GET AND KEEP CUSTOMERS

Some of the most demanding Distributors are the best Distributors and have been the lifeblood of the team.

Jeffrey J. Fox wrote the following in his book How To Become CEO:

Customers are the lifeblood of any company. Everybody should know this. Everybody says “the customer is king” and “we work for the customer” and “the customer is the real boss.” But very few employees in a corporation do anything to demonstrate they believe in this dictum. Commonly, the higher an executive gets, and the bigger the company, the less they deal with real honest-to-goodness existing and potential customers.

Executives reorganize companies, eliminate jobs, and excuse the chaos by saying they are “two or three levels closer to the customer.” Bunk! There are no barriers between anyone in the corporation and the customer.

Why do so few people really work to get and keep customers? Because dealing with customers is tough. Customers reject sellers, they negotiate, they make harsh demands, they expect their needs to be filled, and they can be fickle. Also, dealing with administrative functions is an easier, impersonal, and safe task.

You must deal with today’s customers and tomorrow’s customers. They provide the ideas for new products and new applications. They provide the early warning signals about your products’ quality and timeliness. They know about your competitors. To know your customers is to know your future.

When the phone rings twelve people ought to dive to answer it. The customer is indeed king. And the future president understands how the customer is also the “king maker.”

I would add this one thought to Jeff’s words for those CEO’s out-of-touch with the customers (we are all CEO’s of our own company): The customer is also the “King Breaker.”

Who do you compete with?

MLM Competition can be good for your business if you don’t lose your focus on how to do the business.

What do I mean by lose focus? Many new Distributors overlook the significant relational aspect of the business and do things that cost them money with little return. That’s good for you because it softens the market for your products. For example, selling nutrition products a Distributor may pay good money to put their products in a gym (paying the gym owner an annual fee). Please don’t forget to have a personal relationship with the trainers and the customers.

Various expensive plans will get some retail business (similar to an Internet Web Site) but what is missing? The understanding of how to work the business deep enough to build strong legs (downline) and stay in the game long-term (residual income). Unless you are personally in the equation it’s like advertising the products on a billboard along the highway. It helps to get the product recognized and of course that helps you as a competing Distributor. You should hope that competing Distributors, spending a lot of advertising money to do the business, are successful because you are riding the same wave. Don’t get uptight about competition. Because MLM is about duplication the people you sponsor will do what you do. If they can’t do what you do (and be successful) they may remain product users (that’s good) but they won’t do the business.

Be careful how you spend money because this business is about relationships and investing in your own personal development!

Company Marketing

Thinking about starting a Network Marketing Company? Well, here are a few basic tips you get from getting degrees in Management, Marketing, and Accounting.

• Stay with the Multi-level Business Model. The reason for this model is to cut marketing, distribution cost, etc. and use the power of word-of-mouth (nothing more powerful). This allows you to concentrate on products and R&D growing exponentially (just like your Distributors).

• Stay with a proven Multi-level Plan (like the Stairstep Breakaway Plan). It is a tried and recognized plan by government regulators and the court systems (has a track record). Also, promoting new recruits under established and working Business Builders can block the Leadership Bonuses of entrenched Distributors who are not working the business. Loosening up entry fees and other breakage rules can help accomplish that objective too. This might even drive some “very comfortable” Distributors back to work.

• Don’t divide your Marketing Management into Geographical Territories. Your Distributors aren’t divided into geographical territories. They have customers all over the map so which customers do you service in your Territory? Explore for better ways to manage your customers and products. Generally, channel congruence is important to avoid Territory competition.

• Don’t let some Internet Geek drive your Marketing. Yes, I know about the great success stories but the Internet is still in the high risk infancy stage and is a great tool to complement your business and marketing plan. Keep in mind that it has been difficult for even Amazon.com to make a profit.

