Friday, June 25, 2010
Network Marketing Software - The Big Mistake Most Companies Make
Most MLM companies rent their software. But they can never tweak it to fit their business model, and the distributor base suffers.
Let me give you a story on that. I was consulting for a network marketing company out in Utah.¬ They had a binary compensation plan, in other words a 2-legged plan - one left, one right. Real simple, right?
But the software they leased could not be changed from left to right, to reflect the binary. They tried.
They Had To Pay The Programmers To Come Back In & Reprogram It!
You would think that was a simple, simple, simple fix. But it couldn't be fixed over a 6 month period.
Here's what happened. Let's say you already have your strong leg going well. Now you go into your back office and put all your new sign-ups on your weak leg.
And you're building, building. You have ads running on the internet. People are joining you and your business is growing. And you think they're going on your weak leg.
All of a sudden, you find out they are all going on your strong leg. And in a binary, you only get paid based on your weak leg production. So this is a real problem.
Now You Have To Fight With The Company To Move Your People!
And what was so amazing about that process that I witnessed was, the company went out and hired more and more and more customer service people to handle the paperwork to move these new reps. And then they started charging the distributors $10 each to move the people that the company messed up on in the first place.
Finally, they got so overrun with people wanting to change these positions back over to their weak leg where they should have been in the first place - that they finally said, "We are not switching anybody anymore!" They couldn't handle all the influx of people needing that done.
Now that's a perfect example of buying your software and not being able to tweak it at all.
And when you rent the software, you better read the fine print, because you don't own the database.
You Do Not Own The Database!
About a year and a half ago, I saw a downline genealogy for sale on the internet. I happen to know the owners of the company. I called them up and said "Hey! What's going on? My gosh, your company is doing good, isn't it?"
"Yeah. Company is doing great. But we couldn't afford to buy the software, so we leased it. And part of the lease deal is, the software company owns the database."
And this software company thought it would be great to make an extra $100,000. So they put the genealogy for sale on the internet and sold it to 10 companies for $10,000 apiece. So they made a quick $100,000 selling the genealogy. And right in the Policies and Procedures, it said that the software company owned the genealogy. It was right there, right in black and white. How would you like to build your business and then have your organization for sale on the internet?
So before you build big with some company, ask them who owns their software. If they don't own it, then you could lose everything in a heartbeat.
The big reason they rent it is because it costs them about $2 million to buy it. They can rent it for about $10,000 a month. Most companies don't have the 2 million dollars to spend up front.
But the other thing is, if you really truly, understand your business and it functions, doesn't it make more sense to have someone program your specific software? Then you can work with them.
You Want a Company That Has Built Their Software From The Ground Up!
When the company has built it and owns it, the distributor base is protected.
Instead, these guys get the idea to start a network marketing company, and 10 minutes later, they are in business. So they call the software companies and find out it's 2, 3, 4 million dollars to buy the software program, but you can rent it for 4, 5, 10 grand a month and you're in business!
Now they know this is a tough business, and there's a very real chance they won't even be around 2 years. Taking on a $2 million obligation doesn't make sense to them. $10,000 a month is definitely the way to go. Problem is, you've sold your soul to the devil.
An Evil Secret
Another thing that software companies will do is - and this is a very well kept secret - they will be in partners with that MLM company. So there is a downline organization, a leg being built by the MLM company for the software company.
That creates a retirement income for the software company on the backs of the distributors. How hard is it for the owners of the MLM company to move all their orphan distributors underneath the software company and build them a nice check? That's a very, very, very tightly kept secret,
It's just one more reason you need to build your future with a company that owns its own software.
This article was written by Michael Dlouhy. I found the information in this article to be very educational and so I thought I would share it.
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