The 10 Most Common Mistakes in MLM

by Dan Jensen, Jenkon International, Inc.

Multi-Level Marketing, also called Network Marketing, is the essence of free enterprise. Thousands of MLM companies have sprouted during the last few decades. Sadly, many are no longer in business. Having been entrenched in the MLM industry for over a decade seeing hundreds of companies come and go, I have observed a pattern that might be of help to an entrepreneur wanting to build a successful MLM organization in today’s competitive marketplace. This pattern includes at least ten common challenges facing new start up ventures. These common challenges include:

 

      1.

Adequate Funding

      2.

A Business Plan

      3.

Management and Leadership

      4.

Staff Training

      5.

Computer Systems

      6.

Compensation Plans

      7.

Have a Lawyer Review your Compensation Plan

      8.

Customer Service

      9.

Corporate Marketing Personality

      10.

Fast Growth

While these challenges are not in any particular order, they carry differing levels of severity. For example, Adequate funding is required to keep a company in business. And while a compensation plan can become a major obstacle to the success of the organization, it isn’t too difficult to creating a good one.

 

#1: Adequate Funding

 

Let’s suppose you want to build a house and have borrowed $150,000 to complete the project. You have $50,000 of your own money to add to the mortgage and expect the house to cost no more than $200,000. During the construction, you found a few unforeseen problems. While digging the basement, a water spring was found that had to be capped and routed to a different part of the property. Cost: $8,000. Lumber prices rose 30% from the time you started the project. Cost: $12,000. You upgraded the carpeting hoping to make up the difference in other areas. Cost: $9,000. As you near the end of the project, try as hard as you can, you can’t get the house complete without another $40,000. You’ve already borrowed as much as you can to get the $150,000. You have no more money of your own. What will you do?

So it is with starting a business. Many well-intentioned entrepreneurs embark on a long journey to prosperity full of hopes and dreams. As they journey along the road, they hit a few “springs”, and find many things costing far more than expected. They make a few mistakes, which are expensive to fix, and soon find they didn’t budget enough money to get the business off the ground. These people always come from the experience learning a golden rule of business: Know how much money you need and secure the funds before you start.

How does a person find enough capital to start an MLM business, and how much does he need? Nobody will be willing to risk his or her money without a plan.

Common sources for funding include:

 

  • Home Equity financing through banks, savings and loans, etc.
  • Venture capital organizations that specialize in helping new businesses. This type of investor or investor group will expect a significant ownership position for taking the risk. Venture capital groups are found by networking with financial planners, accountants, bankers, and merger/acquisition specialists.
  • Private investors, including friends, business associates, friends of friends, etc. Find them by networking with everyone you know. Talk to financial planners, accountants, business owners, etc.
  • Small Business Administration, or other federal and state agencies. These agencies will either loan the money, or guarantee a loan through a bank. In either case, you’ll need to be able to pay back the loan on a set schedule.
  • Local community bond funding. Some communities, especially those with high unemployment, work aggressively with businesses to acquire funding for starting or expanding. Contact local county and state agencies to see if programs are available in your area.
  • General Financing from banks. Banks will often lend based on credit history and assets with a personal guarantee of the business owner or another creditworthy third party.

Don’t become impatient and launch the business without the necessary funding! How much funding is necessary will depend on your business plan. Some companies start for as little as $10,000, while others find they require several million dollars. As my father wisely told me when I started Jenkon, consider every dollar in the beginning as being worth five dollars later on. Save your precious start up capital as if your life depends on it.

 

#2: Business Plan

 

The business plan is the blueprint of your success. Companies that are successful without a plan gain their success more by accident and luck than by design and thought. Which type of success do you want? Are you willing to trust luck for your success? A business plan is a “first creation” of the business, just like an architect’s blue print is the first creation of a beautiful home. A good architect will plan out every detail of a home long before the first shovel of earth is moved. So it must be with any MLM business. You must become a business architect before you build the business.

Another aspect of the business plan is that it is often used to attract potential investors, lenders, and vendors. No investor will be willing to risk his or her hard-earned money on a business venture without a well-designed plan. You shouldn’t either! As you establish credit with vendors, they will be more generous granting credit if they can review a well-prepared business plan. Remember, that any credit granted by vendors reduces your starting capital requirements; if your manufacturer is willing to extend 90 days terms up to $100,000 for product, you will need $100,000 less to start.

