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Wednesday, October 31, 2007

Think twice before you join Diamond


This article is 6 pages A4 papers. Please bookmark and read it if you dont have sufficient time to finish it.
How I join Diamond

Recently, Diamond Energy Water has been strongly promoting the “success story” of their dealer who has earn a good life after joining Diamond. Their stories are, I must admit, quite touching. As a result, many may think joining Diamond may change their current financial status, having their own business and earning respectful career. Most important, many will think if so many people success there, why not me? I can be success and get a 5 figure income monthly. To make it more ‘attractive’, they offer a RM 50,000 loan without guarantor with a bank and it seems like there is no risk in doing the Diamond business.
It all sound merry. In fact, I was an ex-dealer. I joined Diamond two years ago. My schoolmate who had joined Diamond has called me up by phone and ask me whether anyone has interest to buy Diamond water filter. I was quite surprise as he was earning a good income as a software engineer.
My schoolmate told me he earn RM 8k last month. Wow!Big income right? He did it part time only and prepared to be full time when his Diamond water business going on path. This has made me rethink my future. Hard work everyday as an electronic engineer and yet just get a salary below RM 3k at that time.
I share this news with my colleague and he was quite interested of the business. So, we decided to meet my schoolmate to know the business more. I remembered my schoolmate did the Diamond business (quite pro as they using laptop), with his upline. The business is started with purchasing 20 units of Diamond energy water with a total of RM 26k. All of the water filter units is rental scheme. Besides, dealer need to pay RM 7.5k for the dealership fee. Besides, there are other processing fee , T- shirts, Diamond tools and equipment (for doing testing for customer) , photos (as evidence to convinced customer how good the product) and etc will cost you another RM 1k.
I am a bit step back by the high initial investment. However, the upline has show me a RM 8k of bank draft by Diamond and also his income bank draft of that month which is RM 8k ++. We decided the think of it. The temptation of money is so high. We already starting thinking what will be the life with almost a double of our income.

My Diamond moment

My colleague and I decided to join the Diamond business together. We have planned to treat it as our partner before the Diamond business was stabilized. We did it for money. For better life, better future. We think we can enjoy our life with a stable income monthly and then we can do what we like to do. We can find a job we like or we can do a business that we really interested, like open an online company. Haha…It is all like dream.
We sign up the dealership, by my colleague name but we share the investment capitol. Roughly, we have invested around RM 15k. Some of the money is doing the banner for advertising. It is the banner all you can see at the road side with our contact no on it.
My upline who is my schoolmate start to train us of the product knowledge and promotion skill. The most awkward thing begins. Upline said, first rule, you must list down all the person you know, include your friends, relatives and colleagues. Then categorize them to 5 stars potential customer to one star.
My partner (my colleague) and I not comfortable to promote Diamond water filter to the people around us. It is not about the product quality or what. We want to promote to the people who interested. I think most people who join kind of direct sales or dealership, may have face the condition that your upline ask you to find the close person around you. In fact, if the business has its potential, will you just depend on the persons around you as your customer source? Definitely not! If your business is a good business, the customer source shouldn’t be the biggest problems. Unfortunately I don’t learn this early enough.

So we have two strategies.
One, we distributed flyers around PJ and Damansara residential area. Those flyer bought from Diamond is 3 cent each. We distributed to two thousands flyers. You can imagine how tired it was. But the outcome is we get ONE call from two thousands houses and condominium. More frustrating is we can not convert it to sales. For those who want to do promotion by using flyers, I can suggest you to save the money. It is very ineffective no matter how good your content of flyers. Most people will just throw the flyer away.
Two, we hang banners around the targeted area. We initially started to hang around 50 banners with our contact number on it around the PJ and Damansara area. However, the response is not encouraging as we only receive 3 to 5 calls per week. We found that most the people at that area already has water filter in their house. Then , we decided to hang banners at the busy road as passengers pass through. And we put 50 more banners in the of Ulu Klang, Klang, Cheras besides Pj and Damansara. Yupe!this time the response is encouraging. We get 2 to 3 calls everyday. And we manage to convert 4 of them to subscribe the rental schemes.
Things change very fast. You guess what. These good days only last for two weeks. And at the end of the first month we joined the business, we had only receive several calls to ask about our Diamond water filters. Why? Two reasons.
One, some of the banners we hang at the busy road or area were cut, threw by municipal council like MPBJ and DBKL.
Two, some area that municipal council lazy to take care, there were many others dealer that hang their Diamond banner at the same place or just beside our banner. Even worse were some of our banners were replaced by our competitor (who was selling Diamond ) by cutting our banner.
Hmm..do you have any idea to encounter this?
Print more banners, use more money to hang it again? Yup, it sounds a bit stupid but yet we did it by hanging banners at area we hang it previously and ‘mercy’ enough not to cut our competitors banners. What piss me off is even my upline himself cut our banners and replaced by his banner at the Setapak area (Thank you Mr Ong!!). I was very frustrated and we decided we avoid the same area with our upline.

