What does every MLM or Network Marketing company NEED to survive? MOMENTUM!
Momentum is a critical component of your business success. It is more important than great products, and a good compensation plan.
There are 3 things that have the potential to kill your business momentum:
- Increasing your prices
- Decreasing your prices
- Changing your commission plan
These reasons are often surprising to many and while you can change these things, you should be aware of their impact on your business before pulling the trigger on the change.
We have launched over 1,000 MLM companies. When consulting with them, we emphasize the need to take marketplace price fluctuations into account before setting retail and wholesale prices. Cost prices likely to fluctuate include delivery costs, shipping, logistics, and employment overheads.
Our extensive MLM experience and track record tell us why you need to sidestep and avoid the 3 potential momentum killers. But first, let’s explain business momentum and what it means.
The meaning of business momentum
According to the entrepreneur and blogger Justin Bryant, the author in Selfmadesuccess, momentum creates motivation, motivation creates opportunity and opportunity creates results. He further claims “when you have momentum in business, everything seems to roll forward, stuff gets done, things happen, employees are proactive, customers are happy and extraordinary results are produced.”
Glenn Llopis, in his book “The Innovation Mentality” makes the following statement:
“Progress is good, but if the process of creating progress doesn’t convert into momentum, then you don’t have the right amount of strategic focus to help it become something more evolutionary!”
To move beyond just making progress and generate momentum, people across the company must anticipate the unexpected by embracing risk as the new normal.
The most important thing in any business venture is the momentum you create every day.
So why then can price or compensation changes kill momentum? Let’s explore.
The Momentum Killers
Account for changes in pricing and costs ahead of time and set your retail and wholesales prices accordingly up front because changing them affects your momentum negatively. Increased prices negatively reduces the demand for your products. Put it into a personal context, what product do you like? Would you buy more or less of it if pricing increased?
Lowering prices in the retail market is likely to increase sales but not so in multi-level marketing. Lower retails prices mean lower commissions for your distributors. When you lower the commissions produced you’re also lowering the motivation to your distributors to sell those products, an essential ingredient in momentum. Again, in a personal context, if you’re working hard to make big commissions and then your commissions are cut, are you going to continue to work just as hard for less money?
Changing your compensation plan
You may feel it necessary to lower the payout ratio in your compensation plan because of increased internal costs like shipping, fuel, or property rental increases. The only acceptable change to your compensation plan that will not cause a loss of momentum is compensation additions. You can always add additional bonuses, but taking them away is going to cause problems you for and for your business.
Examples include adding a tier level to a Unilevel plan, adding a bonus that you can pay from a compensation plan leftover.
The negative effects on momentum comes from actions like changing their binary, removal of a commission, making it harder to qualify for commissions.
While there are many different things that can disrupt your business, these are probably the biggest and most infrequently considered.
If at all possible, avoid increasing your product pricing, avoid lowering your product pricing (and therefore commission values), and changing your compensation plan.
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