<>Down the Rabbit
Hole | Pros and Cons of
Accumulation |
<>Buying
Position | Front
Loading Dangers <>| Demotion | Push-up | <>Maintenance
into Profit |
<>Other Factors |
<>Recommended Bonus
Down the
Rabbit Hole
Welcome to Show Me The Plan – Part
2! Although this book is the second part of a 2 part series, the
content here is designed to be stand-alone and each book is written
with lessons applicable for every aspect in network marketing.
Let me just give you a few facts to
ponder about:
Average network marketing companies
today spend roughly a few hundred to a thousand dollars on
Compensation or Marketing Plan Training in just hall/training room
rental, speaker salaries and question and answer sessions! And to
think that most people assume that plans are all about numbers only.
If you plan to recruit professional
networkers (people who do network marketing for a living), and
you hope to bring over their entire organization of maybe 50 –
2,000 people, your chances of sponsoring them is close to zero
unless you are an influential leader yourself AND you
know your company’s marketing plan even better than the company
themselves!
These facts are definitely worth
pondering. If I am running my own network marketing company, imagine
how much money I would save.
On the other hand, if I were building a
network, I
wouldn’t want to
lose my people to networkers in other companies because of lack of
training! If I am not careful, I would lose up to tens of
thousands of dollars!
In this book, we are taking a more
in depth look at plan mechanics as well as practical steps to boost
your career. Learn the tips and tricks how to:
-
Avoid the various pitfalls of
typical plans and how to use them to your advantage
-
Stay in control in spite of quotas
and use them to drive your team to success
-
How to use products and create a
cash flow generating machine
-
Work with the right people and the
right plan to become a networking juggernaut
-
Learn other nifty secrets your
upline might be too busy to teach you
In the words of THE MATRIX:
Those of you, who are ready to take the
red pill in network marketing to get to the truth behind the
confusion, get ready to find out how far down the rabbit hole
goes.
NOTE: Just like the first book, the
applications of each chapter will once again be split into 3
sections: Downline Building Strategies, Product Synergy, and
Starting Your Own Network Marketing Company.
Pros
and Cons of Accumulation
What is accumulation?
In typical marketing plans,
accumulation is a system of rewards that allows the distributor to
save up purchase products and accumulate the point value to reach the
next rank. For example: If I need 10,000 points to go from 5% to 10%,
I can purchase 3,000 points in the first month, 2,000 in the second
and the remainder 5,000 in the final month so I would achieve the
rank.
Advantages of Accumulation
-
It gives the distributor a longer
time frame (sometimes no time frame) to move from one rank to another
giving them less pressure and less stress
-
Volume gained from sales in previous
months doesn’t get flushed away. Meaning, you can gather the volume, go
away on a 3 month holiday, and you can start immediately again as
though you haven’t left.
-
Protected against the effects of demotion
(see later chapters)
Disadvantages of Accumulation
-
Encourages Front Loading
and Buying Position (see later chapters)
-
No time frame means no pressure. No
pressure means no incentive to go out and look for sales so giving too
much time frame also works both ways.
-
If there are no repeat sales in the
business, you
will have a hollow organization. Most people stop buying or
recruiting once they hit a new level in an accumulation system. In
other wards, since there are no quotas, you can have 10 Super
Diamond Ambassadors in your organization who don’t buy anything.
Downline Building Strategies
To overcome the shortfalls of
accumulation, educate your team to be good product users. Emphasize
on teaching them to buy stuff that has a high consumption and higher
repeat sales (like vitamins or skin care products). This way, you
will not only have income from recruiting opportunity seekers, when
each downline has their own set of customers and are consumers
themselves; they will generate more volume from their own purchases
than from recruiting a new downline.
Remember:
repeat sales are what keeps a business running long term.
Product Synergy
Just like a normal business, it is very
important to have market demand. The reason why the government has
scrutinized the network marketing industry or has so many rules and
regulations is because most unscrupulous companies use the product as
an excuse to run a business. How do you spot one such company?
Simple. The market will saturate with many people accumulating
lots of product but once there are no repeat sales, the company
will collapse and those former distributors will be left with tons of
stock that nobody wants. The
litmus test would be this: If the company were to disappear tomorrow,
will you immediately think of how to get rid off or liquidate your
stocks, or find out where to get more of them tomorrow onwards?
Starting your Own Company
In addition to having good repeat
sales, the company must also focus on enforcing an 80/20 or 70/30
rule where 70-80 percent of the products purchased by a distributor
should be sold to customers and the remainder 20-30 percent is used
for personal consumption. This will counteract the negative effects
distributors accumulating products only for the sole purpose of
reaching the next rank faster.
Buying
Position
In certain network marketing companies,
there are some instances where the purchase of additional products
and/or account will enable you to climb the ladder of network
marketing success faster by giving you a jump start.
