How to Build An Army of Profitable Salespeople Without Paying A Single Dollar in Salary

That’s right. You read the title correctly.

Last year, I was in Santiago, Chile exploring a business venture. One night, I decided to check out a local pub.  I grabbed a seat at the bar and started up a conversation with the guy sitting next to me. In his own words, he was a “health food supplements salesman.”

I was intrigued. The guy seemed fairly intelligent. Was there a lot of money to be made in selling health food supplements?

Noting my interest, he pulled out his computer and opened a powerpoint presentation. Wow, this guy was really trying to sell me! He explained to me that he worked on a commission basis, and received a percentage of each sale. But then he told me that the real money was actually in “recruiting others into the company. He would receive a percentage of all the sales that all of his recruits made as well. Over time, this added up to a pretty serious amount of money.”

Hmm….I was suspicious. This sounded a little bit like a pyramid scheme to me. But what caught my eye was the last slide of the deck, titled “business partners,” which had the name and logo of a highly reputable U.S. based investment firm.

It just so happened that I had a friend who worked at that firm. I called him up and learnt that his firm had made a staggering 1300% return on their investment over three years.

As it turned out, the business wasn’t a pyramid scheme. Instead, it used a business technique called affiliate marketing.

Unlike pyramid schemes, which require people to pay an upfront fee to join, affiliate marketing allows anyone to become a commission-only sales representative for a given product. They also have an incentive to recruit their own sales reps (who also pay nothing to join), and receive a bonus for the sales made by these reps.

In this case, the big winner was the health supplements company. Effectively, they have a huge sales force working on commission only. This makes it almost impossible for them to lose money. Instead of paying full-time salespeople salaries and benefits (which may yield no results), they have shifted to a 100% pay-for-performance business model.

Many successful businesses have been built around this idea. Amway, the parent company behind the Avon cosmetics brand, is a classic example of a business empire designed around this simple principle. Today, Amway is a highly profitable company, earning more than $10 billion in revenue each year. Most of this revenue is from a huge team of commission-only sales representatives who present little financial risk to the company.

So how can you develop and recruit great affiliates to sell your product for you? Here’s a four-step process to get you started:

Step 1: Research Your Market

Your first step is to find out as much about your potential affiliates as possible. Who are they? What is their educational and social background? What are their resources? This food supplements company had explored the market and decided that there were far too many companies competing in the United States. However, in South America, there was almost no competition but plenty of demand (link to talent-to-demand ratio). This made for a good business opportunity.

They did a little research and found out the following:

  • The typical salesman was not well-educated. He or she rarely went to college, and many of them did not graduate from high school. They also were only semi-fluent in English.
  • They typically worked in low-paying jobs. Therefore, they would be hungry to make additional money any way they could.

Now that they knew who would be selling their product, they had a better idea of how they could move on to…

Step 2: Create The Right Incentives

I can’t emphasize enough the importance of having the right incentives. This is true in general, but especially true in affiliate marketing where salespeople are totally compensated based on commission.

Generally, a good incentive structure accomplishes a few key goals:

  • It motivates affiliates to sell as much as possible. This sounds obvious, but it’s easier said than done. It’s important to consider the value of an affiliate’s time. If you don’t pay them enough, they’ll either go with another affiliate program or stick with their day jobs. Pay them enough to keep them motivated, but not so much that it prevents you from being profitable.
  • It encourages affiliates to recruit more affiliates into the program.  Things really start snowballing when you start growing your affiliate base. You can do this yourself, but a cheaper alternative is to get your affiliates to work for you. The best way to do this is to pay affiliates for recruiting new people (usually a percentage of their revenues). This way, they can build their own passive streams of income.
  • It prevents affiliates from gaming the system. You don’t want to pay your affiliates in a way that encourages them to cheat you. For example, one company decided to pay out huge bonuses if certain minimum sales numbers were met. A few months later, they noticed that many more people were meeting the minimum numbers, but their top salespeople were producing far less. When they did more research, they discovered that the top salespeople were actually giving their sales credits to the weaker salespeople, and then splitting the huge bonuses between them. Overall, the company wasn’t making any more sales, but they were paying out much more in commissions.

Step 3: Give Them Great Support Tools

Once you have some affiliates, it’s important to invest in tools that’ll help them sell as much as possible. Here are some examples:

  • A Powerpoint presentation that they can show to prospects
  • A professional video (2-3 minutes long) that explains the key value of your product
  • Easy access to enrollment forms (both paper and online). The last thing you want is to lose a customer because you were having trouble processing their payments!
  • Other Marketing Materials: Flyers, Stickers, even a toll-free phone number for higher-end products.

The options are limitless, and your materials will keep on changing as your affiliate base grows. It’s always important to take feedback and criticism: if an affiliate asks for something, take it seriously! Chances are that if one person finds something helpful, others will as well.

Step 4: Keep Them Interested

Eventually, affiliate programs can be boring for the salespeople…and their clients. Here are a few things you can do to keep them motivated for a longer period of time

Have a short-term promotion: The health food supplements company actually offered a “one month free trial” to customers while still paying their affiliates the full commissions. This limited-time offer drove thousands of new sign-ups, most of whom ended up staying with the program.

Increase your commissions: This isn’t ideal, but sometimes it’s the only way to retain your best affiliates. They’re going to leave if they can make more money somewhere else, so it’s important to pay them enough to get them to stay. The increase in commissions doesn’t have to be strictly cash – you can also give bonuses like vacation getaways and gift certificates. These often work better than cash (I’ll talk about the reasons why in another post – feel free to voice your opinions in the comments!).

Create new products: This is really the best option, as it helps everyone make more money. Affiliates are happy because they have something new to sell to their customers, and you’re happy because you’re making money on every sale. I’ll talk more about this in future posts.

Have you ever been an affiliate or set up an affiliate program? What did you find worked best?

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