Product is All Important
Your product represents the value offering to your client. It separates you from the illegal scams out there. Your primary goal is to ensure that the promise of your product is valid and that the transfer of value is legitimate. When your client purchases your product they need to feel they have received value and, ultimately, they should purchase the product regardless of whether there is a business opportunity or not. In most countries, the laws governing the direct selling industry stipulate that 70% of the people purchasing your products should be customers and not involved in the business opportunity at all.
It’s NOT important at all
What I mean by this is that when it comes to Multi-Level Marketing, you can sell anything. All you need is a good value product at a reasonable price and for which you can craft a powerful and honest story.
I have companies coming to me all the time raving about their amazing products and, most of the time, they really are amazing - but seldom is the product responsible for the success or failure of an MLM business. As a matter of fact, I believe the product is responsible for about 20% of a network marketing company’s success. The other 80% is due to marketing and sales strategies. You can look at this post to get more details.
What products can be sold?
You will be amazed by the variety of products sold by MLM companies. I have come across companies selling everything from insurance to water filters and everything in between. There are companies syndicating property, marketing timeshare points, promoting travel, offering gardening services, providing stock market training, selling gold… the list is endless. The point I am trying to make is that any product can be sold via a network of motivated and well-educated independent distributors.
Pricing the product
One of the most attractive aspects of direct selling is the fact that your customers are not price sensitive. Your dealer will be sitting with the customer and explaining all the features and benefits of your product. If you have provided a high enough level of training, they will build a great deal of value as part of the product presentation. The customer makes the buying decision based on the information they have been given and the value that has been built. This is in direct contrast to retail where the client purchases on brand awareness derived from advertising and price derived from in-store comparison.
On average, Multi-Level Marketing companies have a 6x mark up. If the manufactured cost is $1, they will wholesale the product for $6. After the direct cost of sales, there is traditionally a fair profit with which to run the business.
There are some low margin products that can be sold. We have a client that sells cell phone data. Their profit margin is only 20%. The saving grace of this product is that it is an annuity product. The client signs a 24-month contract and the commissions accumulate as the dealer’s customer base increases.
Not every product will have attractive margins or offer recurring billing. Take, for example, a wine business that we deal with. When they started, they had a 30% margin. To keep the business attractive, they gave the entire 30% to the network and ran the company on a small admin fee they charged the network. As the business grew, the economies of scale kicked in and their buying power increased. This allowed them to negotiate better buying prices which resulted in a profit for the company.
As you can see, there are many ways to make a product work in the MLM space.
Amway has a range of very expensive vitamins. When I first looked at the price, I nearly fell off my chair. They were several times more expensive than similar products in the shop and I could not imagine anyone in their right mind buying them. I then sat in on a presentation and discovered why the products were worth every cent.
Amway owns the farm on which the crops are grown and they use zero pesticides or herbicides. They purchased all the surrounding farms to ensure that they did not get any accidental contamination from their neighbors. To combat insects, they release millions of spiders into the fields. At harvest time, the plants are picked and processed and within 24 hours they are packaged in their final form and shipped to the Amway distributors. As a result, the efficacy of these products is substantially higher than anything else on the market. Once I understood what went into the Amway vitamins, I could not understand why anyone would purchase an off the shelf product, no matter how cheap it is. What changed my mind was the pitch of a well-trained distributor.
Amway are Masters of Training and the results are in. Last year Amway achieved over $10B in turnover. Yes, that is correct, TEN BILLION US DOLLARS!!! And if you have ever talked to an Amway distributor about their products you will find that they are militantly committed to them. You can’t say a bad word without getting shot down in flames. The question is, isn’t this what you want for your own network?
You have a golden opportunity to train your people. They are purchasing a starter pack, paying you an admin fee, joining your network with the hope of growing a home-based business and they are giving you permission to teach them everything they need to know. If you do a good job you will have a first-class product advocate who will recruit new distributors and customers with ease. Even if this person decides to quit the network, they will probably remain a loyal customer for as long as you are around.
Provide your distributors with a canned pitch that they can learn and use. The pitch should include the company’s backstory. What makes your products great? Why are they better than anything else out there? If you have testimonials, use them. Make sure your distributors can recite them verbatim. The more detail you give the distributor, the deeper their understanding and belief will become. But beware, you only have 6 weeks.
The life cycle of a distributor
In most Muti-Level Marketing companies, the prospect attends a presentation. They get excited and at some point, they decide to join. We call this their buying temperature. From the moment they join, their enthusiasm for the business starts to drop. If you do nothing, at some point they will exit the business and you will lose them for all time. Our statistics show that you have just 6 weeks before they leave. It is therefore essential that you train them aggressively during these initial stages to ensure that they remain a distributor. I will deal with the details of training in another blog post but for the moment, focus on locking in their belief.
As you can see, the product is important as it is a fundamental part of your business, but training is by far what makes the product a viable option for your company. A mediocre product that is enthusiastically presented will outsell a brilliant product that is badly presented.