On this episode of the MLM.com Podcast, Kenny continues the retrospective journey through the first year of the podcast. We hear from Trent Spratling, Allen Pollard, Mark Rawlins, Mitch Stowell, and more. Listen in for some of the best insights our gracious guests have shared with us so far. And if you haven’t heard part one yet, check it out!

Full transcript

Kenny Rawlins: Hello and welcome to the MLM.com podcast, brought to you by InfoTrax Systems. I’m your host, Kenny Rawlins. As we started last week, we are doing a Year in Review podcast where we feature quotes and insights from all of the guests that we’ve had over this past year. Let’s jump right back into it. Here are some more insights from our guests over the past year. We’re going to stay with Steve Hooper again for our next quote, talking about growth and the risks that are involved in growth and how you channel that growth.

Steve Hooper: There’s a plan and that plan’s got to be strategic in nature. It’s not just a number. There’s got to be a plan of how we’re going to do that. It has to be realistic—which means it’s measurable, it’s attainable, and the activities that are going to drive and help us get there—they are then milestones. As we achieve those milestones, those become triggers for other activities. And then the one that we’ve really got to make sure of is that there’s a continuous evaluation and assessment of how we’re doing. And with those in place, you can look and you can grow—it won’t always be pretty— I mean that’s the thing with growth, you can think, “Wow, every company wants growth.” Growth is not always pretty. You know growth can be very difficult, because, again, the entire organization, all the way through a field organization, all the way through supply chain, everyone is growing along with you.

Kenny Rawlins: My personal background comes from compensation and promotions, so that’s a topic that’s always dear to my heart. One of the guests that I enjoyed having on this year was Sam Glanzer, talking about the role of promotions and incentives and figuring out how they can best incentivize specific behaviors.

Sam Glanzer: What type of promotion or contest is going to really strike it hot with the audience that you’re going after, and will really move the needle, and in my experience the promotions and incentives that that I’ve seen, that have been successful, have a couple key elements that are involved.

One of the key elements is a behavior. You need to identify a behavior that you want to affect, or motivate, or give an incentive to—whether it’s recruiting or sponsoring, whether it’s sales, whether it’s advancement— advancements through a plan. I think oftentimes we make the mistake and we say “Hey we have extra inventory of this product,” or “Hey we want to give away a bag,” or “We want to give away this swag item, let’s come up with something for people to do to earn this.” I think if we can identify the behavior first, and then put a reward on that behavior, or towards an incentive for people to do that behavior, starting at point A and going to point B, as opposed the other way around, that’s the first step. And then once you know the behavior that you want, if you can identify a reward that justifies, or that is comparable to the work that needs to be done to earn the reward, so that the work justifies the reward, that’s also key because you don’t want to ask people to go sponsor 20 people and then give them a recognition pin for it or some sort of trinket. You want the reward to be substantial enough so that people are excited, and that it generates hope and potential for them—the reward has to be within reach. So, I think that’s key—having a reward, having the work justify the reward.

Kenny Rawlins: One of the topics that’s not unique specifically to the MLM space but is something that MLM companies have to take extremely seriously is fraud prevention. One of the guests we had this year was Trent Spratling, who helped us to understand the future of fraud prevention, and what companies need to do to continue to address that.

Trent Spratling: It’s pretty common for people to say, when you think about preventing fraud, “Oh, is that card valid?” or “Is it on a stolen list?”, or “Is it a real card?”—well, honestly—we can go online right now and buy a stolen identity with a name, their address, their email, their spouse’s name, their kids. You can get so much. It’s scary how much data they can get. Five years ago, merchant accounts would say, “Oh yeah, we could tell, and we are getting fraud attempts hitting our website, because the percentage of passing the authorization was pretty low.” Well, those very same merchants now come to us and say, “Oh yeah, we actually look at all of the orders that we’re approved for off, because all of our fraudulent attempts pass off. In fact, good customers don’t pass authorizations as much as our fraudsters do now.”

So, it’s not reliable. We’re on pace for four billion records being breached and stolen, this year alone. So, when it comes to stopping fraud you cannot rely on “Does this name match this address, was this name aligned with this card,” because it will! Unless it’s a kid in Grandma’s basement just trying to see what he can do and it’s kind of like dummy fraud as we called it. But the common real deal fraud we’re dealing with, they have all that information. So what helps that, and what merchants really need is digital behavior analytics about how data points are being leveraged, and where we’ve seen them, and how they’ve been utilized to identify patterns and behavior of use of these identities, to then identify, “Hey you know we’re not saying that this name doesn’t go with this card, what we’re saying is we see 15 other credit cards or four other devices, associated with 35 emails, associated with this order that’s coming through, and we see all these other behaviors and patterns that are pretty indicative of fraud suspicions.” So, if I had to boil it down—you can’t rely on clear-cut database, like, “Is this a legit card?” or something like that. You’re not going to catch the fraud that way in today’s world, we’re way past that. You’ve got to grab whatever piece of data you can about their behavior and how they’re acting in the use of the data points.