Key elements of a business plan should include:

 

  • An Overview: One or two pages describing the business will help a potential investor become interested in learning more of the opportunity. If an overview is missing, few investors will be interested enough to take the time to read the entire plan. The overview should describe the products or services being sold, the principals involved, funds required to launch, and estimated return on investment, both conservative and potential. This overview is also known as the Executive Summary.
  • Background of Principals: A summary resume of the owners and executives of the company is a critical part of a business plan that will be read by investors, banks, and other trade creditors.
  • A mission statement that clearly identifies what the company is all about should be included. It’s been said that distributors will work for money, but kill for a cause. Your mission statement should be something you can proudly display in literature or on a wall plaque. A corporate motto might be taken from the mission statement. Most mission statements are expressed in one or two paragraphs. Find samples of mission statements in annual stockholder reports of many public companies. There are a number of books available that also teach how to write and use a mission statement.
  • Goals and objectives should be identified and each should spring from the mission statement. Goals might reflect the level of customer satisfaction, order turnaround, staff efficiency, but most certainly sales and profits.
  • A market analysis must be done to determine the potential of the product or service, priced as it is to be priced. The analysis should address market demand, similar products and how they have been accepted and marketed, competition, etc. This information can be found in libraries, universities, and other business consulting groups.
  • The Small Business Administration has access to large amounts of information, or people who can get the information for you. Many universities have students who would love to do market research for businesses, often at no charge, for their MBA requirements.
  • Implementation plans: How much office space will you need? How many employees will be needed to handle the expected business volumes? Warehouse space, telephone equipment, initial product orders, printing, distributor kits, videos, and scores of other issues must be addressed in as much detail as possible. This section may be the most important section of all and is usually the one people try to gloss over. It’s more fun to make sales projections than to figure out how much office space is needed. Yet, one major mistake in this area can cost tens (or hundreds) of thousands of dollars. This part of the plan takes time, often several months. Time spent here will pay large dividends in the future.
  • Projections: Profit/Loss and cash flow projections are critical to every business plan. A competent consultant or accountant can assist in this effort by identifying common areas of expenses for new start-up businesses. With computer programs like Lotus 1-2-3, Microsoft Excel, and other spreadsheet analysis systems, many different scenarios can be created once an initial spreadsheet format is built. Always prepare a pessimistic “worst case” scenario, a middle of the road scenario, and an optimistic (but realistic) best case version. As you develop your business plan, always plan on the conservative side, but be ready to upscale into the more optimistic version should the need arise. Remember that if your investor has read the overview, the next thing he’ll want to know is how much money is needed. These projections are critical to a prospective investor. Return on Investment Analysis is important for those investing into the business. This is why they would want to take the risk. Attractive charts and graphs are essential. This section answers the investor’s question of what’s in it for me?
  • Risk Analysis: Careful study of the risks involved should be explained in this section. While not intended to “turn off” a potential investor, most investors will do their own risk analysis but with only the bits and pieces of information available. This is an opportunity for you to address the potential concerns of an investor in a positive and controlled fashion. If you don’t need an investor, this section will make your business plan more bulletproof. No plan is viable that hasn’t addressed the potential points of failure and risk.

 

Once the plan is complete, bind it so it can make an attractive presentation. Include a table of contents, index tabs, and an impressive cover. Don’t put the plan on the shelf! Use it in each manager’s meeting, refer to it like the corporate bible. Change it when needed, but follow it carefully.

Part of the business plan, of course, is to plan to be a profitable company. It’s amazing how many companies fail to plan to be profitable. A general rule might be:

  • 40% of income should be set aside for commissions to the field.
  • 20% of income should be set aside for cost of goods or products.
  • 20% of income should be set aside for administrative expense such as payroll, facilities, utilities, etc.
  • 20% of income for profit.

While the above numbers are very rough, they have proven to be a target that many successful companies have set.

 

 

#3: Management and Leadership

 

No business can rise to the pinnacle of success and sustain it without effective management and leadership. It’s been said that leadership is doing the right things. Management is doing things right. Yet, the graveyard of free enterprise is littered with the bones of companies who were poorly managed or poorly led. Most often, the mismanagement started with an enthusiastic business owner with little or no experience believing that he or she could handle the job. While there are many who launch businesses very successfully, there are few that have the skills to sustain the success.

