Ecommerce opportunities are not slowing down and everyone wants a slice of the profits. Including Direct selling representatives, whom may be undercutting a brand's business efforts by selling online.
- High Earnings
- Minimal risk involved
- Inexpensive operating cost
The above are some of the huge benefits unique to Direct Selling & a Multi-Level Marketing business model.
Now, what if I told you that all these benefits are being poisoned daily by the attitude of direct selling representatives of MLM companies thanks to their MLM sales strategies?
I know what you are thinking, “What are the MLM sales strategies they are implementing that is killing this amazing business model?”
The answer is simple; They are selling ONLINE.
Most MLM companies contractually prohibit its sales representatives from selling any of their products online. Online direct selling is against everything the MLM business model stands for.
Online direct selling by the sales representative has had a meteoric rise over the past couple of years, even though it's a violation of a contractual agreement.
Why do Direct Selling & Multi-Level Marketing companies forbid sales representatives from using the online ecosystem as an MLM marketing strategy?
Below are 6 reasons why sales representatives going online can potentially kill business
1. THE QUALITY OF CUSTOMER EXPERIENCE DIMINISHES
One of the hallmarks of an offline MLM marketing strategy is its emphasis on building relations and trust with potential consumers. This is achieved through seminars and meetings. This approach enhances brand reputation. It is regarded as one of the most successful MLM strategies out there.
However, what selling online does is take away this customer experience. It deprives potential customers of that “touch and feel” and experience.
It is always easier to convince people to buy a product when they can see it, touch it, and ask questions about the product looking into the seller’s eye.
MLM marketing companies understand the principle, which is why so much emphasis is laid on offline marketing.
If you can successfully give a customer the best experience using offline MLM marketing strategies, there is a high probability the customer will refer someone else to you. Better still, the customer becomes a consultant under your mentorship.
This is why MLM companies frown against online MLM marketing strategies. It is devoid of quality user experience.
2. THE BRAND IMAGE GETS BATTERED
Perhaps, the most significant negative impact of online MLM marketing strategies is the lack of resources and technical knowledge to run a successful online campaign by the sales representative. This makes the brand image look inept and undesirable.
The moment you start advertising a product online, you open it up to cynicism, doubt, negative comments. To navigate through this murky water, your online marketing skills have to be top-notch. More importantly, you must have an extensive ad budget to create a successful campaign, to the point that people start to trust the brand and the products.
If sales representatives lack these capabilities, you will fail at convincing potential clients about the quality of your advertised products. Your failure to do so leaves the brand image in a worse state.
This is reflected in situations where the sales representatives use substandard ad creatives ranging from the ad copy, ad image, landing page, or ecommerce website.
Such inferior aesthetics create a negative perception of the brand. Hence, the brand image suffers.
3. Disrespect for the brand guide
Direct sales representatives are known for violating the brand guide when it comes to the pricing of products. This is very common, especially when they are selling online. Choosing to sell products below the price stated in the brand catalog is a violation of the brand's guide.
This is done in the guise of discount sales. Discount sales are also used to offload old stock.
Discounting causes three significant problems for the brand image:
- It does not position the brand’s products as an authority in that niche.
- Discounting and selling online are violations of the brand’s contract by the Sales representative. What it tells potential clients is that the brand lacks the authority to control the activities of its sales representatives. It does not position the brand as a company that can be trusted. Perhaps, the most significant damage the discounting strategy causes is the sales of compliant representatives.
- The online ecosystem lives for the thrill of discounts and Black Friday deals. So, in a situation where sales representative A offers a price slash of 40%, it becomes almost impossible for sales representative B to sell that same product at the stipulated price.
4. DAMAGE CONTROL IS DIFFICULT
One of the reasons MLM companies encourage an offline MLM marketing strategy is that it is easier to do damage control.
Think of it like this: it is far easier to appease a client you have had face to face interaction with in a situation of conflict compared to a client to meet via Facebook ads or Google ads.
Research has shown that 88% of online shoppers use reviews as a critical denominator when purchasing online.
A situation of conflict between the sales rep and customer could make the customer publishing a bad review about the brand on authority review websites such as Glassdoor, Yellow Pages, and Better Business Bureau if poorly managed.
A negative review on such websites spreads like wildfire. It generates long-lasting damage to the brand image.
5. IT STRIPS AWAY MOTIVATION
The success of an MLM business model is linked to how motivated and eager the sales representatives are. How determined they are to go the extra mile determines how successful the brand will be.
The moment some representatives start violating the rule of no online selling, and the brand appears powerless to punish them or enforce the contractual agreement, sales representatives who play the rule become resentful. They feel betrayed by the brand for not having their backs even though they chose to fulfill their contractual obligation. They become less motivated and irritated. The desire to go the extra mile is no longer there.
For the company, it means three things:
- The chances that the aggrieved sales representative will be motivated to bring in a new sales representative or customer is almost nonexistent.
- Sales decline
- A continued partnership between the brand and sales representative is not assured anymore.
6. It costs the brand valuable resources
Are the brands aware of these contractual violations? Yes. Are they making efforts to prevent selling online? Yes. Have they been successful? Somewhat.
The online ecosystem is vast, and fickle laws and regulations govern it. So, the task is proving almost impossible for reasons such as:
- Publish listings in off-hours, weekends and vacations when the company is unlikely to monitor them
- Using fake profiles to hide their identity
- Refusal of domains and e-commerce sites to take down product listings since it does not constitute a copyright violation but a distribution issue.
The only option left is contractual enforcement. Many direct selling companies have set up teams to achieve this. They have put together teams in charge of tracking rogue sales representatives selling online. This also comes with its own unique sets of challenges.
The process of going through hundreds of domains online, figuring out who they are, and keeping a record of those complying and not complying requires an array of resources.
It costs human resources, time, and money. Resources that could have been diverted to more fruitful ventures.
From these, one is left wondering, would these companies throw in the towel and let these sales representatives ruin their brand image? The answer is no.
Through AI-driven technology, companies can detect faster and have a broader reach to detect violations. The introduction of technology has also made direct sales representatives more inclined to fulfill contractual obligations, since they realize they are being monitored.
At this junction, contractual enforcement and AI technology act as the MLM protection mechanism. Thanks to these MLM protection mechanisms, we should not expect the death of the MLM business model anytime soon.
When asking our in-house expert on the matter he said:
“Some companies have started to put in place technology solutions to have greater coverage and faster detection, as they understand that this “transactional-machine work” is to be done by machine-learning technology, not people. The good news is that, when representatives know they are being monitored, their behavior usually improves radically, and even more so when contract enforcements are applied and communicated.”
-Jesus Roca, Seller Tracking manager (Gray and White market specialist)
These companies understand that the consumer is going online, and they have a sophisticated digital marketing team responsible for planning their online presence. The goal is for them to control and dictate the tempo of their online presence however they see fit. The marketing and sales of products are done through systems they own, control, or choose to partner with. For MLM companies, taking back control over their online presence has become key in their growth strategies, which is why moving towards technology-based services to monitor stock and sellers is becoming more widespread today.