Examples would be something like this:
-
Buying high volume of products in Stairstep
plans to start at a higher rank
-
Purchasing 3 (instead of 1) tracking
centers in a Binary plan
-
Buying names of multiple accounts
and stacking them under each other so that income from the
networks all flow back into one person’s pocket
This often has received criticisms
within the industry and certain governments have outlawed extremely
high entry fees (companies that encourage a new distributor to
join at very high costs or purchasing insane amounts of products to
start their business). Regardless of the controversy, there are many,
many companies that allow you to buy positions so it is very common
in the industry and your own choice to embrace it or not.
Downline Building Strategies
If I were to build a network of
leaders, I would want all my downlines to move in the same direction
with the same aim. I would communicate to all my people that if they
want to succeed in this business, they are expected to join at the
highest entry level and at the maximum auto-ship level (monthly
purchases). We want to build strength and not cater to the weakness
of others. It may seem harsh, but unless you are willing to pay the
price, you must invest to a point it hurts then only will you have
the drive to succeed.
Product Synergy
Choose products that are easy to move.
In other words, if I were to come in at a high-entry level, I would
select products that are very easy to retail. There are people
who treat all their initial purchases when they join as an investment
and neglect selecting the right products. There are some who even buy
all the high-ticket products only. There is nothing wrong with doing
this. Just bear in mind that in order to operate a business, you
need cash flow. Retailing products give you easy cash flow and
less financial pressure. You can also choose products that come in
packages because they are usually cheaper to buy in a set and you can
retail those products separately and get more profit.
Starting your Own Company
Emphasis on buying position is
acceptable as long as the products that come with it are reasonably
priced and it matches the demand in the market. As I had mentioned
before, there are many unscrupulous companies who distribute useless
products. A good way to give more value for people is to include
better selection of products in the form of packages so that they pay
the same relative value and have more products to use.
A good way to generate more sales is
through converting your preferred customers into distributors by
offering them the same incentive of a preferred customer with an
accumulation system that allows them to buy cheaper the more they
consume: just like a loyalty program.
Caution:
Front Loading and their Dangers
I especially wish to highlight the
dangers of front loading in a separate chapter in relation to the 2
topics above because through proper understanding of these features
in the marketing plan will prevent people from losing money in the
network marketing industry.
Front loading or inventory loading is
more of a business maneuver where a distributor decides to buy
lots of products in an effort to meet his quota or target faster
and even buy his way up the ranking system (not usually at the entry
level of the business).
Front loading can also occur when new
distributors buy positions especially those at a medium to higher
level. I have personally seen people invest more than $100,000 in
buying products when joining a network marketing company.
More than they would like to admit,
they are more interested in climbing the ranking and not as
interested in using or selling all those products. Their decision in
purchasing those products is purely to be in a more strategic
business position (higher rank means better income) and most of the
time, those products sit in their store rooms or under their beds.
I
would like to stress that there is no crime or unethical actions in
doing this. However, the danger is that many people fail
to control their finances properly and that leads to financial
struggles and ill feelings towards their company and their upline.
Furthermore, many people new in this
industry make the serious error after they buy up their position.
They sit around thinking that their ‘investment’ will grow. This
kind of thinking is extremely wrong because after you have
bought your position, you are not making any income (in fact people
who build their network the ‘slower’ way has a more stable income
than you) and you should work even harder to build your network since
you have spent more money than before.
In the end of the day, network
marketing requires a good business mindset in order to succeed. Being
able to plan your finances is one thing.
Just like people in the real world,
they work very hard to make a living promising to buy gifts and
vacations for their families but only winds up putting more hours
into their work; in network marketing many distributors tend to spend
their hard earned money buying up more positions, volume, or
tracking centers so they can earn more in the future, at the same
time neglecting their families. Striking a balance is very important.
Lastly, front loading has the potential
of DEVALUING a product if executed wrongly. Let us say a new
distributor joins a company and buys up $10,000 worth of products. If
he decides to quit the business, what is the first thing he would do?
Try to cut losses! He might even try to sell off his products way
below his costs!
Now, if the company encourages front
loading and there is attrition by the masses, imagine everyone doing
the same thing to the product. In the end of the day, the overall
value of the product will drop so much that the entire retail market
will no longer be viable (why should I get the product from the
company? My friend sells them much cheaper).
In the end of the day, remember:
-
Only front load if you are
financially able and have a large social network
-
Have a fair assessment of your
abilities and be prepared to go all the way
-
Pace yourself in your business.
Don’t overspend and hurt yourself financially
-
Focus on high demand products with
repeat sales
The
Dreaded Demotion
Demotion is a marketing plan feature
(that is usually not transparently stated in most marketing plans)
that is very important to consider in evaluating a plan and pacing
yourself month after month. Demotion means dropping
from one position to a lower position or rank in a network marketing
company.
