Category Archives:mlm consulting

Starter Kit Strategy Part 1

Starter Kit StrateDan Jensen Consultinggy by Andi Sherwood, Dan Jensen

Consulting Starter Kits. Business Kits. Enrollment Kits. All of these names refer to the same thing: a packet of materials and/or products that is purchased at the time an individual enrolls with your company to become an Independent Business Owner (IBO). More importantly, this represents a strategy.

There are many types of companies in our industry.

– Internal/Self Consumption companies center their pricing strategy on the IBO/Wholesale (discounted) price, which results in most customers enrolling as an IBO in order to purchase at that price. – Customer/Retail Biased companies center their pricing strategy on the Retail Price and their IBOs focus on selling their products to customers who will purchase at the Retail Price and use the products without enrolling as IBOs. – Affiliate Programs are kind of a hybrid of the two. I say “kind of” because it is not really as simple as that sounds. There are some unique nuances and very few companies fall into this category. For that reason, the Affiliate type is not addressed within this article.

While this explanation of business types has been simplified, it isn’t necessarily a choice of one or the other, it’s a spectrum with Internal Consumption on one end and Customer Biased on the other end and most companies fall somewhere in between. There are companies that have succeeded and failed throughout the spectrum so there is no right or wrong choice. Alignment to business type, including the Starter Kit, is critical to success.

The Starter Kit strategies differ based on where your company is on the spectrum and it is vital that you understand how this impacts your desired business type. For purposes of this discussion, we will refer to strategies of the Internal Consumption and Customer Biased companies, even though many companies have a bit of both.

In this three part series, we will address the following Starter Kit related strategies: 1) Pricing 2) Products/Materials 3) Presentations

Strategy #1: Pricing The Starter Kit is not merely materials and products, it is a strategy that creates a healthy “barrier to entry” that can (when desired) separate customers from business builders. It creates a monetary gateway that an individual passes through, whether low or high, when enrolling as an IBO. While you may question the logic of creating barriers for a potential IBO, it is important to understand how this decision will impact your business type.

When the price of the starter kit is low, your barrier to entry is low. Many of the people that join your company are likely to be customers who want to buy your products for the best possible price – like a buying club. This is the nature of the Internal Consumption business type and is reflected in common starter kit pricing ranging from $10-$30.

In this low price scenario, very minimal commitment is made at enrollment so while the customers become IBOs, they do not act like IBOs. These companies will have some business builder IBOs that develop very successful teams made up of a few business builders and lots of customer-IBOs. While the average per IBO sales volume may not be high, the number of IBOs makes up for that.

Higher priced Starter Kits create a stronger barrier to entry. This often results in fewer IBO enrollments but higher commitment to building a business and thus higher per IBO sales volume. In Customer Biased companies, the IBOs count on the retail profit that they make when they sell to customers (who purchase at Retail) as a major source of income. In order to protect this vital aspect of the business, companies of this model should price their kit high enough to discourage customers joining solely for the discount and ensure that the starter kits have the proper mix of materials and products (this will be addressed in strategy #2).

Unfortunately, failure to price the Starter Kit appropriately has destroyed many companies in our industry. A Customer Biased company that fails to protect the retail profit will find that their IBOs do not make enough money for it to be worth their time selling and building a business. When earnings are not sufficient, an IBO will stop working their business and become a customer purchasing at discount. The company will find themselves unintentionally moving more towards an Internal Consumption model.

For example, an IBO who sells $1,000 in products to customers might earn a 25% retail profit of $250. If those same customers enrolled as IBO’s, they would get a 25% discount – in other words the retail profit to the seller becomes a discount to the buyer. The sponsor (seller) who would have earned $250 had they stayed as customers might now earn 10% on the IBO wholesale price ($750) = $75 total (instead of the 25% profit on the retail price). If the sponsoring/selling IBO had spent 10 hours finding those customers and taking their orders, then they would have earned $25 per hour for their time when those individuals were customers. When the customer became IBOs, that dollar-per-hour dropped to $7.50. When an IBO joins your company to make money, the $25 per hour is critical to achieving their goal as quickly as possible, thereby making the barrier to entry vital to protecting the retail profit.

