New Business

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Dr. Howard Stevens and Theodore Kinni, Achieve Sales Excellence, write this about new business:

“New business is still important–every company needs to build its customer base–but because of the additional cost involved in winning new business, repeat business is almost always more profitable. A 2004 McKinsey report, for instance, calculated that on average it costs ten times less to do business with an existing customer than it does to acquire a new one. The revenues associated with repeat customers also rise in greater increments. Studies reported in Harvard Business Review concluded that a 5 percent rise in customer retention rates increased sales by a minimum of 25 percent. In some industries, it is far higher, such as software (35 percent), industrial distribution (45 percent), credit cards (75 percent), and advertising (95 percent).

In addition to not valuing repeat business properly, sellers also tend to underestimate the impact that customer satisfaction levels have on repeat business. Eighty percent of all companies deserting their previous vendors described their satisfaction levels as ranging from ‘good’ to ‘very good’ in another study reported in Harvard Business Review. Conversely, those with satisfaction levels starting at ‘very good’ and ranging up to ‘excellent’ were 42 percent more likely to continue the relationship. In other words, the fact that you have made a sale in no way guarantees that you will be able to keep the customer.

All of these finding support the fact that, if you aren’t already, you should be considering how to manage post-sales activities and ensure that your customers attain their desired outcomes. This requires a wider view of the relationship with customers, one the encompasses the full breadth of a customer’s interactions with your company. It is worth it. The panoramic view that includes the full extent of your company’s contract with the customer includes the richest potential for profit, a potential that resides outside the traditional sales paradigm.”

I’m Getting Excited - Why?

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I can get excited when things aren’t going as planned and it gets us back to basics.

Problems get people back to the basic questions and real solutions.

I like to read nutrition industry financial statements because we are associated with that industry and I see questions–Why? It’s interesting to me that a particular public company has done so many things to help their Distributors (they are a good company). They provide a competitive pay plan, relaxed requirements on exclusive dealing, health insurance, car allowances, etc. Their solution to flat sales appears to be looking internal instead of external like they should be (market positioning and repositioning). While other ratios are staying in line their fixed costs grew over 3% on each dollar of sales. In other words, they will have to greatly increase sales just to cover the additional fixed costs. Companies always grow fixed cost with the excuse that it will increase future sales (bad bet).

They are talking external in their annual report and increasing (not cutting) their costs internal. For example, they admit to external positioning issues (beyond demographic, healthcare and lifestyle trends) that they need to increase the number and productivity of their Distributors (direct correlation to their sales). They have a good compensation plan so why can’t they attract Distributors to grow sales?

Externally (besides market position), we see things like FTC rules (The Business Opportunity Rule R511993) that will be gotten around even if the industry is fragmented and doesn’t effectively fight bureaucracies. Why charge anything to become a Distributor? Becoming a Distributor (if you want to call a customer that name) can be based on sales volume like everything else. Brochures (Distributor Kits) can be available online for free. We don’t have Business Opportunities we have Purchase Discounts (Let’s see if the FTC can do away with Purchase Discounts).

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Winston Churchill

Why MLM Takes Time

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People with influence (friends, acquaintances, etc.) or good at cold marketing or frontline (level one) recruiting or a dedicated business builder can begin to build quickly (win pay period bonuses, etc.) and then begin to fade. Why? Because this is a start-up organization. Your Network Marketing Company is an organization of Key Business Builders (Key people). People are your working capital, etc.

You decide to start a Church (You are the Pastor) because you have a product to sell. At first, this may be only your personal effort. Contributions allow you to build a building and every Sunday the people come (product users) and set and listen. You do it all:

• The Service
• The Recruiting
• Visiting

You will only get so big because it depends upon your efforts. What would happen if you started missing Sunday morning service? The Church would begin to die because it depends upon your efforts. On the other hand, what would happen if the product users (pew place takers) began to invite people, and leaders were established? You take off on Sunday morning and the people say, “I believe the student Pastor does a better job than the main Pastor.” This is your objective! The Church grows and builds people and a new Church (Leg) is started and another new Church (Leg). The organization develops leaders or business builders and grows.

Because of the design of the pay structure we may find that a student Pastor has a bigger Church (Leg) and makes more money than we do. Also, out of all the Churches built you get a percentage of the contribution and the percentage increases as you build more Churches (Legs).

