But having devotion to a company despite evidence that they are not telling the truth or that their products are not superior taints the reputation of all MLMs and their reps. It’s frankly uncalled for.
Investigate companies. Choosing the right company is key to your success. Quick and easy internet searches can usually answer many of the questions you may have. Do some research to determine which company is best for you personally. Some questions you should ask yourself when researching companies are:
MLM companies have been trying to find ways around China’s prohibitions, or have been developing other methods, such as direct sales, to take their products to China through retail operations. The Direct Sales Regulations limit direct selling to cosmetics, health food, sanitary products, bodybuilding equipment and kitchen utensils. And the Regulations require Chinese or foreign companies (“FIEs”) who intend to engage into direct sale business in mainland China to apply for and obtain direct selling license from the Ministry of Commerce (“MOFCOM”). In 2016, there are 73 companies, including domestic and foreign companies, have obtained the direct selling license. Some multi-level marketing sellers have circumvented this ban by establishing addresses and bank accounts in Hong Kong, where the practice is legal, while selling and recruiting on the mainland.
Finally, everyone knows that a good bit of the pricing of MLM products go toward rewarding “top reps” with trips to Hawaii, etc. One company told me that the percentage of their pricing that goes toward commissions and rewards is 40%.
According to internal consultant calls, LuLaRoe is still onboarding more than 150 retailers a day. (LuLaRoe declined to confirm how many people are joining daily.) In this spandex rush, so many women were signing up to sell LuLaRoe that the onboarding queue stretched for weeks. Former customers were often convinced to become sellers so they could get their own wares wholesale, plus hopefully make some profit on the side. “Every time I got a really good customer, they would sign up under someone else,” Sophie says.
Jump up ^ “Hong Kong multi-level marketing plan needs closer look (editorial)”. South China Morning Post. October 31, 2013. Archived from the original on December 8, 2015. Retrieved November 26, 2015.
Interestingly, the issue of supply and demand is what brought the USSR to its knees. By design, the Soviet government tried to macro-manage supply, where bureaucrats would decide how many potatoes were needed, how much toilet paper, etc. Assuming these bureaucrats did the best they could, unfortunately their efforts to deliberately manipulate the control “knob” of supply and demand was not good enough. Notwithstanding their good intentions, they were usually wrong, which created huge shortages and surpluses, and led to a massive economic collapse.
Multi-level marketing (MLM) also called pyramid selling, network marketing, and referral marketing, is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company’s products/services, while the earnings of the participants are derived from a pyramid-shaped commission system.
Promoting products or pseudo-products of dubious or very low intrinsic worth (supplements, cosmetics, financial products, Bitcoin, videos/seminars, software, subscriptions, coupons/discounts) at very large markups, with low profit margins (often less than 1%) for the “distributor”
Network Marketing is a business model that relies on a distribution network to build the business. Network Marketing business structures are Multilevel Marketing in nature, as the payouts occur on many different levels. You might hear the terms Person-To-Person Marketing or One-on-One marketing, which are just other ways of describing Network Marketing. Basically, network marketing involves the direct selling of merchandise or services. Some popular Network Marketing businesses you most likely have heard of include; Avon, Mary Kay Cosmetics, Amway and Herbalife Ltd.
Here’s the reality. Using the 80/20 formula, in order to sign up 5 people you will need to start with a list of 125 prospects. Why? Because of the 125 prospects only 20% (25) will agree to hear your sales presentation. And of those 25 only 5 (20%) will join.
Investigate the products or service the company sells. Since you’ll be responsible for pitching and selling this product, make sure it is reputable. Some MLM companies market questionable or dangerous products, and you could face legal action if you take part. You should keep the following in mind when considering a product:
the upline/downline: a normal franchise model is flat, and all franchisees deal with corporate headquarters or a regional manager for supplies, point-of-sale materials, and the like – in MLM you deal directly with who recruited you (your “upline”) and in turn manage those directly underneath you (your “downline”) in a weirdly feudal hierarchy
So, MLMs profit by conning recruits up-front with a “distributorship fee,” and then make further illicit money by “confidencing” these hapless victims as they fail via the “sale” of collateral material.
