Each Direct Selling Company that has reached the pinnacle of success in today’s competitive market began by offering unique products or services that addressed an unmet need. However, a high-quality product alone was insufficient to sustain a multimillion-dollar growth pattern. By necessity, the company provided sound marketing concepts and a compensation plan that provided a sizable financial opportunity for the serious distributor. Additionally, it was critical to provide a simple way for the part-timer and “consumer/distributor” to remain involved at their own level of interest. Combine this with a capable management team and motivated professional sales leaders, and you have a recipe for success. However, my continued research into this ever-changing industry has alerted me to the fact that a “paradigm shift” is occurring in direct selling methods, compensation plans, communication, and support.
The direct selling industry is undergoing rapid change. Historically, the direct sales single-level compensation structure reigned supreme. According to Neil Offen, president of the Direct Selling Association, in 1990, single level direct selling companies accounted for 75% of the organization’s membership, while multilevel direct selling companies accounted for 25%. Now, 77.3 percent of DSA members are MLM-structured, indicating that a new era of marketing has arrived, bringing with it the long-awaited respect. Even the established pioneers of MLM are feeling the heat as these new age MLM companies achieve growth rates unheard of in the industry’s history.
However, take a look at what happened today for the MLM distributor. Enhanced telephone services, the personal computer (PC), and the Internet have created an environment conducive to the phenomenal growth of Multilevel Marketing (MLM) home based business success that we have seen.
Today, the telephone has surpassed all other tools in sponsorship. Most local phone service providers now offer self-initiated three-way and six-way conference calling, removing geographic restrictions. The Internet satisfies the need for immediate support information and serves as a vehicle for rapid enrollment. Payment for distributor kits and product can be made easily over the phone or via the Internet using credit or debit cards, allowing for same-day shipping. When combined with next-day delivery services, we can literally complete a sponsoring transaction in 24 hours and have the new recruit in business.
Only a few years ago, only a small percentage of the population understood what the Internet was. Numerous businesses are discovering that they can leverage the Internet to increase their sales and marketing reach, enhance the quality of their customer service, and even conduct multimedia conversations with their distributors. For the cost of a local phone call and a few hundred dollars spent online, you can send bulk e-mail to prospective and existing customers and distributors via the Internet. The same message sent via conventional mail would cost significantly more, including printing and postage. In a nutshell, the Internet is fast, inexpensive, and easily accessible worldwide 24 hours a day, seven days a week.
Similarly to how the internet fundamentally altered communication and traditional business thinking, Multilevel 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 impact on business, which came at us like an unexpected tidal wave, MLM is a well-established methodology that dates all the way back to the 1950s. Although the established direct selling community regarded MLM as a fringe concept, it thrived, spreading its tentacles and quietly implanting itself, resulting in a growing army of mostly part-time independent contractors. MLM quickly became a multibillion-dollar industry, accounting for billions of dollars in product sales. While many executives of direct selling companies dismissed the MLM revolution as a distant cousin not to be taken seriously, companies such as Nu Skin, HerbalLife, A.L. Williams, Malaluca, and Excel Telecommunications accelerated their way to sales growth unmatched by any previous traditional or direct selling standard.
As a corporate executive in direct selling who wishes to build a strong and geometrically growing organisation capable of assisting distributors in meeting their financial goals, understanding the compensation plans of the growing number of MLM companies could become a full-time job in and of itself. “Stair Step – Unilevel – Matrix – Binary – Australian… it’s enough to drive the most seasoned corporate executives insane.” I’ve spent hours debating theory about how the compensation plan is a work of art, with each twist and turn, each level and qualifier, and each bonus pool or discount incentive eliciting a specific action and positive response from the distributor base. New Age compensation plans are no longer “pure” multilevel marketing schemes, but are more accurately classified as hybrid systems that attempt to be all things to all people. A little more discount here, another level of depth there, infinity bonuses, compression, roll-up, and pass-through bonuses — we require an MLM dictionary to decipher the written explanations of the plans.
Please take note if you are considering “Transitioning” your current compensation structure to an MLM model.
While radical change may be necessary, resist the temptation to adopt the first fad compensation plan that rings your chimes. Consider your company’s and product’s mission, as well as the distributor culture. Adopting a strategy that adheres to long-held principles while incorporating current trends should be your objective.
Today’s plans must take the following into account:
1. The cost of the new distributor entry sales kit should be low, making it simple for new distributors to get started.
2. Weekly or biweekly payout of initial commissions and bonuses is becoming the norm.
3. A good plan provides bonuses that are proportionate to the level of commitment of the beginning MLMer, the committed part-time business builder who is building an organisation through multiple levels, and the fully committed leader who can benefit from bonuses generated by a sizable downline community.
4. Monthly maintenance requirements for distributors in order to qualify for downline organisation bonuses should be reasonable and achievable for both the consistent part-timer and the dedicated and committed full-time participant.
5. The programme should incorporate Auto-Ship ordering programmes that tie bonus volume to monthly distributor qualification requirements.
6. The plan should impose a minimum personal retail sales requirement on distributors while rewarding them for deepening their organisation.
7. A plan denoted by the term “Plus.” This means that no sponsor disincentives are created as a result of lost or reduced profit centres as a result of downline advancement, which could encourage leaders to suppress downline advancement. All bonus levels earned are in addition to previous levels earned, never in lieu of them.
8. Once earned, distributor ranks and titles should be permanent, but distributor bonuses should be “paid-as” the position for which they qualify during the pay period.
9. Levels or generations should be compressed in order to properly reward performers through the maximum depth of the income stream.
10. The plan’s design should be “capitalistic” in nature in order to reward business builders who consistently contribute to the company’s growth. Be cautious of “socialistic” plans that divide available profits among many and promote a something for nothing philosophy.
If you are a traditional direct sales company considering a transition to MLM or an established MLM simply trying to stay current in an evolving marketplace, a competitive compensation plan tied to cutting-edge technology is only one component of maintaining and growing your market position. You will be competing for the time of your distributor, not just for their product sales or consumer loyalty. Demonstrate to them how to leverage their time while growing their income geometrically, and you will put your business in the winner’s circle.
Naturally, technology and an enticing compensation plan cannot substitute for interpersonal communication. Individuals continue to conduct business with individuals, and the more you embrace technology, the more diligently you should work to develop personal relationships with your distributors. Make yourself available at all times by organising events that will bring you face to face with them. Bear in mind, however, that the world of sales and marketing is constantly changing. Certain businesses are seizing these opportunities and reimagining themselves. Others are closely watching and will soon follow, if only to remain competitive. As is frequently stated in business, “Lead — Follow — or Move Out of the Way!”