July 22, 2019
Customer Compensation Plans Go Viral!
James Carville, a famed political consultant once said to Bill Clinton – “Don’t worry, it’s not about you, it’s the economy stupid”.
To every MLM C-Level Executive, that is struggling from continual stagnation in your direct sales company, let me say to you, “Don’t be Stupid”, it’s about the Compensation Plan. Alternative Gig-Economy compensation plans provided by such companies as Uber, Amazon Marketplace, Shopify and Customer Sharing Apps, are in direct contrast to the out of touch chase the dream compensation plans still found in many direct sales companies.
If we are to become a relevant and vibrant part of the “Gig Economy”, then we can no longer have compensation plans with similar promises offered by no money down real-estate schemes, forex trading platforms, bitcoin currency mining and now click-funnel programs that promise to teach you how to be a marketing guru.
If your company isn’t working the way you envisioned, more than likely your compensation plan isn’t working for you. It’s built upon the wrong premise, it promotes the wrong behavior, no one understands it, no one can teach it, invites legal scrutiny and is hurting your brand.
For the past two decades, comp plans were designed to mirror the success and failure of traditional businesses whereby 20% of the people earn 80% of the income. The attraction of our business model was simple, we offered the 20% tier to people who didn’t traditionally have an opportunity to be in that group! Carpet cleaners, mattress salesman and stay at home moms were offered a second chance at a first-time exclusive income.
While those comp plans did, in fact, work for the few, doesn’t it make sense that any plan designed for the majority of people to fail is eventually destined for failure?
Customer Viral Marketing
There is a new phenomenon sweeping across retail sales called Customer Viral Marketing (CVM) that can evoke revolutionary change at the core of every direct sales compensation plan.
If you still think going viral is how many views a video has reached or whether or not an influencer is now marketing your products, the marketing world already blinked, and that moment has come and passed as your next best marketing strategy.
The new viral metric now is how much money have you paid your customers for sharing your app or your products.
Companies such as Ibotta, Dosh, RetailMeNot, BeFrugal, and Rakuten have paid more than 1 billion dollars in cashback to customers for sharing their products or apps with their friends.
Companies with formalized referral programs experience 86% more revenue growth over the past two years when compared to companies that do not.
Repeat customers are often the most profitable. McKinsey found that repeat e-commerce customers spend more than double what new customers spend ($52.50 average cart size for repeat customers, compared to $24.50 for new customers).
As John Lennon once said, “Imagine all the People”. Imagine how many more people you can now talk to when you are speaking to all your satisfied customers about getting paid for sharing your products, instead of just your distributors? In today’s gig economy, is it easier for your company to create viral activity among customers in order to create viral activity among your salespeople, or do you want to continue to try to create viral activity within your sales force with the intention of having them create viral activity among your customers?
I recently spoke with the CEOs of 3 direct sales companies that are all more than 20-years old with a similar profile of about 2500 active distributors and 75,000 active customers here in the United States. When I asked which group, they believed had a more positive perspective of their company and was more likely to recommend their products, without hesitation they all said their customers. When I asked them why they don’t have a compensation plan in place for the 75,000 satisfied customers in addition to the 2500 distributors, they said I didn’t know we could.
Not only can these companies expand their conversations and talk to customers about referral-based income, so can every direct sales company. Virtually every company can integrate such a program almost immediately on top and alongside their existing compensation plan structures.
The Change Doesn’t Have to be Disruptive Only the Result
The Nutritional and Skincare Direct Sales Companies mentioned above all have a traditional Uni-level/Breakaway model with a wholesale discount of up to 40%. And as usual also have back-office software, not unlike their distributors, that is not kind or receptive to change or innovation.
The good news for both the entrenched distributors and the back-office IT teams for each company is we didn’t need to program a new comp plan to launch the programs. We simply brought in a team to create replicated marketing sites that payout the potential 40% wholesale/retail commissions in real-time to customers and distributors who refer people to the marketing sites to purchase products. Then, through an API, send the sales information to the company back-office for the monthly override commissions to be paid as usual. We didn’t change the distributor’s ability to purchase products at wholesale discounts or affect how monthly override commissions are paid, but we did create an instant cash-back program for both customers and distributors based on the same 40% retail model that each Company had already established.
Here is How it Works
If a customer is sent to the marketing site by a distributor and spends $100.00, the customer receives $10.00 instant cashback he or she can use for their next purchase. The Distributor would receive 3X instant cashback or $30.00 from the customers purchase paid immediately. The total payout would be $40.00 or 40% of the purchase.
The customer viral marketing begins when customers are excited about getting paid to shop. The marketing goes viral when customers also tell a friend and get instant cashback anytime their friends’ shop.
When a customer goes to the site who was referred by another customer and spends $100.00. The customer who spends $100.00 receives $10.00 instant cashback for his next purchase. The customer who referred the customer to the site gets $10.00 instant cashback for referring them and in this case, the distributor who signed up the original customer gets 2X times or $20.00 instant cashback. The total payout would be $40.00 or 40% of the purchase. The distributor makes $20.00 instead of $30.00 because his customers were doing
the work for him or her.
Regardless of whether or not your comp plan has a 40% wholesale/retail or 25%, the philosophy remains the same…only the numbers people receive in instant cashback are different.
This is the First Step We Can All Take – The Second Step is Up to You
Creating a relevant compensation plan with only your wholesale/retail is a first step to creating Customer Viral Marketing (CVM). Sample programs, shopping carts with AI, machine learning prospecting tools, a simplified back-end compensation plan for royalty overrides and customer acquisition programs, are all next steps that companies outside of direct sales have already taken to be competitive in the new gig economy. Why not take the first step that all direct selling companies can and should take?
Go viral! Pay your customers and your Company will be paid back with Customer Viral Marketing (CVM).