Direct Network Marketing – Is Direct Network Marketing Just Pyramid Selling?

Direct network marketing, also known as network marketing or multi level marketing (MLM), has had a huge rise in popularity in the past decade. It has been endorsed by major business heavyweights from Donald Trump to Robert Kiyosaki. But, what is it and why has it traditionally had such a bad name?

Let’s look at what a legitimate network marketing business involves. Essentially the company is structured in such a way that distributors (also referred to as associates, consultants, independent business owners etc) are compensated in two ways:

#1 – Commissions From Product Sales

Distributors make a percentage commission based on the company products or services they sell

#2 – From Recruiting Others Into the Company

Distributors make a proportion of the sales from other associates that they have introduced into the company. This is what is referred to as a distributor’s ‘downline’

As more people are recruited the bottom layers grow and it is this that people refer to as the ‘pyramid’. An illegal pyramid scheme is a non-sustainable business model where money is exchanged in return for enrolling other people into the scheme. There is usually no genuine, stand alone retail product or service being provided and eventually the pyramid collapses with the bottom layers losing their money.

Unfortunately it is these illegal pyramid schemes that have given genuine network marketing businesses a bad name. The key issue is whether the commissions paid to all associates is generated primarily from the products the company sells ie: #1 or from recruiting other networkers into the business ie: #2.

Direct network marketing isn’t pyramid selling and can be an incredible business opportunity if you do your research thoroughly. Not all companies are created equal and it pays to take your time to find one that has a range of products you genuinely believe in and can see yourself being proud to represent.

The 3C’s and 4P’s of Outdoor Marketing

When I was working on my MBA, I took a very insightful class called Marketing Strategy that drilled the concept of the 3C’s and 4P’s into my brain. If you have not heard of this marketing concept, briefly reviewed, it is understanding your Customer and understanding the strengths and weaknesses of your Competition and your Company, then taking this knowledge and adjusting your Price, Product, Place of distribution and type of Promotion to maximize your sales and profitability.

When I started my own company, I sought to take this concept a step further and applying its principles to Outdoor Marketing.

Customer

Applying this principle to outdoor marketing requires different thought than developing a TV or radio spot then deciding on which stations to play it. For instance, you must understand where does your customers travel, shop, work, eat and enjoy life outside of the home? Moreover, what are their likes and dislikes? You must truly get to know your customers because this information will be crucial in your outdoor marketing efforts and specifically in determining exactly where to place your ads.

Competition

You are not the only one who wants your potential customers. Undoubtedly, you have competition. To effectively communicate to those customers, you will need to differentiate your company from your competition and focus on your strengths and on their weaknesses. Furthermore, be sure to expand your idea of competition. You not only have direct competitors (i.e. Ford dealership vs. Toyota dealership), but you also have indirect competitors (i.e. Ford dealership vs. Mass Transit). Broaden your horizon and give adequate thought as to their strengths and weaknesses.

Think like a consumer. If you understand your customers, you will know where to advertise to reach them and your competition may not. Don’t be afraid to directly compare your strengths to their weaknesses in your outdoor advertising. Make your competitors defend themselves. The business arena is not the place to play nice guy.

Company

First and foremost list what your company can do well and, more importantly, what it cannot. It is quite painful to admit that you do not excel in all areas of your business but it is better to understand it now and not misstep and let your customers down by promoting something that you can’t delivery on.

Once you have this list, can you effectively communicate what your company does utilizing outdoor media? Can you get across your primary focus and your main strengths? Can you make it simple enough? Focus on your top two strengths that intersect with the top wants of your target customers and place your ads where they frequent. Furthermore, depending on what you want to communicate, you will need to choose the appropriate outdoor media of which there are many.

Price

If your company cannot afford to advertise on traditional billboards, which can average $2,000 per month for a major highway billboard, then you should look into other forms of outdoor and out-of-home media. You can advertise at bus stops, in malls, on diner placemats, and of course my favorite, on receptacles. The price for this media can range anywhere from $50 to $500 per month depending on which you choose and where they are located.

If you are a smaller company with a small budget for advertising, alternative out-of-home media, as opposed to the traditional highway billboard, will be most effective for you. You will not be able to take the shotgun approach and advertise everywhere. You will have to be more like a sniper and target your customers (not literally, of course) using the information you’ve gathered when analyzing your customers.

Place

Where you advertise will be dictated by how you analyzed your target customer. Thus it is vitally important to truly understand your customer otherwise you could develop a fantastic message that falls on deaf ears. If your target customers are college students, you should place your message around bookstores, coffee shops, bars, and late night eateries. If your target customers are professionals, then you should place your ads on mass transit, highways into town, bus stops, and lunch-time eateries. If your target customers are stay-at-home moms, you should place your ads in malls, shopping centers, and grocery stores. Take note of your best customers and you’ll know exactly where to place your ads.

