When I hit the streets as Super MLM Man (check out the video here), I wanted to find out what people really think about Network or Multilevel Marketing (MLM).
Not even dressing up as Superman could lighten the perceptions about our profession and its recruiting methods … perceptions that have been in place now for 70 years.
Are those people right? Are we a pyramid scheme?
Of course not.
None of those people actually knew what a pyramid scheme is. (And those same people thought Direct Sales companies included Starbucks, Nordstrom and Facebook.)
But … is their impression real to them, and as such, does it impact our future? Absolutely.
Are we as a profession responsible for their perspective and truth? 100% YES.
WHAT EXACTLY IS A PYRAMID SCHEME?
A pyramid scheme is essentially an investment scheme where each new participant pays into the system monies that are paid out to those who joined the scheme earlier.
In order to “get their money back,” the new participant must recruit new money into the system. Since everyone wants to get their money back, everyone keeps recruiting new money.
Like all schemes fueled by empty promises, hype, and greed, the shine eventually wears off and they go “out of momentum.” And when they do, the last people standing without enough recent new money end up losing theirs.
WHY THE CONFUSION WITH WHAT WE DO?
The perception challenge with Network or Multilevel Marketing appearing to some like a pyramid scheme is that the two models do have similarities.
MLM sales growth relies on recruiting new sales reps, who in turn are supposed to recruit new sales reps. Although each new rep is in total control of how much money they “invest” in products, marketing materials, and travel/training, they can end up losing their investment if they do not sell enough product or recruit enough people who sell enough product.
IT IS THE EVER-PRESENT “RECRUITING” THAT LEADS PEOPLE TO FEEL LIKE MLM IS A PYRAMID SCHEME.
Yet, ever-present recruiting is not only perfectly legal, it is the strategy for growth. Quality consumable products are the lifeblood, but recruiting is the growth strategy.
Therein lies the difference between MLM and the kind of sales or distribution models most people are comfortable understanding.
In most models, if a company wanted to sell $1,000,000 a month of a product, they would hire, train, incentivize, hand out territories, and most important, give quotas to 100 superstar sales people. And guess what the quota would be? $10,000 a month. (100 times $10,000 equals $1,000,000.)
And guess what they would do with the bottom half of the sales reps that sold the least and didn’t meet their quotas? Correct. They would fire and replace them.
The MLM model just flips the numbers: 10,000 raving customers (fans) using and recommending $100 worth of product for the same grand total of $1,000,000 a month.
This concept came about when, 70 years ago, a little ol’ company called California Vitamins invented the rule of: no longer does one have to prove themselves a sales manager or a top salesperson before they are awarded a sales team. Rather, anyone and everyone … every sales rep can recruit and earn a commission on the sales of anyone they recruit.
Everyone recruiting everyone can create a viral explosion of geometric growth … so much so that ignorant critics may even ask the “who is buried in Grant’s Tomb?” question: “If everyone is recruiting, who is selling the product?” We know the answer to that question, don’t we?
California Vitamins, btw, has been part of Amway for 40 years. Amway is the largest Direct Sales company using the MLM model of growth in the world. They have over 3,000,000 sales reps that each use and recommend enough Amway products for the company to sell $1 billion in product a month.
HOW CAN YOU TELL IF A COMPANY PASSES THE “PYRAMID TEST”?
What makes MLM a legitimate income opportunity is the product. If the money being invested is in products people love – products priced and valued by the marketplace legitimately – then no MLM company is a pyramid.
Now, of course, in our 70-year history, we have had plenty of MLM companies offer worthless products … products that would never be in the marketplace without an income opportunity to drive their demand.
Worthless-product MLM companies are de facto pyramid schemes.
The challenge is this: who is to say a product is worthless or overpriced? Starbucks sells black coffee for five times what Denny’s does. “Needless Markup” sells clothes you can hardly wear anywhere for 100 times their cost to produce.
The ultimate “pyramid” test of any MLM company is the answer to this question: what would sales be if the company prohibited any more recruiting?
If sales maintained at a level that the company stayed in business, it cannot be defined as a pyramid scheme. It means there is a demand for the product.
The public may not understand or even like our method of growing a brand and sales, but that does not make it illegal or immoral.
In fact, 77,000 people a WEEK become Direct Sellers, and 90 percent of all Direct Selling companies wisely choose the MLM model for growth. Why 77,000? Because where else can someone who is committed to financial and time-freedom find this kind of opportunity?
WHAT’S NOT TO LOVE?
Where else can anyone with the vision, motive and courage build a business worth millions in 4-5 years of part-time effort with all these features?
Only here … in the greatest profession on the planet.
- Richard -