Your Daily Cookie

-Your Daily Cookie-
© 06/16-27/08 EDITED
By Dahni

 

 Your ‘BIG-O Cookie – Certfied organic

 

‘In Pursuit of the Best Business’

Introduction (original post 6/16/08 part 1 of 9)

   Prior to the Industrial Revelution in the latter part of the 18^th century and early 19^th century, people mainly woked in agriculture. Life was hard and was spent primarily just to feed themselves. Over 50 % of the population were involved in this industry. With new technology, life changed and so did business. Beginning in the 20^th century, mass production of nearly everything would be the area where business opportunities would be found. Then, approximately every 10-20 years, a new marketing system is identified as a new way to distribute goods and services to the end user. To begin this journey, I have prepared a list of these trends and point towards the best way to operate a business, in the 21^st century.

•  1930’s – Direct Selling
•  1940’s – Franchising
•  1950’s – MLM (multi-level marketing)/Network Marketing
•  1960’s – Catalogs
•  1970’s – Direct Mail
•  1980’s – Infomercials/Direct Response
•  1990’s – Internet/E-Commerce

   It should be noted that each and every business model above since its beginning, continues to this present time. The simple fact is that they all work and often extremeely well. But why did one immerging trend dominate the one or ones which preceded it? What are some of the individual stengths and weaknesses of each business model?

   Finally, this one last question. If all of the models above are still in use, would it make sense to form a new trend which contain elements of all of them? This is your cookie for today. The new, next best thing in business, is to take all the strengths of each previous model, eliminate the weaknesses and thereby form, the next business trend of the 21^st century. This new trend not only does this and adds other dynamic elements as well, but it is presntly being taught to business majors at one the largest public universities in the country.

Direct Sales (original post 6/17/08 part 2 of 9)

   In the introduction to this series, the previous business trends were listed with a view towards combining their strengths without their weaknesses, to form a new business model. Approximately every 10-20 years, a new marketing system is identified as a new way to distribute goods and services to the end user. Now we we will begin to look at some of the strengths and weaknesses of each trend, show what happens if they were all combined, and by adding some new ingredients to the mix, produce the best cookie or business model of the 21^st century. Today, what is the concept of Direct Sales and what is the best way to make money with this business model currently?

•  1930’s – Direct Selling

  Direct Sales

   Instead of the manufacturer moving their products to a distribution center or an actual store, direct from the manufacturer to the end consumer became the new trend. Direct sales from its beginning can simply be understood by the following.

   Direct sales is the process of taking products or services, directly to the end consumer or end user. The process involves sales which requires, a salesperson. A salesperson has the natural or developed ability to persuade others to purchase (preferably right now), something they may or may not need.

   In the 1930’s, the automobile industry was still new and many people did not yet own a vehicle. Getting to and from stores for goods and services was difficult, slow and not as often as the store owners would have liked. Television was not even on the scene yet. Direct sales was the perfect solution for the time. Manufacturers now had a better way to move their products, by employing sales representatives. Sales reps would introduce new products and services to the consumer, all in the privacy and comfort of the consumer’s home and later, at their place of business or work. This of course was before, ‘no solitation’ regulations were implemented.

   Direct sales worked and can work extremely well, as usually all the decision makers are present during the demonstration of the products and services by the representatives.

   Many of the first products sold in this manner included Bibles, encyclopedias, multi-purposed brushes, and vacuum cleaners, just to mention a few.

  Direct Sales – Credit/Trade/Barter

   Until installment credit became common, most sales were contingent upon cash or transactions made with personal check. In the beginning, there was no ‘lemon law’ or ‘3 day’ cancellation for buyer’s remorse. This could have been the origin of, “all sales are final.”

   Some sales organizations developed trade or barter practices. If the consumer did not have sufficient credit, had poor credit or did not have the cash necessary to purchase the item being sold, a salesperson could offer to trade for some item of value in the consumer’s home or place of business. Often trading meant a reduced final price, but some amount of cash/check or credit was required. This could work out well for the consumer, but it would increase the efforts of the rep. It is true the rep. makes the sale, but they now have to move or sell the item or items they just acquired in the trade. I have personally seen, rifles, television sets, used vacuum cleaners and other items all taken in as ‘trades.’ It is also not uncommon for the sales organizations to have taken post-dated checks (illegal now in some areas), and even act like a pawn shop. The new item is left with the consumer until such time that payments can be made in part or in full.

   The final part of every sales presentation is to ask for the order and ‘close the deal.’ When credit was first used, the process was slow in verifying the customer’s credit. Later, new technology was developed to speed this process along. Many sales reps would eventually use expensive portable machines to verify credit. With the advent of the Internet, the process is now almost instantaneous, but there is still, a potential weakness.

   One of the most difficult parts of the sales process, for the sales representative and the consumer, is at the close. At the close, the rep has made their case and the consumer is ready to buy. If for whatever reason credit cannot be secured, the potential customer can become disappointed and even embarrassed. The sales rep is frustrated, because after all their effort in getting to this point, the ‘deal cannot be closed.’

   When credit verification was slow, the order was written up, the item purchased was often left with the consumer and everything seemed like a ‘Win-Win,’ for all involved. But if later the credit was not secured, both the sales rep. and the consumer could become disappointed and embarrassed, as the sales rep. would have to go back and re-acquire the item(s), left with the consumer. In addition to this, the sales rep. often had to clean, fix, repair or make ready the now used product(s), for resell. Next they would most likely have to sell used ‘stuff’ at a reduced price.’

   Car dealerships and others perhaps that I am unaware of, improved the credit process and reduced stress to both the consumer and the sales representative. One of the first things which occurred was the moment a potential customer walked into a showroom. Their credit was checked by simply using their social security number. Both sales rep and the potential customer would know up front, whether or not sufficient credit was available to ‘sell’ the vehicle or to ‘buy’ the vehicle. It was a time-saver and a ‘disappointment’ reducer to many involved. This improvement may have also produced another problem.

   These checks for credit are most often called, ‘credit inquiries.’ Too many of these inquiries could prevent the customer from obtaining future credit, which was not good for either the customer or the sales representative. Since this was a transparent check of credit and not necessarily a secretive or dishonest process, many times the potential customer would not be aware of this. Sometimes they did not know about it until after visiting several dealers when they were finally ready to buy. At that point, too many inquiries into their credit went up as red flags with the credit companies or reporting agencies. Even though the consumer was ready to buy and though they had good or excellent credit, these too many inquiries would end in denial of credit. Later on, the credit companies and reporting agencies did change and made allowances for potential vehicle purchases, based soley on the availability of credit and not number of inquiries.

  Direct Sales – The Business of Sales

   The nature of sales is to sell. The purpose of a sales organization and a sales representative is to sell. Both in a sense are each a business. The organization is a business of one, several or many and the sales representatives are a business in and of themselves.  

   The job of a representative is to learn how to sell and this is often a lifetime of learning. Younger reps (in age or experience), can learn from the older reps (in age and experience). Many techniques are taught and used to close the deal and there is a familiar thought used in the industry,

“We sell or we sink.”

  Direct Sales – Relationships

   When the idea of We sell or we sink, is considered, it is equated with pressure. By experience, most representatives know that unless you are able to close the deal after a presentation or a demonstration, the chances of it happening later become less and less, nil, or next to impossible. When a potential customer says, “I need to talk with my husband/wife(or whomever),” “Let me think about it for (whatever amount of time given), “I’ll call you back,” or “I’ll be back,” none of things rarely if ever actually happen. So there is pressure on the sales rep to close the deal RIGHT NOW! This pressure is felt by the potential customer. Some sales organizations and sales representatives have used misleading, deceitful and even unintentional practices to close the deal. I know of a certain distributor that used to hire alcoholics, those with drinking problems or other addictions. He knew these individuals could sell or more accurately, hammer people until they bought something. The distributor would even feed their addictions, but only just enough to get them to go to work. He would purposefully withold most of their pay, especially during a big sales push or drive.  Everyone has either experienced or knows someone that has had a run-in with a used car salesperson. Some of these people would stretch the truth or just out and out lie to close a deal. No one wants to be ‘hammered’ or lied to. Unfortunately, this is how many people think of salespeople and of the selling process in general. I once met a really nice man, a school teacher just trying to earn some extra money by selling cars. He told me that he was going to quit and not just because his sales were low. He told me, “I have to lie to people, because they don’t believe me when I tell them the truth.” As the saying goes, “It only takes a few bad apples to spoil the whole barrel.” Many people are afraid of sales people and many do not believe or trust them. This adds even more pressure to the honest sales representative which could cause them to become even more aggressive.

   Some people believe they are not suited to this profession as they fear being told NO, and may look upon this as being personally rejected or that they have failed. Some people believe you have to be unscrupulous or dishonest to be a sales person. For some, this may be OK, for others it is totally unacceptable. Unhealthy and sometimes dishonest competition arises between competitors, each vying for the exact same customer and this could be similar products and services of different sales organizations. Sometimes, it is even among sales reps in the same business, each trying to sell the exact same thing, to the exact same customer. When bonuses are being offered to the reps, this can become even more pressurized. Bonuses were offered like carrots on a stick to get them to move, and not as a reward for a job well done. In the end, the customer feels this pressure too.

   Initial words exchanged between a sales representative and a potential customer illustrate the potential adversarial relationship.

Rep to customer: “Hello, may I help you?

Customer: “No thank you I’m just looking.”  

   Even though the words above seem to mean exactly as they are written, they may in fact be interpreted differently. “Hello may I help you,” could mean –  I’m just being polite, but what can I sell you (preferably a lot of), right NOW? “No thank you, I’m just looking, ” could be interpreted as –  I’m just being polite too, but get away from me, I’m afraid of you, I’m afraid you are going to lie to me and sell me something I do not want or need. This is NOT a win-win for everyone, but in essence it is why most people would agree with the following:

“People love to shop, but they hate to be sold.”

  Direct Sales – Compensation

   Because of  the perceived, intentional or unintentional pressures involved with the selling process, sales organizations have evolved in the way they compensate, to attract people to sell. Sometimes this was and is in the form of wages for hours worked. Sometimes it is straight salary. This may work well for all involved, except for the employer that is still is required to pay the rep., even though insufficient sales or no sales were made. The representative’s income may only nominally increase, based on previous production, or they may lose their job for failing to produce. Sometimes their efforts are not the problem, it is the business as a whole or from other salespeople not producing. Even if you are the greatest salesperson, others can still effect your potential income.

   Sometimes, a base salary is offered plus commission or a certain percentage of every sale made. This does take off some of the pressure to the sales rep for ‘lean’ times or situations outside of their control. The base salary still has to be justified by the business in the form of the ‘bottom line,’ as sales must be greater than compensation.

   Sometimes, the representative is offered a ‘draw’ against commission. If they have a bad day or week, they will still be paid in the form of a ‘draw,’ but the money must be paid back, out of future commissions.

   Sometimes, compensation to salespersons is offered at straight commission. A percentage of the sale is paid as commission. I have seen these percentages (years ago), as high as 35%. Now many people may believe that is exorbitant or at a minimum, totally unfair. To attract the right people into this business of selling, especially if offering ‘commission only,’ they are paid to produce and for dealing with the pressures (perceived, intentional or unintentional), of selling. In a sense, you might be a great guy or gal and ready to buy, but it might have been the 7 people before you that were not so nice or had bad credit. In one way, you are paying for ‘edurance,’ just so the sales person could continue, until they meet people like you and bring what you do need and want and can afford.

   Other commissions are low like, real estate for example. The percentages may be between 1 – 2 ½% of the selling price. If it was the sale of a home for $100,000.00, the sales person might receive $1,000.00 – $2,500 dollars in this example. This may seem like a lot of money, but most people starting out in real estate are advised to be able to live off their savings or other money, for at least six months, before they make a sale. Even as they develop a network of contacts, satisfied clients and get really good at their work, other variables may effect their compensation. The present housing crisis is just one example. There may be a lot of stuff to sell, a lot of people to sell the stuff, but fewer people to buy.

   Overall, straight commissions offer the sales representative, the greatest potential for limitless income, but it also poses the greatest risk.

“We sell or we sink.”

