Multi-Level Marketing, referred to by the acronym MLM, or terms like “Network Marketing” or “Home-Based Business,” has been around in some form for decades at this point. Yet million of people have been involved with one (or more). In fact, I guarantee either you, or someone you know has been “in” one of the following companies: Avon, Mary Kay, Tupperware, Melaluca, Costal Vacations, Fortune High-Tech Marketing (FHTM), Xango, Monavie, Pampered Chef, Cutco, Scentsy, Amway, etc.
From the iconic ring of “Avon calling,” to the famous pink Cadillacs of Mary Kay, to the garage-fulls of Amway many folks have foisted off upon themselves, millions of people have tried MLM and very few if any have done more than break even.
Let’s be clear about some things. First, this blog is going to be brutally honest about MLM, and that means stating what does work, and what doesn’t work.
That said, Second: I like MLM. I think that the concept works — if all the parts are in place. I’ve been involved in a few, and I’ve made thousands with them.
However, I also think that there are a number of companies out there which fail to meet a few key evaluation points and which force them to fail.
I’ve personally been involved with one of the above companies, am presently working with two others, used products from at least 3, and known dozens of people who have been involved in such businesses before (nearly all of them unsuccessful). Nearly half of the people in the US have purchased something through direct sales/network marketing/MLM. This being the case, why are so many so unsuccessful?
Well, there are a number of reasons. Here’s three.
1) Inability To Judge A Business Or Business Model
If you’ve never been in business before, or had to think like a business owner, it’s easy to get lured into smooth pitches about minimal effort and maximum rewards. If you have an incredibly gregarious personality, and naturally network well with others, it may be very easy to build a huge organization (or “Down Line”).
But most people will never see the “levels” or “matrices” filled beyond a few levels, and if they don’t have a sociable personality, they don’t even stand a chance.
This is in part because…
2) Poor Training
The number one thing that kills network marketing businesses is lack of training.
The number-one proof of this is the super-abundance of “gurus” and “trainers” and “elite secrets to generating leads/sales/distributors/associates” and “turn-key, automated systems” that are out there, earning millions of dollars from the millions of associates trying to make these things work.
We’ve all seen the person who “gets into” a business, and then spams their friends and family, either in real life, or now in the digital forum (e.g., Facebook), with an endless barrage of “buy my stuff” or “come join my business so we can get rich” messages. These people are fluttering in the water like wounded ducks, trying to get their grounding as they slowly sink into debt paying for their new business while they try to get someone else to join them.
Of course, all the training and systems in the world won’t help if you’ve got…
3) Non-Unique, Non-Competitive, Over-Priced Products.
The unique lure of the MLM business is that, supposedly, these companies are “cutting out the middle-men” in marketing and shipping associated with traditional businesses, and allowing independent distributors to reap the lucrative profits.
In practice, however, most of these products are glorified versions of products you could get at Wal-Mart or Target or Amazon.com. The prices are inflated to yield a profit for the company and a string of marketers who all get a cut of the commission from each sale.
Thus your friends and family get to pay the premium price to buy from you what are (usually) only slightly improved versions of store-bought goods. That is not a sound business model.
4) Their “Business” IS A Scam!
Okay, here’s a fourth, “bonus” point, in addition to the other three, which has to be mentioned. This is NOT a “universal” statement about all MLM businesses. Many are fine, but a number of them are built up must less as businesses and much more akin to a traditional “pyramid” scheme. What’s wrong with those? The Federal Trade Commission says:
“Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They’re actually illegal pyramid schemes. Why ispyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people – except perhaps those at the very top of the pyramid – end up empty-handed.”
NOTE: ALL businesses have costs, and the mere fact of having to pay money to start a business isn’t enough to qualify as a pyramid scheme, and should not necessitate making you leery.
However, once you look at the “pay plan” or “compensation plan,” if much of the money comes either from dues the new associates pay, or from the consumption of the products/services of the new associates and NOT from actual sales, then you’ve probably got a dud product at best, or a pyramid scheme at worst.
Getting Past The Hype
All this being said, there are a number of businesses out there which are at least “okay” as side sources of income. And that’s what the promise of MLM or Network Marketing is all about, really.
It’s a business, done on the side, to generate a little extra income. And it’s the type of business that, if done professionally (which means having evaluated your product(s) to make sure that they are in fact valid, unique, un-inflated goods that are worth buying), you can make an honest living in some MLM businesses.
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