Kenny Rawlins: Here’s a quote from Mitch Stowell, who’s also in InfoTrax Systems, talking about how we measure compensation plan effectiveness, and what are some of the things that companies need to take into consideration when they’re analyzing their own compensation plan.

Mitch Stowell: One of the reports that we do is what we call a forward retention report. And we look at a particular month of everyone that could have had volume, or had earnings, or just purchased product. And then we go forward six months and we break out everybody based on what their earnings were from zero to ten, fifty thousand dollars, whatever it is, and we go forward for six months and look at how many of them purchased every month. And one of the things that we’ve really learned from all of that is that a company’s sweet spot is usually not where they think their sweet spot is. This company had this training that they did of “Go for Gold.” And their whole focus was to get the leaders to train people, to get people in, and to do these certain things to get to gold. But when we did the analysis with a forward retention report, we found that the sweet spot was about three to five hundred dollars—and that actually becomes a sweet spot for the majority of companies—but we found that if they could get people to that $300 level, earning three hundred dollars a month, that the retention was anywhere from 85 to 90% for those six months. And so, we looked at changing the build strategy.

Kenny Rawlins: Sticking with compensation, here are two quotes from Mark Rawlins on the role of compensation, and how we should think about compensation, and being more thoughtful and cohesive in our compensation strategies.

Mark Rawlins: What percentage of total compensation is going to social roles, what percentage of total compensation is going to sales people, sales leaders, dream builders, lottery winners, and retirees? And then you can start to compare across industry norms, and that’s something that we’re very enthused about we’re working very hard on, is to get these industry norms sort of nailed down so that we can tell our client, “Hey, here’s where you fit,” because we have salespeople who earn as little as five or six percent of the wholesale dollar, or as little as five or six percent of the earnings. And then you have companies where the salespeople earn 50 percent of the earnings. And what’s right, what’s wrong—within a range, it depends on your product. But if the salespeople are earning a hundred percent of the earnings, then you’re not really a direct selling company as we know them today. And if a salesperson is earning five percent of earnings, then you’re not really a product focused sales company.

But there is, I think, one thing that companies can look at, that I don’t think a lot of companies do look at. It’s salespeople and emerging sales leaders—so people who are earning a few hundred dollars a month. How many of those people stay with you, without growing to the next level? Because the majority of your company’s sales people will always be salespeople. Some percentage will grow to sales leaders, but a very few percent. And then a very few percent of sales leaders will grow to be dream builders. And so, are people content to become a salesperson and stay a salesperson? And if a company looks at those earners, and they either promote or die—that is a very objective criteria that companies can look at, and you know, determine whether or not—at a very high level— is their compensation plan successful. And we’re talking about some really in-depth analysis for really fine tuning a compensation plan with the tools and the techniques we’re doing. But there are things companies can do without having to spend money with us or any other analyst, they just look at people and look at persistence.

Kenny Rawlins: We’re going to circle back around to Amazon. Obviously, Amazon, for everybody, is the 800-pound gorilla in the room, so it’s not a surprise that several of our guests brought up the need to compete with Amazon. When we talked with Alan Pollard a few months ago, he talked a little bit about the disruption that is coming from Amazon, and the things that MLM companies should be doing to compete with Amazon, and one of the things that I’ll say is I do think there are ways that MLMs have a leg up on Amazon, but they shouldn’t ignore Amazon just because they’re in a quote-on-quote different space. At the end of the day we’re all selling products in an e-commerce world.

Allen Pollard: We look at the US, they’ve been the leader in the direct selling space for so many years. And so, I think from a certain kind of perspective, if we looked at it from just purely a business lifecycle or a product lifecycle, I think it’s pretty clear that Direct Selling in the US has moved into a very mature market space. It’s not an emerging market, it’s very much a mature market, so what does that mean? Well, I think, personally, the success that I’ve seen with clients—it is a laser focus on their product with a very specific brand. And when I say brand that’s all-inclusive. It’s understanding the specifics of the target market that they’re serving, it’s understanding the specifics of the consumer behaviors and how they’re going to consume that product, and then being able to put a very compelling brand. Marcom communicates all those things that build around successful brands, there are companies that are doing those kinds of things. We’re seeing a lot of activity, I think, Kenny, if you sit back and really look overall. We’re seeing a lot of our US companies start to embrace more of a consumer-centric brand management, even in direct sales, so that the consumer leads, the product leads, the benefits, the solution, whatever it might be. Those are the lead for the direct sales force. Rather than, as we well know, the direct sales industry has had the ability to lead with more of the business opportunity. So, I think we’re seeing that pendulum swing, and as our companies I think really embrace this kind of new millennium a little bit, I think we’re going to see some tremendous successes within the direct sales space. But again, I think it’s going to be led by a focus on consumer, a focus on product, a focus on that overall consumer experience, and those are the things I think are going to really lead the up growth in the US market.