A wise business owner must be honest about his or her shortcomings and hire talent that makes up the difference. He or she must then empower the hired talent to do their job effectively; don’t hire skilled people and then ignore their wisdom and talent!

The role of the business owner becomes leader once effective managers are empowered to handle the operations. Leadership becomes one of planning, reviewing results, promoting, and motivating. Let the managers do their job according to the business plan. It becomes the yardstick to which the managers are accountable.

 

#4: Staff Training

 

What NBA basketball team would recruit a new player, place him on the floor his first day, and expect him to perform like the rest of the team? Without training with the rest of the team, his performance, at best, would be mediocre. At worst, disastrous, and the game would be lost.

Such it is with any new employee, especially if the whole staff is new as in a new business launch. Who should train them? What should they be trained to do? How do we know if they have completed their training? These questions need to be addressed individually:

Who should train new employees?
Don’t let the old adage, the blind leading the blind be said of the trainers. If you are a new start up company, find very competent people for each department and have an experienced general manager orchestrate the various departments like a symphony. Don’t be led into the trap of saving money on inexpensive workers in the beginning; it will cost far more than it saves.

One critical department that needs to be trained is the Order Processing department. This group is charged with taking orders over the phone and receiving orders by mail and FAX. They are in constant contact with field distributors and portray an image of your business to everyone they talk to. If you hire educated, warm, and friendly people, your image will also be such. If you hire minimum wage clerks to take orders, they will portray a much less impressive image. These people need to be screened during the hiring process for personality traits, patience with frustrated callers, and their ability to think on their toes. They must be trained by others employees who are of the highest level of competence; don’t let them receive training by less experienced peers.

The second most critical department is the Distributor Services Department. Each person in this department will handle problems, complaints, inquiries, and a thousand other issues that arise. These people must comprise an elite “SWAT” team with an obsession for customer service excellence to the field distributors. These people must have a similar obsession for excellence.

Where will you find experienced people to do the training if your company is just starting? Look to consultants (a list is provided at the end of this report), trade organizations such as the MLMIA, and the DSA for names, and advertise in industry publications. Executive search firms can often be fruitful as well.

What should they be trained to do?
As an experienced person is hired to supervise a department, their first task is to design and document a “system” or method of operation. For example, to process sales orders, a diagram of how an order must flow through the office could be created. Exceptions should be noted with a flow chart or diagram to handle each. What should an order entry operator do if the credit card is declined while the caller is on the phone? What should a warehouse person do if some of the products ordered are not in stock? Every conceivable problem must be documented in advance with an appropriate solution. Policies need to be documented and organized into a handbook for the staff. They might even be put “on line” on the office computer system for instant look up. Professional MLM consultants can be an invaluable source to help prepare these flow charts and documentation.

Once the systems, policies, and procedures are documented, training can begin. With documented systems in place, training proceeds quickly and thoroughly. Without systems, policies, and procedures, training can never be complete, and takes many times longer.

How do we know if the employee has been trained?
An evaluation process should be established which takes a new employee through a sequence of duties and responsibilities. For example, an order entry operator might be required to take ten phone orders with a supervisor at his/her side before being allowed to take an order alone. A distributor services rep might not be allowed to handle commission related questions until they have explained the compensation plan to the department supervisor thoroughly, top to bottom. In summary, each department must also establish a minimum level of competence before allowing an employee to perform their assigned tasks alone. Until then, they are “buddies” with another peer or supervisor. Many companies have tests that are taken and scored which focus on the various objectives each job has. The best tests focus on objectives rather than on the mechanics of the job.

 

#5: Computer Systems

 

In the section on training, I addressed the need to have good “systems” that, if followed, comprise the methods to handle each type of business transaction, whether the transaction is a sales order, a phone inquiry, a complaint, or the return of product for a refund. Computer systems in Multi-Level Marketing companies become the glue that binds the office departments together, a “core around which the business is built. No successful MLM Company has ever sustained their success without a well-designed computer system. Likewise, there are many MLM companies that have failed due primarily to the lack of a good computer system. Don’t let your new venture become just another statistic. Choose your software vendor wisely.

