Multi Level Marketing and Network Marketing explained - vital information for the potential new MLM recruit.
"... and why do bastards (sic) like you spend all your time trying to justify your own failure in MLM?..."
It is not MY "failure" that's important. It's the continuing failure of SO MANY that counts here! Ultimately, it comes down to the failure of MLM's to address the inequities in their geometric progression recruiting schemes that has caused me to take the time to point the inequities out.
What about Xxxxxxxx? It's a new MLM by a former Amway/Quixtar Diamond, Xx Xxxxx. Xxxxxxxx members claim the payplan is such that most make money and the support tools are cheap, too. The product pricing is said to encourage real retail selling instead of massive self-consumption of the product by the participants in the payplan. What do you think?
A New MLM...
Similar questions involving various new MLM's have been submitted recently, making for a "frequently asked question".
Simply put, if a recommended recruiting system within any business opportunity is based on geometric growth without any effective controls on distributor numbers, then it will eventually cause majority distributor failure rather than promote majority distributor success.
Many MLM's provide excellent products and promotional tools. These attract many would-be distributors to invest money, whilst the recruiting system they participate in most often causes them to fail through excessive (including self-generated), competition.
Traditional Biz Vs MLM
FREQUENTLY ASKED QUESTIONS
Why are there not anti-small business or small business survivors pages for people who start and fail at traditional small businesses?
It's widely (known that) the failure rate of traditional small business is 80% in 5 years.
I am a small business consultant by trade and every day I meet people that have absolutely no business (being) in business!
Traditional small business owners loose (sic) considerably more capital than the average MLM entrepreneur. Most people aren't cut out for business ownership.
Because this applies to MLM businesses as well, doesn't mean that this is not a viable business model and I feel doesn't give you much of a ground to base your claims.
Traditional businesses do not try to convince every person on the planet to emulate their business by duplication. Imagine that every shop in every city only sold hardware. If that were the case, I have no doubt there would be many who would contribute to a "small hardware business survivors" website.
It is true that something like four out of five small businesses (about 80%) fail in the first five years of operation. It is also true that somewhere around 99.5% of MLM-ers fail in the first two years. Distributor failure rate for MLM is generally around 60% per annum, meaning that the "best" MLM companies lose their entire distributor base in something under every two years.
MLM distributors are initially so utterly dedicated to the pursuit of making money that they do not believe for a moment that someone may not have the ability to duplicate what they are doing (even if they are only potentially successful distributors themselves). Because of the nature of the MLM recruiting process, many more people who are definitely NOT suited to having their own business are convinced to give it a try, which further contributes to the failure rate.
If most people are not cut out for business ownership, why is it that MLM companies invariably claim that their business is for everyone? And why do they continue to allow obviously inept people to join and participate? Would IBM knowingly employ an uneducated and largely untrained person to represent them? Would they, even if the person paid for the right to do so?
The MLM business model is not, and cannot be viable for any other than a select few. It is logically, and factually, impossible for the concept to succeed in the way that the recruiting pitch would indicate, as recruiting ever-increasing competition guarantees the eventual forced redundancy of existing people in any given marketplace. The proof? Tens of millions, (perhaps even hundreds of millions world wide?), of failed MLM entrepreneurs over nearly 50 years!
For the record, the grounds on which I base my opposition to MLM include the fact that MLM's well know what their distributor failure rates are, and must therefore clearly understand that 99.5% of the population who join them are fools to have done so. So long as companies continue to cynically conceal their failure rates and any current distributor saturation figures, they will continue to dupe Joe Public into joining them. The sad part is that the deception is propagated by people who simply don't know any better (including well-meaning folk such as yourself).
hi i just join a MLM company called omegatrend.com im still hedatating about this mlm thing...i thinkg everything is just a hoax...I need ur advice...on joining or leaving ths
One of many queries from Malaysia, I believe. My advice will always be:
A WISE MAN WILL NOT JOIN ANY MLM COMPANY. IF YOU ARE NOT A WISE MAN, YOU SHOULD AT LEAST ATTEMPT TO BE SO IN REGARD TO MLM.
Here's another comment regarding an Omegatrend recruiting meeting experience...
The 5% Community Note: This answer should suffice for all similar queries.
I have joined a Norwegian mlm company "The 5 % Community". This company refers to Norwegian laws. They have "set out to change mlm-history", as they say it.
The basis of the company is a webshop and an Internet based travel-company. You don't have to pay anything to become a member and you don't have to buy any products. As a member you can browse the products (all from computers to clothes) and buy if you want. If you don't buy anything it doesn't matter. It is though, a mlm-company as you get commission from sales in your structure (if you have any).
If you don't recruit any persons you still have the advantage of the favourable prices on the products. To be honest - it sounded good to me. But after reading your article I have become sceptic.
You are experienced in this business. Have I been victim of a con company?? You can read more on the company here www.t5pc.com.
