Party
Plan Marketing
Direct Selling Through the MLM Party Plan
An Alternative To Traditional Marketing and Distribution
by
Michael L. Sheffield
Party Plan Marketing
Consultant
More
and more traditional marketing companies offering consumer products are turning
to Direct Marketing concepts such as mail order, direct mail, infomercials,
telemarketing and even e-commerce on the Internet in an attempt to maintain
brand name loyalty or recapture the minds and dollars of their established
customer base. But, no other method of reaching out to current and potential
customers has the proven lifecycle success of direct selling.
Direct selling has its roots firmly planted in the seedbed of American colonial
capitalism. The "Yankee Peddler" was a marketing phenomenon of the
colonial period — a drummer who went from community to community selling
household goods and farm implements. He was the 17th century version of the
Fuller Brush, Tupperware, or Amway salesperson.
Today, according to the Direct Selling Association (DSA), the look of direct
sales companies is changing rapidly. The one-on-one sale is being replaced
by group sales through Party Plan techniques combined with the aggressive
business building structure of Multi-Level Marketing. The Multi-Level Marketing
industry legitimized by Amway (the legendary grandfather of the Networking
Industry) during the 1960's has matured into the mainstream world market.
Companies and products, which have traditionally been sold through "conventional"
distribution channels (people going to the product), are now recognizing the
potential of Multi-Level Marketing's ability to achieve spectacular sales
momentum. The Chairman of the marketing department at Long Island University,
Dr. Srikumar Rao, a student of Multi-Level Marketing Companies for over two
decades said that, "Multi-Level Marketing has an enormous power to create
wealth." It is singly this phenomenon which has attracted the attention
of businesses ranging from small private companies to those in the Fortune
500 category, all seeking a better marketing solution which at the same time
offers the hope of an exciting bottom line.
One example is A.L. Williams Insurance which became a Multi-Level Marketing
company in 1984. Traditional insurance companies were shocked when this company’s
army of independent sales reps consumed their market share. By 1988 A.L. Williams
had recorded a record breaking $96 BILLION worth of insurance business placing
them as the most productive insurance agency in America. This company was
subsequently purchased by Primerica Insurance and then by The Travelers.
The next shock waves were sent through AT&T. Over the last few years AT&T
has lost over 15% of its long distance market to competitors like US Sprint,
and MCI, both who had early successes in expanding their market share through
associations with a Multi-Level Marketing sales force. Today, Excel Communications
and other aggressive MLM companies are cutting into the business of Sprint
and MCI. Even Coca-Cola has sold a small soft drink dispensing machine through
the Amway Corporation. Service Master, Gillette, Colgate-Palmolive, Avon,
Dupont, Home Shopping Network Direct, Texas Instrument and even AOL have all
experimented with or embraced the concept of direct selling through the Party
Plan group selling concept, Multi-Level Marketing or both.
Why? Because direct marketing/direct sales hybrids using Party Plan combined
with Multi-Level Marketing is the wave of the future. Since manufacturing
costs have fallen so much in the past two decades, distribution now represents
85% of the value of goods at retail. Therefore, the greatest opportunities
in the first decade of the new century await those who reduce the cost of
distribution while increasing direct interaction with the consumer.
There are probably few women over thirty years old that have never attended
a home party offered by Tupperware, Home Interiors, Discovery Toys, Longaberger
Baskets, Mary Kay or any number of other well established and successful direct
sales/Party Plan companies. While in the past Party Plan companies were structured
in the direct sales model with a single level commission compensation offered
to the sales representative, today’s Party Plan companies are combining
the Multi-Level Marketing compensation model with the time tested and proven
Party Plan concept.
The principle of group sales through Party Plan combined with MLM is quite
simple. In traditional distribution and marketing a company distributes its
product to the consumer by going through wholesale distribution channels which
eventually land the product on the shelves of a retail store. At each step
of this distribution channel there are costs which are added to the price
at which the manufacturer sells the product. Typically the manufacturer also
spends large amounts on packaging to attract the consumer's attention and
on advertising to create sufficient demand to move the product off the shelves
of the retail store. These packaging, distribution and advertising costs represent
a very large percentage of the retail price of the products.
In Party Plan/MLM, two significant differences occur. First, the distribution
channel is simplified because the product normally moves directly from the
manufacturer or distribution company to the Party Plan Hostess to be distributed
to her party attendee customers. The Hostess is a volunteer ambassador for
the products that can earn gifts, cash or credit toward the purchase of her
own product selections. This cycle is begun and completed by the Independent
Representative who will ultimately be the catalyst for the retail sales of
the product at the party. Secondly, it is not necessary to spend large sums
on product packaging and advertising. Most products offered through Party
Plan sales are low in cost, highly demonstrable and of benefit to most potential
customers. The independent representative who makes the group sales presentation
utilizes and relies on word-of-mouth "advertising" by satisfied
purchasers to create a brand name loyalty and an ever expanding demand for
the company’s products. Enticing the party attendees to return to another
party in the future is critical to the growth of a good party plan system.
