Multi-Level Marketing Realities – Part 16

So our October commissions were big, paid in November but our commissions for November and December were near zero because everyone stocked up in October and demand had dropped off quite a bit because of the 20/20 interview in October.  Our website sales had dropped to nothing in November with our price change but we were selling to regular monthly customers at the same price we were selling at before.  I was not worried because it would come back and we would build our commissions up bigger than ever.

We did have a lot of stock though for the amount we were selling.  That had me a little worried, especially because we had borrowed to buy it.  Getting through the end of the year was fine but by the first of the year I was getting very serious about wanting to consult or do something.

In December we had planned to go to Disney World with my son’s baseball team and we decided to go even if they didn’t make it.  We had a good time for a week, not thinking about the business, and we told everyone that we were unemployed without an income.  We had actually sat through a timeshare presentation for a future week at the resort, so I guess that was the context of using that line.

By March, I had gotten a job with a consulting company so now I was employed again.  The MLM company had not only lowered the price of the product by March, they lowered it even further to try to generate some sales.  We lowered our website price back down and were starting to see some sales come back in.  Our March commissions were back up to about $5000.

And then… we found out that the MLM company was going to start selling the popular dietary supplement at Wal-Mart.  That pretty much does it for us.  In fact, that is when they said that they would no longer allow sponsoring of new sales people.  We were given the opportunity to convert from being a distributor to a consultant that spied on the Walmarts, Targets, Walgreens, and other stores near us, and fill out an online report.  The MLM company paid us $1500 per month for two years to do this, and converting to a consultant meant no more sales commissions from selling product.

I had a lot of the dietary supplement at the first of the year (2000) and I couldn’t sell it fast enough, so I found a distributor that bought a lot of it from me at a discount.  I looked for ways to cut expenses and free up my time after I started my new job, so our websites went, the telephone system, and as much money I could cut from our budget I did.  Although we did try to start with another product briefly, we gave that up for more time and less spending.  We had a rough time but we got through it.

In 2001, I started with the University of Phoenix to get my BSM degree, and after I got it I went for my MBA, finishing in 2009.  I am on my third job since the end of our business and things are going well.  My middle son starts his third year of college this month and wants to be a screen actor.  My daughter wants to become a country music writer.  My oldest son is soon going to be the general manager of a tire store and gave us a grandson last year.  We tried to instill in our children that they should go for their big dreams because you only live life once.  We are trying to support them every step of the way.


Multi-Level Marketing Realities – Part 15

At the end of part 14 I said I would talk about the 20/20 story on the MLM company and how the MLM company raised the price of their popular dietary supplement to their distributors at about the same time.  But first, I must review some interesting events that happened before this.  Early in 1999, the MLM company decided that they were changing their marketing plan from a 6 level plan to a 3 level plan.  That means that instead of making commissions from 6 levels of distributors you would now make commissions on 3.  They would grandfather in any existing distributors so those with more than 3 levels already would not see a major cut in their commissions.  This didn’t affect us much as most of our distributors were on our first level, though our future commissions would be affected.

The compensation plan change was to increase the profits of the MLM company so that they could contribute more to political campaigns and try to influence policy in Washington.  I guess they were starting to get a lot of heat from the FDA about ephedra (ephedrines) and they wanted this problem to go away.  They felt that they could influence the FDA with the help of some congressmen, senators, house members, and whoever else would take their political contributions.  And of course these contributions came from commissions they weren’t paying their distributors.

At the end of September 1999, the company announced that they were going to raise their price, supposedly to help them make additional political contributions.  They said later that this was to weed out fake distributors or marginal distributors who were selling at too low a price.  We told our distributors that they should buy extra product in October because of the price increase and we ourselves borrowed money and bought 12 master cases.  All of this pushed our commissions for October to nearly $20,000.

In October, the MLM company went on 20/20 to tout their product and their evangelical following of distributors, only to have it backfire on them.  The news show was able to find a customer that had a stroke while taking the product, which left them disabled for life.  In addition, they profiled the founders of the MLM company, who were earlier convicted of producing and selling meta amphetamines.  This was a complete disaster for the company and was a turning point for the popularity of the product.

As of November 1st, we increased the price of the product on our website thinking that the MLM company’s increase was permanent.  We were now priced right with the corporate website, at $45 for a single bottle sale.  This was strategic as I was thinking that if we were able to sell 12 bottles a month that we would at least get our commissions, and we would push harder to sponsor new distributors.  Unfortunately, this eliminated sales on our website and our November commissions were virtually zero.

