Products vs. Opportunity

If the direct selling industry had a mascot, it would be an attractive, outgoing creature with two heads. One head would represent the industry’s myriad of products and services. The other would represent the opportunity that changes the lives of direct selling’s 15 million-plus distributors.

The key to maintaining the mascot’s thriving good health is proper feeding of both heads. Literal translation: Thriving direct-selling businesses know that great products attract both customers and distributors, but business grows much faster when distributors effectively tell others about the opportunity. Neither can be ignored, and many companies begin their emphasis on that essential balance on a new distributor’s first day.

ACN, which offers local, long-distance and digital phone service; the customer’s choice of dial-up or DSL internet access services; wireless services and rate plans; video phones; and will offer satellite television service soon, insists that its representatives sell service first.

“Nothing happens and no money gets paid out unless customers are acquired,” emphasizes Greg Provenzano, the company’s President and Founder. “And no one can move up in the compensation plan without acquisition and retention of customers. Representatives can recruit as many people as they wish, but if customers don’t come through the door, no money is generated for anyone. It’s a great incentive for representatives to build their own company within a company, as well as to train other representatives in their organization on how to acquire and retain customers. Under this system, everyone has skin in the game to acquire a good amount and a good quality of customers who will be on our service.”

Sell, then Recruit

He stresses that ACN doesn’t want its compensation plan to be driven by upfront recruiting and believes that its approach creates businesses that are long lasting and sustainable.

“We’re building a customer base with services that people use every day, and we’re doing it through a network-marketing model,” he says. “Recruiting is the means. Selling products and services is the goal.”

While ACN’s products and services are different than those offered by financial services company Primerica, each company’s approach is similar. Primerica also leads with sales.

“When we portray Primerica during opportunity presentations, we describe ourselves as being in the business of the distribution of financial services,” explains Primerica President Glenn Williams. “For money to be made, sales must be made to an end consumer. We offer no compensation for recruiting, training or licensing. All compensation—either to the producer or through overrides—is focused at the time of the sale.”

In fact, Williams says that Primerica must deliver its recruiting message “very loudly” so that representatives offer the business opportunity as well as term life insurance, mutual funds, variable annuities, loans, long-term care insurance and legal services.

“In our business—the distribution of financial services—distribution is the critical part,” he notes. “But the more people who are doing the distribution, the more money can be made. We use a variety of ways to convey that you can make a lot more money by having an organization than by doing it individually. It’s obvious that money is made at the point of sale. The rewards are less immediate for building an organization, but it’s ultimately in your favor to have a lot of people distributing.”

Williams says that the company’s sales-focused compensation plan requires Primerica to work especially hard in other areas such as recognition, awards and incentives, which must sometimes stress recruiting since representatives are paid only for sales. But Primerica seems to have achieved the right balance. It recruited almost 235,000 people and paid out $682 million in compensation to its representatives last year.

Exotic Opportunity

Five-year-old nutritional beverage company XanGo was created to offer a product featuring the mangosteen. They gave the small fruit the leading role in XanGo juice and now sell it throughout a network of distributors in 23 countries. Their product, the company notes, is XanGo’s best recruiting tool.

“From our standpoint, you have to start with a credible, beneficial product that people have a good experience with or you won’t have an opportunity,” XanGo’s Vice President of Public Relations Bob Freeze says. “We started with something that had been used for hundreds of years in Southeast Asia. Scientific research affirmed the anecdotal evidence we heard, and people have had a marvelous experience with it. That fuels the business opportunity because then they want to share it. We have a competitive compensation plan, and it grows from there.” He adds, “The best direct selling companies have good products and also offer attractive compensation plans and business opportunities.”

XanGo pays distributors a 50 percent commission to its 800,000 distributors on the sale of products. As they advance in the company through sales and recruiting, they can grow through nine levels of the company’s distributor hierarchy. The first of those is the Preferred Representative rank—basically the company’s preferred customer program. Preferred representatives pay an annual fee to purchase XanGo Juice at a wholesale price. Freeze says that a significant number of XanGo consumers are just that: Consumers only.

Bejeweled Business

Party plan companies have traditionally focused much more on sales than on their business opportunity and sometimes have fewer levels in their organization than traditional network marketers do. But some, such as fashion jewelry company lia sophia, have expanded their organization models to encourage business building.