‘Tweaking the Direct Selling Industry For the 21^st Century

   The best way to start a sales organization or to become a successful and professional sales person today, is to add to the strengths of this model and reduce or eliminate its weaknesses. Traditionally, someone makes something and then someone has to sell it to someone that may or may not need it. Instead of selling, allow people to buy, by simply providing what the customer already wants or needs. The act of buying something pretty much remains the same, the customer has the money, can get the money, has the credit or they don’t. Credit transactions have greatly been improved, especially in the sense of making any potential disappointment or embarrassment, more or less private. The consumers are pretty much the only ones that know why their credit was denied. Yes, on line sales can be very lucrative and instead of promoting a potential adversarial relationship between customer and sales rep, it is all but eliminated by shopping on line. One thing missing on line (and it seems ironic), is the personal touch. People really do want to get together. A solution to this will be shown in another installment, ‘in pursuit of the best business.’  

  Direct Sales is so important and it is the foundation from which all other business models are built and sustained. Direct Sales is an honorable business and profession. Without sales organizations, sales vehicles or sales persons, nothing moves anywhere in this country or in the world for that matter. For those individuals which believe that they are never ‘sold’ anything by any salesperson, they are wrong. Even if they did all the research, groundwork and were fully prepared to buy without assistance from a sales rep, to the sales rep, these are just “easy sales.”  Somewhere along the way, someone made something available to be purchased, therefore someone sells everything we all buy.

   Consider Direct Sales as a business or profession.

 Franchising (original post 6/18/08 part 3 of 9)  

   We have looked at some strengths and weaknesses of Direct Selling. Approximately every 10-20 years, a new marketing system is identified as a new way to distribute goods and services to the end user. So you want to start your own business. For your cookie today, we will begin to look at some of the strengths and weaknesses of the next trend and how it could be ‘tweaked to be a better model for the 21^st century. Today, what is the concept of a Franchise and what is the best way to make money with this business model currently?

• 1940’s – Franchising

 Franchising

   He was rolling along as a salesman and directly dealing with small businesses mostly and trying to sell milkshake machines. In order to sell more milkshake machines to resturants, he came up with a very strange idea. There was a popular restaurant out in California. He came up with this half-baked idea of selling franchises at about $10,000.00 each. Some people thought he was crazy. Who would pay $10,000.00 to sell hamburgers that cost around 10¢ each? But many did, McDonald’s was born, and within a few short years, the name of Ray Kroc became synonymous with McDonald’s and our subject here, Franchising. Like the famous radio commentator Paul Harvey says, “And now you know the rest of the story!”

   When the idea of “Hamburger University” was first conceived and then implemented, many people thought that this was real funny, but it was in fact, real business and real successful. Almost anyone that had never cooked or flipped a Burger in their entire life, could become a professional ‘flipper’ by attending ‘Hamburger University.’

   Prior to franchising, it was mostly ‘Big Business’ that was highly successful. Hamburger joints may have paid the bills as a ‘Mom and Pop’ store, especially if they lived upstairs of their business, but that was about all. McDonald’s, Ray Kroc, and franchising leveled the playing field, (at least for a while). Ray Kroc just wanted to sell more milkshake machines, but he saw some other things happening too, especially after franchises and particularly McDonald’s made rapid inroads into society. ‘Inroads‘ was a good word to use. Hmmm, inroads, reminds me of roads, highways, and cars. But whoa (like you would say to a horse to get it to stop), let’s back up a few decades, it’s important to franchising.

   This other guy had a crazy idea in the early 1900’s. He wanted to build something for everyone. He wanted everyone to drive a car. That all sounded nuts because at the time, around 50% of the population were still working on the farm and using horses and other animals for transportation and to get things done. Those in the city worked in the factories as the industrial revolution was really taking hold in this country. Most people lived close to where they worked, so what would they need a car for? If they could afford one (they were expensive in those days all things being considered, and only the wealthy had one). But if they could buy a car, where would they drive it? There were no roads. If there were roads, what would happen if they ran out of gas or needed repairs? There were no gas stations. But Henry Ford sold over 16.5 million of these cars to someone. The record stood until it was broken by the Volkswagen Beetle in 1972.

   OK, fast forward to the ‘inroads‘ of franchising, Ray Kroc and McDonald’s. After World War II, America entered a time of great prosperity and the ‘Baby Boomers’ generation began. American families became larger, busy and the desire to eat out more often was supplied by McDonald’s. It was good food, cheap, and fun for the whole family.

   This other guy after the war, he got a new job and became president of the United States. The former ex, 5 star general placed into public works, The Interstate Highway System.  WOW, a highway system! Instead of goods and services and raw materials being distributed mainly by ships and trains, regional manufacturing facilities and distribution locations could now be built and supplied and moved by another industry. The modern Trucking Industry would forever change the face of business. Oh and those cars! Mom and Dad could pack up the family or anyone could head out on the highway, visit relatives and friends and see the country. Gas was cheap. If they needed to stop for food, it was most likely at a McDonald’s at first. If they needed to spend the night, it was usually at another franchise like a Holiday Inn or a Howard Johnson. It wasn’t long before almost every exit off the Interstate was lined with franchise after franchise.

   The Highway System began in 1956 and technically was completed in 1991, at a cost (adjusted for inflation), at over 400 billion dollars in 2006 dollars. President Dwight Eisenhower and congress authorized the Federal-Aid Highway Act of 1956, popularly known as the National Interstate and Defense Highways Act of 1956. Defense? Hmmm, do you think a former military general thought that maybe airplanes could land on this highway system and troops could be deployed in time of emergency? And I thought it was just to honor Henry Ford’s vision of cars for everyone, a place to drive them, and so Ray Kroc could sell more franchises and more hamburgers. 

   Rac Kroc, in interview, once said that he was not in the Hamburger Business, but in Real Estate. With this highway system, at almost every exit off the highway, there sits a McDonald’s all over the country, and across the globe, each considered to be, Prime Real Estate.

   Now Ray Kroc is no longer alive to agree or disagree with me, but I personally believe the concept of a franchise would not have ‘moved’ as it has, without cars/trucks, The Interstate Highway System, and one more thing.

   This ‘other thing’ was directly or indirectly responsible for the success of all franchises. It was also after WWII, that another guy became primarily responsible for changing the economics and business of post-war Japan. He was so popular there that his picture was placed on display and often larger than and along side of, the picture of their emperor. In this country (which is where he was born), he was virtually unknown and many people have still never heard of him. But in 1981, his expertise had propelled (interestingly), the Ford Motor Company to the top position of the American automobile industry. They beat out even General Motors (GM), for the very first time. Well, who was this guy and why is he so important to Ray Kroc, McDonald’s and franchising?   

“Systems under which people work account for 95% of all errors and failure; therefore, the key to excellence is to perfect the system.”

- Dr. William Edwards Deming -

   Remember this guy, his name and this quote. As this series continues, you will see his name and this quote again.

 Franchising – The System

   The greatest element of the success of a franchise is the system. With this new business model, the average person could become, a Big Business Person,’ for a price of course. $10,000.00 may seem like a lot today and even a lot more in the 40’s, but it was a bargain. Today, one could spend 1 ½ million dollars for just one McDonald’s franchise. There are those that do, and those that will.

   Franchises operate similar to logistics used in the military. The military must often move large amounts of troops, equipment and everything needed to sustain the operation for the duration. It is a system which must often be implemented at a moment’s notice and anywhere in the world. Franchises were and are so successful because, they operate under a carefully planned and executed ‘system.’ Like the military. For McDonald’s, the grill was placed there, the french fryer was over here, the milkshake machine there and so on and so forth. There was no guessing or need to figure anything out, it was all according to plan. The average person with no background, no business experience and no other such qualifications, could become hugely successful with a franchise. As is often the case, those getting in on ‘the ground floor’ of a new opportunity or emerging trend, could make a fortune. Many did and there are still opportunities out there.

   With all their success, franchises are not without weaknesses.

 Franchising – Some Weaknesses of a Franchise

•  Cost prohibitive to many – an average franchise today is around $137,000.00 Unless you pay much more for a complete turnkey operation. Basically all you get for this is the right to use the name, some training, some materials, some national advertising if applicable (you usually share these costs with other franchisees), and not much else.
•  Royalties paid regularly (often monthly), 2 – 5% just for the privilege of continuing to use the name
•  Unless this is a total turnkey operation, you need some real estate, rent, land-lease or own something that has a suitable building on it or where you can build it
•  A franchiser approved building (it usually has to be built brand new by a corporate approved construction company)
•  Equipment
•  Supplies to run the business
•  Stuff to sell (often large inventories)
•  Local, state and other appropriate licenses, taxes and fees
•  Legal & accounting fees
•  Advertising and marketing dollars
•  You are still not open for business – you need to hire and train employees, managers and staff. Note: If this is a restaurant chain, having prepared several P&L’s (Profit & Loss Statements), even though most employees are paid minimum wage or less if it is a wait staff that can earn tips, I was amazed that labor is still over 50% of the costs a business pays out!
•  Loss – waste, damage, returns, employee theft, firings/rehiring/re-training etc.
•  Long hours – not uncommon to associate the phrase, “married to the business”
•  Stress
•  AND AN ALMOST ENDLESS LIST OF OTHER EXPENSES REQUIREMENTS & WEAKNESSES

   The rules and requirements have changed since the beginning of franchises. Although it is still possible, it is highly improbable that the average person can successfully operate a franchise today. You almost need a degree in business, definitely some experience and business savy.

   Just because you have everything going for you and have sufficient money to open, operate and have in reserve sufficient capital to be successful, does not mean you will be. Franchises may fair a little better than traditional businesses, but it is not uncommon for new businesses to fail in their first or 2^nd year. The rule is, if you can make it to 5, you might stay alive.

   Franchises are usually awarded by a carefully laid out plan of territories. So just because you live down the street of one does not mean it is available. Yours could be miles away, cities away and maybe even states away. There could be another same type of franchise as yours, just down the street that is now in competition with you, often trying to get the same customers as you. This other franchise might even be owned by you and it still may be in competition with your other franchise(s).

 Franchising – Compensation

   The rule in business is, 5 Times Your Net. This means, if you want to earn an income (taxable), of $100,000.00 you would have to invest $500,000.00. As your income goes up, so do your other costs. The real money to be made in franchises despite territorial restrictions, compettition (even among your own), added costs, extra time and stress is in, owning multiple franchises (preferably the same kind). Part of this is due to the fact that even though your costs go up, the volume of business generated is usually associated with discounts on those costs. It is a volume game.

‘Tweaking the Franchise For the 21^st Century

   The success of the franchise model is primarily due to it being built on a system. Having a system means that it can be duplicated and duplication is the key element, not just with franchising, but ANY BUSINESS MODEL! Having the right system means in theory, it can be duplicated and should be duplicatable by anyone, anywhere and anytime.

   Eliminate or greatly reduce the costs and weaknesses normally associated with franchising. Whereas franchises began by leveling the playing field and opening the door to the average person to become like ‘Big Business,’ it has greatly changed. Franchises have become ‘Big Business’ and the average person cannot afford a franchise or have the background to make it work, even though it has a duplicatable system. More and more people are desirous of owning their own business. Some statistics show that 50% of all new business is in the private sector and known as ‘Small Business.’ In my area of Rochester, NY, I heard on the radio just yesterday, that 90% of all new jobs in Monroe County (which includes Rochester), are from ‘Small Business.’ But what would be the best way to operate a  small business with a duplicatable system; with reduced costs? The answer is, ‘Home Based Business!

   The doors are once again open to the average person. Let me just define what I mean by ‘average,’ as it is NOT intended to be an insult. An average person is one that typically already works a 40 hour per week job. They may or may not have a college degree. They are people of every gender, race, color, creed, economic and cultural background. They represent approximately 95% of the population and have (or had until they give it to the other 5%), 95% of the money. This is a HUGE opportunity for another emerging trend and for those which can take advantage of it. These 95% of the population have a lot of money to spend. Many of them are desperately looking for opportunity to have greater control over their finances, their time and their lives in general. They have dreams! This trend is the next item or our list, ‘In Pursuit of the Best Business.’ It was true when it began, it is true right now, and will no doubt continue for years to come. A ‘Home Based,’ duplicatable franchise, with eliminated or greatly reduced costs, which can capture the wallets and purses and the hearts of those seeking opportunity, will prove to be an incredible opportunity! But what is the best franchise like franchise to accomplish this? Ahh, this is what we are pursuing here!

   Consider Franchises as a business or profession.

Multi-level Marketing/Network Marketing (original post 6/19/08 part 4 of 9)

   We have considered some strengths and weaknesses of Franchises. Approximately every 10-20 years, a new marketing system is identified as a new way to distribute goods and services to the end user. So you want to start your own business. For your cookie today, we will begin to look at some of the strengths and weaknesses of the next trend and how it could be ‘tweaked to be a better model for the 21^st century. Today, what is the concept of a MLM (multi-level marketing)/Network Marketing and what is the best way to make money with this business model currently?

