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The Real Pyramid Selling

Spot the pyramid

Spot the pyramid

One of the challenges of any business is dealing with its reputation. Reputation is very important to success. A good reputation is something that most business people aim to achieve and to keep. A bad reputation can break your business. That’s why people protect their reputation. Brands are built upon reputations.

Some industries have bad reputations which have come about through the unscrupulous practices of a minority. Estate agents have a bad name, in general, but most of them work hard to sell your property. Double glazing companies have a bad reputation for sharp sales tactics and over-inflated prices, but not all double glazing companies behave like that.

Business models which are well known for being scams and are illegal as a result include ‘Ponzi’ selling schemes and ‘Pyramid’ selling schemes. The financial crisis we are in has revealed one massive fraud through Bernard Madoff’s Ponzi scheme where people are taken in by large confidence tricks. Pyramid selling has been banned because it involved persuading people in their team (their ‘downline’) to buy products for resale for which there was no market. The products were purchased on a ‘no return’ basis which meant the purchaser was stuck with this worthless stock.  But people confuse network marketing for pyramid selling.

Network marketing works on a completely different basis. It is based upon an individual building a team of motivated people who also build motivated teams. If you start a network marketing business, you gain from other people’s sales. It is a highly leveraged method of building a business and it is a very efficient form of distribution.

But, the teams of motivated individuals are not infinite in depth. The most successful network marketing firms only go three deep. Nobody has to buy a whole load of stock up front which is difficult to sell because it has been marked up so much by the numerous people above you in the chain. The price of the products are controlled centrally.

However, it is common for people to misunderstand network marketing. They think it is ‘pyramid selling’. However, the point I want to make is that we live in a business world which is not so far off ‘pyramid selling’ and it is hard to see why network marketing as a model is so looked down upon when it is so different from ‘normal’ distribution methods and illegal pyramid selling.

Our ‘normal’ distribution model relies on a manufacturer producing their products which are then purchased and resold, perhaps, by a national agent. The national agent sells the products to distributors who might sell it to wholesalers or retailers. All the way down the line, each party takes a cut of the recommended retail price. A pyramid of stock is spread throughout the chain.

Each one of them holds stock and gets a better deal on the products they buy based upon the risk they are prepared to take in knowing how much they can sell. Often, the manufacturer sells their product based upon a limited amount of unsold products that can be returned. This transfers risk from manufacturer to the agent who then might pass this down the line to the distributor to the wholesaler to the retailer. Unsold stock is often sold off cheap, hence the wave of ‘end of season sales’. Sometimes, the retailer is able to return all of their unsold stock to the wholesaler or distributor.

Compare that to network marketing where the distribution channel consists of the manufacturer who is also the distributor, that ships products directly to the end customer or sometimes through the person who is the local networking marketing agent. No stock is held in the pipeline. The networking marketing agent and their team is supplied directly by the manufacturer/distributor.

The team of networking marketing agents are all paid by the manufacturer and the person who built a team below them is rewarded for doing so and paid on their results.

So, why is networking marketing believed to be pyramid selling when traditional distribution methods are far more akin to that sales model? It comes down to reputation. Pyramid selling caused such a scandal that it tainted a very good, efficient and reputable business model. People cannot separate network marketing from pyramid sales models. And, ironically, illegal pyramid selling schemes are far more like mainstream distribution models than you may care to believe.

Keeping it simple is easy to say but difficult to do

Focus on the outcome

Focus on the outcome

Several years ago when working for one of the world’s largest software companies, I was having a conversation with a colleague whose background was software development but who was now in marketing. He was extolling the virtues of the latest version of the company’s software development tools.

It was interesting to a point, and I pointed out that I was probably not the best person to try and excite about the details because I was far more interested in what the tools did rather than how they did it. He was shocked at my attitude. I remember the look on his face. His expression looked as though I had just blasphemed. How could I work in that company and not be interested in the nuts and bolts of the ‘how’ of the software rather than the ‘what’ of the results of using the software?

The advertisements of the time for that product had a theme of moon landings and a line which went something like “Just imagine what could have been done in 1969 when getting those now famous Americans onto the moon if they had this product“.

The problem with that campaign was that most people who would be using the software were not trying to get astronauts to the moon. Most software developers wanted to do far more basic things in their daily work lives and do them slightly faster than previously possible. The launch of that version of the product was a flop and it took them another two to three years with the launch of a new version and more down to earth ambitions for the product to take off (if you’ll excuse the pun).

This story is commonplace in businesses which have technical products. Often, the technical people become wrapped up in splendid details and features but become detached from why their customers would benefit from them. That’s basic sales and marketing knowledge but it is surprising just how much it continues to happen.

Last night I ran a presentation at the Hull Digital networking event about 2-D codes which is a technology that enables people to scan a code on, say, a poster using their mobile phone which then might take them to a mobile web site, or which will dial a number for them, or send a text message.

This is all very well, but I focused on the opportunity that the technology represents rather than the technology itself in my presentation. 2-D codes happen to be good at connecting offline marketing (e.g. an ad in a magazine) to online resources (e.g. a mobile web site). But the opportunity which is more interesting is, for example, that of enabling two different companies with different specialisations in marketing to work together in partnership to offer clients new solutions.

This is approach is far easier for people to comprehend than an approach which talks about features. I know you need people who are good at understanding the features of a product or service. I couldn’t do my job without a team of expert web developers who know how it works. But clients don’t care too much about the ins and outs of a product. They just want to know if you can help, what the outcome will look like and when you can do it by.