Especially nasty is the church situation. Will the pastor join? If not, he will take a dim view of MLM proselytizing at church functions; animosity will rise, factions will form. You are either “in” or out. If the pastor joins, then those who are not “in” will feel a little uncomfortable in this church.
With MLMs, the situation is much worse. Nobody is home. Even the Soviets had someone thinking about how much was enough! If the bureaucrat in Russia was having a hard time trying to play Adam Smith’s “invisible hand” in setting the supply level in the Soviet Union, then an MLM “executive” is in a truly unfortunate position. Not only is there no one assigned to make the decision of how much is enough, the MLM is set up by design to blindly go past the saturation point and keep on going. It will grow till it collapses under its own weight, without even a bureaucrat noticing.
In 2016, the US Census Bureau stated the median rural household income is 4% lower than it is for urban families, and income inequality is also higher. The US government tried to help people understand the risks before joining these kinds of companies, but MLMs had their way. In 2012, federal legislation passed requiring all franchise companies to provide a disclosure document with information on weighing the benefits and risks of signing up. However, MLMs poured money into lobbying and flooded the FTC with more than 17,000 comments from consultants saying the disclosure would be a burden, and asked to be excluded. The FTC complied, and now MLMs aren’t required to disclose information on risks to interested consultants.
Another common practice is “channel stuffing” – requiring distributors to buy large minimums of company product, ostensibly for retail sale or for “personal use,” which serves to inflate sales numbers to give the appearance that an MLM is more sales-driven than it really is. However, the only support materials usually provided by their recruiter(s) are ones that promote the signing on of more new distributors. As a result, many a person out there has a closet full of Mary Kay cosmetics that they don’t need, and can’t sell. Type the name of any well-known MLM into eBay or Craigslist and you’ll see evidence of what becomes of that “investment” of “just a few hundred dollars” made in order to achieve new wealth and prosperity in ten hours a week from home.
Jump up ↑ “Attorney General Abbott Shuts Down Pyramid Scheme That Marketed Bogus Fuel Pill”. April 2, 2007. https://web.archive.org/web/20070402211346/http://www.oag.state.tx.us/oagNews/release.php?id=1906.
“I did pretty well for myself,” says Stern, who split sales with her business partner. The work was part-time, and she pulled in anywhere from $5,000 to $10,000 a month in revenue. Every month, the head of her consultant group would post a leaderboard for the top inventory buyers and sellers, some of whom were bringing in up to $60,000 a month. Stern noticed that the amount of inventory bought correlated with higher income, so after attending one of LuLaRoe’s touring conferences, she was inspired to bulk up her inventory. She and her business partner went on a buying spree, posting pictures of all the unopened boxes on her Facebook page, which began to swell with excited customers.
Christina Hinks, an aspiring journalist and the former moderator of the Facebook group, attempted to draw attention to LuLaRoe practices she found problematic. She has been collecting and documenting LuLaRoe issues at her blog, Mommygyver, which went from product reviews to educating readers on the risks of MLMs and inventory loading, revealing fat shaming by consultants, sharing stories of women who claim to have been victimized by LuLaRoe, and posting screenshots and stories of shenanigans by consultants and leaders at the top.
Clearly, there’s a disconnect between what most people think about MLM and what the women who are actually participating in these companies experience. And we may be doing a disservice to these business owners by characterizing all MLM companies as scams.
Français: devenir pro du marketing en réseau, Español: tener éxito en las redes de mercadeo, Deutsch: Im Network Marketing erfolgreich werden, Português: Alcançar o Sucesso com Marketing Multinível, Italiano: Avere Successo nel Network Marketing, 中文: 成功进行网络营销, Русский: преуспеть в сетевом маркетинге, Nederlands: Succesvol zijn in netwerkmarketing, Bahasa Indonesia: Sukses Di Pemasaran Jaringan, العربية: النجاح في مجال التسويق الشبكي, Tiếng Việt: Thành công trong việc kinh doanh theo mạng
^ Jump up to: a b O’Donnell, Jayne (February 10, 2011). “Multilevel marketing or ‘pyramid?’ Sales people find it hard to earn much”. USA Today. Archived from the original on May 4, 2011. Retrieved April 5, 2011.