For example, let’s say a Silver
Rank Producer works hard to become a Gold Rank Producer.
The next month he fails to reach his target and he drops back to a
Silver Rank Producer. This normally results in a loss of potential
income or even resetting his quota back to square one.
Demotion can also occur in certain
plans where people are qualifying or challenging a certain position
in a plan where they require distributors to produce large sales
volumes in a short period of time. If they fail to reach their
target, they do not necessarily drop in rank but they have to build
their volume all over again. They may not lose all of their volume
but retail some of it as they roll into another month to start
qualifying again.
Downline Building Strategies
How can we use demotion to your
advantage? It is often said in life that we
are not pulled up to success but rather, we are lifted up to success
by the people around us. This is even more so in network
marketing because there’s no way you can succeed alone. You need
the support of your downlines if you wish to beat your quotas and get
to the next rank!
You must develop 2 very important
factors within your network. TEAM RAPPORT and MARKETING
PLAN EDUCATION. If you or your downline is in a qualifying phase,
you must strategize with your entire team because volume needs to be
created to achieve the target. Teach your downlines that if they
support their upline now, they will become a good upline and in
future, their downlines will support them as well. With everyone
doing a little each day, achieving the target is not difficult.
If you educate your downline enough and
they support you enough, they will realize that you as a qualifying
upline is in a challenging phase and they will feel that your
success is in their hands! They don’t want you to fail and will
work hard to help you reach your target (while they earn most of the
money because it is THEIR sales. They are merely helping you fulfill
your ‘conditions’). Use demotion to build the urgency in your
team!
Product Synergy
Demotion is not a worry for the
distributor is he has a large customer base. On a personal level, the
only real fear demotion poses is when they stop doing maintenance
or cancel their auto-ship. This only occurs when the
distributor is having financial struggles or is not making money from
their business and they decide to stop buying products from the
company.
Starting your Own Company
I will not touch so much on whether to
design a marketing plan with or without demotions due to the
subjective nature of network marketing product. But here is one
basic rule to follow: Will demotion affect the distributor too
much in a positive way or negative way? Only you know your own
product and your distributors.
Push-up:
Taking the Short Cut
Push up is a feature in some network
marketing plans where a downline achieves a position higher than his
upline and all his upline immediately gets ‘promoted’ to the same
rank as that downline. Allow me to illustrate:
12% Level ‘Pushed
Up’ to 15%
D’s group
Works hard to
Become 15%
9% ‘Pushed Up’ to
15%
6% ‘Pushed Up’ to
15%
3% Works Hard to
Reach 15%
This diagram shows that as long as the
person at the bottom reaches the rank, all his uplines gain the
BENEFIT of being in a higher rank (but not the commission from
the SALE). Certain push-up systems may differ. This diagram
illustrates what is known as Single-Line Push-Up. Other forms
of push ups may have other conditions.
Downline
Building Strategies
Although push up may offer benefits for
the upline, I personally feel that this form actually develops
weakness rather than encourage people to look for downlines. Network
marketing is a copycat business where the downline will copy what the
upline is doing. If the upline is ‘waiting’ for someone to push
him up, the downline who joins will want to do the same and you will
have a huge organization of people waiting for each other to produce
the volume. Lead by example.
Product Synergy
In relation to the above, ultimately
products must move in order to generate commissions. Having a higher
rank through push up but no personal sales volume only looks good in
the eyes of others (ranking wise) but deep down in your heart you
know that you are not making money. If you do benefit from push up,
focus rather on creating volume for yourself in that month because it
costs less to buy products you can sell later due to the higher
commission payout you are getting.
Starting your Own Company
A good plan to develop with a push-up
system is one that rewards leadership and development of downline
rather than having people wait for each other to create volume. A
typical marketing plan today usually pays residual income to
distributors who have successfully developed two strong legs rather
than one. Don’t design push up systems which reward too much for
finding downlines that either buy in to the position (hence letting
the upline benefit without doing anything) or letting the downline do
all the work while the upline gains without doing anything. Set the
rank limit at something reasonable.
Turning
Maintenance into Profit
Let’s face it. No one likes forking
out money even when they are making millions. What is Maintenance?
Maintenance is the sales volume a distributor has to buy from the
company (or minimum group sales in some instances), in order to
fulfill conditions set out by the company such as:
-
Prevent demotion
-
Generating group sales volume
-
Entitlement for commissions or
overriding downlines
-
Eligibility for bonus pools paid
either quarterly, half-yearly or yearly
-
Minimum order to maintain a high
rank (leaders who are earning more are expected to purchase more
products)
But the most important factor of all
is that network marketing companies need to make money as well.