What is a good MLM computer system?
There are three major pieces to any computer system:

  • The equipment or “hardware” is comprised of the main processor which does the “thinking”, disk drive to store the business information, work station screens, and printers for reports. Fortunately, the cost of equipment has declined drastically in recent years while the performance or capacity to process business information has increased many times.
  • The operating system software makes the computer work when you turn it on. It comprises the programming language that the business software is written in, the commands necessary to create a back up tape of the data to avoid losing all the information, and many other commands necessary to simply keep the computer working as conditions change. Without an operating system, the computer is nothing but plastic, metal, chips, and silicon. Operating systems include MS/DOS, UNIX, PICK, VMS, AIX, and scores of others.
  • The application software is the most important part of the computer because it is the piece that determines how you will run your business. The hardware and the operating system are of little importance compared to the application software. This software provides input screens for order processing, creates your commission checks, prints downline genealogy reports, and provides look up information to handle distributor inquiries when they call the office. In short, this software is the core of running your business successfully. It will make or break an MLM business.

The greatest challenge companies face in this area is to think they can save money by writing their own software. This can take months or years, it can never include the experience and know-how that packaged MLM software contains. Why reinvent the wheel? Would it be worth the risk of losing the business to poorly designed software resulting in incorrect commission checks, errors in tracking a person’s downline records, lost orders, and so forth? Those companies that elect to write their own MLM software often find later on that they are vulnerable to the programmer who wrote it. What if he moved away, or became injured or sick? Never let someone convince you they can program an MLM software system in weeks or months. It’s never been done successfully before. Why should you believe it could be done, now? Companies such as Jenkon have spent many years writing MLM software that works right the first time, every time, and offer it to the public for a small fraction of what it costs to create it. It’s the best money you’ll ever spend.

How do I choose a good MLM software package?
While this report does not have the space to address this subject fully, a few suggestions should be noted:

  • Choose a reputable vendor. There are many fly-by-night software companies that make many claims of experience, know how, and software gadgetry. Unless you are willing to be a guinea pig, choose a vendor that has developed a proven track record. Track records are built over many years of working with MLM companies, not just selling a software package a few times. Indeed, only having a small handful of clients may speak more about a company’s persuasive abilities than their actual know how and skill. Above all, check out at least six references. Remember that vendors will be eager to provide only their best references. Always get the names of other companies from these first references that you might call. You might be surprised to find a different story when you call companies not included in the reference list.
  • Visit the Software Company’s office. When you choose an MLM software package, you not only choose the software; you also choose the vendor’s support services. If the vendor is not able to provide support services acceptably, what will you do when you need to change your compensation plan, or add a new input field to the order entry screen? Jenkon has serviced over 500 MLM companies since 1982 and has yet to find one company that has not needed support services. There is only one constant among all MLM companies – they constantly change things! While at the vendor’s office, meet the vendor’s people that will service you. What kind of people are they? How long have they worked for the vendor? If you find they are relatively new, either the vendor has little experience, is growing rapidly (in which case you may have trouble competing with other clients for good service), or has high staff turnover. All these can mean trouble for you, as the vendor may not be able to handle your needs quickly and competently. Be willing to pay for experience and competence. You’ll pay far less in the long run. If you think knowledge is expensive, try ignorance!
  • Avoid very small software companies. Small software companies, to compete with larger established firms, must offer software at bargain prices. This often puts them on shaky financial ground during their most critical years. Many MLM companies, trying to save money by purchasing software from these small software houses, find themselves virtually abandoned later on when they need assistance. The problem is that servicing one highly successful client can consume virtually all of the human resources of a small software company leaving the other clients out in the cold. It can take months (or years) to train competent software technicians on an MLM software package. The more deadly problem, however, is that smaller companies tend to go out of business without warning. The MLM industry is especially brutal on small software companies and has caused a number of firms to close their doors leaving their clients high and dry. If you value your business, stay away from the small vendors and stick to those with staying power and track records.
  • Buy a software package that allows you to create your own reports. Many packages force you to live only with those reports they put on the menus. Managers must resort to running large reports to answer small questions or concerns instead of small exception reports on demand. Small exception reports can be reviewed quickly and accurately. Large general-purpose reports can take hours to review and digest; this is not a wise use of a manager’s time. The computer industry has adopted a standard in modern software engineering that allows non-programmer users to type free-form queries on a computer terminal. In response, the computer provides specific and focused information according to the query. For example, suppose a manager wants to see a list of all the distributors in Florida with a group volume of $5,000 or more. Most modern software systems would allow the manager to type a relatively simple command sentence to obtain the report.
  • Make sure the company can program your compensation plan. Compensation plans are complex and take massive amounts of experience to program properly. When you have your tax return prepared, do you go to an inexperienced person, or do you find the most competent one who is also reasonably priced? Compensation plan programming is not something inexperienced programmers should be doing.
  • Do you plan to expand internationally someday? If so, choose a software package that incorporates international issues such as currency conversion, language translation, cross border sponsoring, VAT tax reporting, and foreign address formats.
  • Buy software that can work on bigger computers and a PC. While personal computers are terrific for starting a new company, they are not cut out for larger successful MLM operations. Most personal computers allow only one person to use the computer at any given time. Networks allow PCs to be linked together and can grow to become quite powerful and large. Networks are good but expensive. Minicomputers allow less expensive workstations to be connected to more powerful systems and are usually less complex to manage than networks. Most large MLM companies have either a minicomputer with several hundred workstations attached, or larger mainframe computers. In either case, if you expect to be successful, don’t limit yourself by choosing software that only runs on PC computers. If you do, you will be forced to use networking to expand, the most expensive way to connect employees together.
  • Compare features. Software is designed to handle specific business issues and often has a great deal of difficulty dealing with matters outside designed limitations. It’s difficult to force a software package to do things it was never intended to do. Wise computer buyers compare features and capabilities, side by side, of one package to another. Ask the vendor which features they consider are unique to their package compared to others. A package that is missing an important piece will never be a bargain at any price. As you compare software packages, use the feature list of the package that has the most to offer as a guide and compare the features of the other packages against it feature by feature. You’ll be quite surprised as to how many “holes” the other packages might have.

