If a product is going to be sold through a network today, it needs to be a product that works for the purpose, with a price that works in the market and makes the whole model scalable, or duplicable as we say.
For direct selling to be a good channel, in my eyes it also needs to be a product that's highly consumable. You should be able to eat it, drink it, rub it in or in some way use it every day. Cosmetics and health products: it's no coincidence that those industries are big when it comes to this business model within this profession.
Ever since the EU came out with its guidance in 2005 saying that at least 50% of turnover should come from external customers who aren't part of the sales organisation, more and more companies have started adapting to this and started working with customers.
Does it fit the channel
The chair you're sitting on may be a good chair, but it wouldn't be sold particularly effectively through direct selling. Apartments, cars, vacuum cleaners or various kinds of therapy machines are not what I'd call optimal products for direct selling, because it has to be simple to present the whole thing.
”I don't believe in anything that isn't consumable if it's going to be truly scalable.”
The price
Many of the single product companies seem to have settled into having a product that costs 1000 to 1500 kronor a month, and they don't think it matters that only the distributors buy the products regularly. 100% of the turnover is really internal in the organisation, which means they have no customers at all, since it turns out they aren't selling any products. A while back I sat down with a person from one of the juice companies and it's always the same story.
”This particular juice is better than all other juices. It's very rich in antioxidants. This juice comes from this region in this country and these substances can only be found in plants, fruits and berries from these bushes and roots. We own the land they grow on...”
It's a nice fairy tale and a powerful story. The only question is what the numbers look like. Does the company have any real customers who buy products because they want the products, or is it just distributors buying products to qualify for bonuses?
In my eyes it's much better today to find a product with a price that makes it work for a network that works with external customers. Instead of having the distributors stay active with an order of 1000 to 1500 kronor a month, find a product that costs no more than 300 kronor to an external customer who isn't part of the sales organisation. Customers should buy products because they want the products, not because they want to qualify for some bonus.
How many people do you know who you think are able or willing to spend 1000 to 1500 kronor on a product? Supplements or cosmetics, it doesn't matter. Just think about whether it fits and whether it scales. If you have a health product that costs 300 kronor, you reach so many more people who couldn't afford, or wouldn't make room for, a product that's five times as expensive. There are people who buy a skin serum for 2000 kronor, but if you have a product that costs 400 kronor it's easier for the ordinary person to sell that product through a network and you reach a considerably broader audience.
Scalability
Instead of having a monthly order of 1000 to 1500 kronor as a distributor, you teach people how to present a product that costs 300 kronor, which they sell to 10 people and thereby turn over 3000 kronor a month. They can be their own customer, or even get their own product for free if the company has that kind of setup once the first customers are in place.
If you build a medium sized network of 100 people in the organisation and they have 10 customers each and you sell a product for 300 kronor, you've created a turnover for the company of 300,000 a month in pure recurring consumption. On top of that comes the turnover from new customers and partners, which means you have a profit margin you can probably live on.
If you build an organisation of 1000 people with 10 customers each buying for 300 kronor, you have a turnover of 3 million and a profit margin you can absolutely live on. And when those same customers want more products, you can double your turnover. It's about what the equation looks like when you zoom out.
In November we passed 11,000 active customers and 600 active partners, so we have an average of more than 18 customers per partner. I'm looking forward to the day when we're 1000 people who've each got 25 customers spending 300 kronor.
The right price on the products creates powerful duplication in the network. The story about the jungle juice is good, but real customers are better. We're facing a paradigm shift. A new era has begun in direct selling.
