Question: Will you explain the difference between MLM and Party Plan?  I think that MLM is the same as Network Marketing, but are these different from direct selling?  And how do I know which is best for our startup?

Answer: “Direct selling” is the generally accepted term the selling system that moves products and services directly from a company to its users and consumers.  The selling is performed by the independent representatives of the company.  Worldwide, companies sell an estimated $118 billion in goods and services through this massive distribution system of person-to-person marketing and sales, with as much as $28 billion of that in the United States.  (Sources: Direct Selling Association, www.dsa.org, and the World Federation of Direct Selling Associations, www.wfdsa.org)

Some MLM Consultants teach that there are three methods of person-to-person selling:

1. Direct Selling
2. Party-Plan Selling
3. MLM or Multi-level Marketing

The LaunchSmart MLM consulting team suggests a subtle distinction, which is that direct selling is the umbrella under which two methods of selling reside: MLM and Party Plan.  Direct selling is a generic reference to the movement of goods and services directly from company to consumer, where sales commissions are associated with the sales efforts of the company’s independent sales force.  Party-plan sales commissions are generated through group selling, often with retail commissions plus incentives for gathering a group together.  Party-plan compensation leverages a one-to-many sales presentation.

MLM compensation plans pay commissions for personal sales, accumulating commissions and bonuses on sales that are related through sponsoring lines.  Both MLM and Party Plan methods link individual sponsors and business builders, often paying compensation through, and/or as a result of, these connected lines.  These methods are sound and very legal since compensation is tied only to the sale of products and services, and not to the act of sponsoring someone.

Advantages that are common to MLM compensation plans and Home Party Plan compensation include the following:

• Sales representatives need not stock products other than those used for demonstration or samples
• The company ships directly to the distributor or customer who makes the purchase
• MLM presentations and Home Party Plan demonstrations are ideal for presenting products that require explanation
• MLM compensation plans, like Party Plan compensation plans, pay for sales personally produced, with commissions and overrides paid to those who train and manage individuals and groups in their sales organizations
• Distribution channels, once established, are the marketing channels through which information, goods, and services are moved
• Part-time to full-time selling, with incentives for immediate action, are characteristic of successful MLM compensation plans and Home Party Plan compensation systems

Through MLM (multi-level marketing, network marketing, viral marketing, referral marketing, etc.) the direct-selling process is duplicated by independent sales reps who sponsor and train others.  Through this basic system of selling, on which virtually all sales systems are based (from insurance to real estate, and from automobiles to men’s clothing) multiple levels of commissions are earned, paid directly from the company to the sellers, managers, and leaders.  This basic concept applies in both the MLM and Home Party Plan selling models.

For a Free MLM Consultation or Free Party Plan Consultation, contact the MLM Consultants at LaunchSmart.  We want you to succeed, since your success is our success.

By David M Taylor, Co-Founder of LaunchSmart

We all remember the great childhood story about the little engine of the train that said: “I think I can, I think I can, I think I can . . . . “  Well, in the wonderful model of direct selling we call party plan – there is an amazing little engine that drives that business, and therefore drives the long-term, sustainable growth of a party plan company.  Understanding that engine, and all the personal motivations involved, is critical to success using the party plan model.

The little engine gets started right after a new party plan consultant (independent field sales representative) enrolls.  As soon as possible after enrollment, she needs to do her “grand opening party” – usually with the support and supervision of her sponsor (the person who enrolled her).  The grand opening party fills the little party plan engine with its first tank of gas!

A new consultant’s grand opening party will usually be held at her home, and she will invite all of her close friends and relatives to come and support her as she kicks off her brand new home based business.  Usually she will get a good turnout at this party, because her close friends and family want to support her.  But what is vital is that she has to get as many bookings for additional parties as she possibly can before those guests leave her grand opening party.  Why?  Because, here are the key elements that drive the little party plan engine:

1. A full calendar means a full bank account for the party plan consultant.  An empty calendar means she’s out of business.
2. The goal is to get at least two bookings from every party.  That’s what keeps the calendar full!
3. The goal is to get at least one follow-up phone interview per party with an attendee who is interested in starting her own party plan business.   That’s what builds her team and exponentially increases her income!

Now, to get the guests at the grand opening to book their own parties, there are three essential ingredients.  Of course, attendees have to fall in love with the product.  Second, there has to be an enticing hostess reward program in place that is communicated to all attendees.  And third, the new consultant has to be taught how to invite attendees to book their own parties.

Next, let’s fast forward a couple of weeks.  The new consultant is now doing the parties she booked at her grand opening.  Again, what’s her goal?  Simple – two bookings and one prospective new consultant from each party.  To make that happen, again there are several key ingredients.

