In today’s New School session we were discussing how much you earn on your customers – what the company pays you for customer orders.
“I’ve been telling prospects and my own people for years that I make up to 50% on customer orders. But today I realized that that is not true. I only make 25% at most.
I will never say 50% again and will correct this wrong impression with everyone in my group, so they don’t say that anymore either.” -twenty-year vet in the business, eight years in current company.
Others chimed in that they had been doing the same thing, only they didn’t realize they were actually telling a lie.
When a company charges $100 for a product set, and tells you they pay you 50% when you sell it, how much do you expect to get?
And if you pass that info on to a prospective distributor, i.e. that the customer orders average $100, and the company pays you 50%, how much will THEY expect to get if they sell such a product package?
But instead of $50, what if they they only get $25?
Happens all the time in companies that disguise what they really pay out: they publish their product prices and the promote big percents they pay you on sales, but they actually pay you your percent on another, much lower price.
It’s the PV (or BV), folks. (Purchase Volume or Business Volume).
In the case above, the gal had just been repeating what she’d heard for years without much thought, because everyone in the leadership and at corporate were saying the same things.
Here’s what happened to her:
She has typical orders of $50/mo from many customers. She gets paid 50% yes, but not of that $50 the customer paid – but of the PV the company assigns that product – which is half the customer’s price – $25
So instead of $25 (half of $50) she gets $12.50 for a sale. (50% of the product’s assigned PV of $25.)
That is 25% of the $50 customer order. Not 50%. But of course, 50% sounds better, doesn’t it?
Naturally there’s much explaining of the “complex pay plan” to those who discover this.
Is there any purpose to assigning PV and BV numbers to products other than to disguise the real percent being paid to the reps? And the reps pass the big percents on as an incentive to prospects to get them to join them because the “pay is the best”?
If a house sells for $100k, and the broker’s commission is 6%, $6,000 is what is paid out (and divvied up however). It is NOT 6% of the “oops just revealed PV” of the house, only $70,000, so the commish is $3,200. Hahahaha.
Am I missing something here, or shall we stop encouraging reps to misrepresent to others (and themselves) what they’re actually getting paid on customers?
P.S. This is not about the reality that most companies pay a commission scale, depending on one’s level. It’s about the basis of the pay, which is less than advertised for any company that has a double standard: public product price and its PV/BV, that being the lesser amount they actually pay the Rep on.
Unless the FTC forces us to do so, we ought not disclose dollar amounts per customer or sale. I have always encouraged prospects and new recruits to examine the comp plan and figure it out for themselves.
If I say I earn $25 per sale, that doesn’t really give the prospect or recruit a true idea of what THEY WILL EARN.
My answer to the direct question, “how much do you earn?” has always been, “Not as much as I’m going to earn.” Then I explain how to review the comp plan. If pressed, I tell them, “my goal is X per month, and I am working very hard to achieve that. What is your goal?”
I usually add, “If I show you how to do that, will you join my group?” That puts the conversation back where it belongs, on their expectations and their willingness to get involved.
I haven’t misrepresented anything, haven’t avoided their question, and answered without misleading them. What I earn and what somebody else earns is never going to be the same amount. And don’t forget that what someone earns per sale may vary widely if their company has multiple products or product lines.
Telling somebody what you make is hype that may set up an unachievable expectation in their mind, and lead to their quick exit when they don’t reach it. Better to re-direct the question back on what they want to earn, and tell them how to review the comp plan.
You’re not missing anything, Kim. The purpose of assigning PV/BV numbers is pure deceipt. One of the things that sold me on the company that I rep is that they play none of those games.
Read carefully, Kim did not say to tell someone your monthly income, she talked about average commission per CUSTOMER. This is not hype. Telling someone what your average sale is and what your average commission on that sale is NOT hype. It’s the truth and it’s easy to understand. There is no need to avoid or miss-represent your income. No doing the Salesman Sidestep. You come right out and give the prospect an honest solid answer like, “I make about $25 per customer per month.” From there, you can ask your prospect how much they want to earn per month and easily calculate how many average customers they would need to earn X dollars per month. Answering the income question in this way also disengages your income from their income. The response, “Not as much as I’m going to earn,” screams ‘seller talk’ and will send most people running for the hills. A response like that sounds the alarm in their head – ALERT – DANGER – It’s one of those things! ESCAPE NOW!
Think about it this way:
You apply for a job (which is what your prospect is doing) at a shoe store. You ask, “How much will I earn?” The manager responds, “When I become regional sales director, I’ll bring you up the ladder with me. You and I will both make much more than we are today.” Sounds like you’re going to starve for a while. Better go look for a job somewhere else.