As a rule of thumb, the higher your Starter Kit price is, the more Customer Biased you are and likewise, the lower the price, the more Internal Consumption focused you are. If I were to place a price on the Starter Kit for a company right in the middle of the spectrum, in today’s economy, it would be somewhere in the range of $50-60.

Please note that there are some legal requirements regarding the Starter Kit pricing in the USA. The are a number of states which specify a maximum amount that you may charge for the kit and there are rules that govern the cost of goods for the kit versus the selling price. Please check with your industry attorney for specific information on the legal aspects of the Starter Kit. In summary, the pricing of your Starter Kit is a very important strategy that should be considered in your business in order to create alignment between your kit and the business type that you intend to be.

Shave Years Off Your Learning Curve At The Direct Selling Symposium

Launching a new Direct Selling Company (home party or MLM) and getting it off the ground can be a very complex and difficult process. Especially if you’re doing it on your own. Unlike many things, the world of Direct Sales is not something that you can just YouTube and find easy-to-follow tutorials on how to effectively build and grow a Direct Selling Company. There are many areas that must be considered, such as building your compensation plan (and keeping it legal), training your field, compliance, legal, your sales pitch, how to motivate your sales force, recruiting, retention, logistics, what software are you going to use, how do you keep a balanced budget, communication with your field, customer service, social marketing, and the list goes on and on. The best practices for each of these disciplines is truly unique for the world of direct selling.  Much of what drives the peculiarities is the fact that your products will be demonstrated and sold by an army of independent field sales reps – who will make a decision each day whether or not to work their business and stay with your company.

Because of these complexities, only 20% of all direct selling startups are in business after one year.  The other 80% have failed in their attempt to launch.  However, what we have found is that if the entrepreneurs will take the time early to learn and follow proven best practices and processes for starting and running a direct selling company – that success rate is as high as 80% still in business and growing after one year.

We want more successes and less failures!  We’re sure you do to!  Failures are bad for the industry and leave thousands of independent sales reps’ dreams laying in the wake.  Successes breed confidence and good will in the direct selling industry and help independent sales reps reach their dreams and aspirations.  To increase success rates – YOUR success, we have brought together in one place, at one event, the industry’s leading experts in these different fields to educate you on Best Practices of Starting, Building, and Growing your Direct Selling Business.

The Direct Selling Symposium is a place of education, learning, and mentoring – and includes front-of-the-room instruction as well as individual coaching sessions.  It is NOT a time when services are sold – in fact it is prohibited.  Whether you’re an entrepreneur starting from scratch or leveraging your existing business by diversifying into the direct selling space – attending the Direct Selling Symposium will shave years off your learning curve, and dramatically increase the likelihood of success.  We look forward to seeing you there!100_6124.JPG

Dave Taylor

 

Top 10 Practices of Field Retention Leaders – Part 2

Every year we interview hundreds of field leaders representing a broad range of companies, products, and approaches. There are some consistent best-practices that emerge that cause field reps to excel at retaining those they recruit. Here are the first five best-practices that field retention leaders live by:

Ask, Listen & Act

A pre-requisite to really knowing and serving a field team is the desire and skills to ask, listen and act. The results consistently astound those who effectively apply these practices.

o Get to know your customers and business recruits at a personal level.

o Ask for feedback, input and insights.

o Become an expert listener.

o Seek understanding.

o Act on what you hear, perceive and promise.

