Over the years, I have had the pleasure of helping a number of multi-level marketing
(MLM) companies address their compliance challenges. This experience has given me
an inside look at the various ways such companies deal with compliance, especially
as it pertains to online sellers. I hope sharing some of the lessons I’ve learned
will help you improve your own internal processes.
You should begin by reviewing your current compliance policies to determine what
your distributors are and are not permitted to do online. You should then consider
how to effectively balance the needs of both parties, providing your affiliates
with the tools necessary to succeed while avoiding a “Wild West” environment in
which your intellectual property is threatened. In short, ask yourself whether your
strategy protects the company’s reputation and interests while simultaneously helping
your distribution network be as effective as possible.
How to accomplish this? For compliance departments, the ability to regularly monitor
online marketing efforts is critical.
One challenge comes in determining how to allow your distributors to go beyond a
simple reseller website without having them divert traffic that is intended for
your marketing initiatives. Most companies permit their distributors to use a second-
or third-level name domain under an existing MLM brand: www.MLMCompany.com/JaneDoe.
(While companies previously allowed distributors to use sites such as www.JaneDoeMLMCompany.com,
that was during a time when compliance departments had many fewer websites to monitor.
The rare issues that surfaced could be quickly identified and acted on.) Today,
more than 85 percent of MLM companies allow or even encourage development of distributor
websites; as a result, the compliance department in a successful online MLM company
is likely dealing with hundreds, if not thousands, of such websites. Coping with
challenges of this magnitude can require a great deal of resources to simply monitor,
let alone enforce, compliance. How can any company effectively monitor its network
and avoid problems?
Farther down the food chain is an entity that may be considered the MLM company’s
best friend…or its worst enemy: the lone MLM distributor. Depending on the company’s
compliance policies and the extent to which it provides access to marketing materials,
the lone MLM distributor can feel isolated in a very competitive market. Since such
distributors can get lost within all the co-branded MLM websites, many have branched
off to acquire their own domain names, in many cases incorporating the MLM company’s
name improperly, and often initiating an ad-word marketing campaign around that.
This not only creates compliance issues, but can also increase marketing expenses
for the MLM company itself, since in effect it is competing with its own distributors.
Although use of copyrighted material from the MLM company is usually prohibited,
distributors are left with a (usually ineffective) website handed down from the
brand.
And frankly, it’s become obvious that many MLM companies’ distributor websites are
simply not working.
The common solution is to add a slew of amendments to reseller corporate compliance
policies, creating an ever-tightening grip on how distributors are allowed to build
their businesses through online strategies and tactics. I have never seen this solution
work on a long-term basis, largely because it involves ignoring the real issues
and instead focusing on easing enforcement burdens for the MLM company itself.
I suggest approaching this problem with logic and clarity. Let’s face it: distributors
want to succeed and believe, reasonably, that such success requires an online presence.
So instead of inhibiting a distributor’s ability to market on the Internet, compliance
departments should establish simple yet effective policies, regularly monitor online
activity, and then enforce compliance among their distributors.
The new top-level “dot anything” extensions are one solution, since they can enable
companies to corral all their sites within the SAME extension and choke down the
.com activity to virtually zero. By owning the “dot anything” extension, you can
marshal your distributors at the registry level -- a never-before-seen but instantly
effective option. For example, distributors that don’t comply can have their DNS
changed to reflect the main company site until they return to compliance.
Companies should also consider offering rewards to those who regularly maintain
compliance, and perhaps adjust commissions or increase traffic to those sites following
the correct policies.
There are a variety of possible incentives. However, the key is to provide distributors
with clear guidelines in an easy-to-understand and mutually beneficial compliance
agreement, rather than forcing them to use ineffective, cobranded websites. Viewing
your most ambitious and aggressive distributors as valued partners rather than as
mavericks, while encouraging them to comply with clear and reasonable guidelines,
will enable you to quickly resolve most of your compliance issues. And increase
the company’s bottom line.
