I watched a YouTube video the other day by Dale Calvert. He was discussing why he thinks auto-ship is bad for the MLM Industry. In essence, he said that forcing people to go on auto-ship kills your retention rates. In fact, most people who go on auto-ship will cancel their auto-ship order within two to three months and quit the business. I agree with him.
I think it’s a better idea to ease your customers and distributors into the business. By forcing them to spend $100 to $300 (or more) each month on auto-ship, you are forcing them into negative cash-flow, right from day one. Sure, some people might disagree with this, and that’s okay. But if you look at your genealogy report, you will probably notice a similar trend.
Instead, I think it’s much wiser to slowly introduce your company’s products to your distributors. Let them place and order when they join the company, and then order products as they need them. This will give them time to incubate in the business, and learn the basics.
Personally, I’d rather have my downline stay in my downline for a longer period of time, even if they weren’t ordering products every month. This will help build their belief level in the company and in the products. Over a period of time, many of these people will go on auto-ship. But I think it’s best to let people make that decision on their own.
Another common mistake by MLM Companies is forcing distributors to go on auto-ship, just to be eligible for their bonuses and commissions. Personally, I don’t believe there should be any personal consumption requirements to earn a commission from your downline. If you build a large team, you shouldn’t have any personal consumption requirements, just to get paid your commission check.
What Others Are Saying
“I think forced auto-ship is one of the reasons MLM has a bad reputation — it makes it appear that the company is making its money off of the recruitment of new consultants (and the resultant auto-ship) as opposed to its product being viable in its own right. It raises the question: if the product is so great, why does the company have to force its consultants to buy it? I don’t know if there is an MLM company which does not use forced auto-ship — if there is one I’d be seriously interested in it. I’m investigating one now in which you not only have to auto-ship to get your commissions, only one category of products (out of three categories available) counts. I’m trying to decide if that’s a deal-breaker, or if I can figure a way to make it work. But it shouldn’t be this difficult to get started, IMO. It seems to me that all MLM companies need to do is to require a purchase or sale every month to get commissions, rather than the forced auto-ship. Then consultants could decide what they wanted or needed, and if they really believed in the products. If they don’t believe in the products, these aren’t the people you want selling your products anyway.” ~ Pat
“I recently took an MLM FTC course that I had to pass in order to validify my membership and during the course of which we were tested after each segment, during one of the segments it was stated that requiring business members to auto-ship to be qualified for income was against FTC regulations and that companies must have greater than 50% of product sales to non-participants (preferred customers). I think auto-ships stink and are what feeds the MLM machine having newcomers paying older distributors. The primary focus of every company and its distributors is the sale of products or subscription to non-participating customers and focus on getting them to auto-ship to enjoy the benefit and value of the products.” ~ Anonymous
“In the article above, I wrote why I thought auto-ship was bad for the industry. Today, I would like to defend the other side of the story and talk about why auto-ship is good for the MLM Industry. The best thing about auto-ship is that it creates volume in your organization. In most cases, volume is the only thing you get paid for. If you have 1,000 people in your team, but no one orders the products, you won’t make any money. Some could argue that it’s better to have 100 monthly auto-ship orders than to have 1,000 distributors who only order once or twice a year. Another great thing about auto-ship is that it gets people using the products right away. Many people will not order the products if they aren’t required to. It doesn’t mean the products aren’t good; it’s just human nature. The sooner you can get your team using the products, the sooner they can build their belief level in the products. As I see it, these are the two major benefits of getting your team members on monthly auto-ship. What do you think?” ~ Chuck Holmes
Watch the Video
As Dale Calvert mentioned in one of his YouTube videos, the auto-ship requirements are having negative consequences in the MLM Industry. I agree with Dale and think MLM Companies should seriously reconsider their auto-ship policies that force people to sign up for auto-ship in order to be eligible for bonuses. What are your thoughts? Leave a comment below and let us know.