Creating Customers for Life – A comparison of customer creation in two different network marketing business models. (Shaklee vs Sisel)

Even though I’ve been involved in network marketing for many years, this year has been the first year that I’ve been successful in building a sustainable customer base.  I’ve always been able to recruit new distributors, but I seldom recruited a customer, and when I did, 99% of the time their initial order was both their first and their last.

When I first studied the Shaklee business model, I found that 75% of their volume comes from customers (not distributors). This was amazing, because most other network marketing companies have 95%+ of their revenue generated by distributors. This happens for a variety of reasons.  First, many MLMs design their compensation plan, and then add on customer sales as an afterthought (more on this later).  Second reason is product value.  If the product does not provide a good value to a customer (that’s not involved in the business), then the creation of sustainable customers is problematic.

With 75% of sales coming from customers, and average customer retention of 17 years, Shaklee obviously has something working for creating customers for life.  I first thought that this was just due to following reasons:

  • Shaklee’s 100% unconditional money back guarantee (even if you’ve used the entire product).
  • Great Value – Customers can get Vita-Lea vitamins for about $10 a month
  • Trusted Brand – Shaklee is the most trusted brand in Natural Health Products
  • Scientific Proof – Clinical Studies on their products, not just the ingredients.
  • Superior Product Quality – Always Safe, Always Green, Always Work

After working with Shaklee and creating my first few customers, I discovered there is another important reason they have so many customers – incentivized distributors:

  • Having a customer base makes it much easier to qualify for higher levels of compensation.  For example, at 2000 PGV you get paid 20% commission and also get a 10% reduction in the price you pay for products.  This is much easier to do if you have an active customer base.
  • Shaklee pays it’s distributors Extremely Well to create and support their customers. 

The reminder of this article will primarily address this point, and will show you how much money you can earn creating customers with Shaklee.  I’ll be comparing this to Sisel, which was my prior business model.

Let's add a customer to Sisel with a Gold Triangle of Life at $150 and 150 BV.  At Sisel, customers pay the same as distributors so there is no price difference that is paid in compensation.  When you sign up a customer, they are placed in your front line, which pays 5%.  You also get a 30% FastStart bonus the first month, and a 10% retention bonus (encourages you to get them to do a 2nd order).  This means that your customer will spend $1,800 and your commission will be $135 for the first year (as shown below).

Annual Commission on 150 BV Order

Total

FastStart Bonus 30% - 1st Month

$45

Retention Bonus 10% - 2nd Month

$15

Direct Distributor 5% - Month 3 to 12

$7.50

Total Commission over 12 months

$135

Total Paid by Customer

$1,800

Actual Commission Percentage

7.5%

Sisel is a good example of a company that does not have a clear strategy for customers, so what many distributors will do to make a bigger commission is to trick the system and pretend the customer was sponsored by someone in their 3rd tier of compensation (this is the level that pays the highest percentage).  They get a smaller FastStart bonus since they are in the upline FastStart matrix, but make a better overall return.

Annual Commission on 150 BV Order

Total

FastStart Bonus 5% - 1st Month

$7.50

Direct Distributor 15% - Month 2 to 12

$22.50

Total Commission over 12 months

$255

Total Paid by Customer

$1,800

Actual Commission Percentage

14.2%

Now, let’s look at a similar sale with Shaklee. Let’s put in a new Customer with a 100 BV Autoship. We will use Vivix + Vitalizer which is normally $164 member price, but with an autoship, the customer get a 10% discount, and the they also get a $10 Shaklee 180 coupon which allows them to buy a $48 product for $10 (which keeps them ordering).  In this scenario, the Vivix + Vitalizer is reduced to  $148 member price ($128 DP) with 100 BV.

Annual Commission on 100 BV Order

Total

Power Bonus (2 points)

$20

Volume Bonus - Points (20%)

$20

Price Differential Bonus          

$20

- First Month Bonus

$60

- Months 2 to 12 Bonus

$40

Total Commission over 12 months

$500

Total Paid by Customer

$1,776

Actual Commission Percentage

28.2%

So even with the customer paying less that Sisel, with a 10% discount, you still earn twice the compensation. 

The real kicker is that it’s easy to get new Shaklee customers when you have a great brand, great value, and a great business model for customers.  In February, we added 32 new Shaklee customers to our team.  Just think about that and do the math…

 

 

category: Joye Team