The Power of the Virus Ealier I talked about Word-of-Mouth (WOM) marketing and how effective it is. Multi-Level-Marketing (MLM) groups build entire buisnesses based on WOM. Why? Because of one key business advantage...Leverage!
In this blog, I'm going to talk about two key concepts: 1: Promiscuous vs Powerful WOMers (also known as Sneezers made famous by Seth Godin), and 2: Leverage, more particularily Other People's Efforts (OPE) and Other People's Money (OPM).
1. Promiscuous VS Powerful WOMers
So you know that WOM is the most cost-effective form of advertising. It generates the most revenue! But how do you initiate it? How do you control it? And how to you track it back to ROI (measure)?...Let me give you some insight on how to exactly that:
1. Pay-for-Performance, Lead Generation, Referral Marketing, Refer-a-Friend program, Independent Marketing Representative, Affiliate Marketing, you name it...it all is based on Promiscuous WOMers! You are paying people/businesses to get you customers! This seems great; you only pay them when they refer a customer who buys from you, but it's not all a bed of roses. Why you ask?...because they aren't that loyal! They want money, rewards, free stuff, etc. Plus, people can see through their hidden agenda rather quickly. They'll refer only to the higest bidder. Nonetheless, they're still a beautiful acquistion tool to get "like" customers buying from your business.
So what about these Powerful WOMers? These guys/girls are authorites or experts in their field and cannot be bought, but rather like your product and service and recommend or talk about it at length. Look at Oprah for example, as Seth Godin points out, she puts her "thumbs up" on a book and sales sky rocket! So how do you get these people to talk about your product/service? Give it to them for free, send them information, offer trials, anything you can do to get in front of them...do it! They don't want your cash, they want to maintian they're social esteem or market position as an authority! Again, they are harder to find, but way more persuasive and effective for your business.
2. Leverage: OPE & OPM
MLM'ers know the power of leverage and talk about it to no ends. It makes sense though...for example, say you can only work 20 hours a week at your part-time business and you get $xx return. You can make more by working more, but eventually you'll be tapped out and your loved-one will forget your name. Or, you can leverage yourself by duplication. Basically, you recruit people like yourself you are eager to make some money at something they like or are interested in; this is key for referral/MLM marketing. Now you try to teach them to work 20 hours per week promoting your business for their benefit and yours! Let's look at this example:
You work 20 hrs per week = $1000 Revenue
You recruit 5 people to work 20 hrs per week (5x20 = 100 hrs)
100 hrs per week x $1000 Revenue = $100,000 Revenue
Of course you have to pay them for their efforts, so let's take away some margin
$100,000 Revenue x 15% margin = $15,000 in referral fees
Total Revenue minus referral fees = $85,000
Cost of Goods Sold (i.e. 50% margin) = $50,000
Incremental Profit = $35,000
ROI (incremental profit - incremental costs/incremental costs) = 133%
Looks like a good idea doesn't it? That's why referral, MLM, affiliate, WOM, or whatever you wanna call it is effective, it works!
The key to this whole leverage aspect is that the entire time your pay-per-performance sales team is at work for you, they're using THEIR OWN MONEY, and THEIR OWN EFFORTS to help MAKE YOU MORE MONEY and of course to make themselves some money too! Hence the term OPE and OPM. Remember, you don't have to spend money to make money...you can have other people do that for you!!!
Hope you can start thinking about how you can leverage your talents, products/services, and business model to take advantage of OPE/OPM, and people's powerful influence on your bottom line!
Cheers,
DC
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