companies to offer wholesale options to attract customers. For $10, $29, or $39 depending on company, it's like shopping as a Costco member and it makes sense if you love the products.

Plus, when you sign up product users, you'll never know when these "product users" might decide to pursue the business. Once someone loves the products, they're more likely to consider selling the products.

Of course, this all sounds good right? But on the flip side, there's a downside too, especially if you're attracting more product users than business builders.

Direct selling makes it easy to earn an immediate income by selling products directly to a consumer. With most companies averaging around 25% retail profit: sell a product and you earn an easy 25% right away. That's the simplicity of the business.

But when you sign up a bunch of wholesale customers they're technically consultants and part of your team. Network marketing is structured differently but most direct sales companies such as NYR Organic and Ava Anderson Non Toxic which are similar.

These companies offer a start up fee of $99 which comes with $250 in products. This makes it easy to attract product users. Sign up for $99 and it's a bargain to get all those products, even if you decide not to do the business after you get the kit.

Although these direct sales/party plan companies aren't pitching their start up fees as a "wholesale" option as network marketing companies do but people sign up anyway because it's a great value.

So what's the deal? And how is this not good for your business? It's not bad and unless you have a lot of consultants as product users, your team won't have enough monthly team volume for you to earn a commission.

Here's an example:

Let's say your company pays you 2-5% for the people you've personally signed up. In the case of product users, they're signing up to enjoy the products at a discount so whatever they buy is for personal use. Best case scenario, they might even sell a few products here and there but they're not one of your business builders.

Even if your best product user spends $100 a month- 5% of this is hardly anything. Not to mention, to earn commission from your team sales, you must meet a certain amount in your personal sales volume as well as a minimum volume from your team.

So, if your company requires that you must have at least $100 in personal sales and your team volume must be at least $1000 and you only have one or two consultants that are product users ... guess what? You've earned ZERO for the month from those two product users.

That said, not all companies have the same compensation plan. Some companies have lower team volume requirement which would make signing up product users easier to earn a commission but given this example above, you'll need a lot of product users to earn a commission from them.

Team building is long term income for those that are willing to work at it and stick it out for the long haul. If you're planning on selling to a few friends, stick to re-selling at retail, because earning an immediate 25% makes more cents.

I would prefer a low start up fee to make it affordable for people to get started with some samples or a few products but not to a point where people are signing up just for the products. If you're a business builder you're looking for a balance of product users and people who are actually interested in building a business.

A company with only product users and not enough business builders is not good for the company either because you need sales to grow. If you don't have business builders out there selling, sponsoring, and teaching others to do the same, the company will be slow growing and might not have enough sales revenues to stay in business.

Your thoughts?


Janette Stoll

P.S. Have you heard of Beautycounter yet? First month in business broke all sales records and we welcomed hundreds of consultants in 32 states and growing. Look at my website under Events for upcoming Launch Events in a major city (hopefully near you). Email me for more info and how to RSVP.

No comments: