MLM Software - Old School - New School - Bad School!
I've been in the industry. providing Consulting and MLM Software for over 27 years. In the coming months, will look back at some old files to verify, but may be more than 29 years.
Yes, I have seen a lot.
- A lot of Good, a lot of Bad.
- I have seen Good intentions go south,
- I have seen Bad intentions go north.
- I have seen marketing techniques which succeed and those which did not.
- I have seen successful company and product launches, as well as failures.
- I have seen companies contract to launch a company and never launch.
- I have seen companies that didn't try to launch, but it went wild anyways.
Yes, I have seen a lot. There is a Magic Sauce, if you will. One of the ingredients of the Magic Sauce is a correct view of MLM, MLM Software, Tools, Features, Methods and Compensation Plans.
Today, I will pen down some points, regarding MLM Software - Old School, New School and Bad School. The aim here, will be to separate some of the confusing terms, trends, requests, which we receive, to give you a better understanding ahead of engaging in MLM Software and your Business Venture!
What it is MLM Software
1st, if you are using the title Affiliate, Direct Selling, Referral Marketing, Party Plan, MLM... it is ALL 100% MLM. You are only defining a subsector of MLM. It ALL requires real MLM Software, as all have the following attributes, regardless of tracking to 1 level or 1000 levels.
MLM Software is the system which manages the sales data, tracked to genealogy data, delivers reports, and operates a commission engine to deliver commissions and bonuses.
To manage sales data, indicates sales must occur, indicates product/service must exist, indicate inventory and order management must occur, indicates public ecommerce must exist.
Tracked to genealogy data, indicates sales must occur on some replicated site belonging to an individual in a genealogy, indicates persons exist within a genealogy with relationship to one another, indicates a genealogical structure, indicates a sponsorship structure, indicates sales relative to one another, and also indicates some joining process exists to open new positions within the relationships of the genealogy.
Deliver reports, indicates data consumed, sorted, stored, with relationship to customers, distributors, sponsors, genealogical relationship, could be pulled and delivered for various views of interest.
Commission engine, indicates an ability to discern the sales data and relationships within the genealogical structure, discern qualifications for each individual within the genealogical structure, then tabulate bonuses and commissions, based on qualifications to earn, and the sales relevant, for each individual within the genealogical structure.
If you think that is a mouthful... we have just scratched the surface, but will go on, for 'brevity'.
What MLM Software is Not
MLM Software is not an ERP (Enterprise Resource Planning), while it may be a considerable 'spoke' of an ERP, it is not the whole. ERP can get into managing a manufacturing process, label, bottle and cap inventory, labor, etc. ERP can get into warehouse management, etc.
MLM Software is very much the central hub of managing an MLM Company, as it utilizes APIs to push and get info from your fulfillment centers, payment gateways, tax providers, etc, but is not an actual ERP. Please stop confusing it with such.
And, please stop suggesting an ERP could every be MLM Software! ERP is, by it's name, about Resource Planning, it should not be manipulated to be an actual operational management platform of actual sales, marketing, commissions. It is completely different, no matter how custom you attempt to make it.
MLM Software Terms and Titles
As stated earlier, Affiliate, Referral, Direct Selling, Omni Level, Single Level, Influencer Marketing, Party Plan, MLM. Call it what you may. In the first section, I gave what is key to MLM Software. This is the same for all these title, why? Because they are all MLM. Don't believe me? Break a Biz Opp Rule of the FTC and let them tell you.
No matter your term or title, you wish to manage how sales relate to a referrer, and possibly some relationship of at least one referrer or more above.
Then, you wish to determine, if that referrer or the one above have met certain rules to earn some commission, and if they have, what commission or % should they earn.
That relationship of referrer is level, and multiple levels of relationship must be tracked and maintained of the genealogical relationship, that is multi level, from a software sense.
Feel free to call it Quantum Affiliate Referral Demonstrative Business Opp... it is still MLM and MLM Software which we speak of!
There are other terms and titles in MLM Software, other then the global business model. You may refer to income centers of the genealogy as Distributors, Stylists, Consultants, Social Influencers, Referrers, Ambassadors, the list goes on. Then, ranks are title and terms used within the genealogy to identify advancements. Example: Silver, Gold, Diamond, Leader, Builder, Ambassador...
MLM Software Compensation Plans
UniLevel, OmniLevel, SingleLevel, Matrix, Board, Straight Lines, Recycler, Weakside Binary, Steps and Cycles Binary, Stair Step Break Away, Coop, Australian xups and many more.
At it's core, most all comp plans fall into 3 general differences, then the details further separate them.