You know, one of the things that I find fascinating is the disruption that we’re starting to see with Amazon. I mean for 100 bucks a month–I feel bad because my wife loves Amazon and we’ve got grandkids across the country, so that two-day free shipping with that Prime membership—I mean, we’re getting our money’s worth on that deal because it’s just something that she uses on a regular basis, and she doesn’t even think about going anywhere else because shipping is free at Amazon. That’s a disrupter. And so, we’re starting to see even those kinds of basic fundamentals, where it’s not necessarily competing within the industry, but it’s competing overall in the general consumer space.

So, I’ve seen many of our clients that are really taking a good hard look at “Okay, what is the expectation for a consumer customer experience?” And it’s not just about the product and the price, but it’s also about the delivery mechanisms, about the customer support, as well as the price that goes into that. So, again, clean, clear segmentation between our customers both retail and preferred, and then providing that opportunity. I believe as we move through this, maybe a little bit of a trough if you will, I think we’re going to emerge much stronger because, again, if you look at the hallmark of a successful distributorship, what is it? Well, it’s retention. It’s being able to keep the folks that I bring into the business, and that I’m not having to replace those on an annual basis. So, those companies who have truly mastered that product component, that customer experience—while it does take energy, and it does take effort, and it does in fact take costs away—what we’re finding is that the retention rates of those companies are much stronger. So, several of the clients that I’ve talked to—and we talk a lot ( back in the day you and I would have this argument) about what is the right commission plan? What is the right commissionable amount? And what we’re starting to see a little bit is that commission is being divided up, a little bit differently in this world, because some of those funds that may have gone to our salespeople, to our team leaders, to our executives, what we’re seeing is a little more investment in the customer experience. And so, as we talk about promotions and incentives, frankly, one of the big number-one items is the shipping component. So how do we incentivize and create retention, utilizing a free shipping program, and how do we pay for that.

Kenny Rawlins: Our last two quotes come from people who I’ve worked for many years with, talking about where software is going and also the mistakes that early companies make. First, let’s hear from Sean Smith talking about where IT has gone and where we see it continuing to go.

Sean Smith: That’s where IT in general has gone over the last 10 years is to cloud-based products, where people are buying a little more specific to their needs rather than trying to buy a full suite of something from one vendor. They’ll go out and say you know I really need an InfoTrax case, let’s call it a commission engine, I need to go out and get a commission engine, and I don’t necessarily have to buy a transaction engine or the e-commerce segments from InfoTrax, they offer those as well, but I don’t have to get them there. I can go out and get a cloud-based Commission engine, get a cloud-based ecommerce, and tie those two things together. And I think to answer that question in one word, its integration. That’s the big shift we’re seeing.

Kenny Rawlins: Now here’s David Judd and I discussing the complications of growing from a start-up to a larger company, and what you have to look for when you’re starting up as a company just in your early stages.

The thing that can be more complicated and the place that I’ve seen people make a mistake starting up too early is having too many active integrations where you’ve got a single person jumping into two or three different systems and that can obviously cause some frustrations.

David Judd: Yeah, in the startup world you’ve got a small staff of people who wear a lot of hats. And if you’re asking that staff to jump into different systems, different user interfaces, that just adds overhead to the processes that they have to go to. Phone calls with distributors and customers can take a little longer because I have to move from system to system, and it’s certainly frustrating for that user. In addition to all that, it can also increase the risk of mistakes made by that particular CSR or whoever the person may be, because they are wearing multiple roles, or because they are fulfilling multiple roles, the passive integrations work real nice so when you’re looking for software you definitely want a software provider that can keep a good UI for the for the multiple roles where you may have CSRs, and some admin, and some logistics, and some accounting, and at least there are some aspects that the people that wear the multiple hats can live with in a UI ideally and then bring in those passive integrations, like you mentioned. Yeah, I may have to go in there as a finance person for the company occasionally into my credit card or my tax or whatever, but for the most part, the different roles, because they’re filled by one person, keep that UI, keep that user experience as simple as possible. It will save you heartache, it will save you time, and allow your people to get really good at doing their job.

Kenny Rawlins: And that does it for our Year in Review podcast. I hope these last two episodes have been helpful for you in remembering some of the great insights and thoughts that we’ve had from the many leaders around the industry. I hope you’ll join us again in our next episode as we’ll resume our normal podcast format. I’m your host, Kenny Rawlins, and I appreciate you joining us. Thank you, as always, to Adam Holdaway and Jana Bangerter for production support. We hope that you guys will join us again, and rate us on iTunes or wherever you get your podcast.