I am not the only one who fails

We were thinking hard can not get more customer even with our hard work. We visited houses by houses as the banners cost was over our budget. At the mean time, we attended some sales and motivation classes at the Diamond HQ at Serdang. These classes was taught by some successful upline in Diamond. They have been there for 3 years above. They taught how to be successful like them. They claimed themselves earning RM 10k to RM15k in 3 months. It is very fairytale right?
During the courses, I have met many new dealers. Most of them, like me and my partner, normal job in the morning and Diamond at night and weekend. Their achievement is 2 units per month initially. But after all their contacts (which include friends, relatives, and colleagues) finished, they are unable to look for new customer. After six month, many of them have stopped being a dealer with many unsold units keeping at home.
I am not much better. Our business becomes worse after 4 months. From the 5th month to 11 month, we can not even get a single customer. Besides, we need to do free service to our existing customers. This means we have no income but only expenses. We also need to pay Diamond RM 200 franchising fee.
Finally, we gave up after all we have tried. From door to door visit, banner, do advertising online (but is free!), flyers, open booth in companies family day, give commission if any people intro customers to us, advertise in newspaper, and we even advertise by doing car sticker to promote Diamond water filter.
Although I failed, I do know how some dealer is so successful. May be you can also guess it. Yes! By recruiting downlines. If you can find downlines, you can sell off your current stocks because your downline must purchase one unit of diamond product from their upline. Furthermore, you can get some percentage of commission from their downline.
My partner and I did not try hard to look for downline. The main reason is we knew that this business is very competitive and all dealers are fighting and compete themselves. So, do I need to sacrifice another person in order to save myself? It is very hard for new dealer to be successful. The market is shrinking with many other brand of water filters compete each other. Besides, water filter is not one product you will need to change every year. It could last for 10 years. So there was no much space for the market. Of course, with 60% of Malaysia family still yet to install water filters, you can always say the market is still can be penetrate. But remember, there are many families that is reluctant to use water filter. Either is financially due to higher pricing or lack of water contamination awareness. Therefore, we can assume there is only not more than 30% market to grab.
When pie is smaller and more and more people go in to share the pie, you can imagine.
The incident that make me gave up finally was when I post to sell diamond water filter (with 20% off the market price) at Lelong.com.my, I receive reply. Nope. It was not from a buyer but is a seller. He told me he was an ex diamond dealer and willing to let go his 10 units current stock with a low price. I did not receive any interested buyer contact at all after I post for about 60 days. My partner and I terminated our dealer contract and stop our pain as we pay RM 200 every month for Diamond without any income after the 4th month.

The tips and considerations before you involve in this business

Think first, think twice and think many times before you take any action to join any “business”. I hope this tips (from a failure person in direct sales) may still help you to make a correct decision when your friends is strongly promote or push you into their business. It applies to MLM, direct sales and franchising (except McDonald, KFC professional franchise system). They all have quite similar methods.

Back to the basic of business concept
Getting a dealership of Diamond water, or direct sales like Amway, Cosway or Lamp Berge is nothing different you open a stall to sell fired noodles. You need to know who you want to sell to (target customer). You need to know how the current market justifies the product and its reputation. You can simply ask of your friends or relatives about the product view. If the responses are a bad one, you can forget it. You can not sell a bad reputation company or its product. But the last one is the most important of all, is that product or products got market? Is the product has a demand? It is impossible for most of us to do a AC Nielsen survey of the product. And that where people manipulate the figure to show their product is getting a big hit. Market has been good to accept the product or there is still a very big market to explore. Is it really true? Do you want to lose your hard earn money before you get to know it is not? One trick is to get to know some who involve in this business (make sure they have no intention not lure you to become their downline in the first place), get some information. Remember; don’t make decision in a hurry. People will always said this golden opportunity will go fast if you not grab it. Think it again, you will know it is just a trick to push you to join without you think thoroughly. And tell you a secret; it is one of the tricks I learn in the training course in Diamond.