- UniLevel - Unlimited Width, LIMITED Depth - Slow Growth, Widely Understood, Based more on my actual actions to advance/earn
- Matrix - LIMITED Width, LIMITED Depth - Med Growth, Moderate Understanding, Based partly on my upline's continuation of Sponsoring
- Binary - LIMITED Width, Unlimited Depth - Fast Growth, FEW Understand, based HEAVILY on my upline's continuation of Sponsoring
Nearly every comp plan on the planet is one of these 3 structures, or custom modifications of such.
Now, I am not aware of a compensation model, itself, being illegal, but rather the actions of individuals could be. That said, a compensation plan promotes the action of individuals, good and bad.
If I were launching a company, with my name on it, what would be the basis of my compensation model?... I get asked this often....
Well, If I were launching a company, to answer this question, I would consider the differences, as noted above, and then ask myself...
- Will Most my Distributors Understand the Compensation Plan, that they may, therefore Understand how and where any potential commissions/earnings would come from? (I happen to believe, it is BEST for people to Understand their potential earnings.)
- Will I have to operate an extensive Customer Service Team, due to the limited understanding of the Compensation Plan and where member earnings come from? (There's nothing worse then your phones ringing off the hook, by 100k distributors, believing they should have earned more!)
- Will my compensation plan motivate people to sell more of our products? (good)
- Will my compensation plan motivate people to purchase large quantities of product, to put in their garage, not use, but qualify for commissions? (not good)
- Will my compensation plan motivate people to strong-arm a new recruit to purchase a particular kit? (not good)
- Will my compensation plan motivate people into an endless chain of recruiting? (not good)
- Will my compensation plan bury me in customer service expenses and legal expenses, due to explosive growth, coupled with broadly poor understanding of our product and compensation plan, coupled with misrepresenting the company, product, compensation plan and business opportunity? (not good, not good, not good)
There's more, but by now, you are forming a clearer picture of right and wrong... a clearer picture of what to look for, ask, or build.
In my 'opinion', a compensation plan can be fairly simple, well understood, and hugely beneficial(via commissions and bonuses), without being confusing and creating misunderstanding or a recruiting stampede of misrepresentation.
MLM Software Joining Process
MLM Software, by site replication, should provide a Joining Process. This allows the new signup to be put into the genealogy, in a relationship to the replicated site owner.
The joining process normally has a couple of elements.
1. ) Joining Fee / App Fee / Registration Fee: We see folks have no Joining Fee, a small Fee, or a Large Fee.
There is considerable psychology to this area.
First, it should be stated, that you should consider if a Joining Fee is specifically necessary for your company, as a matter of costs of onboarding a potential new Distributor. Generally speaking, the answer is yes, so we go on.
Now, a Free or Low-Threshold causes many to signup, for the benefits of buying at Distributor price, in essence, creating a wholesale buyers club.. poor choice.
...You 'should' want people as Distributors, that Love your Product and want to Share it with Others. You want Brand Ambassadors, not discount Buyers.
..a. 1000 Discount Buyers, or b. 1000 Brand Ambassadors that each find 5 Customers?
Ok, so you choose a Joining Fee, say $200 as a requirement to join, then you learn that some states have Biz Opp rules, which limit how much you can require a member to spend in 30 days or 60 days, etc. You now consider the required Joining Fee, any Required Kit, any Required Back Office Fee, cumulative requirements by the term set by the state and WHAM!, you have a Legal issue.
When considering the psychology and added concerns, I am a fan of $29 to $99 for Joining Fees, with $69 being a sweet-spot.
2. ) Joining Kits: Company A REQUIRES a Kit Purchase either $1,500 or $2,500 so I want to do that, move a bunch of product, and give great commissions to the Sponsor.
Hold them 'Taters'! How many times did you Mom tell you, just because someone else does it, doesn't mean it's right, or that you should!!!
If you even BEGIN to utter the words, I wrote on point 2.) Joining Kits... Head over to the FTC and learn about the rules for Biz Opps.
Now, get a copy of the actual Biz Opps laws and write them 100 times, by hand, in Blue Ink on Legal Paper. When finished, write on the head of the legal pad.. 'My Most Important Lesson in Life' and put it in your Safe.
When you get called before a judge, put a striped suit and are sitting in a cell, call someone to send you this legal pad, so you have something to read for a while.
Ok, I went a bit dark on you.. and rightfully so!
Here is my answer, to such a comment of 2.) Joining Kits...