Remember that you aren’t just buying a computer; you are buying software, expertise, emergency support services, programming services and you are starting a long-term relationship. Choose your software vendor wisely. Of all the aspects of a start up MLM business, don’t be tempted to penny pinch in the computer area. If you do, you may cripple your chances for success.

 

 

#6: Compensation Plans

 

A compensation plan that fails to motivate distributors will stop a company fast. Some people believe that a good compensation plan is the key element to success. I have found this not to be the case as I’ve observed many successful companies reach very enviable sales volumes with poorly designed compensation plans. At the heart of the issue is the question what makes a compensation plan good?Let’s address a few points:

  • Reasonable compensation percentages. Most compensation plans of today pay between 30% to 50% to field distributors. If a company promotes a plan paying only 25% or so, they will have a hard time recruiting and keeping distributors. Real percentage pay out should fall between 35% and 42%, in my opinion. Theoretical pay out (the percentage the plan would pay if all commissions were paid out in every case) should not be more than 8% above actual to avoid disappointing distributors expecting more.
  • Keep it simple. Many plans are designed by MLM professionals for MLM professionals. While experience is essential when designing compensation plans, one must never forget that ordinary people are the ones who must be motivated by it. The more complex a plan becomes, the fewer people it will motivate. The plan needs to affect the heart of a distributor first, before it can affect his pocketbook.
  • Avoid novelty or “fad” plans. Changing a compensation plan is costly in terms of lost momentum and distributor commitment. When a distributor recruits another person, the compensation plan is often a significant part of the selling process. To change it later is, in essence, admitting that the original plan was not very good after all. Some people may perceive the change as a “bait and switch” tactic. By staying within more traditional plans, plans that proved themselves over the years, a new MLM company can still be innovative but know that the plan has staying power. It’s often joked that compensation plans are like men’s ties; when one plan goes out of vogue, you can count on it coming back a few years later. Stick to more traditional plans that won’t need to be changed as new fads come and go.
  • Don’t put too much credence in the impact of your compensation plan. Many entrepreneurs come to Jenkon convinced that they have the best possible compensation plan imaginable. When asked what product or service they will sell, many respond, “we’re still looking for the right product.”Obviously, these well-intentioned people have focused on only one issue of starting their business thinking that the compensation plan is the key to their future success. The facts, however, are different. Many companies have gained great success despite badly designed compensation plans. Put simply, the plan is only one part of the puzzle; it isn’t the only part.
  • Don’t change it often. Those that experiment with the compensation plan are asking for frustrated distributors to join other more stable opportunities. Even good change can be traumatic. Be very reluctant to change the plan.
  • Avoid recruiting “heavy hitters”. These very successful MLM professionals can bring tremendous short-term success but can also be a major cause for failure when they grow bored with your company and join another, often taking thousands of their downline with them. Wise companies always build slowly for the first few years until they have the critical mass to handle changes in business volumes. Don’t design your compensation plan to focus on attracting these heavy hitters.