Practice #7: Recover when necessary and possible, be proactive about retention

Recovery’s a great way to keep team members and customers. Recovery is necessary when you have blown it. Recovery must be a very strong part of your retention effort, meaning, you can’t leave recovery to chance.

o Be prepared to recover.

o When things go wrong, and they often do, follow the basic steps of recovery: sincere apology, involve your team member or customer in how to handle the problem, quickly fix the problem, do something extra, follow up, and ask for repeat business and the opportunity to rebuild.

o Always take responsibility for goofs and become a sturdy, reliable bridge between the company, disappointments and failures on the one side and your customers and recruits on the other side.

o Learn the economics of the lifetime value of a faithful customer and resolve to invest in each individual customer.

o Perfect the ability to turn problems into strong relationship building blocks.

Practice #8: Regularly and meaningfully recognize

Once we learn to credit the people who are actually our customers and faithful workers in the field, the entire organization can achieve greatness. The key is to figure out how to convey to them our honest appreciation for their contributions and to realize the success of an organization depends less on motivating the top 10 percent and far more on motivating the other 90 percent.

o Recognize your customers and business builders from the heart.

o Remember that the right awards, recognition and celebration represent victory of will over doubt.

o Be consistent, be genuine and be accurate.

o Develop spontaneity and magic.

o Remember that it all comes down to motivation, and the heart of motivation is recognition and encouragement.

o Use recognition and rewards that are valued by the recipient – remembering that money is an important (but not the only) motivator.

Practice #9: Train and develop your team; constantly learn from retention leaders

Successful retention leaders take responsibility for training and developing their teams; and they, themselves, are lifelong students of the best practices.

o Always be learning and stay on higher ground.

o Share what you learn, don’t hold back; remember that each individual in your organization is at a different level, has different needs and responds in different ways.

o Use and contribute to the company’s training systems and materials.

Practice #10: Generously Give Warm Fuzzies

“Warm Fuzzies” refers to those special extras that provide the glue in a business relationship. Retention leaders understand what they are and how to use them. They are different for each leader and each recipient, but they all have in common a single vital element: a warm fuzzie creates and strengthens relationship ties. TLC (Tender Loving Care) comes naturally to some, has to be created by others. Either way, develop the feeling and give the nurturing care.

o Keep it simple and from the heart

o Develop your own style, techniques and flavor of TLC

o Give generously

Terrel Transtrum is the CEO and Founder of ServiceQuest, The Direct Selling Experts. terrel@servicequest.com

How Your Enrollment Kit Affects Your Compensation Plan

A successful compensation plan drives the behaviors that make your sales force successful and helps to create sustainable growth for your business. While there are many factors that determine your business success, everybody knows that your compensation plan is one of the big ones. But there are many factors that can help or hinder your compensation plan. One of the big ones is your enrollment kit – the “business in a box” that all of your new recruits purchase when they sign up.

Guiding Principle: Align your business kit strategy with your compensation plan strategy so they work together in harmony.

Best Practice #1: If your people lead with product and follow with the opportunity, you are probably a customer driven business model. Your sales force hunts for customers to sell products to and they earn a commission or profit making it worth their time. We call this a “retail biased” business model. Your products will have a market acceptable retail price that customers are willing to spend for your products once they hear your unique selling proposition (USP). In this approach it is vital to avoid customers signing up as distributors only to get the distributor price discount. Doing so robs your distributors of their commission or profit they would otherwise earn. Instead of a 25% to 50% retail commission / profit, your distributors earn a much smaller commission on the purchases of their new enrollee who is actually their customer. The dollar-per-hour proposition for the sponsor drops like a rock from $25 or higher down to less than minimum wage. Next month they’ll find other things to do with their time. Bad for them. Bad for you. Last one out turn off the lights! When you charge a high enough price for your enrollment kit it will act as a filter so customers stay customers and people who want to earn money buy the kit to start a business. Usually this means a business kit price of $79 to $199. The higher the kit price the fewer the customers that enroll for a discount.