Regardless of whether the company
determines maintenance to be mandatory (therefore they enforce
auto-ship in order for the distributor to be in business), optional
or have no maintenance at all, the key point to remember for all
parties to be successful is that VOLUME must be created. In other
words, everybody
needs to buy
something!
Now I will share with you a little
trick how to make everyone pay maintenance willingly without having
people to fork out money grudgingly.
The
trick is to work depth.
If you want all your people to do
maintenance, the simplest way is to go all the way down in your
organization and help the newest people to build the most volume.
Don’t worry about volume in the middle. If the person at the
deepest level generates a large sales volume that month, do you think
all his uplines all the way up to you will make a lot of money? Now,
if they are making money, do you think they will have trouble paying
maintenance?
This
works no matter what plan you are in! People get more
fired up when they see people at their deepest levels moving because
depth gives more security. If the company doesn’t require
maintenance, then they will still willingly buy products because they
will be making more money and buying products allows them to increase
their percentages so they can override more! This will cause a chain
reaction all the way upline and suddenly you will have volume
bursting from your entire network!
Downline Building Strategies
A good leader will never stop building
depth within his networks because attrition occurs when the one at
the bottom drops out and the same chain reaction occurs: only
backwards. Suddenly you will have no one left in your organization.
No recruitment = No
income
No income = No
Maintenance
No Maintenance = No
volume
No Volume = NO PROFITS!
No matter how far down your downline is
or how little you are paid at that level (sometimes you may get even
less than 0.5%) keep helping them generate the volume and make money.
Don’t pass the baton of leadership to your downlines too early and
expect them to build depth for you until you know they are truly
ready.
Product Synergy
This point can never be emphasized
enough even if I have to repeat it 10 times:
Teach your people to use and love
the product!
Maintenance is usually an issue with
distributors when they have NO MONEY to maintain or DO NOT
LOVE THE PRODUCT. Cut down your expenses in the supermarket if
necessary to sustain your business. If your business sells vitamins,
buy from your own company instead of the pharmacy. If your business
sells health drinks, buy from your own company instead of the
supermarket. Once your people make the product a part of their lives,
they might even buy more products from the company than the minimum
auto-ship.
Starting your Own Company
There are pros and cons of having
maintenance and not having maintenance. Remember these few principles
when designing your own marketing plan:
-
No Maintenance takes the pressure
off new distributors financially because they don’t have to spend
money. This minimizes attrition at the beginning. However, if
your organization is very large and nobody is maintaining, you will
have to concentrate more on recruiting new blood (because new people
pay higher entry fees). High level distributors might even quit and
bring their entire networks elsewhere because he is not developing
residual income (no volume generated monthly). Unless you have a
fantastic product, make sure you enforce some form of maintenance. You
don’t want just one-time sales only.
-
Don’t force too high a maintenance
on your distributors at the start. You can set up a system that
gradually increases the minimum maintenance as the distributor climbs
up the ladder. You can even make maintenance optional and still allow
them to draw commissions but not bonuses (which requires maintenance to
be activated). Design a plan with an easier learning curve.
-
One other way is to use a variation
of an auto-ship system which automatically deducts your commission to
use for mandatory maintenance ONCE their commission exceeds the
maintenance amount. This system is good because you don’t need to
collect money from the distributors or members, and the system runs
automatically. I would recommend this type of system more for Internet
based network marketing companies which deals with digital products.
Other
Factors to Consider
No matter how good a marketing plan may
be, there is one very important thing you must remember before you
consider joining a company or starting your own network marketing
company.
Plans are dead
without a system for recruiting new downlines!
I am not saying the numbers and
percentages are not important enough. (In fact small percentage
differences can determine your income for the rest of your life). If
you can’t recruit anyone, NO ONE IS MAKING MONEY no matter how good
a plan is.
I won’t write about designing a
recruiting system now because it would be off topic and saved for
another book title, but I would leave you with this thought:
Think of the most famous hamburger
franchise in the world. You and I know what it is. We all agree
that their burgers may not be the best tasting burgers in the world.
But why is it doing more successful compared with Papa’s homemade
burgers? Those homemade burgers probably taste much better.
Simple. Their
primary business is not selling hamburgers. It is selling a system
for entrepreneurs to MAKE MONEY. It is proven. People
rarely lose money there.
If you have a recruitment system that
is effective in training new people, moving the products without hard
selling, doesn’t require distributors to make 100 phone calls or go
door-to-door and helps people generate cash flow and leads, then that
company is doing the right thing. I highly recommend that you go to
this
website. They will cover more in depth about the recruitment system.
In the end of the day, you have to make
the plan work for yourself and your people. Network Marketing is not
an easy business. Don’t leave home without being well equipped
about everything in the industry.
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