Tuesday, February 4, 2014

MLM Commentary: Think VERY HARD If You Want To Pivot to MLM

English: Seal of the United States Census Bure...
United States Census Bureau.
 (Photo credit: Wikipedia)
Generally speaking, network marketing (or multi-level marketing) is a niche that grows, but the rate is hardly noticeable against inflation, despite having been around for decades. Most products are launched through traditional retail channels, and only a few very niche products are launched with network marketing.

Consider this: According to US Department of Commerce, Census Bureau, 2011 total retail is

4,136,352  million dollars (not counting auto sales or auto parts)

According to Direct Selling Associasion (DSA), estimated direct sales to retail 2011 is...

29,870  million (i.e. 29.87 billion)

That's 0.72% of all US retail (again, not counting auto sales or auto parts)
DSA (US) Logo
DSA (US) Logo
(Photo credit: Wikipedia)

Not much of a niche, is it?

How much did it grow? Let's take a look at 2010's data (2012 data will be published in March or April 2014, according to Census Bureau).

3,841,454  million dollars

That's 7.6% growth from 2010 to 2011.

How did direct sales do in the same period?

28,560 million

That's 0.74% of all US retail, only a 4.6% growth from 2010 to 2011.

If a company can't make it in regular retail, how do they expect to make it in network marketing?

Thus, if a company that was originally launched as retail business want to switch to direct sales... That company should consider ALL the angles, lest it end up with a disastrous pivot.

A "pivot" is when a business tries to refocus its business into a different field. It can be done, but it is extremely risky, even when all the moves are right.

IBM did a successful pivot to get away from the personal computer business (sold it all the Lenovo) and concentrated on business services and solutions, sort of going back to its roots. 

Pixar did a successful pivot when it dropped its hardware and software business and concentrated on animation, which was merely a sidejob that keep the bills paid. 

There are plenty of companies that failed to pivot. Blockbuster Video would be one... It tried doing the "DVD by mail" like Netflix... but can't keep up when Netflix dumped the DVDs for streaming. 

Not only you have to choose to pivot, but how you pivot is a major concern. For companies that is considering pivot to network marketing, you may have rocky road ahead, due to incompatible culture, possibly shady marketing moves, and more. 

One company that tried this marketing pivot is BidRX.

BidRX was a high flier. It offered a way to shop for prescription drugs via their proprietary platform. It was really hot... in 2011. It even got on the Today show and Lifehacker. Pay as low as $2.50 a month for continued access to money saving measures. And after that splash, it hadn't been heard from since. 

Which is sort of understandable. Expanding drug coverage, prescription now available at Target and CostCo, existing pharmacies like Walgreens introduce "clubs" for additional savings... Growth of BidRX probably slowed, which in turn slowed their recruitment effort of additional pharmacies. 

Then suddenly in 2014 a company called BidForMyMeds came along, and started representing itself as a part of BidRX. Their "about" page shows CEO and VP of BidRX, except BidForMyMeds have a monthly fee of $7, and if you pay $17 a month instead, you can recruit other people (who pay $7 or $17) and get PAID for your recruitment. 

This is so much like Burnlounge (a pyramid scheme closed by FTC). Add to that the shady nature of unclear link between BidRX and BidForMyMeds, that lead Oz over at BehindMLM to question if the use of BidRX was even authorized. That resulted in an attorney sending Oz a legal threat to remove the review, which was politely refused

Later updates revealed that BidForMyMeds is merely a marketing company (one of several) that reached some sort of deal with BidRX, and the lack of separation between the two had lead to some BidForMyMeds members calling BidRX and yelling at the reps on the phone for lack of support, thinking they're talking to BidForMyMeds.

It's a PR disaster in the making, for both BidRX and BidForMyMeds. What went wrong?

First, BidRX apparently did not check how did BidForMyMeds represented itself and its relation to BidRX. This should have been a part of compliance review before the marketing agreement was signed, and review should have been done by professionals.

Second, BidForMyMeds apparently did not have sufficient training in place to explain the difference and what can be said (and cannot be said). This is a part of "affiliate compliance" and someone really did drop the ball. If they had training in place a lot fo this could have been averted. Though BidRX gets part of the blame for not checking the marketing campaign.

Third, the compensation plan essentially is a headhunting bounty, and since one has to PAY to join, that makes it a potentially illegal pyramid scheme / endless chain referral scheme. A MLM consultant or MLM lawyer would have caught this early on.

Fourth, the chain referral scheme attracted the type of referral game recruiters who recruit through half-truths, lies, misrepresentations, and so on that only made the situation worse.

Fifth, botched attempt to 'suppress' the 'negative' review illustrated the power of the Streisand Effect.

I like the idea of BidRX, but I'm afraid this botched marketing pivot may damage its hard-earned goodwill.

So be VERY careful if you are consider a company with MLM plan that was added recently. This pivot is often a sign of desperation.

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