Good and Bad News for Network Marketers

Sep 22

Good and Bad News for Network Marketers

There is good news and bad news for direct sales nutritional companies.  The good news, the recession has not decreased demand in the nutritional supplement business. In fact, supplements are selling quite well in the consumer market place. In a Packaged Facts survey, 63% of adults surveyed have taken a supplement in the last 12 months. That is phenomenal news if you are selling supplements. The bad news for network marketers, people are more price conscious than ever and let’s face it, network marketing has never quite matched up with Wal-Mart’s pricing.

It is time to get a little real, network marketers. Yes, I am talking to the big distributors and company executives here.  It is time to acknowledge what the public is saying with their checkbooks. The public is buying more health and nutrition products, but not from you. Few network-marketing representatives encourage retailing and instead tell their downlines to focus on the business opportunity and personal consumption. The problem is that there is only a small percentage of people that make sustainable money with their downlines. When people don’t make money, they look at how much they are paying for their $30 bottles of juice and switch back to Wal-Mart multivitamins and $4 orange juice.

The CEO of Dominos pizza recently said, “We are going to learn and we are going to get better.” Dominos even has the guts to post customers’ pictures of bad pizza and apologize to those customers via text message software. It is time for network marketing to step up and admit that, although we have a great form of distribution, we also have some issues that need to be addressed.

We can get better, but we better start looking at some facts. In order to pay commissions of 40-50% on a product, network-marketing companies must mark up their cost 6-10 times. As a result, the product value can suffer at the expense of the opportunity.  We can preach product value all day long, but if it is too expensive, the public will stop buying.  Network marketing works because of the opportunity. I am not encouraging that to stop. On the contrary, I am saying that the days of over priced supplements for the sake of the opportunity are fading quickly.

Before you start thinking I don’t know what I am talking about look at these numbers. Packaged Facts shows that supplements continue to grow steadily in sales with the market steadily progressing from 5.5% annual growth in 2007 to 6.5% in 2008 to 7.5% in 2009, bringing U.S. retail sales to $9.4 billion in 2009. However, as supplements continue to increase in sales, network marketing companies’ site traffic continues to decline during the economic hard times.

Company   –  Monthly Unique Visitors  – Yearly Change

Tahitian Noni (tni.com) 15,277               – 36.13%

Monavie (monavie.com) 63,847              – 59.39%

Xango (xango.com) 29,259                       – 40.46%

Amway (amway.com) 453,490                  +165.68%

Melaleuca (melaleuca.com) 390,923       – 30.80%

Usana (usana.com) 74,994                         – 12.93%

Of the list above, only Amway’s traffic has increased in the last year. Amway has reemphasized the product significantly through a multimillion-dollar ad campaign. Few companies have the resources to buy millions of dollars of advertising on the major networks. I purchase some of my supplements from Wal-Mart and I have never seen Wal-Mart advertise vitamins on television. (By the way, Wal-Mart accounts for 43% of supplement sales in the Packaged Facts survey.)  Perhaps it is time to reemphasize the product value through education and better pricing rather than emphasizing the opportunity so much.

Getting people to buy product with the pitch that they will eventually make a ton of money is not statistically sustainable. However, selling a great product that people want regardless of opportunity will always improve the bottom line.

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