How and When to Retail - Elaine F. Nugent
In most compensation plans, you'll notice that the highest percentages can be made by those people who move product. There is a difference between signing people up to commit to minimum purchases and moving product. Moving product means selling more than the minimum required to qualify for bonus checks. Your Network Marketing company is in business to do what? Move product! Is it any wonder, then, that the people who move product make the most money per product sold? That's a clue to how to maximize your profits in this business.
Building a residual income is a wonderful benefit of Network Marketing. But most people quit your company before they even make $300 a month in residual income. What if you could show them a way to make more than $300 a month in upfront money by retailing? Then they'd stick around as the residual portion of their income began to grow!
The problem with most compensation plans, as new recruits often see it, is that they end up making 50 cents or a dollar per product sold as residual income. This is great if you have 1000 or more people in your organization-- but what if you work your tail off in the early stages, invest a lot of money in personal marketing and get a whopping check of $16 for all your time, money and effort? This is why many new recruits quit and some people don't even sign up in the first place. They don't see the "big picture."
When should you retail? As a past participant in a Randy Gage MLM Bootcamp, I remember him saying to present the business first and then, if the prospect is not interested in doing the business, offer the person the opportunity to become your customer. I agree with Randy wholeheartedly and take him one step further: If they just want to be your customer, make them your retail customer and not your auto-ship customer.
By selling retail to your customers rather than having the MLM company do all the work, your profit on goods sold is greatly increased. Granted, your work will also increase, but new distributors need to understand that if they are only getting 50 cents to a dollar on a customer's purchase, for example, it's because they aren't doing a thing to service the customer. The company is doing all the work. If distributors want to make more money, they should provide more service. It's as simple as that. They should retail product to people who don't want to be distributors.
Should you make a special retailing effort to sell your MLM company's products to the general public in addition to looking for distributors? Or should you just make retail customers out of people to whom you've shown the business plan but who don't want to be distributors?
I say: Just make retail customers out of people who've seen the plan but don't want to be distributors. And I have a personal case study to back this thought up.
Some time ago, I did a telemarketing experiment which I've appropriately dubbed "The Elaine Nugent Retail Experiment"-- that I later aborted. We now focus on recruiting distributors only-- and getting our retail customers from this pool of leads. The experiment was on behalf of a product which addresses a specific health concern, so I bought a floppy disk from a list broker specifically giving me the names, addresses and phone numbers of people who have this health problem. (I should point out here that I've been a nationally known telemarketing expert and sales trainer. I co-authored the book Here Come The Sales Trainers, published by Royal Publishing. So if telemarketing for retail customers were to work, I should have been able to do it.)
I dialed 913 of these potential prospects, got through to about 319, made a presentation to 82 and generated 60 leads. This represented 6.57% of the 913 dials, 18.81% of the 319 get-throughs and 73.17% of the presentations made. This is all great on paper, but the problem is that a minuscule amount of these 60 leads actually bought product!
It goes back to what Tom "Big Al" Schreiter talks about when he says that people buy from those they "know, like and trust." I didn't know any of these people and they didn't know me. No real relationship was established. Hence we went back to making retail customers out of those to whom we've shown the business plan but were not qualified to do a business.
This is why I agree with Randy Gage that you need to present the business first. When you're looking for business partners, you take special care to build a relationship. That relationship building will enable you to get a steady flow of retail customers out of those people who don't want to be distributors. It will also enable you to comply with that ever present "70% rule" that we all hear so much about.
Let's take a comp plan with a 5% payout on the first level for a new enrollee and a 25% savings over suggested retail prices to distributors. A $30 wholesale-priced item would give you a commission of $1.50 if your customer is on autoship. You would charge $40 retail for the same item, and your profit in this case would be $10, which is almost SEVEN times (700%) higher than your commission on an autoship customer! Plus you are building a relationship with your customer which could lead you, through a personal referral, to sponsor a potential top distributor in your organization!
(Naturally compensation plans vary; this example is for illustration purposes only.)
By establishing retail versus auto-ship customers, your new distributors should be able to make at least $300 a month in retail profits. This will ensure that they don't quit before building the organization needed for sizable residual income checks to start coming in.
When you don't retail to people who just want to be customers, you're leaving money on the table. Your retail customers may also lead you to the heavy hitters. It's not who you know, it's who they know. By establishing a relationship with them through retail service, you set yourself up for endless referrals as well as retail profits. This won't happen if their relationship is only with the order department of your MLM company.
In our own business building efforts, we've learned to heed the words of Randy Gage and Tom Schreiter. Present the business first, and make sure that you build a relationship with your prospects so that they "know, like and trust" you. Train your organization to retail to those people who don't want to be distributors. In the early days of building a business, the retail profit will exceed the residual income for many people. But it should be enticing enough so that the fledgling distributor doesn't quit before he or she can taste the residual income payoff that the industry prides itself on.
And finally, remember that helpful four-letter word: "NEXT." When someone turns down the business and product offer, just relax and say "NEXT." When someone in your organization isn't motivated to work, again-- say "NEXT." Profits are maximized when time is appropriately allocated. Network Marketing is definitely a numbers game. The less time you spend with non-prospects, the more time you have to find the real ones. The less time you spend with unmotivated distributors, the more time you have to spend with motivated ones. This also leaves you time to provide retail service to those people who genuinely love your products, but just don't want to be distributors. Who knows? That retail customer that you build a relationship with just might lead you to a relative or acquaintance of theirs that could just be the next Mark Yarnell-- in your organization! It's worth the time to build meaningful relationships through retailing.
ELAINE NUGENT and her husband Bill are directors of Bill & Elaine Nugent's Programs For Success and are the authors of the audio cassette Network Marketing: Top Secrets Revealed! They are making a special, limited-time offer (while supplies last) to the readers of Upline. Just call them at 914-576-5965 or 1-888-572-3671 to request a free copy of the audio cassette. They are also the authors of the training manual 12 Proven Strategies & Tactics Used by the `Secret Society' Of Top MLMers. Retrieve their Fax-On-Demand at 1-888-291-8520 Ext. #001. Check out http://members.aol.com/b1e1nugent. Or send e-mail to firstname.lastname@example.org.
Reprinted with permission from Upline, Nugent Feature February 1999, 888-UPLINE-1, http://www.upline.com