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Direct Sales Software

Article by: Bob Hipple
September 26, 2013

Direct sales software is an area that will make you or break you. Some well meaning programmers will tell you it is no big deal to build it yourself. You might be tempted to do this. DON’T. When you are a $200 million dollar company maybe.

You need to ask yourself what business are you in? Do you really want to be in the software business? Direct selling is a hard enough business with the best software let alone trying to build it from scratch when you are starting a new company. You can buy a software system from a direct sales software vendor in this industry that will get you started for now.

Having spent years working with clients and direct sales software we have learned many things about this industry and technology. One thing is clear, most people looking at software don’t have enough information or understanding of direct sales software to avoid the major landmines.

This article was written to help you understand some of the key components you need in direct sales software and how to ask the correct questions of yourself and the software vendors.

Let’s first state what a good direct sales software system isn’t:

  • It is not some simple commission engine you build in a spread sheet.
  • It is not a no-brainer to build like your friend the software programmer is trying to tell you.
  • It is not just a shopping cart you plug into a website.

So what is it?

  • A highly complicated, comprehensive software system that manages downline genealogy.
  • A sophisticated commissioning engine that understands the complexities of multiple types of sales volume, incentives, bonuses, commission types, promotion qualifications, and every other twist that you can imagine in a compensation plan.
  • It is integrated with inventory, warehousing, order entry, shipping, commissions, taxation, payment processing, replicated websites, reporting, administration, 1099s, and a myriad of functions you have not even started to think about.
  • Standardized direct sales software is about a 35-year-old industry. The high-value vendors have developed enterprise applications to support almost every aspect of your business from taking an order, shipping an order, recruiting a distributor, to paying distributors.

Now let’s talk about some of the things you will want to know before starting down the software path.

Why do you need it?

The direct sales industry today is a complicated mix of technology. There was a day not long ago that companies looked at credit card processing as an option. It was only in the mid 1990’s that the internet was starting to be used by direct sales companies. At that time there was not even high-speed internet in most homes.

Even back in the 1990’s companies had to purchase expensive servers to install the software on and have an IT person to manage it in-house.

Today most vendors offer hosted software applications that are managed in high tech third party server farms. All the company needs today to get started is a high quality home computer and a high-speed internet connection. Many small companies today are started with the partners in different parts of the country. But they all have the same access to the software no matter where they are located.

The basic expectations of distributors today are much higher than they were just a few years ago. Distributors expect a company of any size would have personal websites, online shopping carts and new recruit enrollment. They just take it for granted that they can login and look at their downline and view their customer orders. Plus, at the end of the month they want to see they got paid and if they got promoted to a new rank.

So why do you need good direct sales software? Because you probably don’t have the ability to build it, your distributors are expecting it, and a good application will let you focus on the other areas of your business like recruiting new distributors and building a larger organization without trying to build the software yourself. Plus, initially it is much less expensive to just buy the software instead of building it.

Do you buy it or build it?

This is always a big question. The answer is if you can afford it, buy an enterprise application from a respected vendor who is strong in the direct sales industry. You should be able to purchase a good basic direct sales software system for about $15,000–40,000 with a monthly hosting fee around $1000 to $2500/mo. Some companies also charge a monthly distributor fee from $2.00 and up.

If you cannot afford this option, then you may have to use Quick Books & Excel to manage your business. But you will find out when you get to about 50-100 distributors it is going to be very hard to keep up with all the moving parts.

By the way, using QuickBooks and Excel is not what we mean by “building it.” QuickBooks and Excel are just stopgaps until you can get funding or have proven your business model.

Building direct sales software is about having an in-house programmer who is trying to design the same type of application you would be purchasing from a software vendor. This sometimes works but most of the time it ends up costing you many times more than just buying it. This is a frustration you might want to avoid until you are much bigger. The truth of the matter is even buying your software and dealing with the vendor is frustrating enough.

What to buy?

When buying direct sales software you first need to determine what kind of a direct sales company you are. For the purposes of this section we will consider two models. Network marketing and party plan. Both of these models have MLM compensation plans. So that is not the main differential. The main difference between these two as it pertains to software is primarily order entry, order fulfillment, hostess rewards, and reporting.

In a network marketing model there is a one-to-one ratio between the order and the individual. Either a distributor is ordering or a customer is ordering. A distributor may place an order either for retail or wholesale. They can do this from a shopping cart or through auto-ship. A customer can also order through auto-ship or just place a single order online. The order is generally shipped directly to the person who ordered the product.

In the case of a party plan the entire order entry and customer relationship is much more complex. Everything done with orders in the network marketing model can be done in the party plan model. But here is where things change. The party plan model has what is called a party. This is a gathering of primarily women in a home of another woman called the hostess. Orders are taken from each of the women at the party. Generally, this is done on paper and then later that night or the next day entered into the software application by the consultant.