Study the commission plan and the agreement clause
Study clearly the commission plan and agreement clause. Read it whether it is pro company as they take less responsibility and unfair term and condition that will let them in control. One example is Diamond changed their BV and PV points (related to the sale commission) regularly last time. This will affect your income directly. Besides, understand the commission plan. You must know whether the plan is giving higher commission to sales or getting a downline. If the plan is encouraging of getting new downline, please aware. Thinking of more people to join and compete with you, do you think it is a good sign? This happen in Diamond now. I can not see bigger market but yet getting more dealers.

How do you sell or market your product
Before you join, you must think of a strategy of selling your product. You want to sell to close friends and relatives or selling to customers that you don’t know them? Then how you want to get new customer? Is your networking alone already enough to support your business? Do your customer will come back and buy the product from you again? It is important to estimate how much the value of product you will able to sell. Even you opened a booth or a shop to display or introduce your product, it is hardly to get good response nowadays. Consumer will think twice and compare similar products before they made decision. I have experienced opened a booth in a not so famous shopping complex, and it end up spending RM 500 per day without getting any customers. I observed a few people come over to my booth and most of them only stopped by to take a bottle of Diamond water. No body really wants to know of your product.

How to let other people to know you are doing the business
After you involve in the business, who will know you are doing it? SO you start telling your friends, “Hay, I am now doing abc business, if you have any one interested this product, please let me know.” Or you send flyer , hang banner or place a advertisement in newspapers? Networking is very important in the initial stage for doing direct sales, but in long term, it will not working well. How to getting new customers is a most important things in your mind if you are serious to involve in direct sales.

Amount of the investment
The rule of this game normally like this: In order for you to start the business, you must keep stocks of your products. There is no direct sales company will let their member to sell only when they get the order. If there is, then they will ask you to hit a high sales quota for you to earn your commission. No matter which plan the company using, you must calculate yourself the actual investment. This include stocks you keep plus other expenses you estimate to spend for doing the business. Put yourself in the worst scenario, and ask yourself is that the amount of money that you afford to lose?

Internal competition or competition form peers
Internal competition can be very stiff. The more people doing the same business, the more competitive it is. For example, Diamond has more than 2000 dealers. From the first sight, you might think that the company is strongly supported, their product is getting overwhelmed response in the market and the sales is very high and etc. On the other view, you can imagine how competitive it is. With a not so big market and yet there are over 50 dealers in Cheras, KL alone, there are many dealers that are eliminated in the competition. To get the customers, one will destroy another product banner that hanging at the area. Ethics is not important to survive. If a high barrier entrance like Diamond is so competitive, imagine low barrier entrance direct sales company. There are much more competitive. The game is cruel. You will be out of the business if you are not competitive (hard working only will not guarantee any result) as too many people to compete for a limited size pie.

Check the withdrawal statements
Many people not really read and understand the agreement they sign up. Check whether the company has the withdrawal terms if you want to go out from the business. Normally they will give a certain time and you can return the stocks in your hand by a discount rate and processing fee. That means you will lose money there. But it is far better that you keep stocks that you can not sell. Some company never has withdrawal terms. However, this withdrawal term is certainly favour to company. You are impossible to out of that business without any payment.

External competition
They are many companies produce or selling water filters. Diamond is one of them. Besides, there are NESH, Amway, Waterco and etc. Healthy food product such like Away, Herballife, Elken, Cosway and many more compete with each other. No matter how this company differentiate themselves, there are not much difference between them. If your product is vastly superior to others and is price competitively, you may have a good chance. This is not the case. Since the company needs to pay all the dealers commission, Diamond has increase the price 3 times. While, NESH at that time has snatch the share as their price is much lower. You must determine what is the strength of your product over others, what is the selling points, what make people choose your product. If there are more than 3 strong competitors selling a similar product, it will be a very hard battle if you don’t want to be out of market.

Quota
Check is there a quota (normal monthly) that you need to achieve to receive your deserve commission. If there is, ask yourself is that reasonable for you to achieve the quota. The higher the quota, the harder you need tow work. The higher the quota, the riskier you may not receive your commission. I have experienced with Diamond where they revised their plan and increase the quota. Initially I need to rent out four units each months to get my commission. But after that they changed it to minimum 6 units to hit the quota. While there is one time a new plan come out, we need to rent out 12 units. Diamond did it by reduce the BV (quota points) per unit rent out but the total BV points remain the same. However, I am not sure the current condition now, as they have a buy 1 free 1 plan. I don’t know how it will benefit their dealers. I only can ask you to beware as the plan is changing frequently.

