Compensations Plans
Customer Focused Success Compensation Plans | This is the second in a series of four articles, each of which focus on one important aspect of direct sales compensation plans and presents practical strategies to consider in the design and enhancement of all party plan and multi-level compensation plans. The topic of this compensation plan post is Customer Focused Success.
If you missed the first article or if you’d like to read it again, click COMPENSATION PLANS: FOCUS ON COMPRESSION
Customers are vital to the health of all businesses. Direct selling companies have two types of customers: those who participate in the income opportunity and those who do not.
Start with Strategy
Your business strategy is a plan of how you will achieve your goals. Direct sales compensation plans encompass your pricing structure and your approaches to motivate and reward specific behaviors. Your compensation plan truly is one of your key tools to execute your business strategy.
Ask Yourself These Customer-Focused Questions
- Will representatives and customers pay different prices for the same product or services?
- Are your prices aligned with what a customer would consider as reasonable for the products or services being offered?
- Will customers who are not participating in the business opportunity desire your products and services at the prices you’ve set for them?
Customers Are Good For Business
Creating products that are filling an unmet need and selling them at a price that attracts retail customers is a formula for long-term success. Direct selling companies whose sales are made primarily from their independent representatives are at risk of FTC actions due to a lack of customers who are not representatives. The Federal Trade Commission (FTC) sued Vemma in 2015 and imposed a settlement requiring that Herbalife restructure its business in 2016. These actions were made in response to a deep concern over a lack of customers who were themselves, representatives.
Compensation Plans Recommended Strategies
- Don’t charge zero to sign up as an independent representative with your company.
- Charge a representative enrollment fee that is high enough to prevent people from signing up just to purchase products for personal consumption at wholesale prices; and be sure not to pay any compensation upon the required fee.
- Have a fully developed pricing model that includes a market analysis of similar products and documents your go-to-market pricing strategy for representatives and customers.
- Don’t encourage people to join just for product discounts. Make it possible for one to pay the lowest prices without being a representative.
- Sell products or services that people will buy even if they are not earning any money through your compensation plan.
- Charge customers a fair market price for your products or services.
- Leverage promotions and incentives to increase customer sales.
- View your incentives holistically to ensure you will not negatively impact either your representatives or your customers.
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