 

#7: Have a Lawyer look at your Compensation Plan

 

While a compensation plan may motivate distributors, unless it is acceptable by every state or country where it will be used, it could put the company in jeopardy. There are many legal statutes that must be complied with in order to carry out an MLM business in any state or country. Those affecting Multi-Level Marketing vary and are well beyond the scope of this report. Several major points, however, should be discussed:

  • Nobody should profit by recruiting another person. Pyramid schemes are illegal and allow distributors to profit simply by recruiting people. Many companies avoid pyramid statutes by paying commissions solely on the sale of product (or services) and stipulating that people are not required to buy any commissionable product in order to join. Never pay commissions on distributor kits or other materials purchased as a condition of joining the company.
  • Have a generous return policy. Inventory loading is a term used to describe a distributor who buys too many products, more than can be sold in a reasonable period of time, to qualify for higher commission percentages. Many states have acted aggressively against this unethical practice. Many companies, to avoid any association with inventory loading, have instituted generous return policies allowing customers and distributors to return unused product. The Direct Selling Association (DSA) has recently established a requirement for all company members to offer a 12-month, 90% buy back policy. Most companies are now adopting this rule and deduct commissions from distributors and their uplines when products are returned. Incidentally, automatic calculation of commission adjustments for returned product is often considered a major requirement in a software package. Otherwise, it must be done manually costing hours of wasted time and leading to embarrassing mistakes.
  • Sell products and services at a real market price. If your product or service can’t be sold unless an MLM compensation plan attached, regulatory agencies will eventually take action. Imagine selling toothpaste for $10 a tube, but paying out $9 in commissions. While some people might be attracted to this scheme, it will most certainly demand the attention of consumer protection agencies as well.
  • Make no claims of income. While it’s a tremendous temptation to explain the potential income available in your new venture, avoid it at all costs. Regulatory agencies are notorious for video taping distributor meetings to gather evidence of unsubstantiated claims of income. If you mention any income statistics, then mention also the average income. It is not enough to simply tell the truth in this case. You must also avoid setting unrealistic expectations.

I have included in this report the names of several attorneys who work almost exclusively with the MLM industry. Many companies have found them to be very competent and knowledgeable in MLM legalities. It is highly recommended that a new MLM company retain one to review the compensation plan.

 

 

#8: Customer Service

 

Many companies enter the industry thinking they sell business opportunities and their products. They soon learn that they sell a third product, one of immense power: customer service. Distributors are fickle and seem to join the company that offers the most. One great discovery of our age, however, is that people love to be served well, and their loyalty is placed on those who service them best. Some MLM companies find their average distributor stays active only six months. Others find it is several years. What’s the difference between them? It’s not the compensation plan. It’s not the products they sell. Instead, it is how well the distributor is served.

Excellent customer service does not come by accident. It is the result of well thought out plans and hard work. It starts by having a very committed Distributor Services Manager empowered to implement the necessary systems, policies, and procedures to achieve excellence. The Customer Excellence System (CES) must comprise at least four areas:

  • Customer Information Data Base
  • Follow Up Systems
  • Satisfaction Measurement
  • Work Load Monitoring

Customer Information Data Base
In today’s modern business, customers have very high expectations for service. When a distributor calls the home office to ask for information, they expect to receive their answer immediately, not an hour later. With a customer information data base, the service rep on the phone can instantly access information that would otherwise take minutes or hours to find. The goal of any customer information database is to know everything possible about the distributor that might be the source of a question. From order status to commission problems, the customer service software must provide instant answers to distributors as they call the office.