Future
It is always hard to predict the future, but you need to predict the future of the business you involve. Only if you can’t see a bright future that can last at least 5 years, you must think twice. Most of us who join this direct sales (franchising, business, call it whatever you like) because of money. But don’t let the greedy over take you. This business may seem good now, but due to competition, the good time may not sustain. It is not easy as we think.

You may want to join this kind of opportunity or business with a good and sincere purpose to help your family. However, the chances you become a burden is much higher you can have a good life after that. More than 95% of people who join direct sales fails and drops out. So, what make you believe youa re the 5 %? I am not saying you can not be successful, but the fact is the rate is very low.
I share the with you a quote," find a right direction, success is not far away". Please think carefully is business like Diamond and other direct sales is a right direction for you? Then you ahve the answer.
Borrow Rm 50,000 from bank to do a Diamond business, you take the risk, but the boss has no risk to earn your money before you can earn a ringgit.

What happen to me now?

My partner and I were getting 8 units of Diamond water filter each. This includes several units that we top up when we not achieve the quota.
My partner let go all his stocks with a total RM 4000 for 8 units.
I can not say I am lucky. I manage to find a barter system company and exchange my Diamond water filter at market price with other goods and things. However, I need to pay a fee as a member and some processing fee.
We both still continue our daily work. The dream to earn more money has become a night mare of losing over RM 15,000 each person and facing a lot of pressure. Nevertheless, it is a very good lesson in my life.

P/S:If you think this article is helpful to you, send the link of my blog to your friend to share with.

7 comments:

keel wong said...

P/S:If you think this article is helpful to you, please put a click of the Google ads and send the link of my blog to your friend to share with.

Do you want get your adsense account banned?
back to topic,you just post an good article about mlm system.most of them are just selling "dream" to the people who wish to get rich quike.if you have time,there is an ebook "7 greatest lies in MLM",you should read about it,it may help you get know and understand the "real side" of MLM system.

OMG said...

I fully agree with what you said
but you still can turn your problems into cash.
May be you fail to read Steven Covey 7 Habits book.

megaman said...

Hi,

I have some experience and tips to share with you when it comes to creating your own business.

The Golden Rule:
Do what you do best and know best !

It is the chinese saying, "If you are not familiar with the business, don't do it. If you don't trust the person, don't do business with him"

Business opportunities exist everywhere, you can even be rich by doing things that nobody wants to do, e.g. throwing rubbish.

I have a permanent full-time job but in my free time, I still put in the extra effort to either
a) do freelance work to extra income
b) work on my pet project which is a product that I can sell in the future once it is perfected
c) learn new skills or knowledge or brush up on my current skillset.
d) learn and invest my extra money in reasonable investment schemes that I understand and not too risky.

There's no shortcut to success and even with hardwork there's no guarantee you will get what you want. Learn from past mistakes but try not to make too many mistakes as you only have 50 - 60 years to make it.

I am not rich but I think I have done reasonably well. Still working hard to get more so that a good retirement is feasible.

Just my two cents. Hope you like it.

Anonymous said...

Diamond ?

Anonymous said...

MLMs scheme are getting complex day by day. It is getting worst. It cons young ppl, new ppl and it designs to con big qty, big amt of yr wealth.

THe entire scheme is to lure u in with yrweakness, desire to have big money, desire to be success and desire to have good life in the near future by showing you a few successful cases and a bank draft.

But on the ground, as a user of DIAMOND, i am angry. When I read this, i am amazed. I knew it even 10 years ago when i had briefly involved. I want to buy one for my apartment, but SMS no one care to response. Every1 only keen to find new downlines, get new cooned ppl to buy 10 or 20 units. No one like to sell DIRECT and even get to field and work with buyers. every1 like to do MLMs only. so be it.

God bless u all richer in days to come

Anonymous said...

Great tips, looks like you are wiser now after you are kena! Lucky for me because i was too lazy to spend my evening selling overpriced goods. True enough your sister or friends consider you kedekut. But I am happy with whatever little money I have. More money doenst mean you will be more happy, no?

Stella Chua said...

Hi Jason, I do agree with you.. Do check out my blog.
http://hargagiler-business.blogspot.com/2007/12/mlm-company-must-be-consumable-products.html