Like Churches (MLM) has a formal structure (on which we are paid) and an informal structure.  The informal structure may be crossline and can greatly benefit our group at Large Group Meetings or Corporate impending events.

While the pay can be fantastic when we get to this level many people want to place the focus on themselves (doing it all) and never get to this level of activity.

Churches are great examples because everyone understands that Churches grow through people and so does MLM!

Starbucks

You are a Champion!

Get ready as Corp. America tightens its belt.

Starbucks earnings dropped 28% in the second quarter so the board of directors slows expansion. Starbucks, like many Corps. start the belt tightening. Many Corps. will start early and strong to protect earnings. Why? Because it’s easier to cut hard and deep than carve on the body over an extended period of time.

Also, this is the time that many CEO’s use to clean house and get rid of projects they don’t like because the “excuse” is so obvious. People can’t buy $4 a cup coffee in a recession and it’s not my fault! How deep can I cut? Anyway, that’s how many of the companies I’ve been with would approach this issue because VP’s and CEO’s go into survival mode.

Don’t know how many times you have been through this drill but over the years I can remember many times. Corps. don’t just stop expanding they begin cutting hard because one thing Presidents and VP’s understand extremely well–you don’t start late to stop the bleeding in your Corp. body and major surgery is the only cure.

This begins the time when being in management is no fun at all because of the impact on a lot of people. I can just feel the tension in the boardroom as the CEO asks each VP who he’s going to cut in his area of responsibility and then turns to the CFO to ask him how much he should cut pay across the company: 4%? 8%?

This is a time when you will work harder than you’ve ever worked in your life and feel grateful for just receiving a pay cut.

Believe me when I say it’s not likely to be a high paid VP that gets cut. When will you face reality and begin to lookout for yourself?

I remember one of these times at a division of PepsiCo, Inc. when the Financial Officer said, “This cut will impact everyone from the top floor to the bottom.” An accountant I knew raised his hand and asked, “Can you tell me who this will impact on the top floor?” We all cringed as the VP began to turn red in the face. I noticed that accountant in his office after the meeting and the voice of the VP raised and he didn’t stay long in his position (surprise, surprise).

Your boss may like you but he can’t save you from the reality of a market downturn. In fact, if things get bad enough he can’t even save himself. Will he/she do the right things during a layoff or layoff the people with cancer or the terminally ill which means their death without health insurance? People can make all kinds of comments to “sugar coat” the situation but sooner or later the hard reality is staring us in the face and this has nothing to do with staying “positive.”

Take a moment and consider how easy it would be to join Network Marketing. Pick an industry that’s contra-cyclical (contrary to the cycle) if you can. Obviously, expensive coffee isn’t one of them in this market.

Compensation

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Are you correctly working the compensation plan?

A difficult challenge in Network Marketing is getting recruits to understand and work the compensation plan the way that it is designed. A person can study the various compensation plans used by the industry and some of them are complicated. We hear all the time comments like, “Our plan pays the best compensation in the industry.” That statement is often easy to check by looking at royalty or commission expense as a percentage to Net Sales (Industry Statement Studies). In fact, looking at the Big Picture (Income Statement) is the best way to check the truth of such statements.

Some companies in the industry would like to let you think that they are unique when it comes to their compensation plan and are paying more than other industry players. Without strong proof to the contrary I suggest you greatly discount those statements until proved wrong. Why?

1. As we said, the plans can be complicated so many companies “borrow” the relational database logic. It would be extremely risky for any start-up company to design their compensation plan logic because of the complication. Doing so could result in catastrophic failure of the plan (Distributor lawsuits) or the bankruptcy of the company. Be very concerned about a company that pays more than industry because you may work long and hard for residual income to find them in bankruptcy.
2. Why would a Company pay more than industry and why would they pay less? A Company that pays more than industry places their company in financial jeopardy. A Company that pays less than industry can’t properly recruit people to market their products. If a Company pays more pay close attention to the quality of their products, fixed costs, and their financial management.
3. Why would a company design a compensation plan that hasn’t been historically tested in the courts? Want to quickly find out that the Attorney General of your State thinks your new start-up company is a pyramid scheme? Design your own untested compensation plan.