•  1950’s – MLM (multi-level marketing)/Network Marketing

 MLM/Network Marketing

   To many, the 50’s was thought of as, “The Affluent Society.” To others, it was a time of suppression of civil rights and women’s rights, despite that those affected had the right to vote. There was segregation prevalent in almost all of America. Soldiers returning home from WWII, replaced most of the women in the workplace which had kept the war effort going during their absence. Education was on the rise and population exploded with the ‘Baby Boomer Generation.’ Many believed that they and their children would have the best of everything.

    The fifties was a time of change and perhaps it is best to call it, restless change. New York City became the center of the art world, beating out Paris, France for the first time ever. Even the Fashion World was moving towards New York. Teenagers began to influence fashion with leather jackets and blue jeans, Letter sweaters, poodle skirts, saddle oxfords and tennis shoes among others. Cars were being built to run on the new Interstate Highway System, also begun during this period. Computers and space exploration were moving forward, especially after the former Soviet Union launched Sputnik 1 in 1959. The Cold War and the Space Race was happening. Troubles were brewing in Cuba, South America, Egypt and Korea as well. Other places in the world were becoming potential ‘hot spots’ too. These and other issues created great defense needs for the USA and these concerns, turned the Wheel of Business.

    Television was on the rise, as a new means for information and entertainment, which would further the expanse of the American persona. Everyone was supposed to have their own home with a white picket fence, living in the ‘Great Suburbia.’ Many Americans were working; many were not, and many were restless.

    The fifties were a busy time for many and an innovative time for others. There was this  American persona of peace and prosperity. There was massive production of world known and wanted, quality goods and services.

    As the previous model of Franchising continued to move forward, it was being absorbed as just another arm of ‘Big Business.’ It was mostly only ‘Big Business’ that could afford to franchise. People after WWII were reminded of freedom and free enterprise, but many started to think these were only available to ‘Big Business’ and you could only get the crumbs from their table, if you worked for them. Some became rebels and some became ‘rebels without a cause.’ The beatniks came on the scene and Rock ‘N Roll music were outlets for some of this frustration. To others, freedom and free enterprise were diligently searched for and the opportunities they would afford.

    Two such freedom seeking guys (friends since childhood), began to look for opportunities and possibilities. They believed that ‘in the land of the free and the home of the brave,’ everyone should be able to enjoy the sweet taste of prosperity. They believed  everyone could become the masters of their own destiny. They began in setting up a distributorship and at first, just selling vitamin supplements. Perhaps they were the pioneers of what is now called, ‘The Health and Wellness Industry?’

    In a few short years, these two guys developed a revolutionary concept. Multi-Level Marketing/Network Marketing was born. What they accomplished in such a short time was nothing less than remarkable! It was only after their rise to success became known outside of Ada, Michigan that they would face business and political opposition. In part, it is my belief that their success became a threat to ‘Big Business’ and their dominance in the marketplace. Envy and Jealousy are often disguised by appearing as the protectors of the consumer, when they were actually trying to protect themselves. Wealth had always been in the control of the few. These two guys placed the same opportunity into the hands of the average person.

    If you have not figured it out or if you have, I am referring here to Jay Van Andel and Richard DeVos, founders of Amway, an abbreviation for “American Way.”

    Almost every adult, 30 years of age and older have heard of Amway, not just in this country, but in many countries around the world. Many of these people have purchased products, have seen their business presentation or actually have been or are distributors. I have been among them. Now unless you think I am pro-Amway, let me just say, I am not, but the founders of Amway with their concept of Multi-Level Marketing/Network Marketing are due the gratitude and the thanks of everyone that ever desire, to own their own business!

    Much can be written and has been written about their business practices, especially the legal/illegal or questionable practices, but the commission of something wrong and the intent to commit something wrong may legally not matter, but in ethics and morality it does, at least to me. I do not believe Jay Van Andel and Rich DeVos ever purposefully or willfully intended to ever hurt anyone! Their problems or the problems of Amway over the years, are due to products offered, misleading distributors, outside political and business pressures, naiveté, lack of understanding and primarily, just a faulty business plan. I will never be persuaded that either founder of Amway, ever had any other motivation, than to offer an opportunity to anyone, that could change their lives for the better.

    For years, Amway was attacked and Amway fought back. Finally, they were cleared and Multi-Level Marketing/Network Marketing is NOT A PYRAMID SCHEME! Anyone involved in or considering MLM/Network Marketing, owes a great debt of gratitude to Jay Van Andel, Rich DeVos and Amway, for their stance and edurance. Without them, a small, home based or network marketing business, may have never been available to the average person!

    Expanding upon the model of Direct Sales in the 30’s and the element of a ‘system’ with Franchising of the 40’s, MLM in theory, was a network of a lot of people, doing just a little bit, but producing great volume. Distributors were independent business people. Most operated out of their homes (which is actually where Amway began by the way, in the basement of one of the founder’s home).

   The possibility of making a lot of money, being able to control your finances, your time and your destiny, was appealing to many people. It still is!

    It is neither the products (I personally did not like most of their branded products), or the theory of Amway, which are in question here. Amway began and became the model of Multi-Level Marketing/Network Marketing. For the most part, the concept of MLM is either DEAD or DYING. I will reserve a future post as to why this is true and how Network Marketing split off from, replaced and has become its own business model. There are at least 23 differences between an MLM and Network Marketing.

   For the present, MLM/Network Marketing is joined together as their origins began at the same time. MLM’s that are to survive, by necessity, must move towards and become a true, Network Marketing business.

    As with any sales organization, products and services must be distributed and sold. The distinct problem with MLM, is the system itself and the way the products are often moved.

“Systems under which people work account for 95% of all errors and failure; therefore, the key to excellence is to perfect the system.”

- Dr. William Edwards Deming -

   In viewing the most common results of most MLM’s, only 2-5% of the distributors make any real money. Only around half of the distributors make any money. Many distributors earn less than $300 a year and many quit before or at the end of their first year. Is there any question about why they did, do or would ever quit?

   Again, the draw of this model is the possibility that the average person could become successful. Though possible, it is highly improbable. Statistics show that the average person may be able to recruit around 2.8 people (don’t ask, I have no idea what a .8 of a person looks like). This is the first of two major faults of the MLM’s. In order to really become successful, you must have a large network of distributors. This is primarily due the requirements for compensation in the MLM. These requirements are the other major flaw of this business model. In business, you cannot pay out more than you take in otherwise, you will eventually be out of business. The business must remain viable and solvent, so requirements must be set and maintained to do this. Pay out, after all other business costs have been fulfilled or are expected to be fulfilled, is to compensate the distributors. Therein lies the problem. A MLM will NOT and canNOT work for the ‘average person.’ Why?

 MLM/Network Marketing – Compensation

   Compensation is received by a distributor according to the rules of the MLM company and their individual ability to meet those requirements. This ability is reflected in the size of their network of other distributors. They must build a network and maintain sufficient volume to be paid on the volume of their network. But they are only paid from a certain numbers of ‘levels,’ which is how Multi-level Marketing is named and defined.

   There is of course training, a lot of training. Much of this involves required or mandatory trainings, books and tapes. Sure it takes certain amount of money to make money and a certain amount of learning before there is any significant earning, especially for the inexperienced ‘average person’ But when third party materials are required to be purchased and both the MLM company and its top distributors make money off of this (a lot of money), there is something wrong with the ’system,’ or someome(s) doing this on purpose. Does it make more sense to have limited training requirements that are FREE or inexpensive and handled ‘in house?’ The faster people can learn, the quicker they will earn and then everyone wins. Make sense? It does to me!

   Still, some amount of training is necessary, but it should be followed up with mentoring to the end that the ‘experienced ones’ ’make it happen’ for the inexperienced ones. They learn it and pass it on. Is not this the point of a ’system’ that it can be duplicated? YEP! 

   As with many new business models, those which ‘get in on the ground floor,’ and stay in, are the ones that usually make significant money. Even though they are a pioneer so to speak that started ‘in the beginning,’ a brand new distributor starting years later, could make more income than they did or do, or even the person that ‘sponsored‘ them. In theory this is possible and in rare occasions even accomplished. It is possible, but not probable. Why? The reasons are twofold: the requirements to be be able to receive compensation, and the ability or lack thereof to build and sustain a network large enough to receive any worthwhile compensation. A ‘worthwile compensation’ by nature of the MLM model, has to come from more than than 2.8 people, which is all the ‘average person’ is able to recruit into their business. There are those that can and do sponsor and recruit more than 2.8 people, sometimes 100’s and thousands of people.  But even these able persons must constantly recruit and sponsor. Why? It is because other people, the ‘average people,’ cannot do this, so they do not make any real money and therefore quit. Those that remain must replace them and the volume of business must be maintained in order for them to continue receiving compensation.

   Compensation is received, based on the volume of business any distributorship can produce, but only to a certain number of ‘levels.’ This volume of business must be maintained usually monthly, to receive compensation. If you are possibly $1 short of reaching the requirement, it could mean $100’s or thousands of dollars lost for that month. You may get a nice ‘Thank You,’ or a ‘close but no cigar,’ but that is about all. You would have to start all over again for the next month and all subsequent months that you remain ‘in the business.’ Starting over, you begin at zero again and again.

   Some people understood and understand this and found a loophole. This loophole could be seen in the attics, garages and basements full of products getting old, stale and unsalable to the consumer. But the volume of business was or is maintained and the distributor would get their check in the mail. I think this is called ‘stacking‘. Products are moving, but they are not being purchased by the general public. Being required to purchse a large inventory of products to re-sell, is a major turn-off by many people, when they think of considering an MLM as a business opportunity.

   Another major flaw is what is called ‘break-away.’ This refers to a person or persons in your organization that has reached a certain level of success. Maybe they are better than you at what you do? Maybe you recruited them or maybe not. Maybe it is through their efforts that you have primarily reached the level of success you enjoyed? Whatever is the case, there may come a time when by requirement of the MLM , they are taken away from your distributorship. This is a ‘break-away.’ At that point, the only two things you can do is to recruit someone to replace them or build another distributor in your existing network, to replace the business volume lost.

   Now I am not suggesting that most MLM’s intentionally set up potential distributors to fail while the business itself continues to be profitable. It should be understood that every MLM will eventually disappear as there is no way to sustain the business, because of the flaws in their system. Their systems are generally setup to maintain the business and provide opportunity for others, but it is the system itself which is at fault.

   There have been and there are other MLM’s, which clearly understand the faults of this system and they have built them anyway. They get in, make a lot of money, the business fails and they get out, laughing all the way to the bank! These unscrupulous businesses and characters are the major reason most people believe MLM’s are scams or pyramid schemes, but they are not! A faulty business plan is just being manipulated plan, at the expense of others, but they are not  pyramid schemes. Pyramids are illegal. But just so you understand, all major business corporations and even the federal government in the United States, are technically all legal pyramids. Think about it. No matter who you are or how good you are, it is pretty much impossible for you to ever reach the top of the organization in which you work. If a C.E.O. dies, quits or is terminated, there is a great chance they will be replaced by someone outside of the organization. If the president dies in office, it is the V.P. that becomes the next president. Technically, these organizations are all legal pyramids. But when it comes to illegal pyramids, they are those where ONLY a select few will EVER succeed and primarily due, to being paid to recruit others!

   To make an MLM a good business is to first, just let it die. They cannot work, they cannot be sustained. Replace them all with Network Marketing.    

‘Tweaking Network Marketing for the 21^st Century

   The success of the Network Marketing model is primarily due to its ability to move products and services. It is appealing to the average person wanting to improve the quality of their lives. Two things must first be understood when considering this as a business model.

•  It is BIG BUSINESS!
•  What is Network Marketing actually?

   Network Marketing is Big Business! It is not just one of those things no one ever really succeeds at. To illustrate this, all one needs to think about is CBS or ABC. Following both CBS and ABC is the word Television. Following the word Television is the word Network. What you have is the CBS & the ABC Television NETWORKS! Network Marketing is HUGE BUSINESS!

   Network Marketing is as old as when people first populated the planet. It is something everyone already does (unless they are dead or live in a cave without any contact with any other person). It can be understood by the following examples.

