The Case For Customers in Direct Selling
How important are customers in Direct Selling? If you want to build a long-term, stable Direct Selling business, customers are more important than most people realize. Frankly, they are essential.
In this live recording from Mastermind Event 2014, Art Jonak makes “The Case for Customers in Direct Selling.”
In this presentation, Art Jonak:
- Shares a brief history of the three phases of Network Marketing;
- Defines the “modern era of Direct Selling;”
- Outlines the benefits of customers to the field and the company;
- Introduces customer ratios;
- Shares relevant case studies;
- Covers how to increase volume per distributor circle over time;
- Reveals how to minimize dips;
- Illustrates shareable analogies; and
- Paints a picture of the future of Network Marketing as we enter the Direct Selling ‘Customer Era.’
This forward-thinking talk was given nearly a year before government regulatory agencies impacted the Direct Selling profession through newly enacted guidelines specific to retail customers:
- See “FTC vs Vemma” (Oct 28, 2015): The FTC in conjunction with court approval currently allows Vemma to pay commissions to distributors ONLY IF more than 50% of a distributor’s organizational (downline) sales originate from retail customers.
- See “FTC vs Herbalife” (July 15, 2016): Herbalife in the future CANNOT pay any distributor who fails to have at least 66% of his or her total sales (personal and organizational (downline) included) come from retail customers.
Source: From the line in the Order that states, “Rewardable transactions (i.e., compensation) shall be limited such that no more than one-third of the total value of a participant may be attributed to [internal consumption] transactions.” See Page 6: LN 23–28 and Page 7: LN 1–2
The U.S. Federal Trade Commission (FTC) is sending a clear message. (Update added Jan 12, 2017)
The FTC has been very clear as to where they stand on the importance of Direct Selling companies having “real customers.”
In the FTC article referenced by FTC Chairwoman Edith Ramirez, the following excerpt applies to all Direct Selling companies doing business in the U.S.
“If the person who recruited you into the business tells you not to worry about selling because you can make money by recruiting others — walk away. In a legitimate MLM program, you need to be able to make money by selling the product, not by recruiting others to join and buy the product.”
In the second FTC article referenced by the FTC, Direct Selling “industry members can learn a lot by reviewing the conduct the FTC says ‘violated the law’ and understanding the principles underlying those orders.”
Here is the first section specific to “real customers:”
At the heart of a legitimate MLM are real sales to real customers. For companies acting within the law, the business is driven by selling products to real customers. Who do we mean by “real customers”? People unaffiliated with the company who actually buy and use the product the MLM sells — real retail sales, in other words. And by “real sales,” we mean sales that are both profitable and verifiable — retail sales that can be confirmed. Contrast that with MLMs built primarily on bringing in more and more recruits and racking up sales to other insiders. Very few people are going to make money and most participants will be left in the lurch.
The FTC then shares this second section related to “real customers:”
Make sure compensation and other incentives are tied to real sales to real customers. The FTC complaints against Herbalife and Vemma challenged compensation structures that rewarded distributors without regard to retail sales. The court-enforceable orders in those cases require the companies to dismantle those systems. In their place, Herbalife and Vemma must implement systems that incentivize participants to sell products to people outside the network. Is it time to take a closer look at your MLM’s compensation structure?
Creating “real customers” in Direct Selling is now critically important.
The conversations around “real customers” inside the Direct Selling profession is heating up, in large part directly because of the Federal Trade Commission (FTC). The profession shouldn’t take creating “real customers” seriously only because the FTC is asking us to, we should do so because it’s a better business model; better for the distributors, better for the companies and better for the profession.
The Mastermind Event faculty has been stressing the need for “real customers” for over six years now, with more emphasis at each year’s event.
The live recording in this article is just an example of one of the many talks related to customers. It shares some reasons why having “real customers” inside our profession is simply a better business model.
Staying ahead of change.
Many corporate executives and top leaders who attend the Mastermind Event yearly took advantage of the knowledge, got a significant jump start on current FTC “customer” mandates and as a result are in a much more advantageous position today.
SHARE this article with your team to help them understand why companies insider Direct Selling are increasingly emphasizing “real customers” and why this is a good thing for all distributors.
One last thing…
If you liked this article, click the 💚 below so other people will see it here on Medium.
- The Mastermind Event is the most trusted, well respected and relevant Direct Selling event in the world. Attended yearly by entrepreneurs from over 50 countries representing over 100 Direct Selling companies.
- The term “Direct Selling” in this article encompasses the terms “Network Marketing,” “Social Selling” and “Multi-level Marketing.”
Want more Direct Selling tips? Subscribe to our email Newsletter
Join us at this year’s Mastermind Event: http://MastermindEvent.com
Connect with us: Facebook |Twitter |YouTube | SoundCloud | Instagram | Periscope | SnapChat | Medium | Pinterest | Google+ | Tumblr | Email Newsletter