This can be accomplished by introducing new products, offering future discounts
to past customers, or most assuredly by making sure that the attendee has
fun and looks forward to a repeat performance. The sales representative has
the ability to use this group sales party environment to recruit other candidates
to act as Hostesses for their next party. In addition they can use their exposure
at the party to sponsor new independent sales representatives on whose sales
he/she will also realize a small return. Since this whole procedure can then
be duplicated by the newly sponsored rep and income can be generated for everyone
through several levels of sales activity, the Party Plan/MLM model can create
momentum which fuels the spectacular growth of which this business is capable.
The dollars which would otherwise have gone to distribution and to expensive
packaging and advertising campaigns are paid directly to the Party Plan/MLM
representatives as commissions and bonuses rewarding their sales efforts for
retailing the product.
Today Multi-Level Marketing Companies not only accounts for billions of dollars
in sales, but they are estimated to influence one out of every three homes
in America with marketing related contact. In fact, the Direct Selling Association
reported that MLM sales represent about 25 billion dollars in the US and are
closing in on 100 billion dollars world wide. Virtually any area of the economy
today is open to penetration by using a Multi-Level Marketing sales force.
Any company who ignores the power of MLM is certainly missing the future."
At a time in history when large numbers of highly professional and entrepreneurial
persons are motivated to get out of the corporate arena and into their own
businesses, the Party Plan/MLM Industry is growing at an unprecedented rate.
What Is
The Key To This Success?
Before you consider committing your time and efforts to this type of business,
you should understand what a good company looks like so you can make an educated
judgement. Naturally, of critical importance is a viable product or product
line. The ideal Party Plan product must meet a widely experienced need, and
offer a cost effective solution to that need in a way that is unique and non
duplicable if possible. It must be priced such that its purchase represents
an easy decision for the buyer. Following the purchase, the product benefits
should be readily discernible and should create a level of excitement in the
buyer that they will want to share with their friends. It is essential that
the sale of the product return an immediate income to the independent sales
representative as well as set the stage for earning future bonuses.
The next most important ingredient is the company leadership. As the leadership
goes, so goes the Company. The leadership determines the company's character
and personality and is responsible for maintaining this character and personality
throughout the entire field marketing organization. The leadership must also
be competent to deal with the potential of explosive company growth.
The marketing leadership is especially critical to a Party Plan/MLM company's
success. This style of marketing is so unlike traditional marketing that prior
experience in the company's marketing leadership is especially valuable. The
entire sales and marketing momentum will take its shape, substance and values
from the company's marketing leadership.
Momentum is the magic of Party Plan/MLM. Momentum can also be the death knell
— if not properly managed. The marketing leadership can create momentum.
The leadership team must also include administrative leadership to make certain
the company can properly service the growth which marketing creates. Staffing
at each growth level must be planned for and must be implemented in anticipation
of growth. Cash flows become substantial and these cash flows must be managed
according to a well-developed plan.
The ideal combination for a Party Plan/MLM leadership team is the counter
balance of a boldly optimistic marketing professional and a practical, conservative
administrator who works behind the scenes providing the required organizational
structure, financial management and technical support to allow the marketing
growth and momentum to continue unimpeded. THE FUTURE OF MULTI-LEVEL MARKETING.
Advertising Age predicted that as much as 40% of the budgets major corporations
were spending on mass media campaigns would be "migrating" to "point-of-purchase"
marketing efforts. The only mistake Advertising Age made was in being too
conservative. Recent estimate indicate that 60% of all manufacturers and marketers
now want to spend their promotional dollars as close as possible to the consumer.
One of the means they have recently discovered for this point-of-purchase
marketing is Multi-Level Marketing. One of the reasons for the success of
MLM is the recent explosion of entrepreneurial enterprises in America and
throughout the world. Although studies conducted in the late 1960's predicted
that more than 80 percent of the American work force would be employed by
mega-corporations by the year 1990, just the opposite is true. The trend has
been for corporations to "downsize" or “rightsize” their
organizations while establishing "networking associations". One
of the principal "career goals" cited by graduating MBA's last year
was not to go to work for a corporation, but to get into some form of entrepreneurial
enterprise.
Another reason for MLM’s success is simple socio-economic need. Milton
Friedman, University of Chicago professor of economics and Nobel Prize Laureate,
said that the greatest economic need of most Americans is for "cottage
industries", businesses they can run out of their homes, on their own
time, conforming to their own schedules; businesses that do not depend on
the "good-will" of others; business that can increase the discretionary
income of the average worker, but not at the expense of his or her family
life. Such cottage industries, Friedman reasons, are especially valuable in
times of recession or other economic uncertainty - times when MLM flourishes.