It’s simple to understand, but often people forget to do it and end up losing opportunities to help their clients and to gain new ones.

Interesting article about changing values

The Generation M Manifesto – Umair Haque – HarvardBusiness.org http://ow.ly/jxfF

Explaining What You Do – 5 Top Tips

05/08/2009 1 comment
Being clear about what you do helps you and your prospects

Being clear about what you do helps you and your prospects

Most people in business have heard of the ‘elevator pitch‘ which is an a summary of your product, service or idea which you deliver to people that you want to invest with you. The elevator pitch may sound like a piece of business jargon but the principle behind it is sound.

If you can’t explain to someone what you do in a concise and clear manner which makes it easy to understand for the person that asked you the question then you should stop what you are doing and work it out now. Without this clear understanding about your business, idea or project then you put yourself in a weak position from which you will lose opportunities to sell, influence and connect with people.

It’s no good saying that what you do is very complicated and it can’t be explained in a sentence. People don’t have the patience to listen to long winded explanations and, in a competitive world, you will be replaced by someone else quickly who can explain what they do quickly.

When you have worked your pitch out, it has an amazing effect on your marketing and how your team think about their work and where the business is going. Your pitch will then influence how you write copy on your web site, it will affect how you write your emails, it will affect how you express yourself on your stand at shows and how you differentiate yourself from your competitors.

Prospective clients will know whether it is worth talking to you and you will know whether it is worth talking further with them. Your elevator pitch will save you time and help you to either sell more, gain investment or gain important contacts.

Here are my five top tips for working out your elevator pitch:

  1. Ask yourself what you are good at. Not what you want to do but what you are really strong at doing.
  2. Recall moments when you felt as though you were in your element when working with previous or existing clients.
  3. Reduce your ideas and words from the previous point into one or two clear, easy to read sentences.
  4. Test your elevator pitch out with some existing clients or prospects and note the difference in how they react to it.
  5. Practice what your pitch out loud and then practice, practice, practice until you know it off by heart.

Our business is going through this exercise right now. Our strap-line says ‘Digital Communications Agency‘ but it does not tell people what we do. It hides our deep skills and experience in a particular area and it affects how we explain what we do and how we can help. This is changing as I write and we will soon have a new, clear way of quickly explaining to people what we do.

People Like Lists. So Use Them.

People like lists. So use them.

People like lists. So use them.

When God gave Moses the Ten Commandments written on those stone tablets, he started something which has captured people’s imagination ever since . He started a fascination for lists.

Perhaps one in every ten tweets that I see on Twitter has a link to a list of some description. It might be a list for the top ten Twitter tools, or a list for the top things to do when looking for the best way to find new customers. It might be top tips for learning to how to be a better manager.

Why do people like them? Some of it is due to their easy access. People can read them quickly to learn new things and then decide whether they want to read more detail. Lists are easy to remember. They can be amusing. They can be serious. You only have to look on popular web sites like Amazon to see lists in action. Bestseller lists, music charts, video charts. There are numerous web sites that are dedicated top ten lists of just about any subject, item or product you can imagine. The list goes on.

A list is often passed around to friends and contacts too. People like sending lists to people with whom they share an interest. People feel happy to send them to their contacts because they are quick to read and easy to pass around.

For anyone who has their own blog or web site, then lists are a surefire method to attract new visitors to your site. You can use lists to show your expertise in your field. They are a good way to provide fresh material to your web site and to build mailing lists.

Lists can be incorporated into documents which visitors download from your web site in return for their email address. When you use this method, you can identify their interests to help you send them relevant news and information if you have a newsletter.

Promoting a list is important to get right. If you have no marketing money to promote the list, then make use of tools like Twitter, LinkedIn Groups and Facebook. Share the link to the list with your friends and contacts through email too. Let as many people as you can know about the list. If it’s a good list, they will pass the link to your list around.

I recently put together a list which was in a document and which could be downloaded from my blog in return for their email address. It was on a particular subject, namely ‘QR codes and 2-D codes’. I promoted it through specialist groups on LinkedIn as well as through Twitter and Facebook. As a result, traffic increased five-fold on the first day of the promotion on my blog and it continues to be a popular link.

So, if you want a simple and effective way to build your mailing list nd vistors to your web site, start thinking up a list on your area of expertise, place it on your web site and promote it. It’s an effective and cheap way to bring visitors to your web site or blog who share your interests and value your expertise.

Recruitment in the Social Media Age

Big business connects with candidates through social media

Big business connects with candidates through social media

Some time ago, I wrote an entry about traditional recruitment companies facing the challenge of showing their value to employers when it is now so easy to use the internet to find potential employees through services like ‘Monster’ or LinkedIn. It was an entry which created more people to comment on my blog than had done for some time.

I read an article today on ‘computerweekly.com‘ which highlighted an example of how large companies like Microsoft and KPMG have recruited technical staff through LinkedIn and Second Life and saved themselves tens of thousands of pounds in the process.

Furthermore, companies like Accenture are using Facebook to attract potential employees to their business through the use of games. For a fraction of the cost of placing advertisements in newspapers, major organisations are now able to connect with candidates and present themselves in a less formal manner than more traditional methods.

Understanding the Credit Crisis

The credit crisis or credit crunch has affected most of us in one way or another. Most of us probably know roughly why it happened. But, could you explain it to someone?  More importantly, will you know how to watch for the signs of credit crunch in the future so you can avoid being trapped by it again?

Here is a very good animation explaining the credit crisis in an approachable way.

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