“This is a numbers business, and it’s always important to bring in new people,” says Bonni Davis, Vice President of Sales for lia sophia. “People come into the business for many reasons, and they change frequently as things change in their lives. So sharing the opportunity is utmost. Without it, the company will slowly decline. But for a jewelry advisor [lia sophia’s name for its distributors], it’s important that she sells and enjoys sharing the products. When she does that, she’ll show the opportunity, too.”

As in many companies, lia sophia’s jewelry advisors usually start as customers who first fall in love with the company’s 400 styles of jewelry at an in-home show. Jewelry advisors share the opportunity as well as sell jewelry at the shows. Davis acknowledges that new advisors who are confident about organizing shows, selling jewelry and even finding hostesses sometimes have to reach a comfort level with offering the opportunity.

“But once they’re comfortable, they run with the opportunity,” she explains. “Some women run with it the minute they join. Some have to get their feet on the ground first. Once they’re comfortable with what they’re doing and they see how lucrative the program is, they feel proud to offer the opportunity, knowing that they’re helping others.”

She notes that advisors who describe the company’s opportunity typically do so by explaining what it did for them—paying for college tuition, making a car payment or reducing debt, for example. Once they begin to offer the opportunity, they can develop an organization that is five levels deep.

Two Track Takeoffs

Lia sophia lets advisors start at their own pace but they show newbies how to fuel their business’ growth, if that’s what the advisor wants to do.

“We keep it very simple with our Quick Start Guide,” Davis says. “We don’t overwhelm them with a 300 page manual. Instead, we give them the basics of how to sell and have a show. Basic show training gives them ideas on how to sell jewelry at shows and how to share information about trends of the season. The rest of the training is through other advisors and managers at monthly meetings. Once someone is comfortable, they begin to share their story of why they’re doing this. That creates questions that let them offer more information on the opportunity.”

Lia sophia advisors try to create connections with party guests as they share their stories. As guests and hostesses empathize, they begin to see themselves in the advisor role.

“By sharing their story with other women, guests can see, that’s me. I can get to that level,” Davis says. “They realize that they can relate to this person. It isn’t always a story about a stay-at-home-mom. It may be an empty nester or a career woman paying down debt. We’re not always the same, and the opportunity means different things to different people.”

New ACN representatives are taught to first gather five personal customers. Then recruit two people and teach each of them to get five personal customers.

“Representatives earn elevated income based on achieving that status, called Executive Team Trainer. All subsequent positions are all doing the same thing—building a company within a company, building a distribution network and showing new recruits the business,” Provenzano explains. He adds that the company’s recruiting advantage is two-fold: First, because distributors sell services, no inventory purchases are required; and second, the company offers services that people already use daily, so customers don’t have to change buying habits. They simply buy service through ACN, which says it helps them save money while experiencing the same or better quality of service. Most customers, Provenzano says, say they’ll give it a try.

They draw new recruits from among the ranks of their customers, but also at local and regional opportunity meetings. Sometimes interested prospects who want to see the company’s big picture will even attend a convention so they can talk with numerous people who have been successful in building their customer base and their organization.

Start with the Story

XanGo’s new distributors start their education by learning about the mangosteen fruit and its benefits. Starting with the fruit itself was essential because five years ago, few people had heard of the exotic mangosteen. The idea of consuming little-known but highly nutritious foods has gained ground, but distributors still have plenty of opportunities to tell the story. So XanGo helps them learn it well.

“We’ve been very proactive in helping distributors understand the story behind the product first,” Freeze says. “Once they understand the story and consume XanGo juice themselves, they’re motivated to share the business opportunity.”

The company’s distributors carry an appropriate amount of inventory so that they can offer samples to prospective customers and recruits. The amount depends on the distributor’s level of activity but is typically only two or three cases. XanGo’s auto-ship program delivers products directly to consumers, so individual distributors carry a minimal amount of inventory.

Later this year XanGo plans to introduce its second new product, a new personal care line. Even it will include ingredients from the mangosteen, which traditionally has been used both internally and topically for hundreds of years.

“With personal care, we will enable distributors to go to a different segment of consumers who may not be interested in nutrition but may be interested in skincare,” Freeze anticipates. “The great thing is that the explanation of the skin care line will still feature the mangosteen story.”

Primerica representatives carry no inventory, though many use the company’s financial services. Company data shows that between 30 and 40 percent of sales are to Primerica members, while 60 to 70 percent of sales are to the public. Representatives become customers because they have confidence in the products.