There is no need to go into a complicated comp plan and most are just that, compilcated. More confusion is the last thing we need. If I had handed my current reps the comp plan booklet before they joined me, I’d still be looking for my first rep. Besides, one does NOT need to understand a comp plan to earn money. My top selling rep doesn’t know our comp plan. He has no idea what our level titles are. What he does know is that for every X dollars of product he sells, he earns Y dollars. His reps? Same thing. They didn’t care about hitting Platnium Zebra level or Super Double Flip recruiting bouns. They just wanted to know how much money they would earn for selling the product.
I am aware that Kim was talking about what we earn per customer or sale. What I was referring to, and did not do a good job of explaining is the question I frequently get: “How much do you earn?” They mean how much do I earn each month.
I have often seen the top earners in a company parade across the stage while the president announces: “Mary and John Smith have been in XYZ Co. for nine months and they’re already earning $X thousands per month.” This is a terrible practice which leads to building unrealistic expectations and prompts 95% of new recruits to quit.
I don’t see it as “seller” talk to say “not as much as I am going to earn.” It’s a tactic I use to turn the conversation back onto the prospect. And, I have heard that, or a similar statement said to me on a few occasions, and I didn’t run screaming into the hills.
Kim will tell you that I am one of the most skeptical network marketers you will ever meet, and if I’m not scared by that comment, I am not sure if someone else will be.
However, everyone is entitled to their opinion. You have yours, I have mine. That’s what makes for a democracy, i.e., red states vs blue states.
I also recommend that prospects review the comp plan and I will be happy to help them through the complicated wording. I am all for simplifying the comp plan, but until these companies do that I’ll help prospects review and understand it. It’s good customer service to do that, and it also helps a prospect learn and gives you a chance to learn about them.
Joining a NM company is NOT like applying for a salaried job. This is not a salaried business–it is a commission business. Your illustration would be ridiculous if used in the corporate world. In this business there is no way for us to truthfully tell a prospect what they will earn.
All I am saying is discussing income per sales or customer is an iffy practice because it doesn’t take into account the performance of the recruiter versus the potential performance of the prospect. It also doesn’t take into consideration the different prices on products in companies with multiple products or product lines.
By showing them what they will earn by reviewing the comp plan with them, you have followed the legal requirement of proper information disclosure.
I just don’t believe in shooting from the hip on what I earn, either monthly or per customer. I want the prospect to review the company’s information and be clear about what to expect. I don’t think there’s much wrong with that approach.
I like to KISS (keep it simple sweetheart)so Kim s class yesterday was a beacon for me which shines light into the dark corners and crevices of the comp plan many of us work with.
There seems to me to be everything RIGHT (and nothing wrong) about saying “when you sell X you get X dollars so if your goal is to make X dollars per month you need to sell X dollars of products.”
So plain and simple.
The class was sooooo great for me Kim. As always…. thank you from my heart!
Mary
I’ve hated the BV, PV, BP thing for years and had to come up with a way to explain it honestly first to myself and then to my prospects. What I came up with is that BV is what’s left over after the company subtracts its profit from the cost of each product. That BV is split with our upline.
Example:The widget cost $44.95 – 25BV= $19.95 (Company’s cost plus profit.) The distributor gets 40% of the BV or $10 (25BV X 40% = $10)That $10 divided by $44.95 give us the actual percentage we are paid on the widget or 22%. I can live with 22% and so can most people.
I think, Robert, that you are still missing the point. And I don’t think you’re alone.
“Nylon Women” (and everyone else too 😉 deserve a straight and simple answer when it comes to income questions.
You’re answering what you want them to hear. “Selling the dream” as it were. And fwiw, it comes across to me as seller talk as well. But maybe that’s just me.
It’s very simple. How many $100 autoship customers/mo will I need to generate myself a $200 residual check?
Now I realize that many companies don’t even payout till certain volume hoops are jumped through … these things also need to be disclosed … and yes, if you attempt to answer with a mixed bag of products with varying payout as compared to dollar value, it makes it difficult to be absolutely accurate.
Also we know, there are often personal volume purchase requirements which have to be considered when trying to assess profit margin.
Oh yeah and how many tool systems and leads etc… the upline talks people into a monthly commitment for (if you’re into such things) … oy vey.
These points also make cross company comparisons much like looking at apples and oranges, but that’s what we got, so we work with it.
BUT back to the point … I can only use the company that is my focus as an example …
For every $100 customer (and I prefer to only count *true* residual money, so here I mean autoship customers) we make $20. Starting with the first sale.
And of course they’re already product lovers since everyone begins as a customer (there is no other way) so the 49BV personal purchase (appx $100) is something that truly “they would buy anyway”.