In part 16, I will talk about our Disney trip in December of 1999 where we told everyone we were unemployed without an income.

New Website Coming

I am moving my blog to a new website soon!  I am going to host it myself and it will be a WordPress blog, so it’ll be easier on me to write my posts.  I am guessing that it will be ready around the first of March or so.

The new blog will have fewer advertisements and will have a bulletin board with several forums.

I thought I’d give an early notice to all of my readers, and just take a break from posting serious articles for a day.  For those of you who wonder, I actually write several articles on the days when I write, and they post at noon day after day.  I don’t write an article a day ever.

Thank you for reading!

Multi-Level Marketing Realities – Part 14

At the end of part 13, I said I would talk about the telephone server I installed in my home and a product launch by the MLM company.  Right away after we moved I had Ameritech install four business lines in my home, as well as our home phone and fax line, so that I could install a telephone server I had just bought.  The telephone server was to replace our off-site telephone service that we had been using for so long.  With the telephone server, which looked like a computer server, we could do the same general things as the telephone service but I would have more control over what it sounded like and how it worked.  The telephone server was one of my early projects after I quit my job.

I had several web site changes I needed to make and I also worked on them.  I answered the telephone, filled orders, and got out information requests.  I was able to talk to many of our customers and had a good working relationship with Wayne so he, myself, and Chris could trade off telephone duties.  I was able to play some golf while the weather was warm and bowled some.  I got out to the store for walks or walked around the neighborhood.  Back then there were very few people my age off during the day.  When I played golf, other sales people would be golfing so I got a chance to socialize then, but the day was typically pretty quiet.  As the weather turned colder, there was nobody to socialize with and no reason to leave the house during the day, except for maybe a walk at the mall or something.

I realized after about six weeks that this was something I wasn’t going to be able to do long term.  I loved my family and being around them, but I also needed more adult interaction.  So I decided that I would try to take on consulting projects.  Unfortunately, I had no clue how to do this really.  So I went several months trying with no success.

In September, Chris and I went to a product rollout for the MLM company in San Diego.  I got to meet with the other distributors Chris had been talking about and we had a good time.  The new products seemed good and hopefully we would be able to cross sell them to our existing customers for more dollars in sales.  The company also talked about an upcoming 20/20 interview that they were going to do.  I got to meet the owners of the company and several executives.

In part 14 I will talk about how the 20/20 interview turned into a disaster and how the MLM company raised the price of their product at about the same time.

Multi-Level Marketing Realities – Part 13

Part 13, that’s fairly ominous.  Well I still do have good stuff to talk about before I get to the bad stuff.  In part 12, I said I would talk about the summer of 1999 when I quit my job.

Up to this point I had gotten pressure from Wayne to quit because we were doing so well and I really wanted to quit my job and run the business also.  Chris was a little more concerned, she felt we could do both but it was very busy.  We talked about hiring somebody but she didn’t want to do that either, so we finally decided it would be ok to quit my job once we closed on our house.

In the spring and summer of 1999 I was advertising in various ways, mainly to try to attract new distributors into the business.  I am fairly positive that our commissions were up to nearly $15,000 per month, probably early in the year, and that was our plateau as we had that commission level for nearly all of 1999.  By the end of the summer we had over 350 distributors in our group.  My advertising consisted of small display ads in Entrepreneur magazine, a card deck advertisement, and I tried a full page ad just once.  I was a little unhappy with the results of these ads although the quality of distributor we attracted seemed to be much better.  Ultimately I went back to the internet and signed a contract with Excite by the end of the summer.  It was about $3000 per month for banner advertisements.

I had contracted out the work to create our advertisements.  Our display ads, card ads, and banner ads were all created by other companies and were generic rather than being specific to the product we were selling.  By being generic, I was trying to avoid the discerning eye of the MLM company’s compliance department.

As far as our house goes, we were able to pay off our second mortgage and close on our house in August.  We had also sold our townhouse and were able to navigate both so we only had to spend one night in a hotel between closings.  Our new house was giving us space for living and space for doing our business, as it is a 4 bedroom, full basement, office on the first floor home.  We also got some nice features like a two story family room and 10,000 square foot lot.  It’s a nice place to live and we have been here more than 10 years now.

I gave my notice and quit my job, with no place else to go.  This is the first time I had been completely without a job since I went to college (the first time).  I was now able to devote time to the business and I had several things on my agenda, as well as several regular things I wanted to do outside the house.  My kids were still little then so I was able to walk them to the bus and meet them at night.  I really enjoyed my family and got along with my wife very well during this time.  When the warm weather ended the story changed a bit.