Product

Your product will most likely have many features. Depending on where you are advertising and which segments of your customer base will see your message, you will want to showcase different features of your product or service. If your message is in an upscale part of town, you will want to focus on your service and how you are customer-oriented. If you are placing your message in a lower-scale section of town, then you’ll want to focus on value and your guarantee.

Promotion

In promoting or advertising your product or service, you can choose many avenues. The most common form that is most prominent is, of course, the television commercial. However, internet advertising has become extremely popular since most people now have access to it.

While both have the advantage of wide reach, television advertising is very expensive and internet ads can get lost in the thousands of ads that are there. The best scenario is a complete marketing campaign that includes out-of-home media. Why? Because out-of-home media can help to reinforce your existing message and you can also talk to consumers when they are out trying to make their purchase decision. With a properly placed message, you can directly influence that decision. You can place your ad near the place of business of your largest competitor. You can also place your ad near a synergistic business (i.e. if you are a tailor, you could place an ad near a fabric store). Out-of-home media provides much latitude to what you want to say to whom and when.

And do not limit yourself to thinking that out-of-home media, and more specifically outdoor media, is only billboards. There are a myriad of alternative outdoor mediums that target pedestrian traffic. Through such media, you can have a more robust outdoor ad because pedestrian foot traffic is slow and unlike a moving vehicle on the highway, if a pedestrian wants to read your ad, he or she can simply stop walking and take notice. You can also better target your message to consumers who will be most receptive to it because everyone goes somewhere at sometime. Your job is to learn this information about your customers and place your ad there through ubiquitous advertising tools such as the AshCan.

In summary, following the above steps will aid you in better understanding your business, its strengths and weaknesses and how to sell your strengths to the appropriate consumers at the right place with the right message.

Always consider out-of-home media as you can narrowly target your best potential customers and not spend a fortune doing it.

Remember, think like the big guys and perform with the nimbleness and friendliness of a little guy and you cannot go wrong.

3 Strategies For Effective Data Collection and Marketing Communications

You have a message you want to get out. That’s great. However, you have a lot of competition for the attention of your audience. Direct mail, TV and radio advertising, newspaper and periodical advertising and of course, internet advertising. And we have not even started talking about social media (for example, Twitter and Facebook). All of this competition for the attention of your audience could be bad news. The good news is that you have so many channels, or tools, to get your message out. With a little knowledge and some well-planned strategy your business can be one of the few that get the right message to the right audience at the right time. Here are three tools to make sure that your message stands out.

If you wanted to pound a nail into a wall, you would not use a pair of pliers. Likewise, if you wanted to tighten a faucet, you would not use a hammer. In other words, you need the right tool for the right job. That means you need to know two critical pieces of information: 1) what is your desired outcome and 2) what is the best tool to get you there. This is true in any endeavor, be it carpentry, plumbing or communicating. Here, of course, we are talking about communication, which is a good thing because I know nothing about either carpentry or plumbing.

On the other hand, I do know about communicating a message. Effective marketing and communications require you to start with the end in mind. What is it you want to accomplish? Ask yourself, at the end of this, what do I want to have happen? Without this critical piece of knowledge, you can never strategically get where you want to go. You could end up there accidentally, but it would take you a lot more time and a lot more money. In this economy, very few of us have extra time or money. I know I sure as heck don’t.

So what is the goal of your marketing campaign? Obtain more leads for your sales staff? Drive visitors to your website? Get people into a local restaurant? Have people buy their next car from your dealership? Create a robust online community? Whatever the answer is, you need a clear picture of your desired outcome before you can strategize how to get there. You then need accurate information in the form of accurate data and business intelligence so you will know what is relevant to your audience. Finally, your offer has to be one that allows a win for you and your audience.

SO LET’S TAKE A LOOK INSIDE OUR STRATEGIC TOOLBOX:

TOOL #1: KNOW YOUR DESIRED OUTCOME BEFORE YOU START
TOOL #2: CURRENT, ACCURATE DATA IS KING
TOOL #3: MAKE INTERACTIONS WIN-WIN
We will look at each of these in more detail in this week’s three part series Three Tools to Build an Outstanding Communication Strategy. So make sure you check back, or even better, subscribe to the feed. Don’t miss out on a tool you could use to build your business.

TOOL ONE: KNOW YOUR DESIRED OUTCOME BEFORE YOU START!

