Last week, my brother in Vancouver BC Canada asked me to consider a new multi-level marketing company that he had encountered. He has been reasonably successful with various MLM ventures in the past and this one initially looked quite promising. This was especially interesting to me because I often receive requests from people asking me about good business opportunities. I would love to be able to show them a good place to go.
Many people do not have a unique idea that warrants starting their own business. Franchises are a problem for too many people because they have a heavy financial front load. The concept of multi-level marketing (MLM) offers a potentially promising way to develop a residual income stream. However, far too many people have tried and failed with MLM opportunities because they are unable to sell enough of the product or service to make the effort sustainable and viable. Therefore, people who have explored MLM opportunities often have an unpleasant experience.
In responding to my brother about the company in question … Fortune Hi Tech Marketing … I realized that the response I laid out was really a useful tool to evaluate ANY potential business opportunity (MLM, franchise or independent start-up). A lot of pain might be avoided as a result … or a lot of success might be found.
Here is my response about Fortune Hi Tech Marketing ….
When I look at businesses (clients etc) for viability, I study five “Pressure Points”. To be successful in the long-term, every business must be a standout in one of five available Pressure Points. Failure to do so eventually dooms the business.Fortune Hi Tech Marketing stacked up (use the same process to evaluate any other opportunity):
Here is how
#1) I look for a defensible TECHNOLOGY advantage. That means they have a way of doing business, a product or a service that no one else has. It is protected by a patent or trademark or has some kind of company secret that competitors cannot easily duplicate (i.e. Microsoft). Fortune Hi Tech Marketing is a reseller of other people’s stuff so, in truth, they have no proprietary market advantage here.
#2) I look for a defensible QUALITY advantage. This means that what the business does can be proven to be the best in its class over providers of that same (or similar) product or service (i.e. Lexus or Rolls Royce). Again, Fortune Hi Tech Marketing is a reseller, goes head to head with other providers of the same products or services, and does not really even have a very unique business model advantage over other multilevel programs.
#3) I look for a defensible SERVICE advantage. This means they have a superior relationship with the client and almost anticipate the client’s needs before they even know it (i.e. Nordstrom). The Fortune Hi Tech Marketing model is not really geared to this and most reps will actually be at a service disadvantage because they do not know the ins and outs of the products nearly as well as other specialized resellers.
#4) I look for a defensible CONVENIENCE advantage. This means it is flat out easier to buy from this company over another provider (i.e. The closest grocery store). Fortune Hi Tech Marketing could be conceived as offering a minor advantage here but it is not significant enough. Your ultimate customers might prefer to buy Fortune Hi Tech Marketing products from the ease of the internet, but in my opinion, most people want to feel and/or experience these high tech products or services before buying. For example, if I were to change my cell phone company, I want to see first hand what kind of new phone I will get and have a chance to try it out before committing to a contract.
#5) I look for a powerful PRICE advantage. If a business cannot distinguish itself in any of the above areas, it must default to a price advantage (proven lower cost). Price can also be a conscious strategy (worked well for Walmart). In fact however, on almost every product line, Fortune Hi Tech Marketing was more expensive than almost identical options available within the local community and even on the internet.
Since Fortune Hi Tech Marketing does not excel in any one of these areas, the only true offer is the “greed offer” – make money by signing people into the system. It will work for a while, but eventually the recruiting process runs out of steam, fizzles to a stop and then collapses. People will start having trouble recruiting and will not be able to find or sustain happy customers.
People at the top (the people who jump in early) will make good money, but the larger masses will not do as well as is typically promised. I predict this will happen to Fortune Hi Tech Marketing at some point. It is still early enough to be a good money maker, but why put tremendous effort into a business that cannot sustain the residual income stream you are hoping for. Soon, you will need to start all over with another venture! (By Gil Gerretsen)
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April 15, 2008 at 4:25 pm
This has been an extreme hot topic for me. When I was younger and just out of college I was approached by high school classmates I had not heard from in years, co-workers at a large retailer I worked for and numerous church members when I was part of one of the “mega churches” (at least it was mega during that time) in the area.
Almost all of them who approached me the the “business opportunity” used the same lame pick up line telling me how “sharp” I was, etc. I was even approached by a complete stranger at the magazine rack at Barnes and Noble who told me I seemed like a “sharp” person and later by some stealth means called me at home. I didn’t even remember giving him my contact info.
I used the term, “pick-up” line on purpose because almost every MLM approach that has happened to me felt like the desperation one often seeing in the dating scene that wants for ask marriage or a full physical relationship long before you get to know the person comfortably and trust the person.
It’s very hard for me to be sold on selling a product before I have even had the chance to become a satisfied customer. I have a hard time seeing the focus of such companies. Do they want to sell the product(s) or the “priviledge” of selling the product(s) or service(s).
April 15, 2008 at 4:40 pm
Patrick, you are right on. One of the fundamental flaws with most approaches to MLM marketing is that the focus is almost exclusively on recruiting other dealers.
I believe that a wiser approach would be to first build a loyal and enthusiastic customer base and then recruit the strongest fans into the business. In fact, I would suggest that someone should not even be allowed to sign-up another dealer until they have reached some minimal threshold for retail sales.
However, I have yet to find a MLM company that truly understands and underscores the importance of retail customers. Most believe that having a dealer network who are themselves form the primary customer network is enough. I don’t believe that it is. At some point, somebody has to sell something to enough people that are not part of the “inbred” family!
April 15, 2008 at 9:55 pm
This is a great post and you make so very good points about MLM or Network Marketing. I am finding more and more these days that people are not as easily convinced due to the poor business building tactics in the past. Many people were left with a bad taste in their mouth with Amway and Quixtar and that sort of paved that way for negative thoughts about MLM in general. I agree we have a way to go but there is progress with regards to “how you build your business”. Being honest and upfront without hype and false promises is always a good place to start. The TEAM you are associated with is a huge asset to your success. It helps if you have a free training and mentorship as quite often new distributors are left on their own. I am obviously an mlmer and I agree fully that you must develop a large customer base and from those people you will naturally get distributors. A good balance is always the way to go. Oh yeah and never ever stock pile large amounts of product and if your upline wants you to then run! This post caught my eye as I saw “Vancouver” which is where I am from.
Andrew
April 17, 2008 at 12:36 pm
So true. Great checklist that could save a lot of time when evaluating the effort of joining and promoting a new program. Thank you for sharing.