In part 14 I will talk about installing a telephone server in my home and flying out to San Diego for a product launch by the MLM company.

Multi-Level Marketing Realities – Part 12

In part 11, I finished by talking about the vacation where we had to shut down our website for several days because the MLM company said we had a compliance issue and we could either fix it, shut down the site, or lose our distributor agreement.  Based on that, our only choice was to shut down the site.  I also said that I would talk about the MLM company asking for our customers’ names and addresses.

I don’t recall if they called, mailed a letter, or otherwise, but the MLM company told us the wanted the complete list of our customers’ names and addresses or, of course, they would take away our distributor agreement.  I was a little paranoid of the company since they had put us through so much misery with compliance issues recently that I would not agree to that.  I told them it was confidential company information and asked why they needed it.  They told me they were looking for unauthorized sales agents and we agreed to give name, city, and state of all of our customers so they could review them.  I think this was nearly a package of paper and I ended up faxing it to them.  They ended up telling me which customers were selling the product without an agreement, and we agreed not to sell to them any longer.

In the spring of 1999, I rewrote our complete website into perl language, which gave me the flexibility to do server-side configuration of the website.  I could pass parameters between web pages, track inbound links to sales, route orders to local distributors, and many other cool things.  I also wrote shopping cart software that could be used to sell several products and was specific to our pricing, so we could show quantity discounts and monthly subscriptions.  The shopping cart was on our secure server, which ended up being a problem as often the regular server would respond but the secure server wouldn’t.  We worked with the vendor to see if we could get better response from the server, I think we got a little improvement.  But being on the secure server meant that we would leave our orders on the server and retrieve them through a web page, and also allow our distributors to retrieve our orders for local shipping.  Information requests still came the old-fashioned email route.

After our perl site was up and running, we got “requests” from the compliance department for some changes that I really didn’t want to make but was required to.  I was so emotional about it, because the site was my creation, that I had to hire somebody else to make the changes.  After that, we were asked to collect a birthdate for anybody asking for samples and post that the dietary supplement was only for adults aged 18 and up.  I did have a parent call me after this because her teenage daughter ordered samples and I was able to quote her the birthdate her daughter put in the request.  Still, I was a little concerned that we were sending samples to minors and we considered collecting a credit card number for samples.

With the distributor board duties, Chris had to fly to San Diego quarterly for meetings.  In the spring of 1999, she had the MLM company book her airline tickets and they put her on a multi-stop Southwest series of flights from Chicago to San Diego to save money.  The stops did not allow deboarding and Chris ended up being starved to death by the time she got to San Diego.  From then on she demanded a non-stop flight.  At least they did pay for her expenses to attend the meetings.

She would usually have a good time with the other distributor board members.  They would go to dinner, activities, and generally talk about business.  She brought home many stories of how things were going for other people.

In part 13, I will talk about the summer of 1999 when we closed on our house and I quit my job.

Multi-Level Marketing Realities – Part 11

I finished part 10 talking about having to shut down our web site because of the MLM company’s compliance department.  However, I wanted to talk about something I had forgotten to mention: Chris had been taking the dietary supplement for about 6 months in May of 1998 and had lost a total of about 50 lbs.  I used this fact on the home page of our website and it gave people who called something to talk about with Chris.  We didn’t use before and after pictures or anything, but this success really helped us continue to sell a lot of the dietary supplement.

I had also neglected to talk about how I had approached other business people through Melvin Power’s forums and got ridiculed because I mentioned that we were successful, and how successful we were, and asked business-related questions about dealing with the kind of success we were having.  This would have been in the Spring of 1998.  The response I got was not good.  People didn’t believe we were selling $10,000 worth of product per week after only a few months in business.  I learned that being successful in business can be somewhat lonely because you have very few people you can talk to about it.

The effect that being part of a successful business had on my job was not good.  I was more tired than unusual and often had to deal with business problems during the day, especially with the MLM company’s compliance and customer service departments.  My attitude was poor and the pressure I was getting from home was making it worse, to the point where my job performance was good at times and horrible at other times.  I really cared about the client, though, which helped me make it through… I just didn’t feel that the work I was doing was very important compared to running a business.  It didn’t help that we were making more from our business than I was making from my job.

The volume our business was producing made us need some tools that I didn’t expect.  For example, Chris bought a shreader so we could dispose of aged customer paperwork and not give away their personal information.  No, we didn’t use the shreader to get rid of incriminating evidence.  At first I didn’t really think we needed it but it did come in handy.  Chris also got hand-held shipping tape dispensers which we still use.