$20 x 10 = $200
That’s the sort of math that’s easy for people to wrap their brains around. That’s what they’re asking and that’s how I answer them.
I agree with you, my income and that of everyone else’s in the company IS a non-issue. And it’s something that never comes up for me. Interesting, huh?
In the end, I guess it’s all in who you want to attract…. if it’s nylon women you’re after, you’ll hear us when we say these things to you.
And if what you’re doing is working for you and the people who you bring to your company (who are the ones who matter ’cause it’s their retention that we need to most concern ourselves with), well then … no reason to fix what ain’t broke, eh?
I appreciate your being brave enough to defend your position in public and give us a chance to roll ideas like this around.
Make it a great day 🙂
Andrea
I think, Robert, that you are still missing the point. And I don’t think you’re alone.
“Nylon Women” (and everyone else too 😉 deserve a straight and simple answer when it comes to income questions.
You’re answering what you want them to hear. “Selling the dream” as it were. And fwiw, it comes across to me as seller talk as well. But maybe that’s just me.
It’s very simple. How many $100 autoship customers/mo will I need to generate myself a $200 residual check?
Now I realize that many companies don’t even payout till certain volume hoops are jumped through … these things also need to be disclosed … and yes, if you attempt to answer with a mixed bag of products with varying payout as compared to dollar value, it makes it difficult to be absolutely accurate.
Also we know, there are often personal volume purchase requirements which have to be considered when trying to assess profit margin.
Oh yeah and how many tool systems and leads etc… the upline talks people into a monthly commitment for (if you’re into such things) … oy vey.
These points also make cross company comparisons much like looking at apples and oranges, but that’s what we got, so we work with it.
BUT back to the point … I can only use the company that is my focus as an example …
For every $100 customer (and I prefer to only count *true* residual money, so here I mean autoship customers) we make $20. Starting with the first sale.
And of course they’re already product lovers since everyone begins as a customer (there is no other way) so the 49BV personal purchase (appx $100) is something that truly “they would buy anyway”.
$20 x 10 = $200
That’s the sort of math that’s easy for people to wrap their brains around. That’s what they’re asking and that’s how I answer them.
I agree with you, my income and that of everyone else’s in the company IS a non-issue. And it’s something that never comes up for me. Interesting, huh?
In the end, I guess it’s all in who you want to attract…. if it’s nylon women you’re after, you’ll hear us when we say these things to you.
And if what you’re doing is working for you and the people who you bring to your company (who are the ones who matter ’cause it’s their retention that we need to most concern ourselves with), well then … no reason to fix what ain’t broke, eh?
I appreciate your being brave enough to defend your position in public and give us a chance to roll ideas like this around.
Make it a great day 🙂
Andrea
Thanks, Andrea. If you want to use your formula when you talk to people about joining your company, that’s fine.
What do you do, however, when you get an angry phone call or email blasting you for promising a dollar amount per sale and the company has deducted additional charges like a monthly back office fee, or website fee or a processing fee for your check?
That’s happened to me with several companies, and to people I recruited and told they would earn X dollars per sale. Later, it turned out they only earned Y dollars per sale and they were angry at me for something over which I have no control.
That’s why I am hesitant to discuss money with a new prospect until I know more about them and their goals for income. I also do not discuss how many people it will take at X dollars for them to reach a goal. It’s just too uncertain.
It’s also why I insist that they read the comp plan, as complicated as they are, and why I try to help them understand it. If I do that, I have met my legal obligation of disclosure. Remember that word, disclosure, it’s going to be more important in the future.
As to speaking “seller” talk, let’s face it, if you’re in Network Marketing, you’re selling. As long as you don’t lie about what you’re selling, I don’t see the problem.
If, on the other hand, you’re “selling” something that is only attainable by a very few distributors, i.e., a certain income level or a huge number of distributors in your downline, then you’re one of the “recruiting evangelists” that I detest and believe have led our industry to where it is today, reviled as a “low-class” business.
As far as selling “the dream,” I don’t know what a prospect’s dreams are until I have time to talk with them, maybe twice or three times before they sign up. Two-thirds of the adults in the U.S. have “dreams” about owning their own business, but only a small percentage want it for the money. If that’s the case, why talk about money?
I am sure that we have just about exhausted this subject, and I am sure you want to move on. Let’s just say that you do it your way, and I’ll do it my way. Maybe you’ll get more people and make more sales than I will. Maybe I’ll do better than you. Who knows? I don’t care, do you?
I’ve been in NM since 1981, and I do not know what a “nylon woman” is. I must have missed that seminar or tape. I treat all women the same, as my equal in every respect, and deserving OF my respect. Would you clue me in on what a “nylon woman” is?