Best Practice #2: If your business is a “self-consumption” model where everybody who uses the product should sign up as a distributor, then your business enrollment kit should be low, often $29 or less. In this model your recruits don’t earn a retail profit or commission. They only earn on the purchases of their personal recruits and downline so the barrier to entry must be very low. To be competitive, however, you must design your compensation plan to provide a sufficient dollar-per-hour proposition to your people so it makes it worth it for them to enroll new customers as distributors. In the USA and similar markets this requires a minimum of $25 per hour for their time. Some companies pay a very high commission on the first order of a new recruit to make this happen.

Best Practice #3: Optional product kits are sometimes offered to new enrollees to give them sufficient product to sell to customers or personally use for a while. Legally you can pay a reasonable commission on these optional kits (never on a required kit to avoid violating pyramid laws). The commissions earned by the sponsor on selling a kit to a new customer or recruit can be sufficient to make it worth their time (dollar-per-hour of $25 or more). Warning: if your business depends heavily on a monthly Autoship model, selling a product kit to a new customer or recruit can greatly reduce the repeat sales for the following month and/or greatly undermine your Autoship retention rate when they don’t need any product for a while. Nobody stays on Autoship with a closet full of product.

Best Practice #4: If you sell to customers do not include huge amounts of discounted product in your enrollment kit. This defeats the entire purpose of a higher cost enrollment kit. A jewelry company, for example, should not offer $300 worth of jewelry in a $100 enrollment kit for new recruits (the kit would also contain business materials which is why the cost of the kit can be $100). Customers would buy the enrollment kit solely for the discounted value and learn that your products really aren’t worth the retail asking price anyway. The seller now becomes the sponsor and earns little or nothing on the sale instead of a full personal commission or profit. Bad news. High and/or regular discounts will destroy the perceived value of your products.

Conclusion

1) Determine what type of direct selling business model you want to be – customer biased or self-consumption.

2) Determine the price of your enrollment kit based on your business model. A higher price is necessary to keep customers from enrolling as distributors just to get the discount.

3) Be careful when offering discounted product kits that it doesn’t load up the garage to a point where they won’t buy any more product for a long time – especially if you have an Autoship business model.

4) Don’t harm the perceived value of your products by including a high value of products for a greatly reduced price in your enrollment kit.

By Dan Jensen, October, 2014

dan@danjensen-consulting.com

www.danjensen-consulting.com

MLM Consultants Provide Great Advice

One of my favorite MLM consultants once told me that the key to successful MLM consulting is to learn to listen. To a large degree she was right. But in some respects, she had missed the mark with her advice.

Listening is important, don’t get me wrong. As MLM consultants we are called on to solve hosts of problems laid in front of us. Understanding certainly begins with listening. It also requires observing.

A practice that has stayed with me for decades was first taught to me by Frank VanderSloot, CEO of Melaleuca with headquarters in Idaho Falls, Idaho. When he hired me to work with him in 1988, he explained that my job was to “keep the distributors happy.” He went on to challenge me to help him create an enterprise that placed—truly valued—the distributor as the center of the Melaleuca universe.

We didn’t realize at the time that this was the most important practice in creating the company culture that would stay with it, and to a large degree contribute to its extraordinary growth, for decades. And the key to creating the distributor-centered enterprise was to observe.

Decades later, as MLM consultants, we still follow the basic disciplines developed in the halls of the once-tiny Melaleuca: Observe.

Observation has valuable facets. For instance, by creating a two-step distributor service method (step 1 – handle the immediate call / email / inquiry from the distributor, step 2 – consider what went wrong in the first place and formulate a recommendation that is passed along for action). This requires observation by the employee, her co-workers, her team leaders and supervisor, and stakeholders from other areas in the company.

Good MLM consultants will do the same, as they observe from many angles, for a variety of reasons, in order to discover causes and effects of company operations at all levels.

Terrel Transtrum is Founder and CEO of ServiceQuest, a global consulting and training firm specializing in MLM and direct selling. terrel@servicequest.com

Break Down Startup Barriers With Help From MLM Consulting Teams

Breaking down the startup barriers can be challenging, but with help from the world of MLM consulting, the challenge may become more bearable.

