Comp
Plan Conversion: Direct Sales to MLM
by
Michael L. Sheffield
The Industry's Leading MLM Consutant
As a direct sales company executive, you know that your present and future success relies on unique products and services, a solid marketing concept and a compensation plan which offers the serious minded distributor a significant financial opportunity.
Also, it is critical to provide the part timer and "consumer/distributor" an easy way to stay involved based on their own specific levels of interest. Add to this a competent management team and motivated professional sales leaders, and you have a text book formula for success.
But these things alone will not sustain your present market position if your business model is at the end of its lifecycle. Competition for your distributors' attention is fierce. Creative new start-up companies are packaging their business opportunity to turn your distributors' heads.
If you have never felt the sting of a key distributor exodus, the following words may signal a dream-saving early alarm. My continued research into this ever-evolving industry has made me aware of a "paradigm shift" in progress in direct selling methods, compensation plans, communication and support. The direct selling industry is changing, and changing rapidly. In years past, the direct sales single level compensation structure ruled. According to Neil Offen, president of the Direct Selling Association (DSA), single-level direct selling companies accounted for 75 percent of the organization's membership in 1990 with 25 percent being Multi-Level.
Now, 77.3 percent of DSA members are structured as Multi-Level Marketing (MLM), verifying a new age of marketing has arrived, commanding the long awaited accompanying respect. In the same way the Internet has altered communication and traditional business thinking forever, Multi-Level Marketing has infected the direct selling world with such a powerful energy that even many of the oldest and most conservative direct selling companies are taking notice. What is more interesting is the concern of those businesses representing the established pioneers of MLM.
They too are feeling the pressure as new age MLM companies demonstrate growth unparalleled by previous standards. Unlike the Internet's effect on business, which seemed to come at us like an unexpected tidal wave, MLM is a known methodology traced back nearly 50 years.
Although considered a fringe concept by the established direct selling community, MLM has flourished, spreading its tentacles and silently implanting itself while creating a growing army of mostly part-time independent contractors.
Soon, MLM accounted for billions of dollars of product sales. While many direct selling company executives ignored the MLM revolution, regarding it as a distant cousin not to be taken seriously — companies like Nu Skin, HerbalLife, A.L. Williams, Melaleuca and Excel Telecommunications powered their way to sales growth unparalleled by any previous traditional or direct selling standard.
As a direct selling corporate executive hoping to build a strong and geometrically growing organization to help your distributors meet their financial goals, understanding the compensation plans of the growing number of MLM companies could become a full time job in itself.
Stair Step. Unilevel. Matrix. Binary. Australian. It's enough to drive even the most experienced corporate executives mad. I've debated theory for hours on how the compensation plan is like a piece of art with every twist and turn, every level and qualifier, every bonus pool or discount incentive carrying a specific action and positive reaction from the distributor base. New Age compensation plans are no longer "pure" MLM, but can be better categorized as hybrid systems which attempt to be all things to all people. A little more discount here, another level in depth there, infinity bonuses, compression, roll-up, pass-through bonuses. We need an MLM dictionary just to decipher the written explanations of the plans. If you are considering making a "Decision to Transition" from your present compensation structure to an MLM model, please take note!
Radical change may be necessary, but don't jump on the first fad compensation plan that rings your chimes. Your corporate and product mission, along with your distributor culture, must be considered.
Adopting a plan that maintains your long established principles while incorporating current trends should be your goal. Today's plans must address the following:.
- Cost of new
distributor entry sales kit should be modest, making it easy to get started.
- Early payout of initial commissions
and bonuses. Some are paid weekly or bi-weekly.
- A good plan's commissions are
balanced between the beginning MLMer who is just trying it on for size,
the committed part-time business builder who is building an organization
through multiple levels, and the totally committed leader who can benefit
from bonuses on a large organization of the first two.
- Distributor monthly maintenance
qualifications to receive downline organization bonuses should be reasonable
and achievable for the consistent part-timer as well as the dedicated and
committed full-time participant.
- Program should incorporate
autoship ordering programs with a bonus volume relationship to monthly distributor
qualifications.
- Plan should mandate minimum
distributor personal retail sales while rewarding for building an organization
in depth.
- A "Plus" plan. This
means that there are no sponsor disincentives created by lost or reduced
centers of profit as the downline advances which encourages leaders to suppress
downline advancement. All earned bonus levels are in addition to those previously
earned, never in place of them.
- Distributor advancement award
titles should be permanent once received, but distributor bonuses should
be "Paid-as" the position for which they actually qualify during
the pay period.
- Compression of levels or generations
should occur to properly reward performers through maximum depth of income
stream.
- The plan should be "capitalistic" in its design to reward the business builders who contribute regularly to the company growth. Beware of plans that are "socialistic" in design dividing available profits among many and encouraging a something-for-nothing philosophy.
If you are a traditional direct sales company considering transitioning to MLM, or an established MLM just trying to play catch-up in the evolving marketplace, a competitive compensation plan tied to today's technology is only part of the equation for maintaining and growing your market position. You will be competing for your distributors' time, not just their product sales or consumption loyalty. Show them how to leverage their time while geometrically growing their income and you will put your company in the winner's circle.
Request information about starting or growing your MLM company.
Michael L. Sheffield is the CEO of Sheffield Resource Network, a full-service direct sales and multi level marketing (MLM) consulting firm. He is a Co-Founder and Chairman Emeritus of the Multi Level Marketing International Association and in 2001 he was inducted into the MLMIA Hall of Fame. As an MLM Consultant, he and the Sheffield team have assisted in hundreds of national and international MLM corporate start-ups as well as offered a full line of services for established direct sales companies. As the most noted expert on compensation plans, he has been a guest lecturer on the subject for the DSA, University of Illinois, University of Texas, Berkeley and Harvard Alumni Association. Long considered the industry's top MLM Consultant , Michael Sheffield has helped launch over 500 new companies and 200 new products marketed by direct selling companies around the globe. He can be contacted at 480-968-6199, Sheffield Resource Network, 2239 N. Hayden Road, Suite 103, Scottsdale, AZ. 85257, website address: www.sheffieldnet.com.
