What This Blog Is About

What This Blog Is About

Most web sites and blogs about Direct Sales / Network Marketing / MLM focus overwhelmingly on the negative - what's wrong with it, bad experiences, scams, etc. This blog is different. While we discuss the Three Fatal Flaws and other problems with current industry practices, our focus is on positive and pragmatic SOLUTIONS.

Our Vision: To reform and transform this noble and time-tested industry into a positive force for good that powerfully and effectively serves and supports the best and highest good of people, community and planet.

Friday, March 11, 2016

Local Distribution Center (LDC) - An Idea Whose Time Has Come Again?

In the 1980's a direct sales company, Yurika Foods, introduced the concept of a "Local Distribution Center" or LDC. A distributor would dedicate space in their home, or rent a storefront, stocking the company's products for customers and distributors within driving distance to purchase for themselves and their families. The centers also served as venues for product demonstration, customer education, distributor training, networking and related business events.

Granted, those were the days before the Internet, fax machines and online commerce, but perhaps LDCs are an idea whose time has come again.

As energy costs continue to rise, so will the cost of shipping. As we discussed in Snack Bar Sticker Shock, shipping and handling (S&H) fees add a lot to orders, especially smaller ones. Retail stores are more competitive because they don't charge S&H fees. Customers may think twice about buying from us when S&H adds $10 or $15 to the cost of each order.

In populated areas it may make sense to have an LDC for customers and other distributors to walk in and purchase their products. The company would support the distributor who takes on the cost and risk of stocking the LDC by offering free shipping for bulk purchases, provide guidance on which products are most frequently ordered by customers and distributors in the area, simple order tracking and volume transfer software, etc. 

An LDC could be much more than a local "company store." Distributors can meet customers in person and get to know and serve them better. The LDC could become a community hub for demonstrations, training, networking, classes and other types of activities that make sense for the customers, distributors and company. 

The LDC concept fits in perfectly with causes such as Buy LocalShop Small and the Sharing Economy. It also allows the distributor to build relationships and raise awareness of the direct sales company and products to people in the area.

Despite technology drastically shortening the time of online ordering and home delivery, it still costs money. People crave real human interaction, and an LDC enhances the people-helping-people, human touch advantage of our industry because there is someone to talk to, ask questions and have fun working with.

Our industry is all about bringing people together in relationship and community. Perhaps LDCs are an idea whose time has come again?

Snack Bar Sticker Shock

Recently I ordered a supply of my company's healthy snack bars. After adding sales tax, shipping and handling fees, the total came to almost $150. 

I paused before clicking "submit order". On one hand, my family enjoys the snack bars and they are tasty, natural and organic. As a distributor, I get to buy the products at wholesale and the sale would count toward my monthly performance bonus. On the other hand, $150 just for snack bars, even if they last two or three months? I reluctantly clicked "Cancel."

There is a perception that our industry's products are over-priced. In many cases I agree.

Retail stores sell a wide variety of quality, eco-friendly, natural and healthy products and a savvy shopper can purchase these products on sale and save quite a bit of money. In my case with an equivalent number of snack bars, $50 to $70 for a three-month supply. That's a huge savings. 

We may save money by purchasing products at the store, but buying elsewhere doesn't grow our business. If Direct Sales companies want to sell more products and expand the number of customers served, they must improve the ways in which they price, position and market their products. Here are some ideas:

1. Be aware that in these tough economic times, people want to stretch their dollars as much as possible. Some are willing to pay more for exceptional quality, added value and to support their friends and family, but there is a limit to how much more they will pay for products they could also buy at their local grocery or big-box store for less.

2. Shipping and handling (S&H) fees add a lot to small orders. Consider reduced shipping for small orders or some type of free shipping membership coupon program, like Jameco Electronics' Free Shipping Club. Customers may think twice about buying from us when S&H adds $10 or $15 to the cost of each order. Not every customer wants to purchase a large amount of products and we should not penalize them because they may become bigger customers later or refer other customers to us. (Customers are the cornerstone of our business. Honor them.)

3. Set up a Preferred Customer incentive program. Run specials on selected products every month. With each purchase, customers earn a dollar value credit toward their next purchase. Several companies of which I'm a customer do this already, and it helps offset the cost of the product and shipping so I tend to buy more frequently and feel better about doing so. 

4. Fairly price the products. We don't want to target the mass market and compete with the huge discount retailers (a losing battle). Neither should we price our products so only the wealthy can afford them (too small of a market). Because our products are generally of higher perceived value and quality, set the price in the "middle" to "middle-high" range in line with comparable products offered in stores. Make it easy for average people to replace products they currently purchase at the store with higher-quality, yet comparably priced, products from direct sales companies (gain market share).

5. Offer two or three tiers of products so customers have a selection of "good, better, best" depending on the product, purpose, ingredients and level of quality. For example, my company sells a top-level, premium supplement brand with a daily per-use cost of about $2.50. They also sell a high-quality multi-vitamin with a per-use cost of $.20 (20 cents). They could create a third tier in the middle, and target each product for specific types of customers within those tiers.

6. Create a reasonable variety and mix of products, striking a good balance between too few and too many choices. A company focused on home care can offer additional key products that complement the core product line, like sponges, cloths and other essentials. The complementary products can also support added-value services provided by distributors. (Anything to reduce the dependence upon or temptation to buy competing products at the store will only help.)

7. Don't change products so often. Customers get used to a particular product, then suddenly it's no longer offered or replaced by something else. Strike a balance between refreshing product lines and the fact that people are resistant to change, especially if they love what a product does for them and without warning it's repackaged, reformulated, no longer available or doesn't work the same way as before. If changes must be made, be sure to notify distributors in advance so they can proactively inform their customers and find alternatives.

If Direct Sales companies truly want to succeed in the marketplace, they must improve how they price, position and market their products. Only then can distributors make a rock-solid case for offering "competitive value" to prospective customers - and make lots more sales.