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Monday
Nov182013

Party Plan Is Making A Comeback

The single greatest return on my time investment when helping direct selling startups is the ability to tap into the mind of the current entrepreneurs who are starting their ventures in today's market.  

Startups are the guerilla fighters of any industry.   I am able to see how they think, and how they plan to offer a better value proposition than the heavyweights in their arena.  Helping them keeps me close to the front lines of our industry, where the battle is being fought for survival.

One of the insights I've had in the last year has been how the party plan model has been making a comeback with entrepreneurs.  We know that MultiLevel Marketing companies have had, and still have, a lot of the sizzle.  Of the top ten Direct Selling Companies in 2012 (the 2013 list has yet to be published), 5 list their selling method as person-to-person, with MultiLevel Marketing Compensation plans.  The rest list themselves as a hybrid including party plan, or have acquisitions with companies that have both selling methods.  Many of the new startups list themselves as Person-to-person MLMs.  When I graphed some of startups I've been in contact with this past year, 20 out of 22 were party-plan, or "group sales".  

Why has MLM morphed into the most popular method of sales?  There simplest answer: monster growth.  Revenue growth for the company, through earning opportunity for the salesperson.  Nothing explodes more spectacularly in sales like an MLM company on fire.  And when you see one shoot across the sky, it's as mesmerizing as a comet.   Investors love them.  They see the business model as less restrictive for growth, and ROI.  Venture Capitalists are always looking for the next company that will reach $100Million in the next few years.  And it is a simple structure, allowing the company to focus on the simple product line, usually with a subscription component on a monthly basis.

But consider this.  In the last year, some pretty smart, consistently growing companies, which list themselves as Party Plan and Group Sales, have hit the coveted second tier of companies: Top 25.  They are Thirty-One Gifts (18), and Scentsy (23), both having achieved over a half billion in sales in 2012.  The reason?  Their products are highly demonstrable, and personalized.  They leverage group settings to sell and grow.  

Below: A Zumba fitness-party

Even some new companies are using group sales (although listing themselves as Single level, MLM), and are experiencing phenomenal growth.   It Works! Global, sells a contouring wrap that tightens, tones and firms any area of the body in 45 minutes.  The Inc500/5000 list showed that It Works! Global, started in 2001, produced 543% growth over the past three years, and some of that growth came from the group sales environment, always so powerful when showing how effective a product can be.  Even Princess House, founded in 1963, which sales were hovering around $100 Million for the past decade, experienced a growth spurt in 2012, and have recently listed their sales method as "Party plan and group sales". 

Clearly, group sales, which is an adaptable method of getting groups together to show them how the product can benefit the attendees, is the new party plan.  And this is not your mother's party plan: this structure does not have to have all the built in "host" benefits of the traditional party plan structure; therefore, it does not tie the sales force and the company to commitments and rules.  

Perfect for the Gen Y and Millenials who are looking for their own way to sell.

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