   I go to a movie and recommend you see it. You do and take others. This is network marketing. Sometimes it is called, ‘converstional marketing,’ or ‘referral marketing.’

   You drive a car and it has a unique and often recognised style. It has the logo of the company that makes it and probably the dealer where it was purchased from. You drive it all over town and maybe even out of state. This is Network Marketing. Some would call this, ‘visual marketing.’ If you talk about your car to friends, again that could be considered as, ‘converstaional marketing.’ If you recommend your car and/or dealer, that’s ‘referral marketing.’ It’s all, Network Marketing!

   In the examples above, I don’t get a dime for telling you about the movie and you don’t get paid for being  mobile or for all the free advertisement you are providing to the car manufacturer and the dealer. What if we did? This is Network Marketing in is purest sense, as a business. We get paid by telling others about products and services, but only after they buy something like movie tickets or cars. 

   Our families, friends and associates are already a part of our network. Understand the theory of ‘SIX DEGREES OF SEPARATION.’ This means that if you just have a network of five other people, you can potenntially connect to everyone in the world. This is the future of networking. Sprint and Citi Bank already understand this and use network marketing. Both companies are always looking for customers and will pay to get them and they do pay! Network marketing is the most inexpensive and efficient means to move products and services! Why?  Because people would prefer to purchase from those they know and trust.

   Building upon the strengths of Direct Sales and the ‘system’ concept of Franchises, network marketing once again makes incredible opportunities available to the average person. Provide people with exactly what they want and need, have a ‘system’ for success that anyone can follow. Pretty much at this point all you do is just converse with people, educate them and just tell them you have what they already want and need. Referrals work the same way.

    The final thing necessary to really make this model work, for the average person, are the requirements in order to be compensated for their efforts. It should be based on a home based business model, with little or no investment required, no large amount of products to buy and ‘shelve’ before they are resold. It should be based on a ‘system’ that the average person could apply in a short amount of time to become successful. It should be fair and equitable and reward others based upon individual desire and effort. It should be free of structural flaws or business faults. It should offer virtually an unlimited income. It should be sustainable (no critical mass or saturation). It should be transferable to heirs or someone of your choice. It should work anywhere and for anyone in this global economy (providing government allows it. Why wouldn’t they, everyone benefits). Finally, it should work, based upon recruiting and sponsoring at least 2 other people, instead of 100’s & 1,000’s and on a constant basis. Unfortunately and chronologically, in the order of business trends in this series, we are just now moving out of the 50’s. It would not be until 1995 that a patented and nearly perfect system and compensation plan would become available.

   Consider Network Marketing as a business or profession.

Catalogs (original post 6/20/08 part 5 of 9)

   We saw many of  the strengths and weaknesses of the business trend known as, MLM/Network Marketing. Approximately every 10-20 years, a new marketing system is identified as a new way to distribute goods and services to the end user. So you want to start your own business. For your cookie today, we will begin to look at some of the strengths and weaknesses of the next trend and how it could be ‘tweaked to be a better model for the 21^st century. Today, what is the the business trend of Catalogs and what is the best way to make money with this business model currently?

•  1960’s – Catalogs

 Catalogs

   Although not entirely new, catalogs became a popular and a prevalent business model for marketing all kinds of goods and services. Many people had previously known and used the once popular and familiar, Sear’s and Roebuck catalogs for years. Their catalogs may have been the first example of a multiple use product and a recyclable product. Before indoor plumbing, people had to go out back or to the ‘outhouse.’ to perform their private personals. There they could read the catalog and ‘use’ the paper. 

   This was pretty darn efficient, accept the French developed the bidet which is just a fancy name for a bottom washer. Originating in France, it was comprised of a simple encased receptacle used to hold the water and supported in a portable wooden stool. The name bidet originally meant small horse. French Cavaliers desirous of bathing, but having little time to do so, were indeed thankful for the original version of the Bidet. It permitted partial bathing of those body parts which were in close contact with their saddles. The earliest written reference to the bidet is in 1710. By the time of indoor plumbing around 1900, ceramics were in full use for bidets. For the Europeans, this was healthier and less expensive than paper. But for Americans, it was paper and catalogs perhaps was the beginning. This could have also been the time when the phrase “tough ass,” may have been coined. Paper from catalogs may not contain pieces or chunks of wood or splinters, but they are not the softest material either. My wife and I were in Japan about two years ago. Over there, for the ladies, most public restrooms have what I call ‘squaters’ instead of sit down toilets. Men had toilets, but most restrooms for men or women did not offer paper. No paper? What are they doing over there, why it’s uncivilized? Chill – there was paper, but you usually had to supply your own. Not to worry, vendors would either sell or give away little flat packages of paper with all manner of products and services, being advertised in full color on the wrapper. The paper is not real soft so maybe, the Japanese are becoming the “tough asses,” because in the USA, we demand soft, pure white and fluffy paper. The Paper Industry was more than willing to provide for us. I do not know for sure how this whole thing started, but it does relate to catalogs and “softness.” Maybe this came out of the 50’s with our expectation of the very best?

   Paper pulp naturally has a brown tone color. We want white. To get it white, the pulp has to be bleached. It is a known fact that the by-products of paper processing are toxic and harmful to the environment. The state of Michigan used to be a pricipal paper producer as they are close to a major source of trees for supply. Most Christmas trees used to come from Michigan and both Martin Guitar & Gibson Guitars were made there. There is even a small town called Parchment, MI. Hmmm, I wonder what they made? Rivers and streams were polluted with the run-off from paper mills. Many of them later packed up and moved to the south. Paper processing is now more refined and safeguards are in place, but the process itself is still dangerous. Our demand for slick, full color print on bright white coated paper, was not without problems and this is but one of the weaknesses of catalogs, pollution.

   In the 50’s, when ‘rebels’ started to drift away from society, it would be in the 60’s when it became a full-blown revolution. Many were tuning in, turning on and turning off from society. Drugs, sex and Rock N’ Roll were in full bloom (no pun intended towards the Hippies and the ‘flower children,’ but it works). Maybe a lot of people were scared of this generation and did not go out and shop as much? Maybe adults were glued to the TV watching Uncle Walter Cronkite explain, “And that’s the Way it is,” referring to the Vietnam War, the assassination of President Kennedy,  or people landing on the moon, among other dramatic/traumatic events? Maybe the older folks stayed home while the kids were watching Uncle Walt Disney? Maybe the entire family was watching Uncle Marlin Perkins and ‘The Wild Kingdom?” Maybe people did not want to be confronted by sales people? I am not sure of the actual causes or reasons, but people were not shopping as much as they used to. If people would not come to the stores, then the stores would go to them. This they did, with catalogs.

   In the beginning, catalogs were published around once a year. They were slick, thick and people could not wait to get the latest catalog. People were excited when the Sears,  J.C. Penny’s catalogs (and others), were available. In the beginning, they were FREE and you could only pick one up, by visiting the store. Later on, they were mailed, still once per year and FREE, but this did not last for long. Catalog departments were set up in stores to handle sales from catalogs. There were even catalog showroom stores. There were stores of almost every major brand, all offering catalogs. There were even ‘alternative’ catalogs for those that were getting away from society like, ‘The Whole Earth Catalog,’ and Mother Earth News’ to mention just two. Yep, pretty much there was a catalog for everyone and everything. It was kind of like boiling spaghetti. If it’s fully cooked and you throw a strand against the wall and it sticks, it’s done. The problem with catalogs was their costs to print and distribute, but mostly, no much was ‘sticking.’ Catalogs were being used for other things. Backing up, way back, out back to the outhouse, now why would you rip out pices of paper your were NOT interested in? Catalogs were inefficient and being used for other stuff than what was intended like, TP (toilet paper), wrapping fish, packing material, fill for landfills, other stuff and later just tossed for recycling. Catalogs second problem after pollution was hit or miss and it was mostly miss. Why? Because stores stopped making them so thick, so slick and so often. The costs they were paying was not reflected in the sales they were making.

   Next, they tried smaller catalogs (in size and pages), offered quarterly or periodically instead of annually. Partly this was due to the cost of printing and lackluster results, but there was another problem.

      By the time many people received their catalog, the very thing they could not wait to buy may have already been sold out, out of stock or entirely discontinued. Sometimes this was due to some areas of the country buying out a certain item that may not have been stocked as much in other areas. Catalogs generally offered the same stuff to everyone in the country and were not regional or localized in the 60’s. Stores trying to soothe the customer’s irritation, started to offer ‘rain checks’ and substitutions of equal or even greater value, just to keep a customer and make them happy. The thing is, people want what they want, when they want it!

   Pretty much, the end of catalogs as a business trend, was when stores began to charge for their catalogs. People accustomed to FREE, did not take too kindly to this. Stores learned a lot from this period, but not enough. This can be seen in the next trend of the 70’s.

   When printing improved in the 80’s & 90’s, on demand printing, regional and localized printing could control costs much better. The Sunday newspapers started to place slick, thin, but often full color and magazine-like ‘incerts’ into the papers. Sometimes these were and are today, from major brand-name stores. Often these were or are from local stores, offering coupons and what are called ‘loss leaders.’ This is a item or items offered at a significantly reduced price as an incentive for the customer to visit and purchase these products from their stores, plus hopefully to buy more stuff. Sometimes these products were available at the special price for a certain time and for a ‘limited’ time or “While supplies last.” The store is willing to take the loss in hopes that it will lead you to their store and once inside you and I will say something like, “Well, since I’m here, I might as well pick up…(whatever).” 

   Catalogs are still around today, are still popular, and an effective means for marketing products and services. They are a major marketing tool for such sales organizations as Avon. People love to receive catalogs and look through them in the comfort of their own homes. There, they can look through a catalog at their leisure, at their own pace and buy whatever they want and need. To make this a viable business trend now and in the future, the weaknesses of catalogs must be eliminated or reduced while building upon their strengths. This marketing system must be perfected.

“Systems under which people work account for 95% of all errors and failure; therefore, the key to excellence is to perfect the system.”

- Dr. William Edwards Deming -

‘Tweaking Catalogs for the 21^st Century

   Know what people want and need. Primarily, make only those identified products and services available in the catalogs. It’s OK to offer suggestions for new or other products which may complement the customer’s other purchases, but it should be only, ‘once in awhile.’ Otherwise, the cusomer will just feel like your major concern is for yourself and not for them.   

   Chronologically, we are still decades away from the Internet in our pursuit of the best business, but in using catalogs for the 21^st century, this medium must be considered. There are and may ever be, a certain number of the population that for whatever reasons, have no interest in computers or the Internet. Catalogs are a must for them.

   Catalogs should be FREE. Digital Press and on demand printing makes printing more cost effective. Digital Press can now print, say, 10,000 copies with each one being slightly different, like personal names etc. Consider printing in smaller runs for specific targeted markets. If they are regional or localized in nature and your business is far away, consider contracting with local printers for the job. Maybe even mention them in the catalog, ‘printed by…’ This is good for your business and the local economy. Save on postage or shipping by sending them out locally. If you are not in a big hurry, the Post Office has a special rate for just this type of mail.

   Personal home/office color laser or ink-jet printers may not be as good professional printers, but they are pretty darn close and all without having to spend a lot of money for equipment. Print the cover in full color with slick coated paper. Use smaller catalogs like Avon does. A folded sheet of 8 ½” X 11″ piece of paper (standard print size for home printers), makes a nice size catalog. You can even buy an inexpensive stapler which will staple your catalogs and look real professional. Think about ‘Going Green,’ by using Eco friendly inks, recycled paper, and Kenaf instead of paper. Kenaf can be bleached white with Hydrogen Peroxide (H₂0₂), which is safer for the environment than what paper makers usually use to bleach natural pulp. I use kenaf, unbleached and recycled envelopes for my own original greeting cards. Click on either highlighted link for more information about Kenaf or my greeting cards if interested.

   Even though you are printing catalogs for certain people by request or for those that do not use a computer, your catalogs can still be made available and printed for them, from your website on the Internet. Set up files for printing in .pdf (portable document format. On line catalogs can be edited in real time to more currently reflect what is presently available and what is not. Having customers print their own catalogs saves you on printing, paper, postage/shipping and labor costs. People don’t mind printing them or just looking at them on line.

   Finally, as to printing catalogs, have them distributed by friendly and informative, real; live people. Remember these two things:

“People love to shop but they hate to be sold.”

“People prefer to buy from someone they know and trust.”   

   Consider Catalogs as a business or profession.