The orders can be consolidated into one larger order to be delivered to the hostess or consultant. Guests can also have their orders individually shipped to them. This is determined at the time of the order.

Credit cards, cash, and checks are accepted for orders. If a check is written, it is made out to the consultant. This means when the order is being entered into the software, a box needs to be checked to identify the form of payment—check, credit card, or cash. At the end of the order all of the checks and cash orders are paid for by the consultant in the system since the checks were made out to her and the other non-credit card orders were cash. The credit card orders are individually paid for in the order by each individual’s customer credit card. This is sometimes referred to as a summary or consolidated order.

In addition to these orders the hostess may have earned free product and half-priced products based on the sales volume of the party orders and future bookings committed to that night. Once the guest orders are entered, the system calculates how much the hostess has earned and then her order is placed. As you can see order entry in the party plan model is much more complex.

There are other features in the party plan model that are different too. Reporting on parties, information on guests and bookings are needed so consultants can get a better understanding of the activity in their downlines.

If your company is a party plan, be sure when buying software that you are not just buying from a network marketing software vendor who has a few party plan clients. This is a major landmine in your software selection since they may not be able to support your needs without additional programming.

You need to thoroughly ask detailed questions about the software as it pertains to your specific business model.

Decide on the kind of compensation plan you are going to have before selecting a software vendor. It is best to have developed your compensation plan beforehand so you can give it to the software vendor for evaluation to determine if they support your plan. Find out if it is going to cost any additional money to program the compensation plan. In addition, have them show you the standard reports in the system that support your plan. These are all the things that will cost you more money afterwards.

Clarify with the vendor during the demo that the features they are showing you are included in the base package. Some vendors will show you all the features but omit that some features are extra. So ask what features are in the base, which are add-ons.

Who to buy it from?

There are a variety of software vendors that sell software in the direct sales industry. Just remember the phrase: “Not all direct sales software companies are created equal”.

If there is one really big landmine you want to avoid, it is selecting the wrong software. Just type “mlm software” into Google and you will come up with more software companies than you want to talk to. Most of their websites will promote all the right phrases such as “commission engine,” “genealogy management,” “party plans,” “replicated websites,” and many other features. Remember it is easy to build a cool looking website. This doesn’t mean the vendor is the right one for you.

Consider selecting a company who is a member of the Direct Sales Association, DSA. Just go to www.dsa.org and click the membership list. Then click “suppliers” and look up software. Even this list needs to be filtered down more since membership to the DSA doesn’t guarantee that the software vendor is right for you. All of them have issues. You just want to minimize your issues.

Selecting software is important. When reviewing software suppliers here are some ideas:

  • Ask specific questions as they relate to your business model.
  • Set up at least three different vendors to demo.
  • Set up the demos a few days apart.
  • Send documentation and questions to the vendor in advance of the demo (comp plan, hostess plan, and order forms if you have them).
  • Have the key members of your team on the demo.
  • Organize a checklist of features you want to have and questions you want answered beforehand.
  • Drill down on features and don’t let the vendor just gloss over areas (show me more about that!).
  • Be assertive in getting straight, complete answers.
  • Don’t get caught up in the WOW. Cool marketing stuff is nice but is not critical to your business most of the time.
  • Look for basic functionality that fits your business model now.
  • Understand that this may be the single most important decision you make.
  • Cross reference the strengths and weakness of each demo.
  • When possible get a login to the vendors demo site so you can go back in and test drive the software.
  • Get client references.

Ask in-depth questions of the client references. Really listen to the way the client answers your questions. You should be looking to hear if they just tolerate the software vendor or if they love their vendor. You’ll know the difference. Here are some good questions to ask:

  • What was the experience like getting live on the software?
  • Once they went live on the software did it work the way they thought it did during the demo?
  • What was the support like after going live?
  • Did you have to spend more money after the initial agreement to make it work for your company?
  • Do your consultants/distributors feel that the web tools and party order entry features are user friendly?
  • How well does the online party order entry fit your business?
  • How well does the functionality in the corporate side of the application support your business?
  • What software components do you actually use from the vendor?

Contract Negotiations:

Have the vendor email you a generic copy of the software purchase agreement before you decide to go with them. Read it and negotiate any terms and features before settling on a price.

Summary

Understand your business model before selecting software. Talk to other direct sales company owners about their software experience. Ask in-depth questions of references. Take time to really study the options. Be careful not to just buy into the WOW features—basic functionality first.

Research vendors at www.dsa.org

Bob Hipple

Owner

Direct Selling Today

541-263-5191 (office)

801-712-0737 (cell)

bob@bobhipple.com

www.directsellingtoday.com

 

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