Want to know the truth about MLM Companies? It ain’t pretty. That is why you need a Paradigm Shift if you want to succeed in this business. Before I reveal what I mean, let me give you a primer on the principles of Multi Level Marketing (MLM). Network Marketing is another term for the same business model. I shall be using the abbreviation MLM from here on. If you are well versed in MLM skip the next section.
Primer on MLM
Companies have a wealth of options to market and sell their products today. The Internet has been growing in popularity at frenetic pace, and is gradually supplementing and even overtaking brick and mortar stores. Before the Internet was available, some companies added the MLM model to their marketing methods. Amway was the grandaddy of this model and has become one of the largest MLM companies in the world. They trail blazed through uncharted territories that created the model for the myriad of companies that followed. They proved that MLM is a legitimate form of selling products and services.
With MLM, instead of spending a huge amount of money on advertising, companies directed these funds towards recruiting Independent Representatives to promote and sell their products. Other terms for Independent Representatives used are Distributors and Associates.
The cost for these companies to create an independent salesforce consisting of thousands of individuals would be cost prohibitive. Incentives, were derived for the original group of salespersons to recruit Independent Representatives themselves. The idea was to foster geometric growth by sharing the cost and energy required with existing Independent Representatives.
The company would give them a percentage of the sales made by their recruited Independent Representatives. This percentage would be scaled downwards many levels deep. Hence those who recruited the most hardworking Independent Representatives stood the chance of earning the most. In theory, anybody no matter at what level they are in the organization could be as or even more more successful than those above them if they built a large enough hardworking network.
The company provided an array of tools to promote sales as well as to recruit new Independent Representatives. A common practice was to hold meetings ranging from small business briefings to major conventions to motivate their sales force and also help to recruit more Independent Representatives. Everyone was and is encouraged to bring as many guests to these events to encourage sales and recruitment.
Sounds good so far. Right? Sales of companies that have adopted MLM have been generally very successful. Those that have failed did so because of serious missteps. In general though everything seems hunky dory with MLM companies.
Not so fast. I want to discuss the undertones of this practice.
What The Company Doesn’t Want You to Know
The recruiting literature promises the opportunity to create a high paying MLM business to everyone. If you work hard and never give up, you will be successful. The Independent Representative is asked to tell everyone they know about the company products and business opportunity. They are taught this is a numbers game. Some will join. Some wont. So go on to the next. The idea was to do simple tasks like inviting people to look at a video or to attend a meeting often. The idea was to expose their prospects to others who were more experienced than them to essentially do the close.
The vast majority of recruits are looking for a way to make money fast. It takes time and patience doing the right things to build a successful MLM organization. Hence many get discouraged and give up. It takes a person with vision, dedication and discipline to do the simple things day in and day out to achieve success. Then when they recruit a team, they have to work with them to train them, motivate them to do the same. Until they are able to build an organization that can sustain itself several layers deep, there is risk that their network will fall apart together with their dreams.
Why is this so? Most people are afraid of public speaking. MLM demands talking to people. At the very least, you have to ask them to watch a video. go to an event. And get commitment that they will do that. Therefore, the success comes in the follow up. Lots of it. It takes at least 9 invitations to get a friend or family member to even look at the materials you give them. Today this process is automated using Customer Relationship Management (CRM) software.
There are several unfortunate results that occur with virtually every MLM company. The first being the turnover is very high. Hence recruiting is always a huge priority. The second is that the ratio of the big money earners to those who earn a pittance very low. Companies are requested by law to publish the average earning of Independent Representatives. They hide this detail in small print because it is disgracefully low. Less than $1000 a year in most cases.
How Do Some MLM Leaders Make a Fortune?
We have to give them credit. They earn everything they get. When they started their MLM business, they worked hard and smart. They were aware right off the bat that they had to do the simple things to promote their business opportunity as often as possible. They didn’t let their feelings or being rejected get to them.
The idea was not to reinvent the wheel. But to do the things that have worked in the past over and over again. The KISS, Keep It Simple Stupid applied here very aptly.
Not everyone can do this. In order to succeed you have to become a leader. If you continue to remain a follower, you will not succeed.
I call them LEADERS for a reason. They had to show leadership, integrity and resolve that they were success oriented. And that they would not stop helping any member of their team who was willing to put in the work and follow guidance.
The Ugly Truth
What matters the most to MLM companies, or to any company for that matter, is the bottom line. What are their annual sales? What is the cost of these sales? And what is the net profit?
They will do whatever it takes to make these numbers look good. And high turnover is just a cost of doing business.
Does this mean that MLM cannot work? For most people yes.
Unless you have a PARADIGM SHIFT in your thinking and approach that I will discuss in my next post. So stay tuned!