Of course, attendees have to fall in love with the product.  Second, there has to be an enticing hostess reward program in place and the consultant must make it very public to all guests how the hostess will benefit that night from the guests’ purchases.  Understanding the hostess reward program helps them feel a motivation to purchase because they know the hostess and want to help her get some great rewards that night.  In addition, understanding the hostess reward program makes them want to have their own party.  It’s great if the hostess reward program has a booking incentive – something that rewards both the hostess and the guest who books at her party with small rewards.  The consultant will need to learn to effectively use “booking seeds” – comments she drops here and there to inform, educate, and invite guests to book their own parties.  If she books two parties from her grand opening, and two parties from each of those parties, and two parties from each of those parties, and so forth – she will soon have too many parties.  Great!  Now she’ll be even more motivated to invite a new consultant to enroll under her, help that new consultant with her grand opening party, and give that new consultant a couple of her own bookings to help her get started.  Of course, where is the best place to identify and invite new consultants to come on board?  At her parties!  And the hostesses are some of the very best prospects.  Again, she will need to learn to effectively use “recruiting seeds” – comments she drops here and there to inform, educate, and invite guests to visit with her about starting their own party plan home based business.

So, there it is – the amazing little engine that drives this business model we call party plan.  Get some gas in its tank, get all party plan consultants following the formula and teaching those they recruit to follow the formula – and this little engine will build a great big company!

If your company performs according to industry averages – you will lose 80 out of every 100 field reps you enroll.  What’s worse, as much as 50% of your attrition will occur in the first 90 days after enrollment.

If – like most – that is unacceptable to you, then we’re happy to share some specific things you can DO about it.

In a study lasting over 17 years and involving more than 120 direct sales and network marketing companies, we’ve identified 30 “best-practices” that lead to dramatic increases in field retention.  And the very best place to start is with a robust fast start system!  Effective fast start systems not only cut down field attrition levels during the critical first 90 days, but also yield increased average order sizes and help secure long-term field loyalty to your company.

Your fast start system should address the period of time from a new field rep’s enrollment through their first 90 days.  Just as the space shuttle needs over 80% of its fuel in the first two minutes beginning at launch to propel it on its journey – your new field reps must have more support in their first 90 days as they are propelled into their new way of life with your company.

There are several foundational elements that anchor your fast start system.  These are the basic building blocks.  The first order they receive from you is their first real exposure to your company.  It must contain the right information, and the right amount of information, to help them get started.  Within the first 72 hours they should receive a welcome contact from the home office, as well as have a productive training and planning session with their sponsor during which goals should be set and a detailed action plan should be outlined.

They must immediately be introduced to their support team – both corporate and field – and get connected to all important company communications and events.  They must be armed with “the stories” they will need to tell prospects and friends.  And never overlook helping them immediately develop the first story they will have to tell in response to the “you did what!?” question – which they’ll likely be asked at least once shortly after enrollment.

Your job at the corporate office is to create a fast start system built on these foundational elements that makes sure that EVERY new field rep has the opportunity to get started properly.  It must be a system.  It must be built on sound, repeatable processes.

Often we forget that people get involved with our companies for different reasons.  Instead, we design a “one-size-fits-all” welcome and fast start system that – in most companies – is designed to meet the needs of the business builder.  In truth, these business builders are the minority of our field organization, and those who come with different expectations can find our fast start information to be irritating and even offensive.

We have found that new field reps generally fit into three broad categories:

1.    Those who simply want to purchase our products or services at the best possible price.  This is often as much as 75% of the organization.
2.    Those who are willing to introduce a few friends and family in hopes of making enough money to effectively get their products or services for free.
3.    Business builders who are willing to do what is necessary to build some level of monthly income.  They will give various levels of time and commitment in exchange for various levels of income.

An effective fast start system will assure that we understand each new person’s goals and expectations during the enrollment process and capture this data in their customer record.  It will then provide each category of people with the necessary tools, training, and motivation to meet or exceed their goals.  Our objective is to make sure they experience success – as they define success – within the first 90 days.  We should then recognize and celebrate that success.

We must be certain that those in categories one and two experience the full benefits of our products or services within the first 90 days.  This should our focus.  In addition, category two people must be given the tools and training necessary to introduce our products and services to their friends and family members, and must be shown how doing so will result in being able to cover the cost of their own involvement.  Category three people must be provided with the business-building tools they need.  They must also be taught our company’s success cycle – that set of specific activities which, if done over and over, leads to higher and higher levels of income.

Begin by asking yourself the following question for each category – What should each category of people DO in the first 90 days to experience success; and what are the tools, training, and incentives they need?  Design your fast start system around the answers to that key question.

The fast start system you develop will be administered through a series of carefully orchestrated “touches” you have with the field:  first orders, welcome calls and e-mails, conference calls, newsletters, websites, sponsor meetings, etc.

If we understand our field reps’ goals and expectations, we can periodically invite them to increase their level of activity.  For example, it is very easy – after a successful first 90 days – to gently invite a person in category one or category two to invest a few more hours a month to generate some extra income.

A robust fast start system will not only cut down dramatically on field attrition – but it will also increase average order size, build long-term loyalty and strengthen commitment to your company.