Decision
To Transition
Lead
— Follow — or Get Out of the Way!
by
MLM Consultant Michael L. Sheffield
MLM and Direct Sales Expert
Every
direct selling company that has reached the pinnacle of success in today’s
competitive market began its business by offering unique products or services
that served a recognized need. But quality products alone don’t sustain
a multi-million dollar growth pattern. By necessity the company provides a
solid marketing concept and a compensation plan which offers the serious minded
distributor a significant financial opportunity. In addition, it is critical
to provide the part timer and “consumer/ distributor” an easy
way to stay involved at 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. However, 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 in a recent article in
Network Marketing Magazine, single level direct selling companies accounted
for 75% of the organization’s membership in 1990 with 25% being Multi-Level.
Now, 77.3% of DSA members are structured as MLM, verifying a new age of marketing
has arrived commanding the long awaited accompanying respect. Even the established
pioneers of MLM are feeling the pressure as these new age MLM companies demonstrate
growth unparalleled by previous standards.
But, look what has happened for the MLM distributor today. Enhanced telephone
services, the personal computer (PC) and the fax machine have created an environment
for the tremendous increase we have seen in the Multi-Level Marketing home
based business success. Today, the telephone has become the most important
tool in sponsoring.
Self initiated three-way and six-way conference calling is now available from
most local phone service carriers eliminating geographic restrictions. The
fax machine solves the instant support information need and is the vehicle
for quick enrollment. Payment for distributor kits and product is easily handled
over the phone by credit cards or “Check by Phone” programs making
same day shipping of goods possible. Add next day delivery services, and we
can literally complete a sponsoring transaction and have the new recruit in
business in 24 hours.
Just a few years ago, only a few people knew what the Internet was. Many companies
are finding that they can use the Internet to extend their sales and marketing
reach, to improve the quality of their customer service and even to conduct
multimedia conversations with their distributors. For the price of a local
phone call and a few hundred dollars spent on-line, you can send bulk e-mail
over the Internet to your potential as well as existing customers and distributors.
The same message sent by conventional mail, including printing and postage
would cost a great deal more. In short, the Internet is quick, cost-effective
and easily accessible all over the world 24 hours a day, seven days a week.
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 the oldest and most conservative direct
selling companies are taking notice. 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 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 Auto-Ship ordering programs with a bonus volume
relationship to monthly distributor qualifications.
- Plan should mandate distributor minimum 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 downiness. 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 distributor’s 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.
Of course, technology and a hot compensation plan cannot replace person-to-person
communications. People still do business with people, and the more you embrace
technology, the harder you should work at building personal relationships
with your distributors. Make yourself accessible to them at every opportunity
by arranging occasions that will bring you together with them face-to-face.
However, keep in mind that the world of sales and marketing is changing rapidly.
Some companies are recognizing these opportunities and rushing to reinvent
themselves. Others are watching intently and will soon follow, if only out
of the need to stay competitive. As we have heard it said many times in business,
“Lead — Follow — or Get Out
of the Way!”
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.
