Monday, July 19, 2010
Why Most Network Marketers Do Zero Retail Business
Is retailing product a true network marketing opportunity?
On this planet, the lifeblood of any company is retail sales to the end consumer. Think about this, Business models drive the behavior in the field.
Would you agree with me that every product - doesn't matter what it is - a bottle of water, a coke or Pepsi, an aspirin, a vitamin, a liquid nutritional drink - it could be any product out here - if the quality and quantity of all the ingredients, are exactly the same, I ask people, "Would you agree with me that the wholesale manufacturing cost of any product is within pennies of each other?"
And the answer I get is, "Absolutely, no question about it, that is true."
Now here's where the problem comes in.
Marketing The Product To The End Consumer
Let me you a story. Companies A, B and C, these are real companies in real life. Company A hired a doctor to formulate the best vitamin product on the planet - and they did. it's something you can take all at once. It doesn't interact with any of the other ingredients. Works great. That company is marketing that product. They are a fairly large company, publicly traded.
Another company comes along and what's so funny about the story is the COO, the bean counter for the first company, sold his piece of the pie and became a distributor with company B.
Company B has a binary compensation plan. Now the first company is a stairstep break away comp plan, second company is a binary. So A is the stairstep, B is the binary. And the binary plan is just one left, one right.
Now, that guy said "Whoa! We had this great product with company A - now we want it with company B. So they go and hire the doctor away from company A to formulate them the best product.
And I would ask you another question. When you are a publicly traded company, you are not spending your money. You are spending investors' money. So when you put that dot, the comma, the zero on a check, does it really matter to you? Does it really matter where you put it? Absolutely not, it is not your money. It's like you shopping with my credit card.
So they hired the doctor. What that cost, I have no idea. But they told the doctor, "Make us the best vitamin product!" And he said, "Well - they've already got it in company A. But we could take that same formula and I could increase everything one gram.
So He Added One More Gram of Stuff To The Stuff
So every capsule of THEIR new stuff had one more gram in it. Great, no problem, So they created that product.
Now, company C came along, The founder of the company said, "Whoa! Company A, company B, they have got a great product. It's not patented. Don't need the doctor. Four manufacturing companies make the identical product. All I need to do is get the formula, take it to our manufacturer, see if they can improve it."
So they did. So they took the same formula and added to it, improved the formula.
Now, here is the reality, I am going to give you the retail sales price on all 3 company's products.
Company A: $114 retail
Company B: $104 retail
Company C: $39.95 retail
But Isn't The Wholesale Cost Identical?
Now, you agreed with me that the wholesale manufacturing cost of any product is within pennies. So why the big spread? If you joined Company B, I know for fact that you can buy that product at the super duper low wholesale price of 79.95.
Now, you got to ask yourself this question, since Company B's wholesale price is double the retail price of company C. why the big difference? Well, first, you need to understand that the business model drives the behavior in the field. In company A and B, the business model promotes the behavior of recruit, recruit, recruit, recruit, recruit. Why? Because normal mortals will not pay that kind of money for product.
They'll only buy the product to be in the business. So that business model creates the behavior of recruit, recruit, recruit. Now, company C, because it's $39.95 retail, that creates a behavior of retail, retail, retail. And you can prove it with these numbers.
To make $10,000 a month on the residual auto ship volume in Company A, you need 1400 - 1600 people. Company B, you need 2200 - 2400 people, Company C - you need less than 400 people. Same product. Same people you are selling to. So the big question is, can average part time people ever build a group of 2400? Or can they build a group of 400 easier? Think about that.
So The Business Model Drives The Behavior In the Field. Always!
Why is your product so expensive? Here's why, the company need a big, big, big, big, big building. It's so comical. They say, "Oh, we're debt free."Yeah. They're debt-free off the backs of the distributors, they stole the compensation plan to build the big building. Doesn't help the reps at all.
Think about this for a second. Companies A, B and C, and the breakage - that's all profits that they make out of you, the distributor. Breakage is the difference between the wholesale cost and the retail cost, that mark-up from 39.95 retail to the 79.95 wholesale. That pays for the big building, the company jet, pays for all that.
A few years back, a prepaid phone card company charged $2 or $3 a minute for prepaid phone calls. You bought a prepaid phone card back then for a dollar a minute. But these were collector's cards. ("If you don't scratch the back of the card off, and don't use the time, it makes it more valuable.")
So this plastic card, which cost maybe 25 cents to create, was selling for $2 a minute. And the company convinced the people not to scratch it off, so they never had to pay for the phone time.
Isn't that amazing? It's no wonder network marketing gets a bad name.
One way to build your business is to sell products at retail. And to do that, you must join a company with value-priced products. It's important that you look around to find that. Don't settle for a company that charges 2 or 3 times the product value. Consumers are smart. You will always struggle to build with that company.
To Your Success,
"Be A Mentor With A Servant's Heart!"