If you are new to MLM marketing or have been around for awhile, you are likely to have heard about the cost structure business model that is used in Network Marketing. What is this? Is it important? Well, the answer to those questions varies depending on your level of involvement and experience with Network Marketing. Below is a simple review of the cost structure business model and why it is important.
Hitting The Correct Scalability Target
According to the Cost structure Business Model, three key activities are necessary in performing this: Hitting the correct scalability target. In other words, it is important to understand that in order to achieve scalability, it is not enough to be able to adjust the business operations once it hits the correct target, because you also have to adjust the processes and the personnel involved in the process in order to maintain the correct scalability. Likewise, it is important not to neglect the importance of the appropriate marketing mix in achieving scalability. This is because if the wrong marketing mix is adopted, it will create a negative impact and this could lead to a company shutting down operations prematurely.
So, to review – the key elements of a scalable cost structure business model are a properly identified target, a properly determined and appropriately adopted marketing mix, and an appropriate revenue sharing system to maintain success metrics. In addition, the system must be able to measure progress in these three elements and adapt as necessary. Finally, the system must also include effective sales management to determine which channels are profitable and which are not, and in conjunction with customer service, training, and succession planning to ensure a successful operation.
In light of what we just discussed, it is easy to see how these elements can improve scalability. For startups, it may be especially important to take these elements into consideration when determining whether or not to pursue a particular business model. There are many startup cost structures that have been tried and evaluated and often include a sales force or some form of internal support. While these elements can contribute to startup success, it is important to also consider the costs of those elements, and more importantly, whether or not those costs can be properly maintained as part of startup operations without causing a significant slowdown in growth.
The canvas on which any successful business model is painted is unique for each company, startup, and industry. When evaluating business models for startups, it is important to ask the following questions to get a full picture of what is needed to develop a winning canvas: What types of social media outlets do my potential customers use? Will these outlets be able to support my product or service? Will my target market or customers be comfortable buying my products or services based on what they may see on MySpace or Facebook?
Tech companies that wish to be positioned as savvy, cutting-edge enterprises need to think about the “canvas” that will make or break their businesses. This can be difficult for some companies. It takes time and effort to get into the mindset of being cost-driven in a way that is aligned with their values and objectives. However, when it is done, businesses stand to benefit. Savvy tech companies will consider all three of the above canvas examples and will position themselves to be able to move up on the canvas.