of all, yes, if you believe in your products and firm, it is natural
to want to extend those benefits to your friends and family. However,
I see far too many people mistake this for prospecting.
This section attempts to dissect the difference.
is a difficult profession, and there's no doubt that some people
are more gifted at it than others. Financial planning involves sales.
You will introduce a lead to a range of products, and the lead will
buy those which fit his situation. You will work hard.
But you shouldn't let yourself work stupid. At a scammer
firm, you may be required to work just plain stupid.
reputable firms spend the money up front to provide their reps with
bank leads, trade show leads, and other leads from media advertising
as the basis for the rep's income and have the rep supplement
this income through prospecting. Prospectors
don't sit in an office waiting for calls -- they hoof it and beat
on doors looking for the market that isn't calling. Moreover, there's
usually a reason that market isn't calling. Advertising
reaches just about everyone nowadays, and those who want your product
generally contact you. If nobody's calling, chances are the market
is just plain saturated and the fight is down to
market share. In those lean times, advertising costs must be cut,
and prospecting becomes the main tool for reaching this more difficult
market. In order to survive, the prospector must carefully
qualify his leads; he doesn't beat on just ANY door.
The key to qualifying referrals is starting with existing clients
that were generated by advertising -- these "warm leads"
have already bought and thus stand a good chance of referring other
buyers. If the prospector starts from
scratch, it's a crapshoot, and no prospector can afford that for
long. A lead isn't "warm" or "qualified" just
because he fogs a mirror! Face it, not everyone
"needs" your products, and that includes friends, family,
and their referrals.
short, prospecting was never designed
to replace advertising.
scammers seek to minimize or eliminate marketing and advertising
costs and will rely primarily if not solely on prospecting, which
costs the firm nothing. They don't just reserve
it for lean times. Note that the particular advertising costs I'm
speaking of are related to lead generation, not just the
name recognition which is often sought in order to "legitimize"
the business in the public eye. Instead, they
seek to mine an already-oversaturated market with the sole
intent of gaining market share by exploiting the trust
inherent in personal relationships -- hence,
"The 100 Friends and Family List."
(You may recognize this marketing method as
a common prospecting tool of some MLMs, such as
Amway.) This list involves the rep making a list primarily consisting
of friends and family and calling on them as leads.
"100 Friends and Family List" shouldn't be confused with
prospecting. A "natural market"
is the portion of the rep's target market
that shares a personal characteristic with him, not simply a
friendship or familial relationship. A rep who speaks Greek
may naturally attract that portion of the market that shares his
language, but he is starting with that portion of the market,
not just anybody who happens to speak Greek! At a scammer firm,
this "natural market" of friends and family, regardless
of their prior interest in the product, becomes the focus -- it's
after sales it couldn't otherwise make.
and family introduced into this equation are only more likely to
buy because they know and trust the rep and even want his success,
not because they necessarily need the product (or service). Oftentimes,
they already have bought the product -- elsewhere, from
a professional, not some inexperienced rep. Many sales to friends
and family involve transfers of funds that were previously invested
elsewhere, and they're often the only sales these reps make because
they aren't learning to truly prospect. Some firms even
require that the rep hand over his leads list of friends and family,
effectively using him for his free leads. This "natural market"
dries up quickly; only so many friends and relatives can be mined,
and referrals become more difficult until the rep might as well
interesting examination of the history of multi-level marketing
is on www.quatloos.com.
Be warned, the article is heavily anti-MLM. However, it makes a
good argument for why the MLM marketing strategy, which often relies
on the "100 Friends & Family List," is now obsolete.
note that if
the "100 Friends & Family List" worked so well, media
advertising would be obsolete, and many firms using it would
have no need to lure inexperienced reps with promises of unattainable
incomes built on the work of a "downline."
about it. The same applies to any sales job, be it in financial
services or any other industry.
your firm doesn't utilize the "100 Friends & Family List."
Some will simply call on existing clients and offer to "go
over their financial plan or policy" in an attempt to sell
them more products that they likely don't even need (after all,
another rep did this already!). This often happens when a rep leaves
the firm; new reps will call on the old rep's clients and attempt
more sales since those leads are now considered "warm".
It's also used by managers to try to keep new reps motivated by
providing them "leads". In any case, the firm's advertising
for new clients is kept to a bare minimum. Now ask
yourself why the vast majority of the firm's advertising relates
not to finding new clients, but to finding new REPS!
last thing worth mentioning here is that some
firms offer reps incentives to supplement their often meager incomes
by recruiting other reps. They are encouraged to
call up friends and family and scour job search sites for resumes,
calling most anyone with a pulse who might be interested in this
any case, at
a scammer firm, reps' earning potentials are severely handicapped,
and they must continually be replaced to avoid collapse. The next
section discusses in more detail the rep's failure and
firm's methods of dodging responsibility for it.