• Outsourcing and collaboration: “The only thing you have to do is marketing and innovation…In the new world, collaboration is not just an option but an imperative. It is critical that you do only what you do best, that you eliminate or minimize your back room by teaming up with another organization.”* In other words, define what is your “front room” and what is your “back room” by what it is that you do best.

First, perhaps it would make sense to structure by product line in order to optimize your corporate staff. Product Marketing Managers could be a definite plus because they should be familiar with a product or product line from inception to market. If you have a fairly broad product line this helps insure that products (profitability) are not overlooked in the Market Mix. Also, it may be difficult for a manager to get his/her arms around a broad product line and do the products justice. That’s why many companies divide up the product responsibility among Product Managers.

Second, any business (no matter what) can be managed by product line even if the computer systems are limited. Let’s look at a little basic standard cost accounting:

1. Invoiced Amount (Net Sales) by Product or Product Line
2. Estimated Variable Cost including Product or Material Cost (out-of-pocket cost)
3. Gross Profit and the Gross Profit ratio to Net Sales

A simplifying assumption (unless you are an activity based costing guru) is to cover fixed costs (rent, salary, depreciation, etc.) by break-even analysis (fixed cost divided by gross profit ratio) because most companies don’t “full cost” their products in order to remain competitively priced.

A relational database should be able to sort your sales in various ways:

PRODUCT LINE: Distributor Net sales - Variable Cost = Gross Profit (Gross profit percent)

Third, (from Peter Drucker* for the remaining comments regarding, in this case, products) “putting all programs and activities regularly on trial for their lives and getting rid of those that cannot prove their productivity works wonders in stimulating creativity in even the most hidebound bureaucracy.” In other words, managing the company by results.

“What do you have to Abandon to create room for Innovation:

1. If you weren’t in this business today, would you invest the resources to enter it?
2. What unconscious assumptions might constrain your business practices and limit your innovative thinking?
3. Are your highest achieving people assigned to innovative opportunities? Or are they merely working on yesterday’s problems and yesterday’s products?”

Who is Your Customer and Competitor?

An excellent book written by Elizabeth Haas Edersheim, The Definitive Drucker, talks about some of the key business concepts that Peter Drucker used in consulting.

Many companies haven’t defined their customer and their competitor. One of the first questions that Drucker would ask in any consulting engagement is “Who is your Customer?” That’s a basic question that a lot of companies haven’t fully answered (particularly those who are product or engineering driven).

Another question is about customers versus competitors. Times have changed and we live in a Lego World. Sophisticated companies have joint venture agreements, outsourcing agreements, etc. with companies many would consider competitors (isolation is corporate death today). Because of the quickness of the market place many companies can’t react to change and don’t have the relationships other companies have developed.

In MLM this is often the situation with the exclusive (exclusive dealing) distributor agreement. Since many distributors can’t join other companies to “cherry pick” products to sale they may find themselves dropping a current company or agreement. Many distributors, and companies, lament the fact that they have lost distributors and sales (customers) because of these old style agreements and thinking.

Interestingly, history shows that the biggest worry over losing business should come from partners and high level insiders (who are trusted and know everything). Read the history of the two largest candy makers (Hershey’s and M&M’s). The trusted President of Hershey’s had his son start M&M as a partner with another candy maker. On the other hand, high level distributors who can easily leave and keep their residual income shouldn’t be a threat as a competitor. So what if they are starting over as a Distributor in a new company? Big deal. That’s much different from starting a directly competing company. Eliminating exclusivity may allow the company to retain sales, that would otherwise be eliminated, and they can reduce the threat of high level distributors becoming competitors.

Here is an example from the book. “Google is rumored to be ready to launch an online payment business code-named Google Wallet. Both are in direct competition with eBay. In response, eBay has sought out alliances with two other technology leaders, Yahoo! and Microsoft, which are also under attack from Google. Yahoo! and Microsoft could potentially become eBay customers using its online payment business, PayPal, and eBay’s Internet phone service, Skype. Simultaneously, syndicating their clients’ ads on eBay’s auction pages is a huge opportunity for Yahoo! and Microsoft, and Google would like to do it, too.”