But, as important as any other element in the success of Multi-Level Marketing
is what Advertising Age predicted; manufacturers and marketers are looking
for ways to spend advertising dollars as close to the point of sale as possible.
That's what Party Plan/MLM does. It provides a high touch sales presentation
to potential customers right at the point of sale. If a person wants to buy,
he or she doesn't have to turn off the TV and go to the market, or dial an
800 number, search the Internet, or mail anything. All the customer has to
do is say "yes". And the customer is more likely to say yes because
Party Plan/MLM representatives are among the most enthusiastic and committed
sales professionals in the marketplace today.
Marketing
Plan
A Party Plan/MLM program, by its very nature, builds downward from a single
person or entity. The person referred to here is not the VP of Sales or any
other corporate marketing leader. The reference is to the front line Independent
Representatives; people who functions outside the corporate structure as independent
sales representatives, selling the product at retail and recruiting others
into the Multi-Level Marketing program. These people are sometimes referred
to as the "point" people in the sales organization.
It is not essential that "point" people are dynamic leaders - but
it certainly is desirable. If it turns out that the person in this position
does not have the desired leadership qualities, other leaders will eventually
develop below him/her in the organization. It is the responsibility of the
company's corporate marketing leadership to be very actively involved in this
early structuring of the representative organization to assure that adequate
field leadership is in place at, or near, the top.
It should be pointed out here that it is not uncommon for independent representatives
to initially get involved on a part-time basis. It is fully feasible for someone
to continue to work at a job, which provides the basic necessities of life
while building a second income with this opportunity. When this second income
becomes large enough to provide the basic financial necessities is the point
at which most independent representatives will consider devoting full time
to their direct selling pursuits.
Retailing
the Product
The ultimate objective of a soundly based Party Plan company is to create
retail sales of its product through the independent representative organization
by way of the Party Plan hostess and into the hands of the party attendees.
A company which loses sight of this basic retailing principal and promotes
the “loading” of inventory to its sales representative can run
afoul of the laws which govern how Party Plan/MLM companies operate. Through
training meetings, training materials and all communications with the field
organization major emphasis will be placed on the retailing of product.
Although the volunteer party hostess may obtain product orders without the
sales reps assistance, most retail sales will result from personal contact
between an Independent Representative and the retail purchaser. The purchaser
may be the hostess’s neighbor, a relative, a friend, a co-worker, a
business acquaintance or someone to whom the sales representative has been
referred by a previous purchaser of the product.
Some representatives in the organization will choose to focus totally or largely
on their own retailing of the product receiving a base commission. They may
also have the opportunity to earn additional bonuses by on achieving certain
predetermined monthly sales levels. The right individual, with the right product
can earn a very respectable income in this manner.
However, the Party Plan concept offers an additional way for representatives
to increase their incomes through group sales. By recruiting a person to act
as a hostess and invite her own friends to a social event in her home, sales
to multiple attendees will greatly enhance the independent representatives
income potential while leveraging their available time to work the business.
In addition, many people who become hostesses as well as interested people
who are party attendees can be recruited to become independent representatives.
The recruiting representative will then have the opportunity of earning additional
bonuses as a percentage of the sales created by those they have recruited.
Recruiting
Recruiting can be a very important part of a successful representative's involvement
in Party Plan/MLM. It provides the opportunity for a person to literally build
a business of his or her own with almost no investment. In the same way that
no really successful business can exist solely on the efforts of one individual,
no really successful Party Plan/MLM sales reps career can be built solely
on the retail sales efforts of one individual. Even with generous commissions
and bonuses it is difficult to build a significant income from ones own efforts.
A sales rep is limited to their available hours obviously making it difficult
to earn above average income. But in the same way the owners of a businesses
hires employees so they can "multiply their own efforts", direct
selling professional can "sponsor" people to help build their business
into their business opportunity. It is this multiplier effect creating geometric
growth that provides the momentum for individual representatives to achieve
out of the ordinary income levels. This is also what propels the Party Plan/MLM
forward with ever-increasing momentum.
It is important to mention once again that this type of business is not based
on selling large inventories of product to new representatives. A new representative
is usually not required to make any purchase of product in order to become
a representative. The only commitment a new representative must make is the
purchase of an “at cost” representative kit and possibly some
product samples for demonstrations. Since it is extremely useful when presenting
the product at a party to have samples to see and touch, all representatives
are encouraged to acquire a sample kit for demonstration. These product samples
can usually be returned for a refund if the sales person decides to discontinue
their efforts. All products are usually shipped directly to the hostess or
to the individual retail customer depending of the method used in each region.
Never before has their been an opportunity so right for the time and a market
so ready to embrace the opportunity. “Controlled Growth” will
be the watchwords of this new hybrid marketing concept. Timing is everything.
If you are considering a part time or full time business opportunity with
low risk and high potential rewards, the time is NOW!
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.
