Increasing numbers of chiropractors are exploring network marketing as a source of current and residual income. Because most network marketing programs include nutritional products, many DC’s are asking about network marketing, its role in their practice, whether it can deliver what it promises and if so – how to select a network marketing program.
You want to drive a car from California to New York. You turn on the ignition, the spark plugs fire, the car starts this gets you and the vehicle to New York, right? Of course not. It takes more than turning a key and firing spark plugs it takes all components of a functioning vehicle and driver to get you there.
It’s the same with network marketing. Think of hype like the spark plugs that can start a process; it can draw you and others to a network marketing business, to get you started but it takes much more than hype for the business to work, to get you to your financial destination.
HYPE IS DESIGNED TO RECRUIT YOU, NOT INFORM OR EDUCATE YOU.
Hype can provide energy for starting a network marketing business. Unfortunately, it can detract from the critical evaluation process required to select the best program. Most people ignore this they base their selection on sizzle, someone’s over-zealous story, or on only one factor, such as a product’s success, rather than objectively judging the entire business and making some basic comparisons. The purpose of this article is to lay out key factors you have to evaluate in order to pierce through industry hype.
What are the criteria to help you choose a network marketing program (hereafter NMP)?
Examples of network marketing hype:
Rather than offer a dictionary definition, let’s look at some examples of obvious hype that you have to recognize and pierce before selecting a NMP.
1. High earnings fast, such as: “I earned over $400,000 my first year.” When you hear this, turn and run because it usually means:
- The person changed NMP’s, brought along his downline and usually “forgets” to mention this;
- His program is a front-load whereby he encourages recruits to “buy in” with large purchases of product inventory from the company or from him. He then earns commissions, rebates and royalties on these purchases. Mr. Hi-earner himself probably also bought in with a large purchase, got a big rebate from the company, and now has the job of reselling his inventory. Why does he do it? Because he’s been told that he’ll be forever positioned at the top of his compensation plan and so will others who duplicate what he did. Don’t ever fall for this story.The truth is network marketing is a building process by which you leverage yourself through entrepreneurial energy of others called key people. The building process geometrically duplicates resulting in large numbers of people doing a little bit and a few key people who continue to build depth in the organization. Key people and organizational depth are secrets to success in this business and unfortunately finding key people and showing them how to productively duplicate and build deep takes time. Earn $400,000 the first year? Not in a well-balanced, fair, non-front-loading program.
By the way, the guy who earned $400,000 his first year actually bought $360,000 of pills that he resold to other recruits. Who knows how much product is still stuck at the wholesale level in the closets of other recruits rather than in the hands of users and consumers?
2. “Our products are so great and unique they just sell themselves.” Let’s get real. No product anywhere does this. Least of all in this industry where products tend to be higher priced and their sale typically depends on personal testimony and evaluation. That’s why the right products lend themselves to MLM. We point out below that product movement is a key criterion for your evaluation process, and you better be prepared to recognize that product movement results from many things like conviction, price, testimonials, consistency, re-order rates, etc. Products don’t sell themselves.
3. “Our compensation plan is the most lucrative, fair, highest paying in the industry.”
They all say this, and they all can’t be right. Read on for advice on how to pierce through this super-hype.
4. “Leaders are flocking to our program so why aren’t you?” Remember that fear of loss is a strong motivator and that’s what this is. Leaders don’t flock from program to program. They typically stick with a good thing once they’ve found it. A MLM company might hire or pay an industry leader to join its business in a visible position to attract others a common practice in the industry. Don’t fall for the leaders-flocking hype.
5. Hero worship.
This is where a company builds a myth around its founders, industry wizards or technical gurus and relies on the myths to recruit. “If it’s good enough for Dr. X, then why can’t you see how easy our incredible ground-floor opportunity is and how life-altering our products are?”
Experienced, competent, honest management is important. A guru as company spokesperson can help, but make sure the guru has put together a program that meets the evaluation criteria below.
