Yes, we’ve all experienced our fair share and, yes, this is the downside to MLMs, however I want to show you the upside and then maybe you’ll see why brand representatives are so eager and passionate about their work.
Remember the Avon lady? Tupperware parties? Mary Kay pink Cadillacs? Electrolux door-to-door salesmen? The Fuller Brush Man?
These direct selling companies began as single-level marketing companies but then adopted the multi-level marketing structure. MLM companies have traditionally been an excellent way for stay-at-home mothers and wives to earn a little side cash. Even if you love your spouse, your children, and tending the home, it’s always empowering to earn your own money.
Some families or individuals take on an MLM because two (or more) incomes are necessary to cover expenses and perhaps keeping the children at home is a priority. There are all sorts of life situations that require non-traditional extra income and MLMs help meet that need. A service provider (massage therapist) might take on an aligned MLM product to supplement her income.
Early MLMs were typically brands of household, beauty, and health products. Brands that appealed to women were what women were good at selling and recommending to their friends.
Then along came the company Amway which changed the tone of MLMs. It’s reputation is the poster child of all that’s undesirable about MLM companies: pushy sales people, disguised sales calls, cult-like pressure tactics, and over-inflated income promises. (In all fairness, I believe Amway has changed their ways under pressure of the legal system, but the stereotypical reputation has yet to be fully shaken off.)
In spite of the challenges, MLM companies persist and the business model has proliferated.
Because the best parts about MLMs are still great. Now there is more regulation of MLM companies, there are fewer financial risks to those who sign up with a company, their commitment to the company is more transparent, and the compensation plans are easier to understand and more realistic.
MLMs, to get away from the negative connotations, have started using other phrases to describe their business model: networking marketing, direct sales, word of mouth marketing, and referral or relationship marketing. But they are all basically the same.
One thing MLMs are not is a pyramid scheme. Pyramid schemes involve the exchange of money without the sale or exchange of product or services. Receiving monetary compensation for signing up a sales person (distributor, consultant, affiliate) under you constitutes a pyramid scheme. Legitimate MLMs do not do this. Financially benefiting from signing up a distributor under you only happens when that distributor or their downline (distributors or customers under them) purchases product.
Shady MLMs are fading along with the door-to-door vacuum cleaner and encyclopedia salesmen. MLMs are the future of business. Why?
Because I believe that the people (yes,us) are tired of the corporate, capitalistic model when large companies profit from sales then distribute the excess to externalized share holders. The people are very much exploited with seductive marketing, advertising, and strategic pricing. Think of Walmart, Target, Nike, and McDonald’s and how much money they make for shareholders off the common people.
In an MLM the shareholders are the internal, integrated, non-salaried distributors. As the company succeeds and rises, its distributors succeed and rise. When bringing more compassion, collaboration, and cooperation into the future of business, I believe MLM companies are using an excellent and forwarding thinking business model. MLMs who also align with charitable causes or fund their own non-profit organizations do good in the world such as social (buy one, give one) enterprises like Tom’s Shoes.
Do MLM company headquarters and employees want to succeed as much as corporations? Absolutely! But who benefits from the success differs. The MLM distributors who smartly and successfully promote their brand and generate income and bonuses (trips, prizes, money) do! Grand effort can equal grand reward! MLMs are not an easy and quick way to get rich, but they can be a legitimate and fun way to earn money over time with dedication.
“Multi-level marketing, MLM or network marketing, companies have produced more millionaires and six figure incomes than any other business model on the planet hands down.” Scott Hallock
• Good MLMs are responsive to their team of distributors, rather than driven by the demands of externalized shareholders.
• MLMs also offer sales commissions – like in car or real-estate sales – when customers purchase product without becoming part of the company.
• With the advent and dominance of the internet, building a legitimate business as part of an MLM for yourself while staying home or as a side venture is easier than ever offering freedom of location, flexible working hours, and a potentially global downline.
• Now that MLMs are becoming more common and multiple companies are selling competitive products, the companies need to be more strategic and appealing in their prices, compensation plans, and product or services. This is great for the distributor and customer! Healthy competition keeps everyone honest and products appealing.
Here’s what to look for when considering becoming a part of any MLM:
1. Does the person who wants to sign you up actually use the products or services? Can they speak to how using the products or services has improved their lives financially, health-wise, or in self-esteem as a by-product of building a business? Listen to their stories. Are they sincere and inspiring?
2. Is the compensation plan and buy-in clear? Are your financial obligations listed up-front? Do you know exactly what you need to pay to become part of the company? Be skeptical of a high-dollar buy-in. The focus needs to be on future sales, not what you are paying the company up front to become part of the company.
3. Do you have to carry inventory? Can you quit the company at any time without penalty?
4. Is this a line or a brand that you can stand behind ethically? Will the quality, uniqueness, and appeal of the products or services sell themselves? No MLM or distributor can sell a junk product for long.
5. Do you feel pressure to join or sell? This is usually a sign that you and the company are not the right fit. However, if you like the company but not the person wanting to sign you up, find another sponsor. Call the company headquarters for a distributor in your area. Meet with them. They will be your coach. It’s important to feel comfortable and that you can establish a healthy working relationship. Signing up needs to feel like an opportunity, not an obligation or something to later regret.
6. Is there any price-fixing when selling the product or service retail? The company establishes the wholesale price, however when the distributor (individual, business, or store) turns around and sells their product inventory at retail, they should have the freedom to determine their appropriate retail price for their market. Do not engage with companies who price-fix retail sales.
7. How old is the company? Getting into a legitimate MLM early is beneficial. Not only will you get to bring a new product to the world, you also stand to benefit from the large network that will grow beneath you IF the product or service is of quality. New MLMs need to be well capitalized to be a safe investment for you, otherwise it is recommended to only join MLMs that are at least 5 years old if you’re not a risk taker.
8. Do you have easy (phone, fax, email) access to the company headquarters to provide feedback, ask questions, and request help and customer service?