  Direct Mail (original post 6/21/08 part 6 of 9)

   Yesterday’s cookie showed some strengths and weaknesses of Catalogs. Approximately every 10-20 years a new marketing system is identified as a new way to distribute goods and services to the end user. So you want to start your own business. For your cookie today, we will begin to look at some of the strengths and weaknesses of the next trend and how it could be ‘tweaked to be a better model for the 21^st century. Today, what is the the business trend of Direct Mail and what is the best way to make money with this business model currently?

•  1970’s – Direct Mail

 Direct Mail

   After catalogs quited down, stores were still looking for new customers. They were also just wanted to get their regular ones to come back or shop more frequently. Full color catalogs were expensive, but they worked to some degree, so what else could be tried?

   Where is everybody? I know, maybe they are at home? Right! Let’s send them some stuff at home.

   First the stores used their own internal customer information files. ‘City Directories were used and anywhere stores could acquire a list of names and addresses, they would. Somewhere along the way, this opened up a new business, which was to make, trade or sell ‘lists.’

   This new marketing system was definitely cheaper than catalogs and really for the same advertising budget, they could reach a whole lot more people. Direct Mail was born. The print industry was OK with this trend too. But with printing, just as with catalogs, there is a depletion of natural resources (trees), and the process of printing is toxic and damaging to the environment. Years later, as with catalogs printing, there would be changes for the better, in the printing process.

   It has been said that 3 out 4 pieces of mail placed into every mail box, every day, is Direct Mail. Many people think it is junk mail. It’s just extra trash to deal with or extra time spent in stuffing the recycle bin or the paper shredder to remove your personal information and then, the recycle bin.

   Perhaps like me, there are others that on occasion, would welcome Direct Mail, because it was the only mail received. I think in the beginning of this trend, many people were mildly curios about why this company or that store was sending them mail. Might as well open it since it was personally addressed. This is a great part of the success of this business model. The senders are counting on our curiosity and being so, the receiver would generally open the mail. After a while, people must have wised up and when they sorted their mail, this mail was instantly recognised. Direct mailers had to alter their system.

“Systems under which people work account for 95% of all errors and failure; therefore, the key to excellence is to perfect the system.”

- Dr. William Edwards Deming -

   Face it, when we see our name on a piece of mail, aren’t we curios about why this company or that company was sending us stuff? Well sure. But after a period of this, many people just got tired of it. If the stores felt we were throwing away or recycling the stuff they sent us, what could they try next? Hmmm, I’ve got it, just put it in a plain white envelope. This way people will have to open it, just to see who sent it. That might have worked for awhile, but many people caught on to this and would just toss or recycle all plain white envelopes of unknown origin.

   I suppose there are those direct mailers that would argue, the plain envelopes were to protect our privacy and not to be ‘sneaky’ or deceptive. It’s no body’s business who we are getting mail from right? So they want to protect our privacy? Really, protect us from whom, our post-person? I don’t think they have time to look or read the envelopes. They are just looking for addresses when sorting at the Post Office and the same for our neighborhood carriers.

   Direct mail can also be sent to our homes and places of work in the form of inserts, inside magazines, newspapers and even books. They can be found in almost all paper-like news/entertainment/literature products. These are not as personal as having our name on the outside of an envelope. My all-time personal favorite, is seeing mail that has my correct address on it it, but it is addressed to: our neighbor, resident or occupant. There could be other people too, but these are the most common I find in our mailbox. Just so you know, there is no one living at my house named Resident or Occupant. I checked and no one by either name has ever lived here since the house was built in the 30’s. I have no idea who these people are, where they live or why I keep getting their mail! 

   OK, maybe that was not real funny to you, but maybe just a little funny? It does illustrate one of the major flaws of this business model, it is generally impersonal. Even if our name is on the envelope, be generally did not rquest it, unless it was a newsletter with ads thrown in or something like that, which we subscribe to. Maybe it’s a carry-over of many fears or dreads about sales people? Perhaps we view these plain white envelopes as sneaky little sales people hiding inside and waiting to sell us something?

“People love to shop but they hate to be sold.”

“People prefer to buy from someone they know and trust.”   

   This trend, though it is both effective and continues to this day, it is inefficient. Even though we may think of direct mail as junk mail, people are responding to this type of marketing, otherwise, 3 out every 4 pieces of mail would NOT be Direct mail. Still, it is ‘hit or miss’ and a lot of misses. But like flipping a coin, if you want ‘heads,’ sooner or later it will land, ‘heads up.’

   Down the road from the 70’s, it will still be two decades later intil the Internet becomes a new trend and direct mail will adapt and expand to take advantage of that model. Direct mail will work its way into cyberspace in the form of E-mail much of which many refer to as something else. The ‘junk mail’ of ‘snail mail’ will become the ‘spam’ of Email. This expansion of direct mail will still work pretty much the same as it did in the 70’s when it was just getting started. On line, this E-mail, direct mail, is still hit and miss. It will still bug a lot of people. It will waste time and money in spam protection and deletion of the spam itself. Even though most Windows operating Systems have the little recycle bin icon, it really is just a place that all our junk goes, prior to deletion. It does sounds Eco friendly to have a recycle bin. Why not call it really what it is. It is really just another place to throw all our digital stuff we think we don’t need and were getting rid of it. But just in case we decide that our junk is really our stuff, we can recycle the junk back to our stuff. Sounds nuts!

   Again, despite its flaws and the potential to really bother a lot of people, direct mail is an effective way to market products. If this were not so, direct mail would have ceased long ago. It has not. It continues.

‘Tweaking Direct Mail for the 21^st Century

   Know what people want and need.  Make only those products and services available through direct mail. It’s OK to offer suggestions for new or other products which may complement the customer’s other interests, but it should be only, ‘once in awhile.’ Otherwise, the customer will just feel like your major concern is for yourself and not for them.   

    Digital printing is now much more economical and efficient. Digital Press can now print, say, 10,000 pieces, with each one being slightly different, like personal names etc. Consider printing in smaller runs for specific targeted markets. If they are regional or localized in nature and your business is far away, consider contracting with local printers for the job. Maybe even mention them in the mailer, ‘printed by…’ This is good for your business and the local economy. Save on postage or shipping by sending them out locally. If you are not in a big hurry, the Post Office has a special rate for just this type of mail.

   The best direct mail I have ever seen have envelopes (colored or special), with my name and address printed with a nice font that looks like handwriting. Real stamps were used, not some red inked business stamp from a postal meter machine. These pieces of mail looked like greeting cards. Inside, they actually were.

   Imagine this scene. You go to the mailbox and you find a piece of direct mail that looks like I have described it above. You are curious as to who sent it to you and why, but especially what it is all about. You open it and you see a nice folded card with some great artwork and nice friendly message. Maybe they offer a special price for 1 or 2 items, but that’s about all. Maybe they just want to say hello and hope you are enjoying the holidays, the summer or something like that. Maybe they just hope to see you soon.

   Direct mail like this in my house, does not find its way to the trash pile, the paper shredder or the recycle bin like the impersonal plain, ‘secretive’ white enveloped, ‘junk mail.’ It may sit on a counter or someplace where I can read the special poem or quote and look at the artwork. I might even frame the card. The longer it stays around, the more likely I am reminded of the contents and remember who sent it to me. Conclusion, it’s a pretty good marketing strategy. This can even be tweaked for on line direct mail. You can even make it available to download and print them on card stock, using the customer’s printer.  

   Personal home/office color laser or ink-jet printers may not be as good professional printers, but they are pretty darn close and all without having to spend a lot, for equipment. Print the card or cover in full color with slick coated paper. Software is available and perforated card stock. Take advange of the standard paper stock size of of 8 ½” X 11″to fit home/office printers.

   Think about ‘Going Green,’ by using Eco friendly inks, recycled paper, and/or envelopes. Consider Kenaf instead of paper. Kenaf can be bleached white with Hydrogen Peroxide (H₂0₂), which is safer for the environment than what paper makers usually use to bleach natural pulp. I use unbleached Kenaf and recycled envelopes, for my own original greeting cards. Click on either the red or green link above for more information about Kenaf or my greeting cards if interested.

   Personalization and customization is the key to direct mail as a model for the 21^stcentury. Your mailings should be confined to specific targeted groups (not a shotgun blast), certain people that request information from you or for those that do not use a computer. Your mailings can still be created on the computer to be printed by you or made available and printed from your website on the Internet. Set up files for printing in .pdf (portable document format), or even Avery templates. Their templates and paper stock are easy to use. On line direct mail can be edited in real time to more currently reflect what is presently available and what is not. Having customers print their own direct mail saves you on printing, paper, postage/shipping, and labor costs. People don’t mind printing them or just looking at them on line, especially if they have some incentive to do so. Offer a coupon or a special price or a referral bonus if they send family, friends and associates to you.

   Consider Direct Mail as a business or profession.

Infomercials/Direct Response (original post 6/22/08 part 7 of 9)

   We have seen some of the pluses and minues of Direct Mail. Approximately every 10-20 years, a new marketing system is identified as a new way to distribute goods and services to the end user. So you want to start your own business. For your cookie today, we will begin to look at some of the strengths and weaknesses of the next trend and how it could be ‘tweaked to be a better model for the 21^st century. Today, what is this business trend of Infomercials/Direct Response and what is the best way to make money with this business model currently?

•  1980’s – Infomercials/Direct Response

 Infomercials/Direct Response

   If traffic in the stores were down and people would not respond to direct mail as much as they had hoped, how else could you get them to buy your products and services? Where were they anyway? Many were sitting right in front of their television at home. A lot of these same people were tired of their favorite programs being interrupted by ‘pitch people’ selling everything imaginable. Some would use commercial time to do something else then come back to the program.    

   Ronald Regan as president, deregulated the TV industry during this time. Free Market and Free Enterprise works when government stays out of business and business should live and die by the success or failure of their own practices and market forces. Cable TV was expanding. Many with any experience in the broadcast industry were starting their own channels and the numbers of channels grew greatly. The need for revenue to operate these channels is obvious, and advertisers would provide it, or fund raising efforts would.

   Religious based channels were initially very successful and there were 100’s of them, from local, little known clergy with often dubious backgrounds. There were nationally broadcast, spiritual and religious shows, utilizing well-known religious figures.

    Soon, many of these religious channels and the other fledgling cable channels were just desperately trying to stay afloat. Many went under or there was a lot of program space to fill. Fund raising efforts for the religious programs started to diminish, especially during late night or early hours of the morning. Many channels were still using the “sign off” when the station would go off the air for a certain number of hours. Test patterns would fill the screen. First these were black and white in early TV then just the familiar color bars. Later, the “sign off” was often some announcer saying, “this concludes our program for the day,” and this was followed by some nice patriotic and scenic video, while the Star Spangled Banner was played Then those test patterns ran until programming resumed.

   There was now a lot of time to be filled and there were a lot of people at home during those off hours. Some were working the late shift and not wanting to go to bed yet, would be interested in watching TV. Some were out of work, and others were ‘night owls,’ for whatever reasons. Cheap or cheaper television advertising was born. There were many hours of time slots available these off peak hours and many were sold. Some made it their business of brokering these slots to others. But what kind of programming would advertisers spend money on? What would people tuning in during these hours be interested in. The bottom line as with any business is, would sales justify the costs? Enter- Infomercials which is combining information with commercials.

    Off peak programs running for 30 minutes or 60 minute, were inexpensively produced commercials refashioned as entertainment programs or talk shows. Soon,  they added highly known figures or celebrity superstars as hosts or moderators. The cast were a slew of unknowns to keep the costs down since they paid the big bucks for the stars. Many found fame and fortune in this new industry. Many furthered their careers. Jane Fonda captured lightening in a bottle with her exercise videos. Ron Popeil marketed every gadget and device people didn’t even know they needed and made the switch. As print media was losing a lot of ground, this new form was picking up speed and Popeil is still using it. The Psychic Hotline became one of the largest businesses in the world without even having anything to sell! Only in America!

    As is the case in any industry, those that do not have their own ideas, become ‘copy cats’ or imitators, sometimes innovators or ‘improvers all trying to cash in. Many fail, but the demand led to more and more production costs. Air time went up and Big Business was once again in full force, controlling the market by price. What used to be more reasonable costs, would become even in the millions of dolars. But if you could afford to pay out that, the payback can be billions of dollars.

