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You listen
to the sales presentation, done by one of the company's top
producers; you're promised the possibility of earning a significant
six-figure income if you are persistent. Moreover, you learn
about the tremendous tax benefits available to small businesses.
Your skepticism begins to diminish as you wonder if network
marketing isn't something you should consider. After all,
you hear, more new millionaires are coming of network marketing
today than any other sales field.
This is
point when you need to stop and breathe deeply. Before you
decide to get caught up in the enthusiasm, which will be contagious,
and buy in immediately, take this advice: Let the enthusiasm
cool off. Then begin the process of deciding which company
to join by finding the answers to the following questions:
How
stable is the company? Two ways to judge a company's stability
are: first, get a credit report from Dunn and Bradstreet.
Second, find out how long the company has been using network
marketing. Most companies never survive two years. Therefore,
at least two years in the business is a good yardstick in
judging a company's stability.
Does
the company stand behind the promises it makes about its products?
This question is important to ask product companies. Call
the company and ask these questions:
• Does
the company validate their products' claims, e.g., does
a health food product have clinical trials done by independent
laboratories?
• What is the company's refund policy if the customer is
not satisfied? How quickly do they refund the money?
• What is the company's buy-back policy on inventory purchased
by distributors? Most companies promise to buy back inventory
not more than a year old. But sometimes this policy is illusory
because of the complex administrative hoops the distributor
must jump through and because there is no limit on when
the refundable money must be paid back to the distributor.
Buy
the product and try it. Do you like it?
Does
the company want you primarily to (1) sell products/services,
(2) recruit people, or (3) both? Most companies want you
to recruit people to distribute who in turn will recruit people
to distribute who in turn will recruit people to distribute.
But if the company is only recruiting people and no one is
selling the product/service, you may want to look carefully
at the company. Will the distributors use enough product to
keep the company afloat?
Further,
you may just want to market a product and not manage a whole
sales force of downline (the people you get to sign up under
you) distributors. If so, find a company that will let you
do that. Your commission should be enough to let you make
money retailing the product or service without having any
downline. This means that the commission paid on retailing
should be about the same as the commission paid on recruiting
new distributors. Nevertheless, it's useful to remember that
most of those who earn top money in network marketing are
the people who are able to get others to overcome the stigma
of network marketing - to recruit, train, and finally support
people (called their "downline") who are able to get others
to recruit, train & support people, etc., etc.
Will
the products sell? Before you buy too much inventory -
a good guideline is don't buy more than you can sell or use
in a month - do some comparative shopping to find out answers
to these questions:
• Is
the price of the products reasonable? Can customers find
just as good a product on the market for less? Usually network
marketing companies offer products which are only available
through them and which are claimed to be (and may be) better
than those offered elsewhere.
• If the products are not unique, are they priced competitively?
• Are the products so desirable that people will continue
using them and recommending them even if they stop being
distributors? This is an important question, since most
companies have a high attrition rate among distributors.
• Will the products sell even if not marketed through network
marketing.
Does
the company really have momentum? Every company will claim
that the time to join is now because of the "S" curve, a curve
that marks rapid growth times. Momentum is important because
growth magnifies efforts. If you join during a growth period
caused by either the age of the company, or by introducing
a new product, or by getting a new patent, this growth can
attract new distributors and more sales. If the company or
product is growing at 3% a year, your business growth will
mirror the 3%; but if the company or product is growing at
30% a year, then your business growth should also mirror that
percent.
What
kind of sponsor support is offered? We can't overstate
the importance of this answer. Not all sponsors are created
equal The person who takes you to the meeting becomes your
sponsor if you sign up under him or her. You are locked into
that person for a long time. To avoid this, don't sign up
immediately. You can wait, shop around, and find a sponsor
who is known to provide strong support to his people. It is
not polite for a sponsor to accept you at a meeting if you
have been brought there by another sponsor. You will need
to get the person's card and call them after the meeting.
Be careful even if you are signing up only to buy the products
at wholesale. You may want to become an active distributor
later, and you will be locked into the person you are buying
from. To find the right sponsor:
• Attend
several meetings in your area.
• Introduce yourself to numerous successful sponsors.
• Evaluate their reputations. Ask them what they do for
their people and how long they have been doing it.
Some sponsors
are like robots, signing up everyone but supporting none;
others, more responsible, do mass advertising or marketing
and pass warm leads along to their downline. One of the major
benefits of a network marketing company is that you are in
business for yourself, not by yourself: to realize this benefit,
you must sign up under the right person.
What
kind of training and support do they offer? The statement
that "The product sells itself" is rarely true. All companies
promise training; few deliver the consistent quality that
makes training effective. Evaluate the training and the support
materials. Look for:
- Role
playing practice
- Good
scripts
- Ways
sponsors help you to get new leads
- A variety
of quality training tapes
- Find
out about switching to another sponsor if your sponsor leaves
the company or doesn't do training follow-up.
How
good are the marketing materials? All companies have marketing
materials. Some are better than others. The better the materials,
the easier it will be to acquire customers and distributors.
They should have multi-colored, glossy, up-scale brochures
which contain two elements. First, the brochures should stress
benefits offered to the customer, explaining why the products/services
are right for the buyer. Second, they should convince the
customer through concrete evidence that the company is stable,
offers low risk to distributors, and has a history of good
management. It is, therefore, important to have some third
party creditability such as double blind studies or newspaper
articles extolling the virtues of the company.
What
is the compensation plan offered? After investigating
the quality of the products or services offered by a company,
one of the most important considerations is the company's
compensation plan. Comparing compensation plans from one company
to another is difficult. Companies use a myriad of formulas.
One way to simplify the process is to ask:
- How
difficult is it to make it to the top? Do you need 5 good
lines (active distributors under you) or will 2 lines do?
- What
do you get by acquiring customers vs. acquiring distributors?
Customers, not distributors should be the focus of the company.
Thus the compensation plan for selling product/services
should be at least as generous as that of bringing in new
distributors.
- Does
the company offer non-cast rewards? Are the numbers doable
and realistic?
Are
you pushed to buy a lot of inventory up front to make a higher
commission rate? It's better to try a small amount of
product first, see how you like it, see if other people are
interested in buying it before investing in large inventory.
If you
are not satisfied with the compensation plan, you or the people
you recruit will not stay long with the company. Even if you
stay, you may lose people you have invested time and money
in to other companies.
What
is the customer retention rate? When a company pays 50%
of its revenue for commissions, if the customer retention
rate on a product is 5%, your net long-term commission is
only 2.5%. But, when the company pays only 10% payout, if
the customer retention rate is 80%, your long-term commission
rate is 8%. The customer retention rate is critical. To investigate
the retention rate, you can:
- Ask
the company if its figures on customer retention rate are
available.
- Test
the product/services to see if you would use it regularly.
- Ask
the company for names of satisfied customers.
- Ask
for the names and phone numbers of two or three non-repeat
customers. Ask if you can call to find why they didn't continue
to use the product or service.
- Find
out what the competition is offering in the same category
and compare the prices. Your product doesn't have to be
the lowest for what it offers, if it offers some value that
is not offered elsewhere. It also should be marketed well.
- What
other miscellaneous benefits does the company provide?
Some companies
provide distributors with the equivalent of the franchises
without a franchise fee. They not only provide marketing materials
but also management information, tax information and even
an accounting system. Find out what in contained in both the
distributor or upgrade kits. Many times the upgrade package
may be the much better deal even though it is more exclusive.
You can't
promote and sell what you aren't convinced is the best. If
the answers you get to these questions enable you to find
and then believe completely in the product or service and
its company, you may be among those who find network marketing
to be very lucrative.
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