How to Evaluate MLM Products and Services
There is a short list of factors to look at before you decide to represent a product. I am going to first assume that you believe in the product and are enthusiastic about it. If you aren’t sold on the merits of the product or service, don’t go any further – you won’t be successful. Beyond that, your product or service must satisfy three requirements:
1. Sufficient demand to consume existing supply.
2. Product has a clear unique selling proposition.
3. Product or service promotes repeat purchases from existing customers (customer retention).
Demand and Supply
There must be sufficient demand for the product or service. If there aren’t enough people that need/want want you’re offering, you’re dead in the water from the start. Don’t mislead yourself by thinking that it’s strictly a numbers game and if you talk to enough people, you can find a market or that your product will appeal to everybody. The product or service needs to be attractive to a specific group or groups of people. A good rule of thumb is that if you can’t visualize your typical customer (where they live, what hobbies they have, how old they are), you probably don’t have a viable market. The Small Business Administration has some good resources for market segmentation.
Determining the demand for a product can be a little tricky. The easiest way to assess demand is to look at similar or substitute products. Success of these products demonstrates a demand. The drawback is where the market is saturated. In other words, there is too much supply and not enough customers. If you can’t count your major competitors on one hand or if one or two suppliers hold a dominant position in the market, you’re best to look elsewhere.
If you have a truly unique product or service (see unique selling proposition below), you have to take a different approach in determining demand. Instead of looking at competing or substitute products, you need to look at the dictates of demand. The dictates of demand are the unfilled needs and wants that your product or service satisfies at a reasonable price. For example, if you do research and find that a significant percentage of people would like to be an inch taller and would likely pay $100 (based on their spending habits) for a pill that would make them grow an inch, the dictates of demand suggest that you have a viable product.
Unique Selling Proposition
This is the most important factor to consider in choosing a product/company to represent. A unique selling proposition (USP) is a competitive advantage that you have in the market place – it’s why people want to do business with you.
One of the most powerful examples of a USP is that your product is unique. In other words, Jane & John Doe can’t go down the street to their favorite store and buy what you’re selling. This is the best USP that you can hope for because you don’t have any competitors. This situation is usually short lived because there will inevitable new entrants in any successful product market.
Another USP that many of the nutritional products marketed through MLM programs rely on is that the product has unique qualities that set it apart from those of competitors. This requires intensive marketing because you have to convince Jane & John Doe that your product offers benefits that the product that they can buy from their favorite store doesn’t. This type of selling usually requires expert spokespeople or other well trusted authority that Jane & John Doe are likely to trust. Unless these sources are very well known and respected, you’re going to have an uphill battle.
Service can also be a USP. Some people like buying from people they know or they will buy for the convenience of having items delivered to their door. Don’t overestimate the allure that “shipped to your door” brings – there is an offsetting factor of the lead time involved. People are increasingly accustomed to instant gratification and having to wait a couple of days for a shipment can be unsettling to some.
Another USP that works for the big retailers, but doesn’t work for network marketers is low price. Regardless what someone tells you, network marketing doesn’t lend itself to the low cost strategy. You simply will not be able to reach enough people to make a decent profit.
Customer Retention
Since you don’t invest in manufacturing, huge inventories, many employees, or high distribution costs, finding and retaining customers is your biggest expense. Once you find a customer, you must be able to resell them – either more of the same product or complementary products and services. Your product or service needs to be geared to promote ongoing sales from each customer.
The only way that a business can be successful without having repeat customers is for extremely big ticket items like homes, expensive jewelry, rare antiques, etc. these are items that aren’t suited to network marketing anyway. Any other business needs repeat business from an established customer base. After all would you rather have one customer to spend $100 with you each month or have to beat the bushes to find 4 new ones every month that spend $25 each?
If the products or services that your prospective MLM or network marketing program offers don’t measure up well in these three areas, you should focus your efforts elsewhere. The best sponsor or mentor in the world won’t be able to help you succeed without a viable product.
Personal Finance MLM
Copyright© 2006 John Mielke
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