    Basically, Infomercials are television commercials that run as long as other typical programs. They are also known as paid commercials and refer to direct response advertising. The term “infomercial” was originally used for television advertising. It now refers to any visual presentation in any media (tapes, CD’s, DVD’s Blu Ray etc). Information is presented in an actual or perceived ‘news like’ format with the express purpose of persuading others towards a particular point of view, by those making the presentation. Simply stated, infomercials seek to get the viewer to do something or buy something right now. Sometimes the word “infomercial” is used to actually discredit the presentation. Political speeches are associated in a negative sense, by just adding the word “infomercial.” Over a period of time, many people view “infomercials” in a less than favorable light. Back to the drawing board!

    This new form of advertising needed more credibility or perceived credibility than just some well known enties as spokespersons, especially if you are trying to sell products and services in the health and wellness industry.

    Enter the nice stage setup of chairs and a table and make it look like a TV newsroom or some other professinal location. Next, bring in the famous “pitch person” to get the attention of the audience. Have them briefly say something about a new product or service they found out about and are personally using. Next, introduce a panel of experts that are wearing a lab coat if possible to get the credibility of science and the medical industry behind it. Then bring in your so called averge people (actually paid and attractive), that have used or are using the product/service. Put in your “special price,” “while supplies last,” and other such ‘act now’ phrases. Set up your sales staff to handle the phones and wait for the phones to ring. Sometimes they rang and a lot. It wasn’t long before many people figured these ‘informercials’ out. It was time to change. It was time for something new in this business model of Direct Response. Yep, the system had to be changed.

 ”Systems under which people work account for 95% of all errors and failure; therefore, the key to excellence is to perfect the system.”

- Dr. William Edwards Deming -

   A radio station in Florida as all stations do, run by advertiser dollars. For running ads on the radio program, the radio program is paid by the advertisier. One such company had their spots running, but they ran into a problem with cash flow. They could not pay the radio station, so they offered a certain amount of their product instead. So the radio station got stuck with a whole lot of can openers. Yes this is correct, can openers. The popular host went on the radio and within a very short period of time, they were sold out and a new industry was born. In 1985, the Home Shopping Network (HSN), debuted and others like QVC would soon follow. Selling can openers on the radio was one thing, but would this work on TV? According to one article I read some time ago, it was reported that in hour, either $1,000.00 or 1 million products were sold this way. What hour? It was Noon? People tuned in to this TV shopping thingy during their lunch break and bought all this stuff in just 1 hour. Hmmm, I guess this works? 

   Yes, it works so well that many people believe that if it’s on TV, somebody like the FTC, FDA etc. must be making sure it’s OK. It works so well that in 2006, this was a 91 billion dollar industry. It continues to this day, as do all the other previous business models, BECAUSE THEY WORK!

   For such places as HSN & QVC, they have evolved to protect themselves. If they accept a vendor or a company to showcase their products, the vendor has to pay a certain amount for the air time and if they do not do well. What they owe HSN or QVC is reflected in the number of products sold and the contract that is arranged between all parties. If your product did not do well, you still may have ended up paying ‘out of pocket’ and you are responsbile to take care of all product that did not sell.

‘Tweaking Infomercials/Direct Response for the 21^st Century

   First, if you have been following this series ‘In Pursuit of the Best Business,’ you need to know what people want and need and make only these products and services available to them through this business model. How? Take surveys, get referrals and get a working idea of who wants what and how much product you need on hand. Ship regionally instead from a central location. Let the vendor handle the distribution and monitor their sales that are a ‘direct response’ to your program. This saves everyone time and money. The broacast service does not have a separate department for sales (unless this is a brand new product/service). The vendor does not have to pick up product not sold and transport back long distance (unless this is a brand new product/service).

 Infomercials/Direct Response – Program Format

Rules of format:

•  Tell them what you are going to tell them
•  Tell them
•  Tell them what you told them
•  Subject is long enough to cover the subject
•  Subject is short enough to keep them interested

   Thoroughly research product/services. Document all sources like clinical trials etc. Use real people instead of highly paid actors. Consider using more mature people, both they and average people are generally viewed as trustworthy. Verify their background. If the presentation is live, use a time stamp and indicate on the screen that this is live and a paid advertisement (this is probably legally or otherwise required by the station anyway). If this has been previously recorded, indicate this and still show the time stamp and that it is a paid advertisement. Interviews should include that your panel have used the product and make it an honest discussion. Always conclude the program (if health and wellness related), with the suggestion that the audience consult with their physician before using your product, if they have any adverse symptoms or medical conditions. Use some or all of your documentation at the end of the program. Show a toll free number and a website where they can have the documentation faxed or downloaded from the Internet. Use a fast talker for the side-effects (if any). Most people know this stuff is required, they may not pay any attention to it, but it is the RIGHT thing to do and it’s kind of funny listening to these fast-talkers. It’s good to end the program on a light hearted note, a joke or something to make the audience smile.

 Infomercials/Direct Response – Prcing,Guarantees & Returns etc.

   If you are offering a FREE trial, do NOT charge for shipping, it’s insulting. If you can afford the program, and  if you offer the product free, why not pay the shipping? NEVER make money on shipping! Charge only what it is.

   If the product is available for a limited time at a specail price, indicate the actual date the offer expires and show the regular price. 

   If offering a money back guarantee, provide enough product that would cover enough days to receive another order. If your product should be used for 30, 60, 90 days or whatever to see any deasired results, add at least 7-10 days of extra product. If  before or at the end of the trial period is over, have them return any unused portion for an 100% immediate refund. Pay by check or credit card (based on how the customer paid). Pay them back quickly and thank them for trying. Try to find out why they are returning the product and if there is anything you could have done or could do in the future which would make them want to try it again.Enclose return packaging with postage/shipping paid. NEVER MAKE MONEY on shipping/handling/postage charges. Offer to pay in product or cash (their choice), for referrals. Offer automatic shipment for future orders where the customer can automatically receive product every 30, 60 or 90 days.

 Infomercials/Direct Response – Final Comments

   Consider marketing your presentations exclusively on the Internet (cheaper costs overall), or in addition to Television. Tailor these presentations to work with radio as well. Face it, you are in business to make money, not lose money. If your product or service is wanted/needed and is good enough to begin with, there is no reason to give it away. Free does not have much value. I don’t mind paying for something I want to try and that includes shipping, but the return policy for damages or unused product that just did not work for me, should neither be difficult to return, nor take a lot of time

    Consider Infomercials/Direct Response as a business or profession.

Internet/E-Commerce (original post 6/23/08 part 8 of 9

   As with all business models thus far, we have just seen the strengths and weaknesses of Infomercials/Direct Response. Approximately every 10-20 years, a new marketing system is identified as a new way to distribute goods and services to the end user. So you want to start your own business. For your cookie today, we will begin to look at some of the strengths and weaknesses of the next trend and how it could be ‘tweaked to be a better model for the 21^st century. Today, what is the the business trend of Internet/E-Commerce and what is the best way to make money with this business model currently?

•  1990’s – Internet Marketing/E-Commerce

 Internet Marketing/E-Commerce

   The Internet originally was designed as a tool for communication among the scientific community. Many colleagues and peers were separated by 100’s and even thousands of miles. This tool would allow them to share information and data and personal connections and research materials. Initially, it was just a few computers that were connected to each other, located in certain colleges or other think-tank research locations.

   E-mail protocols were in place to share this research and this network was considered a private network. Much of the new technology was being tested on this early network of single, private and FREE connections. It was not readily available to the general public.

   As the technology grew (as did those connections), another protocol was put into place which enabled each location to act as its own host while still being able to connect to the other computers. This opened technology up, to the rest of the world. As rules changed, the Internet became open to commercial enterprise. The first commercial aspect was in the form of ISP’s (Internet service providers), allowing others to access the Internet and mostly for E-mail and games.

 Internet Marketing/E-Commerce – Internet Marketing

   Possibilities of uses for this new medium grew quickly. As users increased, so did the numbers of ISP’s, search engines and applications, most of which were all free. As a business opportunity, the Internet could level the playing field. No one knew if you were a flegling start-up or a seasoned and establishe big business. A slick designed and registered website (.com), would allow your company to appear along with and compete with Big Business. You could submit your site to the many new search engines for free and get listed for anything anyone was looking for. The only costs incurred were mostly only the ISP fees for connecting to the Internet. But everyone was looking for money to be made on the Internet. But how?

   Computers used to be huge and bulky, but by this time, many people had smaller ones we now call PC’s or personal computers. Computer use became much more economical. But in addition to an ISP to connect to the Internet, they needed a device to do this and the modem boom grew. Many, many companies got into this, all selling modems to send and receive data. But they would also need a graphical interface and an operating system to turn data into something the user could use and understand. Companies offering operating systems came forward. But Microsoft so dominated this field along with their Internet Browser (Internet Explorer), they eventually would face multiple lawsuits by smaller competitors, all joining together, seeking to have Microsoft declared as a monopoly and have the government break up the company.

   Practical needs for software, which could help business do something quicker and cheaper were exploding. Innovators promising to fulfill those needs were everywhere. Many were successful and were soon bought out by the larger companies. The very post you are reading right now, was pasted from a copied file, from Microsoft Word. Word was originally not a part of Microdoft, but one of these fledgling companies, acquired, bought, taken over, raided, absorbed or merged with Big Business. 

   Money, money, money, how do you make money on the Internet? Silicon valley in California became the hub of this new world. If you wanted to start something or make something or get money in this field, this is where you went. Supposedly, the idea for Yahoo.com was penciled or penned on a paper napkin. The presentation was made in a little diner over lunch or dinner, just outside of Silicon Valley.

   Many new companies (not even profitable), had to raise money in order to survive. The idea of ‘Get Big or Get Gone,’ was the clarion call. Perhaps Wal-Mart, the once little known outside of where is Bentonville and where is Arkansas anyway, which became and remains the world’s largest retailer, is responsible for this? Wal-Mart changed business in that it did not make anything. It just found a better way to deliver what everyone already wanted or needed. Offering the same stuff as everyone else only cheaper, was one of the ways they became the business phenomenon and the giant that they have become. Now many businesses operate or try to imitate Wal-Mart. If you were to read ‘Made In America’ by the founder of Wal-Mart, Sam Walton, you will find that computers, private airplanes to scout for location, employing a more trusted group of people (the elderly), offering only ‘made in america’ stuff initially and supposedly, and the deals made with manufacturers/vendors, you will discover what propelled them to the enviable position, as the world largest retailer. Wal-Mart is another subject and reserved for another possible future post on Retailing, but they may have contributed greatly to this idea of ‘Get Big or Get Gone.’ The same fledgling companies that were not profitable, turned towards Wall Street and put into place, IPO’s (Initial Public Offerings), to raise enormous amount of cash.  The ‘dot com’ race was on!

   Yes the race was on, but only a few companies were actually profitable. Most were speculative. Of the few that were making money, they were the companies offering domain name registration. They were few in number at first,  but the money made from the large fees collected for their service was astronomical. Already the level playing field or the ‘teeter-totter’ was becoming imbalanced, by the heavy feet of Big Business. As they say, it is only the strong that survive.

   Software to submit to the search engines, and web design programs became in vogue. HTML purists could argue all day and night that handwritten code or the human touch was far superior to these programs, but they could not compete with their speed. The little person just wanting to compete and get their ‘dot com’ on, had to reduce their costs and find the money to operate and stay afloat. Where would they get the money? Affiliate marketing was born.

   Companies of all sizes need customers in order to become profitable or merely to survive. To get them through the Internet, they would offer often large sums of money to anyone or any web site that could deliver. The amounts at first were so small, a website had to ‘affliate’  with a large number of companies. Banner ads would start to appear everywhere. I clearly can recall the first time I connected to the Internet. I think the only reason I did not cancel my contract with my ISP was at the time, I was required to sign up and pay for a minimum of two months. But the amount of these banner ads nearly overwhelmed me. I mean, on television you would at least see one ad in its entirety for 15, 30 or 60 seconds before the next one ran. On the Internet however, there were a whole bunch of them vying for my attention at the same time, WHEW!

   Why so many? For one thing, the advertisers were not paying a lot, so you had to have many of them to make any money. Often the money made was contingent upon the amount of sales generated. You had to continue to find new companies to replace those that left if you were not successful by their expectations.

   Initial problems with affiliate marketing and banner advertising were several. It is not unheard of to get 25,000 hits (users coming to your web site), just to get one sale. Turnaround time for you to get your fee for delivering customers to the advertisers took a long time. Later, these advertisers would only offer limited ‘deals’ for a limited time, unless you could deliver. Advertisers set up how much they would pay and when. This increased the need for more and more banner ads in order to compete and get a share of advertiser paid revenue. Only the best and most recognised companies would make the effort worthwhile and unless you could deliver customers, you probably could not even get their attention, much less their money to make your company on line, successful.

