One lifelong lesson that my father taught me while growing up is that “there is no such thing as a free lunch”. This popular adage communicates the idea that it is impossible to get something for nothing.  The phrase was first coined in the 1930’s and 1940’s when American bars offered “free lunch” to their patrons in order to entice drinking customers to patronize their business.   The bars were willing to absorb the write-off of there food costs in order to capitalize on the revenue opportunity that came from the consumption of higher-priced, better margined alcohol sales.

However, those food items that were on the “free lunch” menu were often high in salt and those who ate them would end up buying more to drink to satisfy their thirst.  The business upside was that more beverages were consumed, driving increased sales and realizing more profits, but the downside was the frequent, over-indulged patron whose zealous, often out-of-control behavior would cause costly damages to the establishment and business reputation.  At the end of the day, that “free lunch” which produced more customers to the business would oft times be more costly than what it was worth.

Many direct selling companies offer this same type of “free lunch strategy” when they offer a free enrollment to the business at no cost to the customer.  The prime objective here is to create and promote a market excitement and field enthusiasm that encourages new distributor sign ups to secure a top-line or ground-floor position in the company sales organization.

This practice is frequently used by new startups to promote new customer acquisition and to get the company growing and rolling in the marketplace.  In fact, we’ve seen a number of new companies experienced a tsunami of new customers from the deployment of the “free signup” strategy when things are free.  But, is this a good thing?

Just like the free lunch strategy employed by bars of the 30’s and 40’s, there’s an inherent risk and cost that could occur to direct selling companies that offer a free sign up strategy to grow the business.  Here are couple of questions to consider as you look at offering a free enrollment strategy to grow your business.

  • What type of distributors are joining if it’s free to sign up?  The enrollment process should be a qualifying or weeding out activity to help build a healthy sales organization of distributors that will be engaged and motivated to grow the business.  More times than not, those distributors that joined for “free” quickly, if not instantly become dead-weight to the business. Why? Just like anything else, if there’s no stake or skin in the game, where’s the motivation? That would lead to the question, why did they sign up in the first place?  Did they sign up to just  appease a friend or family member?  Statistically, those that “pay to play” were convinced at some point in the enrollment process that this would be a good opportunity and they were willing to put money on it.
  • Is your product ready for purchase and is it deliverable to the customer? Many companies in their eagerness or pressures to go to market will start accepting free and/or paid enrollments a fews weeks prior to the product being ready and available for sale.  What happens if the projected availability date of the product inventory is delayed or pushed out to several weeks if not months after you’ve already started taking enrollments and making promises to the field?  The margin of error and field tolerance with this type of scenario could be extremely risky to the growth business,   In fact, we’ve seen that very same enthusiasm and momentum that was leveraged to create all those initial enrollments work in the reverse if product availability is not addressed and resolved quickly after the fact.   We recommend that your company ensures that the product is ready for market prior to taking that first enrollment to minimize the undesirable backlash that may come from a delayed product availability scenario.

In summary, the most successful MLM and directing companies take more of a targeted approach in acquiring the right type of distributors and customers that are a good match for their business model and the products they sell. Most deploy a weeding out or qualification process to help sift out and develop the right type of sales reps to help grow their business. Additionally, they ensure that they have the systems, operations, inventories and fulfillment processes in place prior to accepting distributor enrollments.  Once that first enrollment is accepted by your company, it’s game on and there’s no turning back or redos if the launch is premature or not ready to go.