Wednesday, May 2, 2007

The costs of marketing: A Sham and a Shame

It would be great if your favorite dietary supplements, vitamins and minerals, etc, didn't have to cost so much.

One business owner told me recently about how her $20 bottle of tablets would have to be sold for $50 if she were to market them via the "multi-level marketing" method. It's true that when you have 50%, 60% or more of a product's retail price invested in the cost of commissions (everyone gets a piece), what you end up with is not a bargain for the consumer.

Don't get me wrong, there are some good products that are sold by Multi-Level marketing, and we'll talk about those and weigh their merits as Sham's or Wham's on this website. Still, a good supplement that you have to pay $50 for would be a heck of a lot better for all of us if you could just buy it for what it is really worth.

But it's not just MLM distribution that costs the consumer so much. Here's another example. . .

As an importer and business person myself, I can tell you that it is difficult in ANY marketing scenario to get a healthy product out the door at a fair price to the consumer. If you sell through health food stores or vitamin stores, you need to sell a distributor first. The really big outlets even require you to go through brokers to service their outlets. So, you have the cost of importation (high enough with the low value of the US Dollar), added customs duties, and then you mark the product up and sell it to a distributor. The distributor adds a similar markup and then sells it to the retail store, and then the store doubles the price and sells it to the consumer. If there were brokers involved, that's another markup to add to the mix.

The cost of marketing is compounded by the fact that a single small ad in a relatively modest magazine is $1,000 or more (the kind of health magazines you find in your health food store). Try and advertise in the big magazines and you'd be paying ten times that amount.

Yes, the cost of marketing is a SHAM. But, a sham that is completely necessary in order to get products out into the world. I'd like to see all my favorite products take the route with the fewest "bumps" in price before they get to the consumer. While that may SOUND like multi-level marketing ("You're buying right from me, no middleman, and I get it from the factory"), that isn't what happens in reality. (See the excellent tips article linked to the headline of this post for those who are considering a Multi-Level Marketing commitment).


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