In January of 1999 we put a contract down on our house that we currently live in.  Although we didn’t spend much money on extravagances we did feel that the four bedroom house with a full basement would be a welcome edition, and a milestone that would allow me to quit my job and run the business.  As I had mentioned before, we still had two mortgages on our townhouse at the time but would pay the second off completely before we closed on our new home.

In March of 1999, Chris and I booked a cruise to celebrate our 10 year wedding aniversary.  We were all ready to go when the day before we left, we received a letter from the MLM company’s compliance department.  Something was wrong with the website and we could either fix it, shut it down, or lose our distributor agreement.  I think they said we had 5 days.  I have no idea what was wrong, can’t remember, but I decided we would just shut down the site until we got back from our vacation.  We put our 800 number on the front page so that people could still call in and order.  I think the site was off for a week to 10 days before I was able to make the change and get it back on line.

We did really enjoy our vacation as there wasn’t too many worries about money.  We did many fun things and I was able to buy a bottle of champaign for our table one night.

In part 12 I will talk about how the MLM company asked us for our complete list of customer names and addresses.

Multi-Level Marketing Realities – Part 10

In part 9 I taked about the summer of 1998 and how the MLM company decided not to allow sponsoring any longer until further notice.  I guess they did this to get more control over how the product was being sold, as distributors were saying all kinds of things about the product.  We were still sending out all kinds of distributor information packets with a notice that said that the MLM company was not sponsoring at the current time so to expect a wait when they sent in their paperwork.  The company finally allowed sponsoring in the fall of 1998.

I believe by this point we were already beyond $5,000 per month in commissions and applications were coming in at about 30 per month.  This was actually a pretty small number compared to the number of information packets we were sending out but we were doing no follow-up, just sending them out and hoping for the best.  Between info packets and distributor packets we were sending out probably 20 – 50 per day.

Before or during the fall I had found a company that handled off-site telephone service, I signed up, and I put it to work.  We would have our 800 number call the service, and it would sort calls to voice mails or round robin call us or one of our distributors.  With this addition it made the calls easier to handle and made it so we wouldn’t get calls in the middle of the night.  It also made it possible to try to increase our volume.

Our volume of visitors to our website had started to decline slightly as we were getting more distributors listed on Yahoo so visitors were spread out to others as well as us.  So I started to look at paid advertisements and spent some amount of money on advertising during this period.  I also attempted to sell leads to other distributors, with Wayne being the only one that took us up on it.  He was also answering our telephone so he was getting some leads and sales via our telephone but he was looking for more.  I did add more advertising as time went on trying to reinvest in our business and push profits into future years.

During the fall of 1998 the MLM company asked us, or more specifically Chris, if she would be part of the company’s distributor advisory board.  Chris was the distributor according to our distributor application and I really didn’t want to try to work and fly out to San Diego on a quarterly basis.  We were selected because we were in the top 5% of all distributors and chosen at random I guess.  Chris was able to meet the executive management at the company plus get ideas from other top distributors.

I think it was during the fall that the compliance department was set up at the MLM company and they started reviewing web sites of distributors.  They would from time to time ask us to make changes that I wouldn’t find very agreeable, plus they would be pretty heavy handed about it.  They would threaten that they would revoke our distributor agreement if we wouldn’t comply.  Often their requested changes would infringe on our business practices and I would have a problem with this, but most of the time they were just asking for minor changes.

We started to see interest in our product from overseas in the fall and I believe we shipped to several countries.  We had to learn how to ship internationally and fill out customs forms.  We had one customer from Australia that wanted to order, and they told us how to get it past customs, so I shipped it out.  Australia wasn’t allowing our product to be sold there because of the ingredients.

In part 11 I will move on to the Winter and Spring of 1999, when the MLM company’s compliance department required us to shut down our web site for several days.

Multi-Level Marketing Realities – Part 9

In part 8 I wrote about the summer of 1998 and how the MLM company ran completely out of their popular dietary supplement.  We were better off than most distributors because we had product on hand that carried us into this period.  Unfortunately, we could not prevent running out of stock.  I had also talked about how the company decided not to accept any new distributors during this summer.

We were starting to really get a flood of people asking for information about becoming a distributor and we were sending it out, but then the MLM company decided, for some reason, that they weren’t going to accept any new distributors and sent out a notice.  Since this was the first time this happened, we didn’t know if they would ever allow new distributors to be signed, but we sent out a notice with our information saying that the company was not allowing new distributors at this time but to go ahead and send in their applications anyway.