Good communication is never random. Never left to chance. There is a strategy behind the best, most effective communication campaigns. To come up with an effective strategy, you have to start at the end. That’s right, start at the end. By that, I mean you must determine what you are looking to accomplish with the campaign. There are some examples in earlier sections (I assume you have read the earlier parts of the series. If not, shame on you! But because I am a nice guy, here is a link).

Quite simply, you cannot start any journey without knowing the destination. Lewis Carroll summed it up nicely when he said, “If you don’t know where you are going, any road will get you there.” Even Plato understood this, stating in The Republic that “[t]he beginning is the most important part of the work.” A clear outcome is where you start your work.

What is the difference between a wish and a clearly defined outcome?

A clear outcome is well defined with start dates, end dates and metrics by which you can measure your success. Your outcome should be objective. Instead of “I want more leads,” you should be saying, “I want 5% of the recipients of this message to go to the web-landing page and register for our monthly newsletter.” In the first example, one new lead would meet your goal. If you are selling nuclear submarines, that might actually be your goal, but most of us are not in the business of selling one-offs. The difference in the second example is that you have a measurable, objective way to determine if your communication strategy is successful.

Once you have your outcome clearly defined, you have to strategize how you can reach that outcome. Let’s take the restaurant campaign as our example. You want to reach local customers and increase your customer base and your ability to communicate to your audience. The first thing you need is data. Data can come from many sources, but no matter what, data is king in this information age. You can use a list you have generated on your own or you can buy a list. Either way, it is a first step toward more effective communication.

You can also use a number of methods to reach your audience. Direct mail, email, internet advertising, text messaging, advertising, or combinations of all of them. As we are focusing on data, let’s look at a very basic, targeted customer acquisition campaign. First, you need your list. For this example, let’s say you have no data of your own so you need to buy a list. There are more companies selling lists out there than there are grains of sand on Cape Cod (hey, I’m a Boston guy; if it makes you feel better, you can say the beaches of Long Island – the point is the same). The key here is to make sure you use a reputable, list broker who keeps their list current and accurate. If your list is out of date, your campaign is doomed from the start.

TOOL TWO: CURRENT, ACCURATE DATA IS KING!

Which strategy do you think will yield better results?

1. I will send out mailers to 100,000 people to get more business.
2. I will mail 10,000 personalized postcards every week for ten weeks. Each card will have a personal URL so that the effectiveness of the message can be improved every week.

OK, that was a stupid question. Obviously, answer number 2 will get you better results. My insane pet dog even got that answer right (then he peed on my rug). Yet despite the fact that answer number one obviously results in a less effective communication strategy, I have seen more companies engage in that type of marketing than I have seen engage in the second method. Sometimes the obvious solution is not the easiest solution.

The ability to accurately measure results is critical to success in communication. Who saw the message? Who opened the email? Who read the post card? Who used the QR Code on their mobile phone? When did they read it? Who went to the web landing page and what did they do there? All of this information is easily ascertainable and it is extremely valuable.

With this list you send out a direct mail piece with a compelling call to action to visit a web landing page. In our restaurant hypothetical, you might offer a coupon for a free appetizer when you visit the web landing page and complete a brief survey and sign up for the restaurant’s newsletter. By doing this, your customer is opting into future communications. The survey might ask which pizza topping is the customer’s favorite. This accomplishes a number of things. One, you now have a list of warm leads who you know are interested in your product. Two, you know their preferences from the survey. Three, you have their permission to send them subsequent, targeted communications with specials and offers (this includes sending text messages…but SMS texting is the subject of another post). The point is that for the cost of a postcard and appetizer, you now have even more customers and even more accurate data. And as customers come in, you keep track of their orders, likes, dislikes and other relevant patterns. You build a great database.

TOOL 3: MAKE INTERACTIONS WIN-WIN!

Now that our pizza shop owner has all of this data, what can be done with it to help generate revenue? After all, generating revenue is the point here. SO let’s continue with our example. With the data collected data, our restaurant owner can send personalized email offers that match not only the customer’s needs and desires, but the restaurant’s as well. If you know you have a boatload of excess pepperoni, you might offer a free pepperoni topping with the purchase of a large pizza. You can target that message in an email or text message to customers you know buy pepperoni pizza (remember – you have been tracking customer buying patterns).

So now you have a win-win outcome. You, the restaurant owner, sells more pepperoni pizza when you need to, and your customers that love pepperoni get a price break on what they love. It is good for all, and that is marketing at its best. How can you leverage you company’s data to create win-win situations for customers and prospects? Do you need to start collecting data? Leave some feedback and share your experiences.