“It is becoming increasingly difficult to tell friend from foe. In our new world, where relationships have proliferated, the customer you are ultimately serving can change from transaction to transaction. When is our customer a competitor? It is a question that needs to be asked again and again.”

“In a Lego world, fluid design and the ability to connect and reconnect provide a new agility that is a central element of the twenty-first-century enterprise.”

Goals

If you enjoy humor and satire you might enjoy the movie O Brother, Where art thou? staring George Clooney. What do I like about the movie? It reminds me of a lot of people who live life without direction or compass (The sound track and music is great!).

George Clooney was the silver-tongued Ulysses Everett McGill (glib of tongue) which just naturally made him the leader of the two inmates he was chained to when he convinced them to escape prison so they could get $1.2 million in cash before a new damn covered his home where he had stashed the loot. Unfortunately, it was a made up story because his real goal was to get back his wife and kids before she married another man. Note: “Strategy is not a goal; it is a direction, a blueprint for putting the pieces together and building.” Peter Drucker.

Making mistakes is a part of life but the difference is in how we fix mistakes and stay on course. Also, being glib of tongue won’t necessarily get us to our goals even though it is great to be able to communicate and connect with people. People appreciate honest, direct, and realistic communication so don’t try to convince someone of finding the $1.2 million when you as the leader don’t believe it (your true beliefs will be revealed). Once that happens you’ve lost your recruit. Goals are achieved by planning out the small steps and making course corrections along the way.

Experience is obtained by working toward your goals and we learn more by keeping our eyes open and our mouth shut (listening to other people). During the movie the convicts recorded a song to make a few bucks, I am A Man of Constant Sorrow, which was a big hit. The same unexpected success can happen to anyone if they will learn to structure their life around those things they do best. Stop focusing on things you will never be good at! You may have to get out of your comfort zone but you can do the business by focusing on your natural talents.

Compensation and Perks

When doing due diligence on an MLM company one of the key areas is evaluation of their compensation plan. First, compare the target company plan to industry. For example, it would not be proper accounting to consider “wholesale discounts” as part of commission expense. Therefore, any comparison to industry would have to include wholesale discounts as a deduction from Gross (Retail) Sales. Why? Because no serious person doing the business would buy at retail (making Gross Sales a meaningless figure). For additional comments on discounts see the post made 10/17/06, Direct Sales Compensation and Discount Structure (Industry).

Dr. Charles King and Tim Sales developed a great video on this subject called Brilliant Compensation that gives a strong explanation of this subject. They readily point out that the reason a multilevel company exists is because of marketing efficiency and elimination of distribution costs. If a company does not have a good multilevel marketing plan then they should market in a more conventional way and completely eliminate distributors. What does this mean for you as a Distributor? From a company perspective you are number one!

As the video points out, the more money that an MLM company can get to the Distributor Base (not just a few Key Distributors) the more profitable the company will be and the faster the company will grow. As a Distributor, company momentum is extremely important to your growth and your organization so you don’t want a company with the wrong focus killing momentum.

Whatever you do don’t become a distributor for a company that has their money and spending focus on something other than their Distributor Base (defeating the purpose for being a Network Marketing Company by definition). If they are spending over industry ratios on expenses other than Commission Expense they may not be a long-term company or player. This is a significant consideration! The best products in the world are no good if they can’t be sold. There is no way that a company marketing employee is going to do better at marketing than a Networking Distributor (otherwise it wouldn’t make sense for the marketing employee to be anything but a Key Distributor themselves–think about it). Distributors have not only built the company, and created it’s existence, they keep the company in the game. The founder has provided the opportunity, which any distributor should be very thankful, but without you the founder’s company wouldn’t exist. Any company that doesn’t understand this dynamic is not worth your time and effort working to get to the Residual Income level. When that is the case you won’t spend the money for that airline ticket needed to support your downline that you created and support. You are the company!