“We’re concerned about the reputation of our business—both the products and the opportunity,” Williams stresses. “Quality is critical on both fronts. We must have a legitimate, high-quality business opportunity with a track record of success. The financial services business is extremely competitive. It has many delivery mechanisms, from internet banks and branches to insurance agencies. All claim to have a high-quality product and high value. So competition ensures that we maintain high quality products. We’re constantly updating and improving to remain competitive.”

Because financial advisors must be licensed to do begin to sell and earn, a quick-start program wouldn’t be appropriate at Primerica. But to help new representatives start to earn commissions as they pursue licensing, the company recently began to offer auto and home owner’s insurance, which don’t require licensing to sell.

“They’re one of our lowest commission products, but they’re designed to open doors for representatives and let customers experience how Primerica solves problems. When we can get into a home and sit down, it opens the door for other product sales and to let customers see the value of the opportunity,” Williams explains.

At that sit-down meeting, Primerica representatives use the company’s unique Financial Needs Analysis to take a complete look at a client’s financial needs and goals. Often, the analysis reveals that for a customer to achieve their goals or meet their financial needs, they require additional income. Primerica offers a solution to that need through its opportunity.

Consider Carrots

Because Primerica’s basic compensation program emphasizes product sales, the company has learned that it can help drive the balance between products and opportunity through its incentive programs.

“We’re in constant discussion about how to best drive and balance them,” Williams says. “What you recognize grows. We adjust our incentive programs to recognize both sales and recruiting, building in an appropriate balance based on where we need the business to grow. We adjust based on where the business is strong or weak at the time.”

Primerica typically runs both long- and short-term incentives concurrently. Monthly incentives allow the company to encourage representatives to achieve the balance between sales and recruiting that the company needs, adjusting long-term results along the way.

“We’re always using a carrot rather than a stick,” Williams emphasizes. “We hold out our rewards, recognition and compensation to pull our results in the right direction. We don’t find that it adds anything to the dynamic to have quotas or production requirements.”

ACN has a similar philosophy, beginning with its core compensation plan and continuing into incentives and recognition. \

“Levels within our compensation plan are set up so that representatives must meet two goals,” Provenzano explains. “They must have a certain element of legs or lines of customers, which require them to recruit people. We also require certain service points for them to move up.”

Monthly incentives and trips are short-term encouragement, always designed to give the company’s independent representatives a chance to achieve success.

“We can’t be successful as a company if our people aren’t successful,” he adds. “Our products, services, compensation plan and incentives drive success from the bottom up. A new person can accomplish the goals we set for them. And when they do, the whole company wins.”

Lia sophia also builds incentives to achieve the corporate goals it desires, using monthly, quarterly and yearly incentives.

“Some are just for sales. Some are for a combination of sales and opportunity,” Davis says. “Those two behaviors are both very important. But we don’t want the person who comes into the business only to sell to be left out of the awards, so our incentives recognize both. But greater rewards come when they do both together.”

Davis says that lia sophia tries to recognize that women live complicated, demanding lives and may not always be able to participate in the business at the level that some companies expect.

“This is an industry built on women doing favors for women,” she reflects. “Women’s lives are busy and complicated at times. Advisors will always come and go because what they thought they could do six months ago, suddenly they can’t do. So the simpler we keep the industry and our programs, the more we have a chance of it growing.”

Recruiting Through Sales

XanGo incentive programs usually focus on attracting new recruits through product sales. Over time, the company has seen that such promotions also result in recruitment of new distributors. It recently promoted its auto-ship program in sales incentive programs, too.

“Last year we had an incentive program called Double Up,” Freeze says. “It incented distributors to auto-ship two cases to themselves—one for their own consumption and a second to share with other people. It not only increased sales but spurred sharing with new prospective recruits and consumers.”

He adds that while many consumers are interested only in using XanGo juice, others are open and interested in the business opportunity. XanGo uses its Web site, training and marketing tools to deliver a strong message to distributors that a balance between selling and recruiting is essential.

“If you look at some of the criticism of the industry, it’s leveled at companies that are totally focused on the opportunity and have not balanced that with product sales,” Freeze says. “That’s where the accusation of pyramid marketing schemes comes in. Conversely, if people are just encouraged to buy products that stack up in their garage or basement, that’s not helpful either. Many credible, responsible DSA members counter that stereotype. As leading companies in the industry, we need to tell that story. There have been bad players, like in any industry. But the lion’s share of companies that care about a long-term strategy are those that achieve that balance.”