OK, so hype as seller’s puff is common maybe even necessary in small doses. But how do I dissect the heavy stuff, the hard-core hype? Evaluate all aspects, then compare!
In a moment I’ll discuss the criteria you’ll want to evaluate in order to pierce the hard-core hype. First I want to point out the importance of evaluating all aspects of a program, then making a choice. Too many people select a NMP program based on one factor, usually a product success. For example, think of buying a drug store. Would you buy a drug store just because it sold hot fudge sundaes? Then why decide on a program because you’ve had a product result or because of any single factor. Don’t get me wrong products are an important criteria; they fuel the business vehicle. But by no means are they the only criteria for such an important decision.
Also, I advise people to compare one or two programs. Why not? Too many people make a decision without ever critically looking at another NMP. The key here is to evaluate the following criteria as objectively as you can to pierce the sizzle, exaggeration and hype.
Evaluation criteria for NMP’s
1. Ease of Entry
- Can you and your prospects easily enroll with minimal hassle and cost? Some programs continue to require written applications, initiation fees, starter kits, initial purchases, etc. In this day and age of computer technology for tracking downlines, purchases, royalties, there’s minimal need for complicating the getting-started process. A simple phone call referencing a sponsor’s ID or social security number should be the norm. Many NMP’s today have easy phone sponsoring and no initiation fee or starter kit.
- Is a yearly renewal fee required? I often wonder why a company would charge a renewal fee. Think about it. They can roll this cost into the product cost if they want to. More and more companies have done away with it.
- Is spousal or family member sponsoring permitted in order to double royalty income? Is this a meaningful benefit in light of Section 5b about group or organizational requirements for royalty qualification?
2. Ease of purchasing.
- Is a minimum dollar purchase required for each order? I hope not. Why should you be forced to buy anything? Even a $50 minimum is too high.
- Does the company accept major credit cards, money orders and payment by check? You’d be amazed how many people don’t use credit cards; phone checks are standard with many companies a big plus if a company can handle payment this way.
- Does the company have toll-free lines for ordering and customer service? Again you’d be amazed how many don’t. Could mean additional cost for you (and one more hurdle you have to overcome with recruits).
- Is technical product information readily available? Is information available concerning milligrams of ingredients, processing, preliminary health benefits, etc.?
- How old is the company?
Many network marketing companies are start-ups. In any industry the survival rate for start-ups is low. Maybe 5% will make it to their fifth year. Too much of the hype about ground-floor opportunities is just that a lot of hype to draw you into the business.
Think of it this way. If you were flying from Chicago to California and your chances of getting to California were less than 5%, would you get on the plane? Or invite friends and contacts to get on the plane? Then why would you take such a major risk in selecting your NMP? I’d look for a minimum of three years of successful operations before committing to a program and forget the ground-floor hype. Your time and contacts are too valuable.
4. Ease of product movement a complex and very important assessment. If the products have difficulty getting to large numbers of end-users (because of price, mediocre results, non-consumability), then it’ll be tough to achieve sales numbers that result in acceptable and steady income. Hype can get you and others to try a product, maybe order a few times. But you need products that will be consumed and purchased regularly.
- Is pricing fair? Balance price with benefits to the end user. Compare with similar products in stores or other NMP’s. Are the products affordable for a large number of people?
- Is the product line complete? A key issue for physicians who want to add nutritional products to their practice. Is the line esoteric, complicated, tough to explain, too small to meet most patient requirements?
- Have you had personal results? The more dramatic the result, the greater your conviction which you can transfer to others.
- Are the products frequently consumed? Consumption drives sales volume. The more people use or consume, the easier it is to achieve high volumes where the large incomes are possible.
- Are any products unique? Many consumers get major results with some herbal products, in my opinion because of a given herb or blend. They probably would get a similar result from many competitive products. They and their customers eventually wake up to this fact. It’s a different story with unique formulations. Search for some one-of-a-kind products in a larger line that solve a widely recognized problem and are priced right.
