October 28, 2009 | Debbi A. Ballard | Comments 0
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How Some MLM Companies Undermine the Loyalty of Their Networkers

copyright, 2009, Debbi A. Ballard All rights reserved worldwide.

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Let’s face it. Some MLM companies undermine the loyalty of their own networkers. When they do, sales and recruiting are negatively impacted. If not corrected before too much damage is done, it can end up destroying the entire mlm company.

In the video, you can see that Johnny the Bagger just might understand more about loyalty than executives of some major corporations.

When management does not understand that supporting, instead of undermining, the efforts of its independent networkers, is one of the foremost, basic underpinnings of an enduring network marketing company, then the managers need to go back to MLM 101 class.

Let everyone learn from past events. Here’s what happened when Tupperware decided to put its products in Target. About eight months after it had done so, Tupperware announced that its products would no longer be available in the stores as of September 1, 2003. (Tupperware is one of the oldest, largest network marketing companies in the world operating in over 100 countries.)

Why the change? According to Tupperware’s press release on June 17, 2003:

Tupperware has determined that the initiative has had a detrimental effect on its direct sales business. Consumers’ interest in attending Tupperware demonstrations has declined due to availability of product in Target stores.

Then, again, in another Tupperware press release of July 22, 2003, the company reported:

Declining party activity and a lower sales force size, resulted in sales being down 15 percent. Excluding the impact of a new business model, sales declined 26 percent. The sales decrease along with increased promotional costs resulted in a segment loss of $4.8 million in the second quarter compared to a profit of $10.4 million last year.

The decision to terminate the Target relationship has been positively received by the sales force. However, it will take several quarters to rebuild momentum in the business and operating results will be impacted throughout this year. It is anticipated that North America will, at best, break even in 2003 compared to a $30 million profit last year.

What in the world were they thinking at Tupperware? There are times in this industry when you just sit shaking your head muttering “Why? How could they have made such an obviously bad decision?”

In my opinion, it illustrates that the people responsible on the management team for this decision know little about the nature of this industry and the bond and loyalty that must take precedence with a direct sales force.

How could they not realize that after a Tupperware sales consultant spent years promoting Tupperware’s products in his/her neighborhood, that he/she would be upset when now all the neighbors had to do was to walk into their local Target store and buy the products?

How could a company do anything that could undermine the efforts of thousands of their people who have worked so hard making the Tupperware brand one of the most recognizable, respected brands in the world? How could they jeopardize the loyalty of their networkers?

Avon has to be asked the same question regarding its attempt to sell through a major retail store chain. In 2001, Avon put a line of beauty products called beComing in J.C. Penney stores. (They had also tried to put products in Sears but Sears backed out of the deal.) Did the alliance with J.C. Penney work? In January of 2003, in a press release, Avon announced that both parties had agreed to terminate the relationship.

Avon, however, still has an attraction to retail stores. A recent article by John Austin in the Star-Telegram reported that there are approximately 200 physical retail outlets licensed by Avon in the U.S. These are run by independent reps who must meet certain requirements before being approved. In this article you will find some glowing statements made by store owners about why they are happy.

Too bad the author didn’t interview other Avon reps who weren’t store owners, particularly those who live near the stores. This would have told the real story, I’m sure.

The attraction for the networkers/direct sellers has always been that each person can create a customer base having the security that those products can only be bought from the sales force.

This has not changed over the years. That is why companies strive to have proprietary formulas, exclusive marketing rights, etc. that differentiate their products from others.

However, with the increased competition in the marketplace, it appears that more mlm companies are trying to experiment with other channels that could damage or destroy the relationships they’ve built with their networkers. This is not good news for networkers.

So if you are a networker, look at your mlm company and see what it’s doing to support you and if there is anything it’s doing that is actually undermining your business. If you’re an executive for an mlm company then conduct an audit on how you show loyalty to your networkers.

For decades I have said that for a network marketing company to thrive, it must understand the heart and soul of the mlm direct selling business.

It is not just in the business of selling products and services utilizing any and all distribution channels it so chooses at the expense of its sales force.

Any other distribution channels used must play supportive roles, not roles that undermine the independent networkers’ businesses and cut their incomes.

A network marketing company is in the business of building and nurturing networkers to help them become successful. The end goal is to have networkers enjoy the benefits of enduring, profitable endeavors because that is what will ensure the future of the company itself.

It is not in the business of using networkers to build their brands in the beginning stages and then undermining their efforts later on by opening up other channels to sell the same or competitive products/services.

When a company clearly understands this, the need to provide quality training and to embrace a fierce loyalty to the sales force becomes apparent.

As a matter of fact, my definition is given further credence by Peter Drucker, the world famous management guru.

There is a popular story told how one day the chairman of ServiceMaster Co. had his board of directors meet with Drucker. Drucker asked them to define their business. They spoke about housecleaning and the other services provided. Drucker shook his head and said that they did not know their business. He said that their business was really to train the people they had recruited and help make them successful.

Did Drucker’s message have an impact?

The chairman of ServiceMaster reportedly said that this single message was largely responsible for the company surging ahead to create over $3 billion in revenues!

Why is it that Tupperware did not understand such a basic, critical aspect of the nature of this industry? There is no other way of putting this…they shot themselves in the feet, hurting the company and its sales force. At the heart of the matter, it was a question of loyalty. It’s a question of loyalty with Avon as well as any other mlm company. There are many things for which I respect Avon and Tupperware but every company in our industry must closely re-examine this critical “loyalty” component to see how decisions could impact networker loyalty, which, in turn, impact sales both short-term and long-term.

Loyalty is a two-way street. If you’re a networker and an mlm company has earned your loyalty, then you need to think twice about becoming a rabbit hopping from one company to the next. Network marketing companies want loyalty from their networkers. These same companies must remember that, likewise, networkers want loyalty from their respective companies. They don’t want to be viewed as just another distribution channel that can be cannibalized if the company decides to use other channels.

This fundamental loyalty factor of the company wedded to it sales force must be considered in the mix of the decision making process before any final decisions are made by a network marketing company. Tupperware blew it on this one big time but I give them credit for responding to their networkers. Avon is raising some eyebrows as it expands its retail outlets. Let’s hope all mlm companies begin to better understand the importance of the loyalty factor.

Let’s hope more executives start thinking like Johnny the Bagger.

So you now know that some mlm companies undermine the loyalty of their own networkers. Does yours? I hope not. Today you’ve received yet another mlm best practice you can use from mlm consultants’ blog.

(Please feel free to give your feedback on this important issue by leaving a comment. Thanks.)

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Filed Under: MLM ArticlesMLM Loyalty


About the Author: MLM Consultant, Expert Witness, Author, Blogger, Speaker and CEO of International Network Liaison Corporation...but more importantly, wife, mother, daughter, aunt, cousin and friend.

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