Before the summer of 1998, Wayne Farmer had signed up underneith us and was a wonderful distributor.  He helped us through a busy period of our business by helping us answer our phone and mailing our orders out.  Dom Cavalere (sp) had also signed up during the same period of time.  He lived in our neighborhood and our boys were friends, so he had popped over for some reason one day and saw the disaster that was our townhouse while we were trying to get materials together.  My mom had also signed up and somebody that knew my brother-in-law, but these were our only personal contacts that became our distributors, all others were from our web site.

Wayne, Dom, and one other distributor helped us answer our phone after we got our telephone system, although we had varying degrees of success doing this.  Ultimately we depended upon Wayne because he made zero errors and could work with our customers when they called.  Dom and Debbie (his wife) ended up opening a store in Barrington to sell the product.

I mentioned pricing in a previous post but I had not gone into much detail.  We sold for $37 per bottle plus a flat $3 for shipping when a random customer ordered one bottle.  We shipped by priority mail and offered a 6 month money-back guarantee.  If a customer ordered 5 or more bottles, we dropped the price to $32 per bottle.  We also had a monthly subscription program where customers could get how ever many bottles they wanted per month for $32 per bottle plus $3 shipping, and we would mail their order on the same day every month.  This also helped to keep the telephone volume down and give us a regular base of orders.

Our commissions, that were based on sales to distributors below us, were growing quickly although I was very impatient.  We may have been up to $5000 per month by September 1998 and over $10,000 by the winter.  Our plateau was around $15,000 as we only ever topped it once.  We did this amount for nearly a year.

It is hard to believe that I have not even written about a full year yet and I am up to part 9.  In part 10, I will write about the period of our business beginning in the fall of 1998.

Multi-Level Marketing Realities – Part 8

I finished up part 7 saying that a couple of things happened during the summer of 1998: The MLM company disallowed sponsoring indefinitely and they ran completely out of the product.  I had a spreadsheet that told me how much to order and when based on how much we were selling per day, the days of lead time to get an order, the variations in the number of days it would take to receive an order, the amount of safety stock we wanted, the cost of placing an order, and the customer service percentage we were shooting for.  So I would place an order for the EOQ quantity (economic order quantity) when our calculated safety stock reached a certain point and, in theory, we would receive product from the MLM company before we ran out.

I think they must have been in over their head because we would receive our orders 4 – 5 days after we ordered sometimes.  Other times I would have to call after a week to see where our order was.  Worse yet, I would have to call 2 or 3 times to make sure our order was on it’s way and get it in about 3 weeks.  This all pushed our safety stock way up since we never knew how long it would take.

Sometime in June I was having an issue getting an order and I would call and call, and it still hadn’t been shipped yet.  They weren’t really telling me much beyond that.  Then I heard it through the grapevine that everyone was having a hard time getting product.  Wayne Farmer must have been signed up by then as a distributor because he flew out to San Diego to see what was going on.  He had also heard that distributors were able to get product if they walked up to the MLM company’s will call window.  I asked him to get a master case for us if he was able to get product and I think he actually did.

After the fact we heard that the company had run dry of product because they rejected a new manufacturer’s shipment, as it wasn’t up to their quality standards.  It had to be a certain blend and when they tested it there was too much of one thing and not enough of another.  So they looked for another manufacturer and in the mean time, they ran themselves completely out of their dietary supplement, the one that was the most popular dietary supplement in the 1990’s.

Back in Elgin, Illinois at our little townhouse, the orders did not stop rolling in, as in tsunami if you recall part 7.  When we ran completely out of product, we changed our autoresponder email to say that we were out of product but the customer order would be backordered unless the customer replied to say they wanted to cancel their order.  We did the same for every other order type.  We stacked up the orders in the order they were received and waited, and waited, and waited for product to roll in.  It never came.  I had orders for 11 or 12 master cases as I became more concerned about the MLM company’s performance.  We did not want to run out ever again if possible, so our safety stock went up, we had backordered orders, and I just kept ordering more.

It all came in over 2 or 3 days and we worked our tails off to get the orders turned around and out to our customers.  Nobody had cancelled or complained, and everyone paid.  Most of our orders by now were paid with credit card so we got the money fairly quick.  While we were filling orders, our house was a total wreck and we had tons for the garbage man that week.

This is getting a bit long so I guess I will talk about the MLM company deciding not to take distributor applications next time.

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