The Business Models Drive

the Behavior in the Field

Part 7

So what kinds of behavior do these different business models create in the field? If you see what is happening here, do you think anyone is retailing product at that price?  Not a chance. There is a distributor flyer published by “Company 2” that says that you can buy one month supply of the vitamins for $108.00 retail or $64.80 each wholesale.  I am sorry but this stuff just makes me giggle.  If you buy two packs retail the price is $216.00 or $54.00 each wholesale.  If you buy three packs its $324.00 retail or $43.20 a piece wholesale.  Or if the distributor wants to get really serious, they can buy four packs of the vitamin at $432.00 retail for $32.40 each at the wholesale price.

We've found that 92% of the population does not like to sell and does not want to be sold to. How aggressive do you think you have to be to move a box of a 30-day supply of a multi-vitamin pack at $117.00 or $108.00 each?  Pretty aggressive.

Let me ask you this. Who do you think is buying this? You don't know anybody who would buy it. I don't know anybody who would spend $117.00 or $108.00 for that. But they sell plenty of it. Who do you think is buying it?

It's the distributors. The distributors are buying it. Why?  Because they have to qualify to get their bonus check.  That's the only reason they're buying it. This pricing doesn't create a retailing behavior.

People who market the more expensive products, they spend their time recruiting. This is where the money is made for them. There is no money in retailing for them, because nobody's going to pay the high price for that product.  They have to do it at the wholesale price.

So what do they have to do? They have to recruit, recruit, RECRUIT.

What happens after you join them? When they sponsor you into the business, they have no time to work with you! You're in, they got the commission, and they have to move on to recruit the next person. They do not have time to work with you because their business is built on recruiting because they can't possibly retail products.

Here are some general guidelines when you are involved in network marketing.  When a network marketer talks to 100 people about their business, they will typically be able to enroll one distributor.  He or she will also typically gain 10 retail sales. When the business model is designed for continuous recruitment at wholesale prices, is there any way those 10 retail sales will be accumulated?  You walk right passed them.  The future looks bleak for retail sale of anything.  Where is the profit, and where does it show up in the form of compensation to the distributors?    

If all of these people are being recruited into the business, they go into the compensation plan right?  It does not matter which compensation plan they are in, unilateral, bi-nary, tri-nary, 5x7 matrix, they go into the compensation plan.  Now the distributors buy the products at the wholesale.  In most plans, you will make, on average, anywhere between 5%-7% on the wholesale price of the products.  Wouldn’t it be so much better if you were making 40% of the retail price?

If you are going to make a significant profit, the design of the business model must be set up for retail, retail, retail.  Not recruit, recruit, recruit.  Here is another number that you MUST understand if you are ever going to enjoy any success in network marketing.  This number is an industry wide average.  Read it a couple of times until it sinks in.  74% OF YOUR DOWNLINE WILL BE PRODUCT USERS ONLY.  The other 26% will be active participants in the business.   Retailing product, enrolling distributors and generally building the business.  This is not difficult math here.  Would you rather earn 5%-7% of 74% of your downline at the wholesale price?  Or would you rather earn 40% of 74% of your downline at the retail price.  Do this math with your own organization.  Pick just one product and you will see the results for yourself.  

Here is a bit of advice.  If you are in a business where the behavior that is driven is recruit, recruit, recruit RUN FOR YOUR LIFE.  That is also a sign of an illegal pyramid scheme.  When the federal government asks would you have spent the money for that product if there was no business opportunity there.  If they say, “Yes.”  They ask to see the documentation of all of the retail sales. 

That is why in the policies and procedures for the company, there are so many rules.  The companies with the most overhead always have the longest policies and procedures handbook (P & P’s).  You need a lawyer to figure this stuff out.  “The 70% Rule”…  “We must ensure that you have sold this product.”…”You must retain your retail sales slips for a minimum of five years.”…These are excerpts from an actual network marketing company’s  P & P’s.

More information on this in the final chapter of this little saga.  Check it out next week.

THE BUSINESS MODELS DRIVE THE BEHAVIOR IN THE FIELD

Kristopher Curry

Mentoring For Free

“Be a mentor with a servant’s heart.”