As an example, let’s say that your compensation plan pays an override royalty and leadership bonuses with the top pin level being called Diamond (12 legs). Lets assume that a leg (Business Builder) is determined to pay you as a Sponsor $100 in override. Since that is the definition of a leg and the top compensation is the Diamond pin level (12 legs) what is your compensation objective? Get (12) legs that qualify at $100 dollars in override. An experienced sponsor (including the articles in this blog) can advise you on how to obtain that objective. How to build residual income, a lasting organization, that gets beyond frontline recruiting.

Otherwise, you are NOT working the compensation plan as it was designed to work! That’s a big NOT!

Ready to Opt-Out?

You are a Champion!

In their book The Opt-Out Revolt, Lisa Mainiero, Ph.D and Sherry Sullivan, Ph.D have some interesting facts:

• According to the Center for Work-life Policy, high-achieving women who were expected to now be at the top of corporations are instead out of the workforce or working part-time. Of Harvard MBA graduates, only 38 percent of the women who graduated in 1981, 1985, and 1991 work full-time, and of Stanford University graduates, 57 percent of the women who graduated in 1981 have left the workforce.
• Married mothers are increasingly turning to part-time employment. A recent survey of Yale University women found that 60 percent of female undergraduates intend to cut back on their work or stop work entirely when they have children.
• Researchers at the Simmons School of Management found that while 89 percent of the 571 women surveyed reported that they believed advancement opportunities for women had improved in the last ten years, only 58 percent were satisfied with their own advancement opportunities and only 30 percent believed that women and men have equal advancement opportunities.

“…Many women get off the fast track when work doesn’t provide the fulfillment they expected. A recent survey showed that 17 percent of women left the workforce because their jobs were not satisfying or meaningful. Only 6 percent of women stopped work because the work itself was too demanding. Overall, understimulation and a lack of opportunity were most often cited as the reasons women left the workforce.

The reasons women leave the workforce are not always due to family needs. In our own survey, women mentioned a wide variety of reasons for opting out:

• A medical crisis
• Corporate downsizing
• Services no longer required
• Lack of challenge
• Gender discrimination
• Need to increase education
• Desire to travel and seek adventure

A Fortune-Yankelovich survey of three hundred career women, ages thirty-five to forty-nine, echoed these reasons. This survey uncovered a variety of additional reasons why women were considering leaving the corporate grind (some were considering more than one option).

• 45 percent were considering starting their own businesses
• 44 percent were thinking of changing their jobs in the same career field
• 35 percent were considering the possibility of changing their careers altogether
• 38 percent were contemplating going back to school
• 37 percent indicated the need for a sabbatical
• 33 percent were considering making a major change in their personal lives
• 31 percent were thinking of simply leaving their jobs and not working

For many women, therefore, this exodus may not be about motherhood but about a sense of dissatisfaction at work.”

Can’t you see from this information that a lot of women (and men) are simply existing in Corp. America and are looking for a change?  Are you one of them?

There are options…

Why Do People Buy MLM?

You are a Champion!

In this article I can only speak from my own experience. The obvious things people buy through MLM are products and business opportunities. But what do they really buy?

I’ve thought a lot about this subject because it makes a big difference in how successful we are in our MLM business. For example, we see people spend thousands of dollars on a new car when all of us realize that a car is just a vehicle to get us from point A to point B. In fact, there are ways to get from A to B without even owning a car. And so, if a person buys a luxury car we already know that the primary reason is not for transportation. The salesperson already knows that he’s not selling price or transportation when selling a luxury vehicle.

Therefore, we could go into all the reasons why people buy a car but that’s not the subject of this article. The subject is why people buy the MLM business model.

We might think that they buy price. I can get the quality products at a discount and I can get into business for a small investment. I really don’t think that’s the number one reason even though it is a reason.

My wife and I have outlined specifics we think cause people to buy into our MLM business and those prospects that make up the customers we want in the business. However, those things are specific to our business and not to MLM in general. If you are in MLM you need to ask the right questions of the right people and get the necessary experience related to your specific business. Just be aware that your first impressions about your customer base may be wrong.

I’ll just give you my opinion about what people serious about MLM buy. The number one thing that they buy is hope. They need to see hope in your eyes and your questions should be centered around their hope.