   Search engine requirements were changing. They became wise to programs that would submit to them. The search engines needed money too, so they used banner ads and started charging to submit to them. Sure, you could and still submit for free, but where will your web site be found among the many? When searching for any one or anything on the Internet, most people, if they can not find what they are looking for on the first or second page of about 10-20 entries each (among the 1,000’s), they probably will never find you. What to do? Pay to submit and pay a new industry professional, specializing in search engine optimization (SEO). Again, the costs go up and only those that can pay them, can possibly succeed. This also opened doors to marketing companies that are in business to make you money, but with no guarantees of course.

   There is a coffee company in my area that does not grow, transport, roast, package or distribute coffee, but they have a huge website to market others that do. It is my understanding that there is not a high profit margin in coffee and the success is dependent upon volume. But this coffee marketing company must have a lot volume, because I was told that they spend $35,000 a month, in advertising their web site. This is a bit out of reach for most. Rather than affiliate marketing or by using banner ads to bug a lot of people and your content gets lost and your beautiful and really cool web site is minimized and not remembered, because of all the ads, how can you get money from those you seek to attract to your company; its products and services?  With all this traffic on the Internet, it looked like a gold mine, but how could you take claim your share of the gold? E-Commerce!

 Internet Marketing/E-Commerce – E-Commerce

   It seems like with every problem that technology solves or intends to solve, more problems are created. This could mean new opportunities for some, hassle for others and increased costs for most of us. This is true of E-Commerce and before we can benefit from this, we must first fix some other problems.

   The first thing is security. Many people did not trust the Internet as a place to spend their money. There are many that still do not. There were already horror stories of credit card theft, unauthorised use, idenity theft, fraud and unauthorised private information obtained, in the ouside world. Why would cyberspace or the Internet be any different? Thieves and other malcontents gravitated towards the Internet. There were hackers which I place in three categories.

•  Hackers that seek to either steal information or harm others, because of some ulterior motive – anger, jealousy, got fired from the company, eliminate the competition etc.
•  Hackers that seek to make a point that freedom or use is being controlled by a few instead of making it available to all
•  Hackers that work with other companies to test if their sites are secure

   ‘Denial of Service,’ was a huge problem. If you could somehow access a number of computers and slave them to request information at the same time from a particular web site, you could place such a demand upon the servers, it could shut down the service, the web site would disappear and a user would see a blank screen with possibly a message that read, ‘Denial of Service.’ Well how could these hackers do this? Enter the world of viruses, Trojans and a number of other such programs designed to infiltrate and accomplish some sinister purpose. To the rescue were the anti-virus software companies. They got smarter and so did and do the hackers. ‘Cookie’s (not yourdailycookie), were used innocently at first, to try and figure out what the user was looking for. Then they could also be used to spy on you if you went to a  competitor’s site. Soon, anti-virus was not enough. Internet Security had to meet the need if possible.

   Internet Security had to guard against not just viruses, but spy ware, bogus web sites that look like legitimate ones fishing or ‘phishing’ for personal information and much more. It was more than just to protect an on line transaction for sales, but to protect the users computers from either being damaged or ‘slaved’ to use for unauthorised, malicious and illegal purposes. E-mail programs were becoming more sophisticated to harness and use the users on line address books. So Internet Security had to protect the user from these threats. Then there is the matter of the now evolved Direct Mail marketing model with it’s often being thought of as junk mail. E-Mail was now threatened by spam. So anti-spam had to be developed. On and on, the legitimate or otherwise questionable business opportunities would come and many would go. Some even would argue that in part, the very companies in business to protect the user, were also creating many of the problems. Internet Security today, is one of the most popular and demanded fields of study in many colleges. It holds a bright future for many in this field, with no sign of it slowing down, any time soon.

   At the same time I first got on line and connected to the Internet, my first ISP gave me the best advice I have ever received about the Internet. It still applies today.

•  You can find anything on the Internet, just make sure you are looking for what you find
•  There is no such thing as security on the Internet
•  There is no such thing as FREE

   Keeping those three things in mind, you can minimize the threat of your security being breached. Companies now offer off location, but on line access for backing up entire hard drives, encrypting the data and storing it, just in case something happens to your computer. Maybe you cannot afford enough CD’s/DVD’s/BluRay/tape drives etc. to back it up yourself, because hard drives have gotten to be huge. Maybe the media is not big enough to back up your data regularly? Maybe you don’t have the time necessary to do it yourself?

   Other companies including your bank card companies, now offer fraud and identity protection, but for a price of course.

   Still, on line transactions continue. The last two holiday seasons showed more on line transactions over the Internet, than ‘in line’ sales at ‘brick and mortar’ or actual stores. The trend continues.

   People grew quickly tired of banner ads and boring or just stale web sites. Flash animation and new stuff became the thing to attract others and hopefully to keep them coming back. Internet protocols had limited fonts in order to write their content and expect every one to read it as they intended. This led to more sophisticated graphic software and photo imaging and a way to deliver content that could be downloaded from the Internet, viewed and printed by the end user. PDF (Portable Document Format), became the answer, so anyone could view your content and format and fonts, exactly as intended. Adobe systems would long dominate all these fields of Image/Photo editing with their suites of applications, contained on a single CD, but costing thousands of dollars. Almost everyone uses Acrobat reader for FREE to view PDF files and Acrobat to create them.

   The Internet crowd were and are becoming restless. They want more than just cool web sites with all the latest gizmos and gadgets. With the cool comes the need for speed. Still a few years off would be high-speed Internet.

   With the glut of websites, there was something being overlooked. People want what they want and when they want it. If they are not interested in just buying stuff, what did they want? They wanted they same stuff, but cheaper like what Wal-Mart was offering. New, on line discounters and wholesalers came of age. Still there was something missing and it was more of a personal nature. People wanted more out of the search engines. People wanted information for maps, recipes, research and on and on. They wanted something more personal. They began to not trust the media as they once did, believing most were biased and instead of news, they found entertainment or whatever could be sold for news. It would not be long until entertainment and news would really merge, like Walt Disney acquiring ABC News and so forth. Blogs would answer and the media/news would start their own blogs too.

   People wanted more from the Internet, something more personal. On line social networks were an answer. 

   People wanted something even more personal. They are sick and tired of the one-size-fits-all concept of mass production. They want massive customization. For a price, you can now customize your own special M&M’s candies (plain or peanut). Everyone is now trying to capture their piece of the pie or market share in customizing what the customer wants and needs..

   With all the speculation, new companies, start-ups, mergers, acquisitions and such, the dot com boom was racing forward at a frantic pace. It was like a bubble and like a bubble, it burst. After the damage assessment; after the smoke cleared, only a few remained and once again, only Big Business was in control. This huge system fell apart and if it was to continue, it had to be changed.

 ”Systems under which people work account for 95% of all errors and failure; therefore, the key to excellence is to perfect the system.”

- Dr. William Edwards Deming -

   Despite it’s many faults and failures, Internet Marketing/E-Commerce, like all the previous business models are still around to this day. Why? Because they work. But how can the system be changed or ‘tweaked,’ for the 21^st century?

‘Tweaking Internet Marketing/E-Commerce for the 21^st Century

   First, as written several times already in this series, ‘In Pursuit of the Best Business,’ you need to know what people want and need. Make only these products and services available to them, through this business model. How? Take surveys, get referrals and get a working idea of who wants what and how much product you need on hand.

   Instead of spending massive amounts trying to get your customers, put the money into what they want and provide it to them.

   Provide a one-stop shop for anything your customers want and need, all in one location. This may sound like the same-o banner ads, but remember, the ads that appear are those that are requested. Also, a one stop shop is less prone to security issues if the user never leaves the area. If they do leave, security issues are handled by those web sites the users jump to. Remember again, those web sites are more likely to be more secure if they are affiliated with your site. Those web sites should exist in your business model, because they are what your customers want and need.  

   Once you provide a faithful and loyal customer base to partner stores, you are more likely to negotiate the terms with them instead of they with you. This increases your profit margins while at the same time, reduce your costs. Savings can be passed on to your customers instead of the ‘middle’ people or trying to please stockholders.

   Control the data, sales information and customers sent to your partner stores. If you can control what is shared between you and your partner stores, you can control when you get paid by them. Why not get paid instantly instead of weeks and months after a sale has been made?

   Make customization a priority. Learn from the old stand by, “buy low, sell high.” In other words, volume can reduce costs and increase profits. Rather than make anything or everything yourself, contract others to manufacture and distribute and take care of quality control and returns etc. Pay them more than they are used to receiving and you will not only keep them happy to work for you, but the quality control will be exceptional. Also, in addition to theirs, using your own in-house quality control will eliminate additional problems. DO NOT EXCEPT ANYTHING for sale that does not meet your standards. Be known for your uncompromised stand for excellence.

   By branding your products/services with exclusive offerings of products/services that are custom made to the end user’s specifications, you will keep, maintain and grow your business. One such area with many of the ‘baby boomers’ nearing retirement, is ‘Health and Wellness.’ What do these people want? They want to look younger, be healthier, live longer and enjoy their chosen lifestyles, as long as possible. Provide this and you are now moving into and estimated trillion dollar market.

   What else can be done? Instead of like everyone else that is trying to get a piece of market share, develop your share of the market to provide for all your customer’s needs. This is much more efficient and profitable.

   Paying for extra costs to make the best, can easily be justified by elimating the many middle people and businesses that add to the cost, before the final costs are paid by the end user. Much of this is in advertising and distribution/warehousing. These costs on average, amount to around sixty cents of every dollar the customer finally pays, for the product or service.

   Cut costs and add to the quality of the products/services offered. Offer exceptional customer service. Add value to the customer. Instead of mass blasting to get a share of the market, take care of all that your customers need. Their needs are having their many wants fulfilled, ease of use and whatever will save them time and money; maybe even make them money.

   Develop a universal shopping cart. Instead of multiple transactions for each sale, the customer just puts whatever they want into their cart like groceries, a television set, movies, music, clothing etc. and when it comes time to check out, they pay once and only once, even if the items came from different stores. 

   Provide various means of payment acceptance. Provide a branded credit card (Master Card or Visa), to all your customers:

•  For those that shop on line
•  For those that do Not shop on line
•  For those ‘touchy-feely’ customers that want to go to the same stores available on your portal. They can touch and feel in the real store then use your branded card.
• For those purchasing anything not available on line or not available, yet
• Tie everything together with a preferred customer bonus program. All purchases of anything/anywhere/anytime made with your branded credit card accumulate points, redeemable in FREE products/services or cash (their choice)

    Provide Free E-mail without banner ads/spam etc. Make it really free with no strings attached.

   Provide research capability. One for all the products/services offered and another for everything else the user wants to find information on.

   Use cookies only in house and tell your customers why. Add widgets for surveys and viral marketing of all associative products/services your customers want and need. Make it all customized to their individual specifications i.e., price, brand etc.

   Stay ahead of all industries present and in the future, by surveying your customer base as to what they are interested in presently or in the future that you may not offer, then provide it! Offer value, quality, coupons, and bonus points that can be exchanged for free products/services or cash and make it the user’s choice. Pay them to refer others. Now you have developed a nearly perfect system that is almost addictive. Your customers and your partners would not dream of going anywhere else, IF you give them a one-stop-shop that has everything they could possibly ever want or need. Nearly perfect? What else is missing? A real personal touch! Just like the old time general stores which were the one-stop-shops in their day (mostly due to the fact they were the only store in town). The proprietors developed a personal relationship with their customers. Many companies realizing this need have tried to fulfill it with something like ‘Cyber Bill’ or ‘Internet Betty,’ animated software programs that respond to voice commands and/or questions poised by the customer. This type of interaction between you and your customers may become state of the art, but it is not now or ever will be, close enough! People want to interact with real people and people prefer to buy stuff from someone they know and trust. In order to provide this ‘high touch,’ it is necessary to include Network Marketing to this business model and then, you have an entirely new business model. This is what we are looking to find, ‘In Pursuit of the Best Business.’

    Consider Internet Marketing/E-Commerce as a business or profession.