And now for the tough part…
5. Do-ability of the compensation plan a major source of hype, exaggeration, and misunderstanding. If there’s an area where people misjudge a NMP, it’s here. Many plans have qualifiers that are too tough for most people to meet month after month. And most of us don’t have the experience and knowledge to evaluate and compare compensation plans at the outset of our network marketing careers. You have to check all qualifiers for earning money at each phase of the plan.
Ask these questions:
- What’s the minimum purchase to get a check? With most programs it’s about $100 the lower the better.
- Are there additional group or organizational volumes required for qualification purposes later in the compensation plan? Beware! Here’s where facts are often obscured or just not discussed, yet many people have problems here. I call this having to keep your foot on the gas.
In other words high group volumes require people to keep recruiting at a feverish pace or encourage them to load-up on inventory. This equates to a financial risk that should not be part of a fair and balanced network marketing program.
‘Ive heard statements such as: “Buy-in somewhere between scared-to-death and nervous.” Don’t! You’d be amazed how many people do, and they wind up with enough inventory for the next five generations. Attorney Generals and Better Business Bureaus strongly warn against this practice too. My advice: avoid compensation plans that encourage large purchases either initially or for monthly qualification purposes! Here’s where credit cards get maxed-out buying excessive amounts of products that fill-up attics and basements.
- Is the financial pay-out balanced in motivating people early on to stick with building their business at the same time as motivating those who have built large organizations? Does it provide adequate rewards in the organizational levels where geometric progression has occurred? Or does the plan decrease its royalty percents in these levels?
- How much of the wholesale dollar is paid out both actually and theoretically? The average company theoretically pays out about 50 – 52% but the actual payout might be considerably less. In other words if one NMP pays out 45% and another 60%, what are the differences? Maybe there are good reasons, but find out why you should settle for 15% less money long term.
- What’s required to earn $1,000 in residual income? Super stars can do anything. Networkers from other programs can bring their tribes into another business and quickly earn well. But what about the non-stars? You need a lot of these people for product movement and modest duplication. Is earning, say $1,000 within the reach of their ability, time and financial position?
These are the major items you have to evaluate before selecting a NMP. Many companies and recruiters would prefer that you be influenced by hype rather than thoughtful analysis and comparison.
There’s often a fine line between doing your homework and avoiding the paralysis-by-analysis syndrome. Avoid getting caught in a frenzy of analytical activity that leads to delay and inaction.
Network Marketing and Chiropractors
Increasing numbers of physicians today are exploring network marketing programs for several reasons:
- The career landscape for physicians has been permanently altered. The proliferation of prepaid health plans has curtailed physician’s income and is driving DC’s to search for additional revenue sources while lowering overhead. Some NMP’s can add to revenue and profitability without additional costs and risk;
- Patients are aware of the potential value of nutritional supplementation and are looking to DC’s for professional inputs. Quality supplements are available through NMP’s which enable the physician to provide more comprehensive service to his patients;
- Because of the recruiting or multiplicative nature of NMP’s, the practitioner is enabled to expand his income outside the four walls of his practice with no financial outlay or risk;
- NMP’s can offer tax benefits not available through a traditional practice;
- If monthly qualifiers are low enough, family members can be sponsored into a NMP, income diverted to them and taxed at their incremental rate; and finally
- Network marketing is one of the few options that can generate residual income with virtually no financial risk. How? By piercing the hype that surrounds the industry, evaluating all aspects of a given program, comparing a few programs, working with people who will mentor your progress and development, and by taking the advice of the German philosopher Goethe, “What-ever great and bold thing you plan, start it now!”
By piercing the hype that surrounds network marketing, chances are greater that you’ll be among the thousands who have achieved their financial dreams. This can be accomplished by assessing the evaluation criteria above and objectively comparing programs. By doing so, you can build a large and diversified income source without the risks, costs of entry, and down sides of traditional business.