For anyone who understands the drive and motivating factors behind starting and running an MLM company, the potential for talented individuals to re-invent themselves as business owners will come as no surprise.  Through teamwork, resilience and the “sky’s the limit” attitude, anything is possible.

In our daily and weekly work in MLM consulting, we assist new businesses with the long list of challenges they face in taking a bright idea to market.  We also find that they value mentoring and training that gives them the edge in their new venture.

For instance, a visionary husband-wife team from Corona, California launched their business a year ago and they are already being pushed by the business to transform from visionary entrepreneurs to experienced executives.  “It came faster than I could have expected,” confessed CEO Mark Stidham.  “But then, the obvious steps are to strap in and ride hard.”

And ride hard is an understatement.  Stidham and his gifted partner (and wife) show no fear in the face of extraordinary growth.  “To go from an idea to $10 million in annualized sales in a year pushes us beyond anything we could have anticipated,” continues Stidham.

He describes his venture as the launching pad for a lifelong endeavor to make a difference, especially in the lives of stay-at-home moms who want a fresh, profitable, and flexible business.  Working with a team that specializes in MLM consulting has lifted confidence levels, which in turn  has boosted momentum.

His advice?  “Keep it simple, stay focused, and maintain your sense of humor.”  That, and work with professionals that have dedicated themselves to the field of MLM consulting.  “When you consider how much you can lose by not keeping up with the demands of the business, or by experimenting in ways that you have no business (or time) experimenting and dabbling in, you will quickly see the value in MLM advisory and MLM consulting services.”

We couldn’t have said it better.

Terrel Transtrum is Founder and CEO of ServiceQuest, a global consulting and training firm specializing in MLM and direct selling.  terrel@servicequest.com

Working With A Qualified MLM Consultant Can Mean The Difference Between Success And Failure

The payback from working with a qualified MLM consultant can mean the difference between success and failure.  The incidence of failure of a new MLM startup closely follows the success / failure rate of small businesses across the USA.

According to the US Small Business Administration, 8 out of 10 businesses fail.  It breaks my heart.  The trend in startup MLM companies is the same, if not even slightly higher in failure rate.  At surface level the primary reason the new MLM startup fails is that it simply runs out of cash.  But the cracks in the foundation start well before the heartbreaking day of financial collapse.

An amazing thing seems to happen when an entrepreneur identifies the great opportunity for a direct selling business: they retreat to a cave!  Some are not in touch with distributors (and their wonderful, quirky demands and needs).  Yet the distributors and consultants (in home party companies) hold the key to success deep in their dreams, behaviors, and values.

Of the best solutions, one is dialogue and the other is a qualified MLM consultant.  From our many years in and around distributor service systems, we are reminded of the question asked by Nathan Furr and Paul Ahlstrom (co-authors of the book Nail It, Then Scale It): “Which would you rather do – talk to customers now and find out you were wrong or talk to customers a year and thousands of dollars down the road and still find out you were wrong?”

The other solution is a relationship with a qualified MLM consultant.  In our circles, there are several MLM consultants that seem to float to the top in qualifications.  This doesn’t mean that those in top web search positions are necessarily the most qualified.  In fact, we have found that some of the very best resources are quite difficult to find because they are in the trenches with their sleeves rolled up.

When looking for a qualified MLM consultant, start with the simple, intuitive questions such as these:

  • Where did you get your start in the world of direct selling?
  • How can I be sure that you are qualified to guide me as an MLM consultant?
  • How many of the global top 100 MLM companies and home party companies have you served?
  • How many MLM startups have you helped, and of those, how many are still in business?

Be encouraged, and move and think quickly.  Nail your business model with the help of a qualified MLM consultant.  Otherwise, you’re in the 80% statistic crowd.

Terrel Transtrum is Founder and CEO of ServiceQuest, a global consulting and training firm specializing in MLM and direct selling.  terrel@servicequest.com