Follow Up Systems
If 1,000 distributors were recruited this month, and 10,000 distributors had already joined, how many phone calls would they place with the home office? Statistically, well over 1,000 phone calls would need to be answered by professional, courteous, and competent office staff during the month. Of the 1,000 calls, how many would require a “call back”? It depends entirely on the quality extent of the customer information database. The better the on line information, the fewer call backs necessary. The goal of a good customer service system should be to have less than 5% of the calls requiring a call back. If 30% of the calls required callbacks, there would be at least 300 opportunities for not following up and finishing the call.

Any customer service system that strives for excellence has a means of tracking each phone call to completion. Open calls can be tracked and aged with priority given to the oldest calls, or to the most important distributors. Such a system, often called an Event Management System, becomes the hub of any professional customer service system. In essence, it tracks every inbound phone call from the field and makes sure that each call is answered quickly. It provides the department manager with the reports needed to avoid having a call “open” too long.

Satisfaction Measurement
If you don’t know how well your customer service people are doing, then you don’t know how your future will be. If they are doing poorly, the company is doomed to failure. If the distributors rave about the excellent service they receive, you can be assured of future success. A customer service system must include the ability to track satisfaction levels. How is this done?

When a distributor phone call is logged and closed, a follow up call is placed, or a survey letter mailed to the distributor asking:

  • Was your call answered in a timely manner?
  • Was the customer service representative courteous and professional?
  • Was your question answered to your satisfaction?

Questions such as these, when answered by field distributors, become invaluable to reaching the goal of customer service excellence. The best software packages today incorporate Customer Service Excellence systems to make your obsession for excellence a reality.

Work Load Measurement
No customer service department can survive increasing workloads for long without burn out. If the number of calls received each day is tracked, with the length of time it takes to handle the average call, expansion plans can be put in motion before workloads become critical. Distributors cannot be serviced with excellence if there are too few people to do the work. Once again, the task of measuring workload will require an excellent MLM software system.

In summary, let customer service by your secret weapon to success. It takes planning, commitment, and hard work to achieve the excellence a successful company seeks.

 

 

#9: Corporate Marketing Personality

 

Complement an “on the road” campaign with effective videotapes that motivate, sell, and train. While nothing can substitute for being with them, videotape is the next best thing.

What businessman would start a new company and stay in the office waiting by the phone for customers to call? Time after time, the most successful MLM companies have proved the effectiveness of having corporate marketing people hold meetings on the road. Distributors need contact with corporate people for motivation, training, and especially, to help them recruit. There is no substitute for being in the field. Your success will be greatly enhanced by putting highly motivated corporate personalities “on the road”.

 

#10: Fast Growth

 

While most businesses would give their right arms to grow at exponential rates, MLM has a track record of just that. Unfortunately, this kind of growth has often been a major demise of many otherwise successful ventures. Success is wonderful, but it can bury you.

New businesses have new staff, new computer systems, new facilities, and are short on the experience to handle business efficiently. An office can only handle a certain volume of business. What if that volume is exceeded? Something must give. Many companies go on a spending spree, throwing money at their problems. While growing, cash seems to be unlimited. This too, is a false security, for as surely as the growth came, it will level out, and eventually go downward for periods of time. It is far better to limit growth temporarily, than to succumb to its demands.

How can an MLM company control its growth?

  • Start locally by not accepting distributor applications from everywhere. Distributors who seek to join from unopened regions are simply given a courteous thank you letter. Let them know how much you want to have them join, but that the opportunity isn’t available yet in their area. Notify them when they can join.
  • Don’t sponsor road trips by corporate or field promoters. Take advantage of the less expensive local opportunities, first. Meetings can be held locally every night of the week for the cost of one meeting on the road.
  • Don’t recruit professional MLM promoters or big hitters. If they want to join, then they must join as any other distributor. Don’t, however, go out of your way to recruit them.

By controlling growth, a business plan can become a real guide to making the business profitable. Use the plan to make success become a reality.

Conclusion
Multi-Level Marketing offers incredible opportunities, but also has a vast assortment of challenges. By following these simple guidelines, your potential for success will improve dramatically. Those that have money to burn can ignore these rules. Those that must be careful and hit profit projections must give heed to these MLM Solutions to the 10 Most Common Challenges. Life is too short to learn every lesson by ourselves. We are far wiser to observe others, and let their experiences teach us a better way.

All contents © Copyright Jenkon International, Inc. 1996. All rights reserved. Permission is granted to reproduce this article, AS LONG AS the biographical section above is included with the article.