Jim Kosglow is a recognized leader and trainer in the network marketing industry. His professional career included Vice-President positions with two Fortune-500 companies prior to joining his first network marketing program. He has built large organizations in two programs and enjoys the lifestyle of a successful entrepreneur and MLM’er. Well-known for his frank comments and insight in the industry, he has appeared on television and radio. Jim and his wife live in Boise and Aspen. If you are interested in additional information, Jim has a recorded message at 1-800-895-8757. You can also contact Jim at 208-344-3723; e-mail at firstname.lastname@example.org. Send your comments and questions to Jim Kosglow at 2121 Bluestem Lane; Boise, ID 83706.
Terms of the Trade
BINARY COMPENSATION PLAN Individuals start by building two legs
a left and a right.
BUY-BACK POLICY A manufacturer’s rules concerning the return of unsold products for a full or partial refund.
BUYING CLUB A company that uses the purchasing power of a large membership to work out deep discounts in purchases from manufacturers.
COMMISSION A fee paid on the sale of a product or service.
DIRECT SALES/DIRECT SELLING A method of selling in which manufacturers or marketers of merchandise reach consumers with their products through a personal sales contact.
DISTRIBUTOR An adult who completes an agreement, pays an enrollment fee, if required, and is eligible to represent the manufacturer’s products as an independent salesperson and recruiter.
DOWNLINE The line of sponsorship between a particular distributor and all sponsoring levels below.
FRONT LOADING/FRONT-END LOADING An illegal practice that pressures new distributors to purchase products in order to take advantage of an opportunity.
GENERATION Usually refers to breakaway legs in a stairstep/breakaway program.
LEG A line of distributors that begins with someone you personally sponsor and continues below that distributor.
LEVEL Generally refers to who sponsors whom within a distributor’s network. Someone personally sponsored by a distributor is referred to as first level. Someone sponsored by the first level distributor becomes second level to the original sponsor and so on.
MATRIX The matrix represents a fixed structure where the potential organization size is predetermined by the width and depth set forth by the company. For example, a 4 x 6 matrix means that each person can sponsor a maximum of four people on his or her frontline. This process can continue until the matrix is six levels deep. Matrix plans come in all sizes and shapes. The 3 x5, 5 x 7, 2 x 9, and 2 x 12 are examples of combinations that have been utilized.
MLM/MULTI-LEVEL MARKETING A method of selling in which customers have the option of becoming distributors, who in turn develop downlines, and in which all levels share in the profits of the level or levels below them.
NETWORK MARKETING A synonym for multilevel marketing.
PV, BV Point volume or business volume, used by many MLMs to calculate commissions and overrides instead of using dollar amounts. Typically, the PV or BV is a lower amount than the purchase price of the product.
PYRAMID OR PONZI SCHEME Illegal businesses superficially resembling legitimate network marketing companies that generate income solely from recruiting new members and charging them fees, with no actual product or service being moved.
RENEWALS Many MLMs require that a person restate his/her desire to be a distributor every year by signing a commitment and paying a small fee. This process eliminates dropouts from the companies roles.
RESIDUAL INCOME Money that continues to come in after activity for generating the money has ended. Royalties paid to musicians and actors are examples of residual income.
SALES VOLUME Calculated in both personal sales (what you personally sell) known as PSV, or group sales volume (what everyone in your downline sells) often shown as GSV. In breakaway plans, your group is that portion of your downline above the first breakaway leg.
SATURATION The point at which all potential prospects have been converted. Extremely unlikely.
SPONSOR The person who recruited a distributor and is responsible for training and supporting him or her.
STAIRSTEP/BREAKAWAY The stairstep/breakaway plan typically has a front side and a back side. On the front side, the distributor climbs the stairs obtaining a higher position by satisfying a set of qualifications.
UNILEVEL COMPENSATION PLAN With a unilevel plan, the distributor is allowed to sponsor an unlimited number of distributors on the frontline. The plan pays a fixed number of downline levels. Some plans are described as unilevel because the bonus percentage payout is the same or “level” on each of the levels of payment. There are others that describe it as a single level of qualification to be paid bonuses, often relatively simple.
