THE MLM Wal-Mart Syndrome
The MLM Fatal Illusion?
NetWork Marketing Analysis Institute
"The enemy of truth is illusion. Illusion is a false interpretation
by the mind
a belief or hope that has no real substance. Illusion
comes when we perceive something to be true that isn't true or is
only partly true. Illusion comes because we want to believe the
thing is true. Illusion is often, perhaps always,
tied into false hope. From FATAL ILLUSIONS, by James
R. Lucas (AMA Membership Edition)
Compensation plans revisited! Last year I wrote
about the "Boomers" in NetWork Marketing (companies signing
up 25,000 sales reps in a year or 250,000 in five) and pondered
the question why there weren't any Stair-Step Breakaways on the
list. I started putting the question out to my "Market Watchers".
One of the founders of the NetWork Marketing Analysis Institute,
Rick Larson, came up with the analogy "Everybody today wants
to buy quality products, economically and quickly. That's why people
like to shop at Wal-Mart!" Bingo! The "MLM Wal-Mart
Syndrome" was born.
Wal-Mart has irreversibly changed the way Americans
buy. Wal-Mart (and Sam's) accustomed Americans to buying quality
products at (virtually) wholesale prices. On top of that, Wal-Mart
offers quick service. So why wouldn't the mentality of quickly buying
good products, at wholesale, have an effect on NetWork Marketing?
Lets' look at the wave of the future. The Internet
doesn't tolerate pricing complexity. Comparison with other MLM
companies is too easy. Potential buyers and distributors can price
shop for similar products at the click of a button. MLM - Network Marketing programs move fast and don't have any allowance for splitting
retail and wholesale prices. A good test was AMWAY's Internet
project and the portion concerning their own product sales. Amway
has drove traffic to the Quixtar Internet Mall and made the mall boom.
However I haven't seen a rebirth of or explosion of membership activity.
In fact Quixtar is disappearing and the Name Amway is back.
moving compensation plans will be the wave of the future. Simple
to understand up front then with a secondary commission transfer
for top recruiters.
I grew up and prospered with the Stair-Step breakaway
starting in 1968 with Chemical Associates. In those days we stocked
"our stores" in garages by the truckload. When someone
joined our group they got a discount off retail of 15%. By working
diligently they got 25% off retail, then 35% and finally they broke
away and bought at 50% off retail (which was true wholesale). We
had rebates, which meant the distributor paid retail and got their
discount back at the end of the month (this sure helped the companys
cash-flow). Retail "discounting" isn't favored today -
new distributors want to buy at wholesale right now! Reinforcing
that trend we now have affiliate programs on the Internet promoting
one-price products. This is the MLM Wal-Mart Syndrome!
There are only two or three good Stair-Step or
Group Breakaways that have started, survived, and grown enough to be
noticeable in the last 5-8 years. They are
Symmetry (overseas), and Starlight (about gone). With excellent products and proven management
they should have been boomers (25,000 distributors first year),
but it doesn't look like they will join
the Boomer ranks. Rexall started longer than over years ago. They staggered
at first until they dropped the Stair-Step part of their plan and
became a Group Volume Breakaway before they joined under Unicity
when it was born.
Many older companies use a similar basic system
today. They aren't growing. I was shocked when I read in "Business
Week" that AMWAY U.S. had dropped to less than 750,000 distributors.
Amway just laid off 30% of their Headquarters staff. The old giant
Shaklee isn't gaining any market share today either. There is strong
evidence that companies with older compensation plans may be contracting
and losing market share to companies with newer compensation plans.
These older companies, rather than face the evidence they have a
flaw, are ignoring it. Will these become "Fatal Illusions?"
The "Boomers" in the last 10-13
years, Morinda, New Vision, Isagenix, Life Force, Monavie, and Xango
(the last 2 are over a billion in sales) have sold at wholesale from the minute a distributor
signed up. Yes, Alliance is gone but so are hundreds of other startups.
In fact, despite competition in today's market their growth rate
may be considered astronomical. The Boomers rocked the industry!
They did it by selling quality unique products at immediate wholesale
cost. The face of NetWork marketing has been changed forever! These
plans are not necessarily simple. Some have a hybrid recruiting
boost (based on product sales = legal) on the front end. Front-end
money doesn't come from selling products above the absolute minimum
cost that all distributors pay. Some used a break-away on the back
end or a hybrid of it. Others used other new hybrid modifications
providing depth payouts on the back end to promote their growth.
They do all have one thing in common. New distributors buy at the
best wholesale price from the day they join. No phony
rebates with volume. On top off that some
don't charge distributors for joining their companies!
PAY PLAN LABORATORY
WATCHDOG ON PAY PLANS (COMPLANS)
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