Does your company have a whole lot of distributors who’ve never done a single thing to build a business? Distributors in name but customers in practice. If you do, you’re not alone. Among MLM companies and distributors there’s been a history of signing everybody up and then waiting to see who succeeds. Like throwing spaghetti at a wall to see what sticks.
It may be happening at your company without you ever encouraging it. Or maybe you had policies in the past that overemphasized recruiting. Recruiting isn’t a bad thing, but distributors need to bring in customers too.
Regulatory bodies are pushing for MLMs to acquire more customers – and these customers need to be people who are not signed up as distributors. In the United States, the FTC is the primary government agency interacting with the direct sales industry. The goal implicit in the FTC’s actions is for customers to make the majority of product purchases made with an MLM company. The majority. That’s more than 50%.
You need customers – a lot of them. If you start out being customer-centric to begin with, then you’re better off. But what if your distributor organization is already entrenched in the wrong behaviors?
Correcting this problem is a matter of coming up with policies that incentivize distributors to acquire customers and customers to sign up as customers. (Please note that this is not legal advice. We’re compensation experts, not lawyers. These are simply ideas to get you moving in the right direction. As you design your customer program you need to talk to your lawyer to make sure that you’re getting it right.) You may wonder if it’s even possible to change something this deeply rooted in a company’s culture. Well, yes. It is possible. You can always change a company’s culture. Organizational change is not easy, but it is always possible. In any situation where an organization needs to change, there are always two strategies for change:
A clean break. Make a dramatic change and then move forward. An evolutionary change. Slowly change a little bit at a time and eventually arrive at your end destination. Regardless of how you change, it’s important to note that the success of a change is not guaranteed. No change is guaranteed to give you the results you want. And change can be brutal. You must think carefully about which change strategy you employ and about the actual changes themselves.
Decide the end point that you want to arrive at and immediately enforce that change. For example, you might look at the data, find those people who have never enrolled anyone, and reclassify them as customers. Give them customer programs that offer kickbacks to keep them happy.
In theory, these people would probably be OK with the change. They’re not enrolling anyone so they’re not receiving commissions anyway. Fifty six percent say they didn’t come in for money. If that’s true, then half of those people aren’t going to care if you reclassified them as a customer because they came in for the product anyway. The only scenario in which they might be angry is if they came in with the hope of earning large commissions and are still holding on to that dream. To mitigate this risk, you may choose to exclude people who joined recently from the mass reclassification.
Decide the end point that you want then decide on half measures you’ll take to slowly guide your organization toward it. For example, give distributors the choice to reclassify themselves. If they want to change from being a distributor to being a customer, make that an easy process. That’s a pretty good half measure. Just making it easy to downgrade your relationship to the company to customer status. You may then want to take the additional half measure of creating an incentive to make that switch. For example, “switch to the preferred customer program and get your product free for a month.”
Think creatively here. I analyzed the top 104 US-based direct selling companies. Many companies use more than one customer program. Companies used preferred customer autoship, loyalty or subscription programs. This is the easy one. As an industry we led the way in customer programs by using autoship. One of my favorite customer program ideas is to give customers rewards for referring new customers.
One example of a company that changed dramatically to increase their customer base is Herbalife. Circumstances of their settlement with the FTC required Herbalife to restructure their field and culture to focus on customers. Herbalife had to have 2/3rds of commissionable sales go to end consumers. Herbalife made a clean break. Circumstances forced them to. They converted most distributors to customers and you had to work your way back into being a distributor. This is the dramatic change. Making this change probably would have made people in the organization angry if they had done it without the government telling them to do it. Circumstances were such that everyone knew why the change was happening and knew that they had no option but to go along with it. To soften the blow, Herbalife offered preferred customers the same product discount they give to distributors—up to forty five percent off your product, if you sign up as a preferred customer. In a post-Herbalife vs FTC world, the safe bet is to try to live by the standard that Herbalife is held to.
You can wait to make the change until the government tries to shut you down, which is not pleasant. It’s so rare to survive a legal battle with the FTC, it might be wise to implement changes before you are forced to do so. We recommend the evolutionary approach. First, be transparent – communicate clearly and directly about what’s going on. Give your organization a heads up about the new goal you have for the company culture. Then make small efforts to change behavior among your working distributors while simultaneously incentivizing customers to self-select the appropriate role. If you’re worried that regulators have their eye on you already, it may be wiser to adopt the more dramatic, clean break strategy.
Any opinions, views and beliefs represented in this article are personal and belong solely to the author/s and do not necessarily reflect the opinion, views and beliefs of the organisation and employees of New Image™ International
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