UPLINE The line of sponsorship between a particular distributor and all the sponsoring levels above. Your sponsor is your upline.
Excerpted from “Multi-Level Marketing, The Definitive Guide to America’s Top MLM Companies,” Second Edition, compiled by Will Marks; The Summit Publishing Group, Arlington, Texas.
Because of the abuse of the “rotten apples” of the industry, multi-level marketing has become a closely scrutinized and regulated industry. Regulations vary from state to state, but you should look for companies that are bona fide retail organizations that market bona fide products to the ultimate consumer. Inventory loading and “head hunting” (renumerating for the mere act of recruiting others) are prohibited. Sales kits should be sold at actual company cost to company representatives.
#1 BIGGEST LIE
“Some 20% of all millionaires in America were created through network marketing.”
FACT: “Twenty percent of the millionaires in America” were not created through network marketing. By most accounts, 90% were created through real estate ; 90 plus 20 equals 110. We’ve got men and women who make a million dollars a year in this business. Many more who’ve made one million dollars in their networking careers. But 20% of all the millionaires in the United States?
Please use some common sense.
Some programs are prone to income claims. Because these claims are not illegal, you may encounter several examples of income claims during your search for an appropriate MLM. Be advised that as a consumer you must be aware and use good business sense and logic.
One piece of literature for a company now about nine months old, claims to have an income potential of $540,000. This company claims to have paid out $2 million in commissions and currently has about 24,000 distributors. If you divide $2 million by 24,000, you will note that the average total commission paid out to date is about $83 per distributor over a nine-month period. Even the top distributors in this company, with thousands of distributors in their downlines, are making a small fraction of the $540,000 potential. Canada will not allow income claims that cannot be substantiated. You may only state, as a matter of fact, the income you have personally earned or the average income that 90% of the distributors have made in the company. This is a wise policy.
CLOSING THE SALE
Many people fail at selling simply because they cannot bring themselves to close. If a sale doesn’t close itself, they’re lost. And most sales don’t close themselves, because most prospects don’t make a decision unless you ask them to. What does it take to close? Here are some of the traits shared by good closers.
Selling is not for the fainthearted. When the time comes to close, you must have the courage to do so. You can’t beat around the bush and expect to succeed.
Once you’ve asked for the order, shut up. If you keep talking, you risk “buying back” the product or service you thought you just sold.
In every sales presentation, there’s an ideal time to close, an open window. If you try to close too soon, the window is shut. The timing varies with the customer, the business climate, and sometimes even the time of day. There’s really no “right” point in the sales presentation to close.
Timing your close can be difficult, so you have to use trial closes. You scatter two or three at various points in your presentation. If one of them works, you’ve just closed. If it doesn’t, you keep going. Even when trial closes don’t work, they help you identify objections.
You can’t let anyone know they ruffle you, even if they do. You have to react quickly, but smoothly to whatever they say. Should you deflect their objection, stall for time, or give a preplanned response? You have to make split-second opinions; think on your feet.
If you don’t think you’re going to get the sale, you won’t. So be positive. Have the order form ready. As the customer provides information, enter it on the form. Make signing an order form a routine matter. Instead of asking for a signature, when you think the time is right, simply pass the form to the buyer and say, “Please press hard. There are three copies.”
7. GOOD LISTENING SKILLS
You have to let the customer do a lot of talking. Find out their needs, so you can stress how your product will fill those needs. Keep building up the buyer’s confidence that s/he is doing the right thing.
8. PRODUCT KNOWLEDGE
You must be thoroughly versed in your product. In what is it capable of doing, and how it stacks up against the competition. That way you’ll be prepared for whatever questions the prospect throws at you. If the competition is better in some areas, admit it honestly, and figure out how to neutralize them.
Excerpted from “Dynamic Selling,” Issue 107, published by The Economics Press, Inc. For more information call 1-800-526-2554.