One question that you are sure to be asked, or one that you may even ask yourselves is "What makes Direct Sales different from other types of sales channels", or "There are so many companies in Direct Sales, how are they different and how does the BeautiControl business model compare?" This blog will help you have a deeper understanding into our sales channel as well as give you the words to say when a client or potential new Consultants asks you how BeautiControl compares to other companies.
There are many types of Distribution channels…retail (store-front), catalog, internet, and direct sales to name a few. The BeautiControl business model was established as a Direct Sales business model. A direct sales business model offers a product to a group of sellers at a discounted rate so they can turn around, sell the product for the full recommended retail price and the profit that is earned by the seller is the difference between the full retail price and the price that they paid for the product. In other words, the direct sales channel creates a money making opportunity for a seller. So to be very blunt, direct sales companies are fundamentally focused on opportunity, rather than product.
Within the direct sales channel, there are several different types of business models as well:
One on One selling – through catalog or personal consultations. In this type of model, the product is shipped directly to the end client. The seller does not maintain any inventory. The discount offered to the seller is generally very low because there is very little demonstration by the seller.
- Examples: Avon
Party Plan – group selling, usually with a Host. This type of business model is effective because the selling event offers an experience for the guests, providing both entertainment and education. Depending on the type of product and business recommendations, sellers may be advised to manage inventory (if the product has a high “impulse” appeal.) The product can either be shipped directly to the client or shipped to the seller. The discount, or commission structure in party plan is typically higher (up to 50%) because the seller is holding parties and carrying inventory. Literally speaking, the party plan seller is a retailer, purchasing their products wholesale from a company and selling them at full retail price. The difference between the wholesale price (the price that the Consultant paid) and the retail price (the price that the customer pays) is called retained profit. Because there is product that is being sold at the party, the Consultant can walk away with up to 50% profit on each item sold. When the Consultant builds a team of other sellers, they can also receive commissions on the sales that come from their teams. In other words, in the party plan model, there are three ways to earn money…up to 50% at the time the product is sold, profits that are made through monthly client re-orders, and commissions that are earned based on the sales of their team.
- Examples: BeautiControl, Mary Kay, Pampered Chef, Tupperware
Network Marketing – essentially a “buyers club”, with product lines that lend themselves to monthly personal consumption. Network marketing companies essentially focus on bringing people in to be wholesale consumers of the product, rather than sellers. The discount, or commission structure is typically lowers (on average of 30% - 35%) because the distributor is not paid to “sell” product, hold a party or house inventory, they are simply paid on the number of people that they sign up and the amount that each of those people order for personal consumption. Products are typically delivered as part of a monthly “auto-ship” program and delivered directly to the distributor (personal consumer). In general terms, the “distributor” in the network marketing structure is a “client with a consultant number”. The price points of a product sold through the network marketing channel is generally fairly high priced, encouraging a person to join so they can get the product at a discount. Because there is typically no product that exchanges hands during the selling situation, the distributor is paid at the end of the month as part of their monthly commissions.
- Examples: HerbaLife, Mannatech, Melaleuca, Arbonne, Amway
It is important to note that cosmetic companies in general DO NOT put products on sale (with the exception of Avon). You will never see a prestige brand, i.e. Estee Lauder, Lancome, Clinique, Aveda, Mary Kay, etc. In the Direct Sales channel that is also the case, with the exception of BeautiControl. At BeautiControl, we offer additional discounts each month to help our Consultants maximize their earnings potential when they sell at full price. I hope you got that part…”when they sell at full price”. BeautiControl is not marketing to your clients OR marketing to our Consultants as clients. We create offers to encourage our Consultants to stock their inventory to either give them more profits when they sell at full price, or have the ability to create merchandising offers to their clients without compromising their retained profit. This is one of BeautiControl’s key competitive advantages in this channel, making the BeautiControl opportunity more profitable than any of the other companies in our sales channel.
We will get deeper into discounting, attracting and developing sellers, brand value and commissionable volume in future blogs, but the key takeaway here is that each of these business models appeal to a different type of person:
- The catalog/retail model appeals to a seller that enjoys more indirect selling by just passing out a catalog and collecting orders.
- The network marketing model appeals to those who have little interest in selling products and building a client relationship, but wants to create a down-line of people who are signing up other distributors. You typically see more men in this type of business model.
- The party plan model appeals to those who enjoy the selling situation, want to earn immediate profits through selling, want to create clients and build a regular re-order business and may want to receive commissions on sales that come from building teams of sellers. While the party plan model can be a very appealing business model for men, typically it is a model that attracts women since it is more of a relationship business.
From a business standpoint, each of these business models are structured to be successful and sustainable when they are worked the way that they were intended to be worked. When a network marketing company starts selling like a party plan company, they will not make the money that the network marketing business model was structured to deliver. In the same vein, when a party plan company starts behaving like a network marketing company, and signing up each of their clients to become wholesale buyers, they are not making the immediate profits on the full retail value at the time of purchase, nor are they building a client re-order business which creates a sustainable income. Within the party plan business models, both Tupperware and Mary Kay are best in class when it comes to maintaining the integrity of their business model by selling their products at the full retail price and presenting their business as an opportunity to sell and build a team of sellers.
There are so many things that I love about this business. None of the companies in these channels are “product” companies. Because they rarely advertise or have the same financial burdens of retail brands, they are able to put more money into the quality of the products (in the case of most party plan companies) or in the payout structure (in the case of network marketing companies). Each company in direct sales was built to offer an opportunity to earn money, and the formula for maximizing your income within each of these different business models is very different. When choosing to be in direct sales, it is key to pick the type of business model that best fits your comfort level and your personal style. Does your interest lie in selling and building teams of sellers or are you more comfortable building your business by continually recruiting wholesale buyers and building a team of those who do the same? In order to earn the kind of income that each business model was designed to provide, it is crucial that you operate the business the way it was built to be operated. If your behavior isn't currently matching the behaviors that your business model was structured to drive, then it may be time to make some adjustments in your behaviors or some adjustments in your choice of business models.
The reason that I am so passionate about the party plan model vs. the other business models is it gives the Consultant the ability to earn as much money as they can by simply sharing their passion for the products that they are using, giving them the ability to meet new clients at each selling situation, building new relationships that in many cases last a lifetime and creating a team of sellers who have one goal in mind…changing their own lives by offering the opportunity to help someone else change theirs. This is a passionate business for passionate people, and there is nothing that can be as energizing or personally rewarding as that.
As you read this, ask yourselves these questions:
- Are you maximizing your profits by selling your products at full price and marketing your Hostess Program as an opportunity to earn product credits, or are you passing along your discount as a Consultant and cutting into the profitability of your business and de-valuing your product?
- Are you losing the profits at your Spa by selling your Spa Now demonstration case as one of your “set” options and creating a “client with a Consultant number” or are you selling products at their full retail price, making immediate profits, building clients and creating residual income through client re-orders?
- Are you marketing your business as a retailer of products? If so, do you have products on your shelves or are your shelves empty? What are you doing to make sure everyone knows that your “store” is open?
- Are you taking yourself seriously as a business owner and expecting others to do the same?
- Are you positioning BeautiControl as an opportunity to earn an income, create relationships and have the flexibility and control of being a business owner or just an opportunity to get a discount on their products?
There is no right answer or wrong answer here…but in each question there is one answer that will ensure you are working the business the way that it is intended to be worked. There is one answer that will ensure that you are making money, being profitable, building a team of successful Consultants and creating a strong, sustainable and highly rewarding business.
Be sure to check back next Monday where we will outline the dynamics of Group Selling. Have a great week.
