How much money does your MLM company need to just to stay in business every month? Does it employ a large number of people all over the world? Does it operate its own farms and factories? Does it own large, beautiful buidlings? Does it sponsor sports stars, movies stars, football teams or baseball teams?
And why should this matter to you as a distributor? Because you, as a distributor, are paying for all of it. It comes out of the compensation plan. The more you have to pay for all of that “stuff”, the less you get back in commissions and bonuses.
The retail price points of products from company to company are a great indicator of company overhead. There are thousands of network marketing companies that have consumable products such as skin care, personal care, vitamins, juices, etc.
Although most of these companies say they manufacture their own products, they are in fact, all manufactured by nine or ten companies for all of the network marketing companies. Very few companies manufacture their own products. The companies do, however, specify their own formula to these manufacturers.
Let’s say that two companies all sell a similar product to their distributors. It doesn’t matter what the product actually is – it could be a shampoo, for example. Now the companies buy this product from the same manufacturer, and the quality and the quantity of the ingredients between each of these two different shampoos is pretty much the same. Therefore the wholesale cost to the companies for their shampoos should be within a few cents of each other.
However, Company A sells its shampoo to its distributors for twenty-five dollars ($25.00) per bottle while Company B sells its shampoo to its distributors for fifteen dollars ($15.00).
So why the massive difference? The difference lies in the business philosophies of the companies and how they operate.
Company B has an online ordering system where every product has it’s own sales page. All a distributor has to do is point their customer to a particular product’s page and the customer can order from there.
Company A also has an online ordering system, but it’s very confusing. A customer cannot order a particular product without going through the business opportunity, other products and offers and other hoops. So to make things easier, Company A sets up a customer service hotline to take care of customer orders. It employs 400 people just to take care of customer orders.
Well, Company A now has to build a building that houses 400 people. It has to heat and cool the building. It has to hire contractors to mow the lawns, clean the windows, and every now and then, re-roof the building. To keep the place hygienic you have to hire cleaners to clean the bathrooms. Building maintenance is a huge cost!
Now Company A has to to pay a salary to each of the 400 staff that take customer orders. It has to pay their retirement plans and worker’s compensation as well. The 400 staff can’t manage themselves so it has to hire managers and assistant managers at twice the salary of ordinary staff members and pay into their retirement and workers compensation plans too.
The staff can’t work without computers and telephones, so it needs to have them as well. And Company A has to buy software and the maintenance upgrades that goes onto each of the computers.
The monthly overhead for Company A, just to employ 400 people to take care of customer orders is two million dollars! No wonder they have an overpriced product and a lousy compensation plan.
Now Company A prides itself on customer service, but guess who’s job that is? It’s the distributors job to look after their customers!
Company B had the sense to use technology and a simple ordering system to do exactly the same job as 400 people. That’s why their product is much better value and are able to pay their distributors more generously.
To your MLM success,
Wayne Wu
P.S. I would love your input! If you have an opinion that would contribute to this discussion, please leave me a comment below.
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