Where’s the 3 for Free Ball?

The 3 for Free ball: ViSalus bounced it, others ran with it, but many ended up dropping it.

When Los Angeles-based ViSalus offered the 3 for Free (3FF) program to any customer, the success was immediate (see program details at www.3forfree.vi.com). Other MLM companies followed suit and soon enough, this promotion was everywhere. Then, as suddenly as it was everywhere, it was nowhere. What happened?

ViSalus’s 3FF program rewards those on auto-ship who sign-up three others to receive product via auto-ship. The initial concept was designed to obtain customers who were interested in product discounts but not really interested in network marketing. With this system, the original customer obtains the benefits of marketing without considering themselves a distributor and without the concrete commitment or responsibilities of that position.

According to Mitch Stowell, Vice President of Commission Consulting at InfoTrax Systems, the 3FF program, done well, is a successful platform to expand one’s customer base without laying out lots of cash.

“ViSalus’s idea behind this promotion was two-fold: give a method or process for customers to tell other people about the products and reward them without paying money,” said Stowell.

The 3FF Program produced immediate and substantial results. Witnessing this success, other companies followed the pattern hoping for the same. Still, the concept of rewarding for referrals in product instead of cash was a difficult one for companies to get right as cash is commonly believed to be the best incentive. Other companies tried to balance these ideas by offering both cash and product as referral bonuses. However, instead of bringing twice the results, this coupling proved disappointing. Experience shows that if distributors are paid a referral bonus with half product and half cash, they may feel shorted.

Yet another challenge can result: since the initial customer received the product for free and most plans don’t pay commissions on free orders, the upline of the free product recipient (or “distributor” for our purposes here) is deprived of future commissions. Also, if the product is free, the qualification volume (QV) and commission value (CV) are zero as well; this means that in most compensation plans, the free product recipient is no longer qualified.

The essential oils company, dōTERRA, has found success with its own cash-based version of this incentive program. According to the company website, the “Power of 3™ Team Bonus is designed to provide generous bonuses to consultants who properly structure their organizations.” The company also offers a separate Loyalty Rewards Program providing free product credits and discounts for monthly product purchases.

ViSalus was smart in making 3FF part of their build strategy.  Distributors were taught to use this to build their organizations with customers and then move them to distributors.  The goal was to get distributors to the Regional Director rank as soon as possible. This rank earned a place in the company’s Bimmer Club (a BMW car bonus).  Used as a means to further success with another, higher end goal in mind, 3FF then becomes part of the culture and build strategy.  Most of the other companies that have implemented a similar promotion have failed to do this.

While ViSalus’s marketing of 3FF has waned, the company still brings in substantial, although declining, revenue. A May 2, 2014 press release from Blyth, Inc. (NYSE: BTH) stated, “Net sales for the three months ended March 31, 2014 decreased approximately 25% to $175.7 million from $233.1 million for the comparable prior year period.” Speculation over the reasons for the decline range from international expansion mistakes to a simple decline in its repeat customer base.

However one thing is clear, promotions like these aren’t singular magic solutions. To maintain long-term success, promotional campaigns and customer acquisition techniques must incorporate a solid, ongoing evaluation of program strengths and weaknesses instead of treating it like the sole plan to customer and income expansion. Most of the companies who rushed to adopt 3FF neglected to adapt to the pros and cons of their circumstances and their versions of the promotion floundered as a result. The success ViSalus has maintained with the 3FF promotion could, in part, be attributed to its successful evolution.

The rise, running, and dropping of the 3FF ball has demonstrated clearly that companies must be realistic, practical, and flexible when designing referral and customer expansion strategies. Promotions like 3FF aren’t singular, rigid, concrete means to permanent success in the industry. Upon discovering success through one particular promotional strategy, some MLMs cling to it like grim death. That is a recipe for disaster.

For more information on this topic and many others, check out our website: www.mlm.com.

http://visalus.com/sites/default/files/docs/bbvi_3_for_free.pdf

http://visalus.com/docs/corporate/3forfree/3ForFreeExamples.pdf

http://blyth.investorroom.com/2014-05-02-Blyth-Inc-Reports-1st-Quarter-2014-Sales-And-Earnings