The Business Models Drive

the Behavior in the Field

Part 6

Okay, back to the example. I'm thinking of 3 different companies right now. “Company #1” is a publicly traded company. It has been around for well over 20 years.  It actually owns four companies.  It is a near billion dollar conglomerate.  So when I say big, I mean BIG. 

Years ago they did something that was really unique.  They hired a doctor to develop what would be the best vitamin product on the planet.  They wanted a vitamin pack that a child could take, an adult could take, and a man or a woman could take.  A person could take it with food, without food and in between food.  This vitamin had vitamins, minerals, antioxidants, concentrated green food nutrients and essential fatty acids.  This vitamin pack had to be all inclusive for everything the body should have.  The doctor did what he was supposed to do and the company has sold this vitamin pack for years.  This really is a great product.

Then “Company #2” came along and also did something unique.  They hired the same doctor away from “Company #1.”  They asked him to create for them a better vitamin pack.  The doctor decided that he had already created the best vitamin pack possible.  However, they could add one more milligram of each ingredient to every capsule, and they would have the most powerful vitamin pack on the market.  So that is what they did.

One more thing I forgot to mention about “Company #2.”  They are also publicly traded.

Now “Company #3” saw this and thought that they would also like to compete in this market.  They thought, “Why did ‘Company #2’ hire the doctor away from the other company?”  The product is not patented.  There are four manufacturing companies who make the product.  So they got the formula from one of the manufacturing companies and decided to try to improve it.  “Company #3” added to the formula a chelated enzyme to allow people to digest and absorb the nutrients more efficiently.

All three companies market the same product, a multi-vitamin pack. It's an awesome product, flat-out works, and all 3 companies market the identical formula.

Now “Company #1” markets the 30-day supply of that vitamin pack for $117.00.  So do you think you're going to be able to retail that to someone?  Do you know anybody who would gladly pay you $117 for a 30-day supply of a multi-vitamin pack, regardless of how great it is?  It's going be tough. So therefore, you're going to have a challenge of retailing that product.

“Company #2” sells the same formula, just a little more in each capsule, for $108.00.  It's still expensive.  You're still going to have a challenge retailing that.

Now “Company #3,” which has the same formula, with the added chelated enzyme, so you can digest & absorb it better, sells it for $39.95.  Now, I ask you, is that affordable? Do you think you know people who may purchase that product from you?  Absolutely.

Now would you agree that any product, a vitamin, an aspirin, a can of paint or a bottle of water.  Would you agree that to produce that product, nearly identical quantity, same quality, same formula, and the wholesale manufacturing cost of production for those companies is within pennies of each other?

So why in the world do “Company #1” and “Company#2” charge over $100 per month for this product.  The answer:  They are both publicly traded on the New York Stock Exchange.  They have extremely high overhead, which drives the price of the product to astronomical levels.  As the business grows they will have to raise the price of the products and pay less in the compensation plan.  It has to happen.  There is no other source of money for them.  They have created a monster and can not control it.  The only thing they can do to keep it going is to keep feeding it.

So ask yourself.  Can these two companies compete with a non-publicly traded company?  If they can not compete, where is your reward in the compensation plan?  It is simply not there. 

Now, can you clearly see why “Company #3” can afford to sell the same formula, with the added chelated enzyme for better digestion, better absorption, at $39.95? Why do you think they can do that?

They have way less overhead than the other 2 companies. Their warehouse is in the warehouse district. No multi-million dollar home office. They take 97% of their orders automated over the internet, so they need very few actual employees.  They are not a publicly traded company. Their overhead is a small fraction of those first 2 companies.  So it's a more distributor-friendly business model.

Well if this business model and compensation plan is so great, everyone is going to copy it right?  They can not do it!  Their overhead is too high.  They would have to start over entirely.  They will not do that.  That would require them to say that they were wrong.  That will never happen.  More greed and ego.  And “Company 3” can giggle all of the way to the bank.

THE BUSINESS MODELS DRIVE THE BEHAVIOR IN THE FIELD

Kristopher Curry

Mentoring For Free

“Be a mentor with a servant’s heart.”