What is a Party Plan Anyway?

There has been a quiet revolution in the party plan industry. It is increasingly clear that party plan is not only successful, but also that the lines between party plan and traditional network marketing companies are starting to blur.

In focusing on this important segment of the direct sales industry, it is important to define the “new party plan company”. How is it the same as its predecessor? How is it different? What makes it different from modern network marketing companies?

What defines a modern party plan company?

In almost any network marketing or direct sales company a distributor can choose to sell products at a party as opposed to other ways of finding customers. The fact that there are more women than men does not make it a party plan since 82.4% of All distributors in direct sales are women. No one thing makes a company a party plan company.

What makes a party plan a party plan is the combination of three things:

1. The commission plan.
2. The incentives and promotions to help the distributor hold parties
3. The methods the company employs to protect the retail profit of the distributor

The commission plan: The major difference between network marketing commissions and party plan commissions is how they approach retail sales. I encourage all new companies to decide how much of their commissions should be paid to the distributors involved in selling product to the consumer, and how much should be paid to the upline for managing. Party plan companies use the same commission plans as network marketing companies, however when they define the payout percentages they tend to pay more commission to the distributor making the sale and less commission to the upline.

The incentives and promotions to help the distributor hold parties: The party plan company has had a single mindedness for many years while the network marketing industry has tried several methods of customer acquisition and support sometimes for the good and sometimes for the bad). Party plan companies seem to understand that the basic “currency unit” of customer acquisition and support is the party and while other methods may come along to supplement and enhance their opportunities it seems the successful companies have never forgotten their roots. If a company wants a distributor to hold parties, they help them in many ways: hostess gifts, party booking gifts, party order gifts. Over the years our order entry software has had to become sophisticated in order to handle the many variations to these party incentives. The foundation of the incentive program is the party.

The methods the company employs to protect the retail profit of the distributor: This extremely important issue is often overlooked by startup companies using the party plan model. If a potential customer can become a distributor in order to buy product at wholesale and save enough money on their first order to pay for their distributorship— this is often what they will do. What is the problem with that? The company ends up with lots of “hollow” distributors, and serious distributors do not make the retail profit necessary to support and retain their customers. In order to avoid this problem party plan companies create “barriers to signup” to insure that only those people serious about selling product become dstributors, and the rest stay as customers, thus the retail profit margin is protected. These barriers do not have to be unduly expensive, just high enough to separate the salespeople from the customers, and can be constructed in such a way that they do not present a financial risk for the distributor.

Party Plan Trends

In the last few years an increasing number of companies are paying multi-level commissions. Companies have decided to let the distributors choose how to build their business, a traditional retail business, (the staple of party plan for so many years), and/or allow the distributor to build a downline group and earn commissions managing them.

One of the questions, I am often asked by people starting companies, is should they create a traditional network marketing or party plan company? That is a tough question. I have worked with incredible companies of both kinds. I have seen failures of both kinds.

However, it seems to be the trend lately, that companies are moving to more of a hybrid model to get the “best of both worlds.” They use the network marketing aspect to find, train, and incentivize their salespeople, and use the party plan model for their customer acquisition. As the Internet becomes more dominant, I think that the merging of these two models will generate a completely new company type all its own.

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Mark Rawlins is the President of InfoTrax Systems. InfoTrax was founded in 1998. Mark has worked in the commissioning and systems part of the network marketing industry for over 22 years.