The Best Business Model for the 21^st Centery (original post 6/24/08 part 9 of 9 FINAL)

   During this series, we have explored the strengths and weaknesses of various business models over the past some 70 years. Approximately every 10-20 years a new marketing system is identified as a new way to distribute goods and services to the end user. So you want to start your own business. For your cookie today, we will ‘bite’ into The Best Business Model for the 21^st century. Today, what is the latest business trend for the 21^stcentury? What is the best way to make money with this business model? To sometimes move forward, we must often first look at the past. To know where we are going, many times depends, on knowing where we have been.

•  1930’s – Direct Selling
•  1940’s – Franchising
•  1950’s – MLM (multi-level marketing)/Network Marketing
•  1960’s – Catalogs
•  1970’s – Direct Mail
•  1980’s – Infomercials/Direct Response
•  1990’s – Internet/E-Commerce

   By utilizing the strengths of all the previous business models and eliminating their weaknesses, we can begin to build something new. If we combine those strengths and enhance them, we in essence develop an entirely new business model and a new system.

“Systems under which people work account for 95% of all errors and failure; therefore, the key to excellence is to PERFECT THE SYSTEM!”

- Dr. William Edwards Deming -

 Direct Selling

   This new system begins as a direct sales model, for if offers products and services, directly to consumers by a variety of partners stores and exclusive products and services. As an enhanced sales organization it is not limited as to how the products and services can be sold.

   door to door      home shows      product demonstrations      referrals

   re-orders       retail stores      business to business        on line

   With a wide variety of options, those involved that are not interested in ‘selling’ per se, have other areas to choose from. Products and services which are in demand are not required  to have offers of try-before-you-buy, they are already wanted and needed. Therefore, cancellations, product returns and any stock of used product to try and re-sell or written off as waste, are minimized.

 Compensation

•  Unlimited retail income for sales of one-time or infrequent products/services
•  Unlimited retail income for consumable products/services purchased regularly
•  Unlimited residual income for service or intangibles renewed
•  Network or group volume for residual income

 Franchising

   The main strength of franchising, is the system. The system must be as such that it can be duplicated by the average person, anywhere in the world and at anytime.

•  Low investment or start-up. Little or no risk. Made to work for you, before you   get involved.
•  Independent Business/Distributor “In business for yourself, but not by yourself”
• Team concept in theory and in PRACTICE!
•  Leverage – the system and the team
•  No one receives any compensation for recruiting others into the business
•  No one receives any compensation until others are successful
•  No high overhead (home based business with all the tax advantages of a business + others that are ONLY available to a home based business)
•  No inventory requirements
•  No monthly royalties paid to a Franchiser
•  No territory restrictions or competition with others or even within your own group
•  No employees required along with their associative costs
•  Minimal training requirements at minimal cost. Some FREE and some low. NO BOOKS, TAPES and other such material are EVER REQUIRED
•  Provide specific training also, at minimal costs of optional areas for specialization
•  Provide state of the art marketing and merchandising tools across a wide range of media (real world and on line).
•  Provide state of the art communication and management system which will handle 90% + of the business of the business
•  Provide state of the art quality control and distribution systems (reduces fatigue, accidents and mistakes)
•  Provide standardization
•  Provide uniformity
•  Has a growing visibility
•  Corporate provides all research and development of products/services and partner store relationships, handles all transactions on line, handles distribution, collects appropriate sales tax and provides E-Commerce to all distributors and customers
•  Own multiple businesses
•  Start part/time (8-10 per week)

 Network Marketing

•  One-to-one marketing, conversational marketing, referral marketing, and educational based
•  No large or constant recruitment requirements EVER. Based on what the average person can do, just 2-4 other distributors sponsored, to be successful for life, but others can choose to do more according to desire and ability. Built once, paid for life.
•  No large initial inventory requirements
•  No on going large and continual inventory required
•  Minimal monthly/quarterly or annual requirements
•  Minimal trainings (3) required once and the rest are optional
•  No product stacking ‘garage or attic qualifying’ to receive compensation
•  Bonuses based on the success of those within your network
•  No constant selling rather than finding out what people want and providing it
•  Not paid on levels – computer searches to infinity each week for group volume in your network
•  Paid weekly instead of monthly
•  Business volume accrues – It is not a question of IF you will get paid, but when
•  No ‘break aways’ your best person taken away from your network, because they are too successful. With no break aways, no concern or need to replace them or their volume
•  Group volume is shared from the bottom up. You don’t get paid until others succeed
•  No high attrition, but high retention. People generally do not leave something they are making money with and are successful at
•  Virtually unlimited brand-name and exclusive product/service lines. Always growing according to what people want and need instead of what you may want to sell them.
•  Able to shift and respond to market swings.
•  Protitable in any economic situation
•  Poised for International growth and expansion
•  New people learn and earn by others experience
•  Group synergy – built from the bottom up instead of the top down
•  Eliminates competition among the networks and cross pollenization (others trying to recruit your people)
•  Promotes cooperation across the various groups
•  A sub economy more powerful than government
•  Bridges gender, age, cultural, intellectual, racial, ethnic, socio-economic, and language divisions
•  Average person working 8-10 hours per week for 2-3 years, can earn a six figure residual income for life. Build it once, get paid for life
•  Transferable to heirs or to those of your own choosing
•  A new and exciting concept
•  Patented system

 Catalogs

   Smaller in size and pages and regularly Requested and updated – print, personally printed, E-Mail, and downloaded by the customer. Expand to other medium as needed – CD’S/DVD’s/iPod/BluRay etc.

 Direct Mail

   Newsletters, flyers, greeting cards etc. that are constantly updated and Requested - print, personally printed, E-Mail, and downloaded by the customer. Expand to other medium as needed – CD’S/DVD’s/iPod/BluRay etc.

 Infomercials/Direct Response

   Requested product/service demonstrations, seminars and webinars (real world and on line), across a wide variety of mediums – television (private channel and other), radio, print and on line. Provide customers with the ability to sample music, games, movies, up load their picticures and see how they would look in changing color/style etc. of all manner of products and services. Provide customized on line 3D rooms where customer can decorate/redecorate etc. with products and services they are looking for. For example, they get an idea of what that cool TV would look like in that corner, of that room of their 3D home. Can also show others what you like, like displaying the cover art of a new music CD on the screen of your TV. Can also be used as chat rooms.

 Internet/ E-Commerce – Internet

•  Corporate branded web site interface for all partner stores, distributor network/management and customers
•  Network of multiple individually owned web ‘portals’ tied in directly to corporate. Combines the shared volume and power of thousands of web sites with millions of customers, for search engine optimization (SEO) and search engine placement (on top instead of on the bottom)
•  Provides an on line, one-stop-shop for anything the customer wants or needs – brand name products/services, exclusive products/services, music/movie downloads, special deals, news/weather/sports/entertainment/stocks etc. all customizable by each user, buy/sell/trade (Ebay and other options), Free E-mail, research anything on the Internet, on line social/business/communication and entertainment network. Connect with entertainment personalities, their associative merchandise and even the possibility up back stage passes to meet them at live concerts and events. Make travel arrangements, acquire tickets for events, concerts etc., downloads for music/movies/iPod etc. On line gaming community, contests, participate in surveys, user comments, view product/service demonstrations, download materials that can be printed, blogs (web logs), customer appreciation/awards/bonuses, coupons, personal calendar, state of the art customizable user tools (flash animation, video clips, 3D rooms for chatting and visualizing products and services for your home and business, multiple language options with the click of a mouse. Savings through the portal for even brand name items less expensive than if you visited the store on your own. Get paid to shop. Free trials and samples. Get paid to refer others. Virtually anything the customer wants or needs can be found in one location, without ever having to go anywhere else. If it is not here, it is either not wanted/needed or not available YET.
•  Each portal is individually owned and are designed to handle all the needs of 10-15 preferred customers. More efficient than trying to sell one or a few items to many when you are taking care of all the needs of a few. Mimics the old time concept of the general store and brings it into the 21^stcentury. Each preferred customer has their own personal customer manager like a concierge at a 5 star hotel. Customers can connect in a variety of ways: in-person (if closeby), E-Mail and by phone/voice mail etc. Personal relationships and trust is built, based on the fact, “most people prefer to purchase from those they know and trust. This ‘high touch’ model eliminates long wait time standing in line. Eliminates speaking to either automatic phone people or a customer service person 100’s & 1,000’s of miles away. Saves the customer time and energy, and reduces (or eliminates), stress and frustration. This ‘high touch’ virtually eliminates all competition, by not having to pay sales/telemarketing, customer service personnel, ‘middle’ people, stock investors and boards of governance.
• Time Freedom Time Management
•  Provides real income generation for customers needing to increase their income and/or reduce expenses by working either part time or full time. Provides opportunities for those attending college so that when they graduate, they are not in debt. Provides real help to military families and those returning from service to the private world. Provides help to stay-at-home moms, dads and single parent/caretaker household. Provides help for those with language barriers. Provides aid to senior citizens or retirees wanting to supplement their income. Real wealth generation and opportunity to those financially challenged.
•  Positive impact on health care costs. Reduces absenteeism from work due to illness. Reduces tax burdens, and increases work productivity when distributing products/services to the Health & Wellness industry that really work. If you feel better, look better, live longer and think better, you will be more productive and enjoy life more.
•  Branded services for purchases – discounts for volume of customers – legal services, all kinds of insurance products/services, automobiles and eventually even real estate to mention a few .
•  Corporate profile – natural/organic/eco friendly. Charitable. Work with local, state and federal agencies to identify and elimanate business scams and help recover monies lost for those which were financially harmed.
•  Cyber traffic generated at the corporate web site, is shared among the individual owners of the portals
•  Private company where profits are shared among the individual owners instead of investors and their demands.
•  As a private company, corporate financials are not legally required – Make FULL DISCLOSURE available anyway, through outside and independent and reputable auditing firms.
•  FREE registration and sign-up for anyone with no purchase required EVER to use many free features and services.
•  One-stop-shop – true Home Page reduces security issues that could be encountered at other places on line.
•  ‘Subscribers only,’ keeps information on file and virtually prevents other typical Internet security threats by unknown hackers
•  Intranet network is maintained across the entire network and secured for on line transactions, data transmittal, backup, maintencae, updates and upgrades and real time communication.

 Internet/E-Commerce – E-Commerce

•  Universal shopping cart for any and all items the customer needs or wants. Put whatever you want from whatever store or stores you want, into your cart and check out once with one credit card. Saves time and money.
•  Wide options for purchase acceptance, cash, check (electronic transfer), and major credit cards.
•  Branded credit card (Master Card or Visa), used for all purchases on line and anything, anytime and anywhere else, the customer chooses to shop. Offer great rates, transfer balances from other cards, cash withdrawal etc. Tie in the Preferred Customer Program of rewards, gifts, prizes, and even cash, just for using it. Does not have to be used on line for the customer to accumulate points, redeemable for FREE products or cash (their choice).
•  Automatic shipments for re-orders, for every 30, 60, or 90 days. Customers no longer need to run out of anything they use on a regular basis.
•  Separate login for distributors will take them to their own business/communication location. Virtually 90% + of all business of the business is handled here – ordering, sales, receipts, training, merchandising and marketing tools, special offers, reports, calendar of events, reminders, training, E-mail, voice mail and much more. Can also be used to place orders, print receipts and all materials necessary, for those that do not shop on-line. It’s a CPA’s dream come true and very easy to maintain, operate and print out requirements for taxes.
•  Partner with the top professional people and businesses in the world and in every industry.
•  Teach this system to business majors in major universities.
•  Spread it globally.

   It has been a long list of stuff for this post and this series. There may be more I have left out, but this is real. Just in case you have your doubts, this system was designed and patented in 1995. The only this that has changed is the constantly growing numbers of distributors, customers, partner stores, products and services offered, more cool stuff, greater technology, expansion around the globe and people taking control of their money, time and lives. It is only just the beginning of what is to come.

   Now you could, just disbelieve this is happening and do nothing or find out more. You could ‘re-invent the wheel’ and make your own new thing. You could try and copy this, or imitate this system. Or you could just take advantage of what already exists. The choice is yours.

   If you would like additional information, please reply below. We will E-Mail one another and may even speak personally over the phone (on my dime). Please limit your requests to only the following areas or for contacts you have in these areas:

The United States, Canada, Australia, Taiwan, or Hong Kong. We are just starting to move into Latin America & South America. Europe and specifically, Great Britain will be opening soon, as well as, Japan

   For everyone else, please be patient, we will be in your area soon.

     Consider this, The Business System for the 21^st century, as a business or profession.

 

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‘In Pursuit of the Best Business’

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