|MLM Management System - Why
The Company Should Provide One
Company Growth Rate = Distributors Success
Although the statement above is obvious, far too many MLM companies
fail to understand and implement, that in an ever changing environment
and saturated market, they have to take a more active role in their distributors'
So let us analyze "mathematically" what is distributor's success:
Distributors' Success Analysis
For the sake of this discussion, let us introduce the following three
Equation 1: Distributor's Success = Company's check
Equation 2. Company's check = Sales
Equation 3. Sales = Organization size
Distributor's Success = Company's check
While success as an employee is sometimes subject to interpretation,
status, wages, point of view or attitude, there is no doubt that for an
MLM distributor, the size of the check received from the company is the
ultimate yardstick of success.
Company's check = Products' Sales
At the end of the chain there are customers who buy the company's products.
The company's turnover is the sum of all these sales. A percentage of this
turnover is used to pay the company's sales force – the distributors. This
system of remuneration is the company's "Compensation Plan".
Products' Sales = Organization size
Distributor's commission is derived from the overall sales of their
organization according to the specific compensation plan. On average, the
company's turnover divided by the total number of distributors in the company
represents the average sales per distributor. Hence, the number of distributors
in ones organization determines – on average – the company's check size,
Distributor's Success = Organization size
The New Distributor: Situation Analysis
Beginners have a lot on their plate. To become successful, they have
to master all aspects of their new work: Company, products, sales, systems,
etc. To boost their confidence in their new line of work, they need an
early success. To start growing their organization, they need the tools
and framework to enable this early success.
Since most distributors lack this much required framework, it does
not come as a surprise that currently 80% - 90% of them dropout in the
Organization Manager: Situation Analysis
Once a distributor has added a few new down-lines, he becomes an organization
manager. Since dropout percentage is high, organization managers are in
constant pursuit to recruit new distributors on one hand, while maintaining
and supporting their existing organization.
The need to control their administration and sales time-share, becomes
a major issue.
Growing an Organization: Facts
Let us deal with the harsh facts which, governs the building process
of an MLM organization:
Fact #1: 2% – 3% of people exposed to the business opportunity become
prospects. This figure relates to the best recruiting Websites where figures
can be measured. The figures are much lower when using other advertising
channels such as newspapers, stickers, flyers etc. Fact #2: 1% - 2% of
prospects become distributors. This is an average figure and depends on
many factors. Some of them are personal factors, where others relate to
the lead's quality and source.
The bottom line is simple: A distributor has to expose his business
opportunity to some 1000 to 1500 people to recruit ONE (1) down-line.
Conclusion: Recruiting is a numbers game!
Winning the Numbers Game!
To win the numbers game two components – exposure and conversion rate
- has to be increased!
Exposure: There are many channels of exposure to the business opportunity:
business cards, flyers, publicity buttons, stickers, Newspapers, Internet
ads, recruiting Website - to name some. However, before practicing a specific
method, the following important questions have to be asked:
1. What is the cost effectiveness of this method? How much time and
money I need to invest to get 1 lead (prospect)?
2. What is the quantity of prospects I can achieve using this method?
How many prospects I expect to add to the pipeline in a month? Is there
a limit to the number of prospects I can find this way?
3. What is the prospects' quality this method produces? High quality
leads are informed prospects. These people have already received information
about the business opportunity before you even talk to them.
A good personal and professional recruiting Website can:
Having a mlm management system recruiting website is a must! However,
since no one can expect that a recruiting Website will provide all the
leads required from day one, a mix of advertising channels should be considered.
Beat the 2% - 3% ratio of surfers to prospects
Provide high quality leads
Becomes a source for the cheapest possible leads
Provide a fresh and unlimited source for leads
Conversion rate: Converting leads to active distributors – for some
extent – is personal. Some people are more gifted than others and enjoy
a higher than average conversion rate. However when the human factor is
isolated, the common denominator remains "technical": How well and professionally
these precious leads have been handled.
As time goes by, and the list of prospects lengthens, even the most
talented sales person will find it difficult to handle it without an effective
mlm management system.
USA MLM Market
Here is a snapshot of the USA market:
Being one of the most competitive and saturated markets worldwide, MLM
companies need to make sure that their distributors are well equipped when
they approach potential customers and prospects.
$28 Billion annual turnover
13 million distributors
Traditional Support to Distributors
Usually, MLM companies provide some support to their distributors.
This support can be divided into tangible and Non-tangible support:
Marketing material (brochures, product information, surveys, articles....)
The above support, as much as required, is only part of what a distributor
needs to succeed in today’s competitive market.
Communication between its distributors
Information (down-line performance, own production, commission, Flow of
Organization culture, sense of belonging
We now go back to the beginning of this article: Company Growth Rate
= Distributors’ Success. When a company decides to play a more active role
in its distributors’ success, it can now add to its support mix, a recruiting
and management system. This system will provide:
The Company’s Benefits
A framework for new distributors
A possibility to manage organization
Competitiveness in a saturated market
Save time and money resources to its distributors
Lower the dropout percentage
When company uses its buying power to implement such a solution it
can achieve the following benefits:
Saves time: Comprehensive professional solution is available now
Tailors the solution to its needs
Increases growth rate and distributors loyalty.
Increases bottom line at no cost.
Let us summarize the arguments in this article in a few short sentences:
1. The company success is derived from its distributors success
2. Distributors success is directly related to the size of their organization
3. New distributors need a framework that will enable them to achieve
early success. This will reduce the current high dropout percentage
4. Organization managers need a system to support their organization
and as a mean to lower the dropout of new recruits.
5. Building an organization is a numbers game. To recruit 1 distributors
1000 people has to be exposed to the business opportunity
6. Winning the numbers game, can be achieved by increasing both exposure
and conversion rate.
7. The market is highly saturated and competitive, and the traditional
support provided by MLM companies is not enough.
8. Companies should use their buying power to provide their distributor
with current technology of recruiting and management system to accelerate
growth and benefit from distributors loyalty.
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