We can tap into a persons dreams to achieve wealth and be able to take vacations, have a lake home, provide an education for children, and secure retirement.  Decisions are not always based on pure logic.  For example, when John Sculley was being groomed for the top position at PepsiCo, Inc. he was approached by Steve Jobs to take the CEO position at Apple. Dreams prevailed by Steve asking John if he wanted to spend his life selling sugar water.

Making a difference is important to many people and many companies do make a difference in the lives of other people.  Health and wellness companies are prime examples.

Productivity and Economics

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Your productivity improvements should be “controlled” by economics.

As in government, productivity gains are often (stifled) controlled by subjective decisions that are not rational when it comes to economics and slows down productivity improvements, growth of the economy, and even eventual collapse of governments.

Bad or wrong decisions should be corrected quickly!

For example, if the wrong person is hired for a position it is not fair to other employees in the company to continue working around or over the nonproductive people (carrying their load). Therefore, correction of a mistake is not a “heartless” decision but a “necessary” decision. This is often the hardest part of being in business.

This is one of the main reasons that Network Marketing Distributors have a significant advantage over other business models.

My wife and I were going to meet with a small business person just the other day who was detained in a meeting with a person he had just fired. The person wanted to draw unemployment compensation even though she was being fired for cause. As you may know, this increases the cost of being in business and a hard (distasteful) decision had to be made.

If you find these kinds of decisions upsetting you may want to join Network Marketing instead of starting a small business where these types of decisions “have” to be made everyday.

Opportunity Cost

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In Economics we study the choices we have regarding scarcity. For example, TIME is scarce (just so much time to sleep, eat, work, relax, etc.). How do we spend our time?

Economist describe our scarcity selection as Opportunity Cost or the value of what we give up when we make a choice.

For example, if we open a small eating establishment and work (60) hours each week and net $1,000 after expenses our hourly income would be $16.67. If you can make $20 per hour on a job then your small business is not making an economic profit.

The interesting thing about Network Marketing is the ability to get paid not only for our time but the time of those we sponsor. There are operating costs in any business but it would be difficult to find a business where the operating costs would be lower than in Network Marketing.

The residual or passive income factor in Network Marketing makes this business opportunity attractive to many. If we are willing to trade some evening time to build a business we can compress time (build an organization that pays residual income).

Think hard about what you are trading for your time (you might set down and make a list).

Are you making a good trade?

Lifestyle and Other Changes

You are a Champion!

UK Times March 4, 2008

Britons are leaving the gym

After 20 years of pumping iron and going for the burn, Britons are leaving the health club in droves. The gym’s heyday is gone.

“Five years ago, when gyms and health clubs were at the peak of their popularity, 8.7 million of us in Britain were members. But statistics from the accountancy firm Deloitte reveal that 54,000 fewer people took out gym membership during 2007 than they had 18 months previously. In some parts of the country, including Northern Ireland, the West Midlands and the North East, the dropout rate has risen to 8 per cent, despite joining fees falling by an average of 17 per cent. And there is worse to come, according to business analysts, who point to falling profits and share prices of many clubs over the past two years. Gyms, they say, have fallen into a price battle to woo new customers.

Thanks partly to changed lifestyle choices and partly to the economy, the gym’s heyday has come and gone.“

As we’ve mentioned in previous articles paying attention to the economy, demographics, lifestyle changes, life stage changes, etc. is important. Also, some businesses may not be as recession proof as they would like to think. Do you really think that Britons are less interested in their health than prior to 2007?

Cavett Robert says, “If we lose sight of time, place and circumstances of any product or service we will have lost sight of important elements in human persuasion. For instance, if a man were dying from thirst in the middle of the Sahara Desert, would diamonds or gold or silver be of any value to him? I’m afraid he would not be interested. The possibility of securing one small cup of water would, I assure you, motivate him to the greater extent. This is an extreme case, but illustrates a point that we too often overlook…we would not even “dicker” on price. Since a person is primarily interested in the needs and benefits to him of anything we offer and since benefits are determined primarily by time, place and circumstances, we must view the entire situation before making an approach.”

Well, do you think any British Gyms are taking price increases? Most of them are lowering prices trying to retain customers. Ask our upline sponsors about market conditions. They accumulated thousands of dollars in debt trying to salvage their gym and paid their debt off by joining Network Marketing. Go ahead and ignore trends and market conditions at your peril when you’re in business.

Stay positive! Could be a great time to join a gym (might not need to sign an agreement either)?