For obvious legal reasons, I do not enter into the business of evaluating individual MLM companies on behalf of others. MLM is, after all, still currently legal in many countries. I am also not familiar with MLM laws in Norway. However, I can say that I have briefly reviewed the website and based on the information presented there I would not join the company. My decision has little to do with legalities and more to do with logic.
I would seek the answers to many questions were I to find myself in your position:
BACKGROUND: Remember, all MLM companies reward distributors in some financial way for recruiting others. The use of a geometric progression recruiting scheme ensures that there is no "ceiling" on the number of people an individual, or the company as a whole, can recruit. It also means that EVERYBODY who becomes a distributor may recruit as many people as they can find. After initial growth, the on-going result of this sooner or later is chaotic, blind competition, within which is created an almost continuous stream of "failures" who are replaced by a continuous stream of new recruits. This is most evident after the initial recruiting rush, and during any ensuing period of heightened recruiting activity, as the MLM company matures. Recruiting is pivotal to the company's continued existence.
Q1. DOES YOUR MLM USE A GEOMETRIC PROGRESSION RECRUITING/ REMUNERATION SCHEME? (Breakaway, forced matrix, binary system, etc)
BACKGROUND: MLM's often choose day to day products to sell. In order to maintain distributor commissions, the pricing of these items often remains static, or nearly so, in the face of normal fluctuations (specials, etc), at traditional marketing outlets.
Q2. ARE THE PRODUCTS HIGH QUALITY, CONSUMABLE (to generate repeat purchases by individuals), AND COMPETITIVELY PRICED AT THE RETAIL LEVEL?
BACKGROUND: Whenever you make a decision to buy something, do you automatically review your list of friends and acquaintances first, just in case one may belong to some obscure MLM company you have never heard of that sells products you are not familiar with, then ring the person to check whether or not they sell a product similar to, or exactly the same as, the product you seek? Unlikely?
Q3. AS AN EVERYDAY CITIZEN, WOULD YOU BUY THE PRODUCTS FROM AN MLM DISTRIBUTOR RATHER THAN FROM YOUR NORMAL RETAIL OUTLET?
BACKGROUND: People are often attracted to an MLM because of great products or great prices. However, it is the lure of great INCOME, which is tied to recruiting, that causes most to actually sign up.
Q4. WOULD YOU JOIN THE COMPANY JUST TO BUY A PARTICULAR PRODUCT OR BECAUSE THE COMPANY OFFERS WHAT SEEMS LIKE A GREAT INCOME OPPORTUNITY?
BACKGROUND: Many new MLM companies are created in the image of existing, and even defunct, MLM companies.
Q5. WHAT OTHER COMPANIES WITH SIMILAR ASPIRATIONS AND MARKETING APPROACH HAVE SUCCEEDED? HOW MANY HAVE FAILED? (Hint: www.pyramidschemealert.org offers much in the way of research, as does the pro-MLM website at www.mlm-thetruth.com ) WHAT REASONS ARE OFFERED FOR THE FAILURES?
BACKGROUND: It is a fact that any company is started with only one primary objective - to make money for the principals (owners), of the company. In order to achieve even modest success though, any company must satisfy the varying and often conflicting needs of its investors, its workforce and its customers. Is there conflict of interest at work when a single individual is offered the conditional opportunity to become all three?
Q6. WHAT IS THE COMPANY REALLY STRUCTURED TO ACHIEVE? (Hint: Do not look at the company's stated aims and objectives - look at the actual structure and work out for yourself whether the structure is there to properly benefit ALL concerned - owners, investors, the workforce and the customers. If this is not the case, then history strongly suggests that the company will fail).
BACKGROUND: MLM is currently facing regulatory enforcement in the US which is threatening its very existence. This relates to the age-old problem inherent in MLM. Solely selling distributorships is illegal. Selling product at retail is not. MLM does both, but if a balance showing that distributors earn more from their retailing activities than their recruiting activities is not achieved, then the company may very likely be legally defined as an illegal pyramid. This includes companies who appear to adhere to the law, but which in actual fact do not.
Q7. DOES YOUR COMPANY PRIMARILY EXIST TO SELL PRODUCT THROUGH DISTRIBUTORS, OR DOES IT PRIMARILY EXIST TO SELL THE INCOME OPPORTUNITY BY RECRUITING DISTRIBUTORS? WHICH OF THESE ACTIVITIES WILL EARN A DISTRIBUTOR MORE INCOME?
There are many more questions a potential distributor should be asking. The simplest avoidance device I can suggest is to firstly determine if a company's recruiting structure is based on a geometric progression. If it is, then it is most likely an MLM. Every MLM is designed to involve everyone on earth if possible. Geometric progression based recruiting actually causes excessive, uncontrolled and uncontrollable competition in what is always a finite marketplace. MLM is NOT true free enterprise. In practice, it is true restrictive enterprise. These restrictions apply to distributors at the bottom of the pyramid more so than to those at the top, and they also serve to enhance company income, often to the financial detriment of the lowly distributor.