What insights can Party Plan companies learn from the Vemma and Herbalife court cases? One of the findings seems to be problems with use of autoship?
Bob: In a call with DSA, I learned that it wasn’t so much a problem with autoship as it is a problem with who are the retail customers, and how much are those retail customers buying. How are the customers buying, and can the company verify that they are retail customers? In addition, if a person changes from a preferred/retail customer to a distributor/builder or vice versa, does the company keep track of that change. Very few party plan companies have autoship. In party plan companies, you have real people selling real products to real customers. Prices need to be set where there is a retail price that is acceptable to a retail customer. Party plans are in a very good place because we don’t have to worry as much about the FTC rulings.
Karen: I believe there has always been a divide between party plan and network marketing. In party plan there is a clear cut customer and that is not usually the consultant. Coming from the many years I have spent in party plans, I always looked at network marketing companies as having products that could be put on autoship. Autoship is not at all normal for party plan companies. The consultant in party plan is making a one-on-one sale with a customer in a party setting. The focus for many years in party plan companies has been booking more parties so the consultant can go out and do more sales one-on-one with their customers. I believe party plans are in a good place if FTC is looking at autoship. We know who our customer is and is not usually the consultant.
Are the FTC rulings going to impact consultants who buy inventory?
Bob: Consultants do sometimes buy inventory to sell it at shows or parties on a cash basis in case a customer wants to purchase right there. If a consultant buys $1,000 in product and she resells it for cash is she going to be in trouble? Companies and consultants will need to verify where the product was sold. All consultants that sell at a show or at a party need to give that customer a receipt. The receipt is used for returns and legal reasons. This may be an area that party plan companies need to focus on.
Another area that party plan companies may want to focus in on is training. From the Herbalife case, we learn that it is not enough to have something in policies and procedures. Consultants need to be trained on keeping track of customer purchases. We want to have training on videos and information that we have presented at leadership events. Party plan companies will want to be actively training their consultants and will want to keep track of that training that has occurred.
The training needs to say that the consultant gives a receipt and collects the customer data. This is not just about complying with what the FTC is saying. I have always said it is bad business not to keep track of your customer data. Consultants are using cash and Squares to make the sale. There may come a time when companies are going to want to supply technology to the field in order to capture that customer data. The company can then put the customer data in the consultants back office. Many women who join a company join because they are passionate about the product. The company needs to help train these distributors in how to keep track of customers. The customer base is the most valuable thing a distributor has.
What about income claims?
Bob: Traditionally party plan companies did not make income claims for years. As competition between party plans and network marketing has increased, party plan companies have moved a little toward income claims. Making income claims has always been a dangerous area. You don’t sell people into party plan companies by selling the dream and the compensation plan. Rather, distributors are passionate about the product, and they come in for the product. Most of them are not even thinking about recruiting.
Karen: I don’t remember being with a party plan company that did income claims. It was more about lifestyle. It was more about lifestyle claims such as make a few hundred dollars extra a month or work from home. Party plan companies have always been product focused. People book parties because they love the product. People get into this because of they are excited about the product. Distributors say I love this product. I use the product. Other people are going to love the product too and it is going to be easy to sell. That is why people come on board. I don’t think people come on board to make a lot of money. They come on board in party plans because they get excited about the product in that party.