Hatching A New Distributor Avenue
Direct Selling through MLM Party Plan —
As An Alternative To Traditional Marketing
Wealth Builder Magazine
by Michael L. Sheffield
CEO The Sheffield Group
More and more traditional marketing companies offering consumer products are turning to Direct Marketing concepts such as mail order, direct mail, infomercials, telemarketing and even e-commerce on the Internet in an attempt to maintain brand name loyalty or recapture the minds and dollars of their established customer base.
But, no other method of reaching out to current and potential customers has the proven life cycle success of direct selling. (One in a series of articles dealing with the MLM Party Plan Marketing by MLM Party Plan consultant Michael L. Sheffield).
Direct selling has its roots firmly planted in the seedbed of American colonial capitalism. The "Yankee Peddler" was a marketing phenomenon of the colonial period — a drummer who went from community to community selling household goods and farm implements. He was the 17th century version of the Fuller Brush, Tupperware, or Amway salesperson.
Today, according to the Direct Selling Association (DSA), the look of direct sales companies is changing rapidly. In many instances the one-on-one sale is being replaced by group sales through party plan marketing techniques combined with the aggressive business building structure of Multi-Level Marketing (MLM). The MLM industry legitimized by Amway (the legendary grandfather of the networking industry) during the 1960s has matured into the mainstream world market.
Companies and products, which have traditionally been sold through "conventional" distribution channels (people going to the product), are now recognizing the potential of Multi-Level Marketing's ability to achieve spectacular sales momentum. The Chairman of the marketing department at Long Island University, Dr. Srikumar Rao, a student of MLM Companies for over two decades said that, "Multi-Level Marketing has an enormous power to create wealth."
It is singly this phenomenon which has attracted the attention of businesses ranging from small private companies to those in the Fortune 500 category, all seeking a better marketing solution which at the same time offers the hope of an exciting bottom line.
Shock Waves. One example is A.L. Williams Insurance which became a Multi-Level Marketing company in 1984. Traditional insurance companies were shocked when this company's army of independent sales reps consumed their market share. By 1988, AL Williams had recorded a record breaking $96 BILLION worth of insurance business placing them as the most productive insurance agency in America. This company was subsequently purchased by Primerica Insurance and then by The Travelers.
The next shock waves were sent through AT&T. Over the last few years AT&T has lost over 15 percent of its long distance market to competitors like US Sprint, and MCI, both who had early successes in expanding their market share through associations with an MLM sales force.
Today, Excel Communications and other aggressive MLM companies are cutting into the business of Sprint and MCI. Even Coca-Cola has sold a small soft drink dispensing machine through the Amway Corporation.
Service Master, Gillette, Colgate-Palmolive, Avon, Dupont, Home Shopping Network Direct, Texas Instrument and even AOL have all experimented with or embraced the concept of direct selling through the party plan group selling concept, Multi-Level Marketing or both.
Why? Because direct marketing/direct sales hybrids using party plan combined with MLM is the wave of the future. Since manufacturing costs have fallen so much in the past two decades, distribution now represents 85 percent of the value of goods at retail.
Therefore, the greatest opportunities in the first decade of the new century await those who reduce the cost of distribution while increasing direct interaction with the consumer.
There are probably few women over 30 years old that have never attended a home party offered by Tupperware, Home Interiors, Discovery Toys, Longaberger Baskets, Mary Kay or any number of other well established and successful direct sales/party plan companies. While in the past party plan companies were structured in the direct sales model with a single level commission compensation offered to the sales representative, today's party plan companies are combining the MLM compensation model with the time tested and proven party plan concept.
Why It Works. The principle of group sales through party plan combined with MLM is quite simple. In traditional distribution and marketing a company distributes its product to the consumer by going through wholesale distribution channels which eventually land the product on the shelves of a retail store.
At each step of this distribution channel there are costs which are added to the price at which the manufacturer sells the product.
Typically the manufacturer also spends large amounts on packaging to attract the consumer's attention and on advertising to create sufficient demand to move the product off the shelves of the retail store. These packaging, distribution and advertising costs represent a very large percentage of the retail price of the products.
In MLM Party Plan marketing , two significant differences occur. First, the distribution channel is simplified because the product normally moves directly from the manufacturer or distribution company to the party plan hostess to be distributed to her party attendee customers.
Secondly, it is not necessary to spend large sums on product packaging and advertising. Most products offered through MLM Party Plan marketing sales are low in cost, highly demonstrable and of benefit to most potential customers.
The dollars which would otherwise have gone to distribution and to expensive packaging and advertising campaigns are paid directly to the MLM party plan marketing representatives as commissions and bonuses rewarding their sales efforts for retailing the product.
Today Multi-Level Marketing companies not only accounts for billions of dollars in sales, but they are estimated to influence one out of every three homes in America with marketing related contact.
In fact, the Direct Selling Association reported that MLM sales represent about $25 billion in the US and are closing in on 100 billion dollars world wide. Virtually any area of the economy today is open to penetration by using a Multi-Level Marketing sales force. Any company who ignores the power of MLM is certainly missing the future.
Consider This Before Becoming An MLM Party Plan Seller. Before you consider committing your time and efforts to MLM party plan group selling, you should understand what a good company looks like so you can make an educated judgment.
Product. Naturally, of critical importance is a viable product or product line. The ideal MLM party plan product must meet a widely experienced need, and offer a cost effective solution to that need in a way that is unique and non-duplicable if possible. It must be priced such that its purchase represents an easy decision for the buyer. Following the purchase, the product benefits should be readily discernible and should create a level of excitement in the buyer that they will want to share with their friends. It is essential that the sale of the product return an immediate income to the independent sales representative as well as set the stage for earning future bonuses.
Company Leadership. The next most important ingredient is the company leadership. As the leadership goes, so goes the company. The leadership determines the company's character and personality and is responsible for maintaining this character and personality throughout the entire field marketing organization. The leadership must also be competent to deal with the potential of explosive company growth.
Marketing Style. The marketing leadership is especially critical to an MLM party plan company's success. Party plan selling is so unlike traditional marketing that prior experience in the company's marketing leadership is especially valuable. The entire sales and marketing momentum will take its shape, substance and values from the company's marketing leadership.
Michael L. Sheffield is the CEO of The Sheffield Group, a full-service direct sales and multi level marketing (MLM) consulting firm. He is a Co-Founder and Chairman Emeritus of the Multi Level Marketing International Association and in 2001 he was inducted into the MLMIA Hall of Fame. He and the Sheffield team have assisted in hundreds of national and international MLM corporate start-ups as well as offered a full line of services for established direct sales companies including consultation on MLM Website development. As the most noted expert on compensation plans, he has been a guest lecturer on the subject for the DSA, University of Illinois, University of Texas, Berkeley and Harvard Alumni Association. He has helped launch over 200 new products marketed by direct selling companies around the globe. He can be contacted at 480-968-6199, The Sheffield Group, 2239 N. Hayden Road, Suite 103, Scottsdale, AZ. 85257, website address: www.sheffieldnet.com.
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