If you won't listen to me, hand up, call an MLM Attorney, because you MUST have an MLM Attorney author ALL verbiage of a joining process and policies, which even begin to cross the lines of Requirement to Purchase at signup, or otherwise trip FTC Biz Opp Rules!
When you get done... Yes, you can do as Company A, requiring that purchase... but you may have ended up spending the money to qualify as a Franchise to do so... or you may now be operating a business, where... when you want to register a New Distributor, you say.. you can not signup today. I know you want to, but, first. I need you to take these documents. Notice this one I have put others that have purchased this Biz Opp/Required Product Kit in your area. Here is their name and number. Please call them to do due diligence and review all these docs for 7 days. If you have done that, after 7 days, I can receive your application.
Why is that? Because, some companies have truly taken advantage of consumers, right down to encyclopedia sales people, where the push to sell was so strong, buyers remorse kicks in, yet they have already signed up.
Worse, on top of this, is your consideration of paying a commission, on this Required Joining Kit....
In my 'opinion' If you would like to present 1 or more kits during the joining process, follow these rules. 1. It must be Optional to purchase a Kit or Product Assortment. 2. It must NOT provide any benefit/bonus/commission to the sponsor, or ANYONE. 3. It 'Should' be items at a good value, preferably at cost. 4. It must Always be with a 100% unconditional and unlimited by days, return policy of unopened/unused items.
I see this, as a viable Joining Process, generally good, for most companies:
- Joining Application Fee $69 - Required, One-Time, Non-Commissionable
- Kit 1 $99 - OPTIONAL, One-Time, Non-Commissionable, Refundable
- Kit 2 $199 - OPTIONAL, One-Time, Non-Commissionable, Refundable
- Kit 3 $299 - OPTIONAL, One-Time, Non-Commissionable, Refundable
Our MLM Software also has some added features that could be applied, that may incentivize the purchaser to an Optional Kit. Note: incentive the Purchaser, not incentivize the Sponsor into selling the new recruit on it.
After reading this far, you should know I am very cautious, that said, this added feature is very very very good!
MLM Software Marketing
Yes, Marketing. Marketing for an MLM Company begins with the MLM Software Tool-Sets. Perhaps, not all MLM Software companies may offer marketing tools, but, we do.
Marketing Tools of MLM Software should include Gift Cards, Discount Code, Cart Promotions, Add On Products, Social Share Discounts, Blogs, Email Campaigns, Landing Pages, Squeeze Pages, Prelaunch and much more!
That's not all MLM Software, as it forms the sales and signup processes of Customer and Distributors, the extended Marketing Methods of an MLM Company become intermingled.
In short, a company should market it's products and services, gaining a loyal following, of which 'some' are so excited about the products and services, that they become brand ambassadors, telling others. This natural attrition into a Distributorship provides the most solid foundation for a sustainable and long-term company.
...In contrast to a company that markets a Biz Opp, compensation model and get in now.
MLM Software Back Offices
Back Offices fall into 3 general categories.
- Customer Account Area - Customer Portal: Customers would access to manage their profile, order history, communicate exchanges and returns, receive marketing and promotional communications.
- Administration Area - Admin Portal: Administrators would access to manage customers, distributors, orders, marketing, content, commissions and more.
- Distributor Back Office - Member/Distributor Portal: Distributors would access to manage their sales, customers, downlines, genealogy, reports, personal profile and much more.
Times have Changed, so a few continued Comments
MLM Software - Old School
In Old School, we would see individual BV/CV on every product, unrelated to the invoice amount, creating an elusive summation for Distributors, as to the value for Rank Qualification or potential earnings.
In Old School, it was common to see a joining process with a Fast Start Bonus, which you encouraged a New Recruit to purchase a particular KIT, that you may earn that Bonus.
In Old School, it was common to ignore the product, focus on the earnings.... ouch!
MLM Software - New School
In New School, we see Qualifications and Commissions based on Invoice Subtotal, or a specific Percentage of such.
In New School, we see Social Influencers become Top Distributors, referring bands of consumers to a replicated website.
MLM Software - Bad School
Bad School, after reading everything above, Bad School has been greatly laid out already. That said, a Comp Plan that pushes Recruiting is Bad School. Mixing Affiliate Commissions of Customers with Genealogy Commissions of Distributors is Bad School. Having a Joining Process with a Required Purchase is Bad School. Having a Joining Process where you do not collect a SSN or Tax ID is Bad School.
Believing you can operate, successfully, and nurture successful Customer and Distributors without MLM Software is Bad School.
So, what will you do? Sit and wait?.. or get out there and Build your Empire!
Call us for a Free MLM Software Consultation 619-770-7107