Take Great Care When Pricing Your Products

This is the third in a series of 6 Open Letters to Direct Selling Companies and Organisations. Every Tuesday for 6 weeks commencing 11th June, we’re looking at some of the problems faced by the Direct Selling industry.

As enthusiastic advocates and supporters of this industry, it pains us to see the damage done to this legitimate industry sector, by new entrants who do not understand, or who sadly perhaps choose to disregard the ethos of the industry.

Such damage is not confined to new companies entering the sector. Equally, damage may be caused by people who have joined an established business, as a direct seller or as an employee, and then fail to follow the standards required.

Open Letter Series – No. 3 of 6

In each of our Open Letters we deal with a troublesome topic (or two) and make suggestions for further consideration.

Our focus in this, our third letter in the series:

The message we want to communicate here to DSOs, is…
‘take great care with your pricing of your products’

This may seem an obvious statement but let’s take a look below the surface at the implications of not getting the pricing right.

Naturally, the convenience to the customer of buying through the direct selling channel can justify a mark-up, but this doesn’t mean selling products at unreasonably high prices.

The dangers of getting the pricing wrong are twofold…
1. Economically it just doesn’t make sense. People will prefer and opt for the cheaper product available elsewhere.
2. It is damaging to the business model pursued by legitimate direct selling companies, because it supports the “internal consumption” or “buying clubs” contention that products are wholly or nearly wholly purchased by active participants in the business.

Of course there is nothing wrong with active participants buying and using the products they are representing, in appropriate volumes; it is to be encouraged for obvious product endorsement reasons.

However, if the products are wholly or nearly wholly purchased by active participants, that suggests the pricing makes sense only if you factor in the dealer earnings…. Hence the reasoning behind “the 70% rule” and similar requirements, whereby a certain minimum proportion of sales must be to end-consumers.

…more from our OPEN LETTER challenges and solutions Series

We are very interested in your thoughts… What other dangers are there of getting the pricing wrong? Please share your experiences and stories in the comments section of this post.

… and, if you’ve found this useful/interesting, please share and remember to pop back next week and each week thereafter for the next 3 weeks, for our Open Letters Series.

This article is not intended to be either comprehensive or advice as to the law in any respect.