Whether you’ve seen numerous packages and boxes for some product you’ve never heard of laying around on the floor in the home of a relative, or your ears have been blasted by your best friend’s constant marketing for some product he/she seems overly interested in, one thought eventually crosses your mind…
“What is MLM about?” …I’ve personally never been involved with MLM before. It just seemed like too much work. I have though, seen on a couple of occasions my mother, and then my sister get involved with this interesting looking money making scheme. A couple of months later the same thing that happened to my mother, happened to my sister as well. What once was a dream to make it as one’s own boss and living a job-free life, turned into a room full of excess boxes of unused lotions and other cosmetics products.
So what went wrong? Every business requires hard work, and you get out of a business what you put into it. Perhaps they where too lazy. Maybe they didn’t work hard enough. Maybe they were totally unprepared and were in over their heads. However, years later, the idea of MLM popped up again and I, being interested in different ways to make money without a job, decided to look into this possible business venture.
So what is multi level marketing anyway? How does it work?
Multi level marketing (also known as “network marketing”) is a marketing and sales strategy in which a person joins a marketing network for a company. The participant then markets by word of mouth and attempts to sell a certain product or various products. The marketer also tries to recruit others to join the network and make sales as well.
When you join a network, you are compensated in two ways: By direct sale of a product and receiving a commission, and/or receiving a portion of revenue generated by the sales of those you’ve recruited (not directly) in addition to the earnings from the ones your recruits have recruited down the line as well, therefore creating multiple levels of compensation.
The larger your network is, the larger your revenue will be…
In MLM, the survival of your business endeavor depends on your sales, but more importantly how many people you can “recruit” and add to your network. having that in mind, let’s look at a scenario: You recruit one, two, three, or four people. Then they do the same. The people they recruit do the same and so on and so forth. Your sales, recruits, revenue and overall network begin to form the shape of a “pyramid.”
What holds your entire marketing campaign together is your success, as well the success of those you’ve recruited and their recruits etc. This is also known as your “down-line.” As your down-line succeeds more and more, so will your revenue grow, potentially creating and sustaining a very lucrative business.
But is such a marketing scheme realistic? Is it sustainable? When judging the viability and potential success that a business may generate, you not only have to look at any perceived lucrativeness and any hype that follows, but also take a step back and evaluate it’s long term sustainability.
The first and most important thing that worries people when they decide to start up a new business is the risk involved. When evaluating ways to make money you have to consider if it’s really worth your time. Will you lose money? Are you selling everything you have in stock? Will enough people be interested in joining your network? Well, in order to fully answer those questions, let’s take a look at how “promising” multi level marketing really is.
Which pays more… a “dream” or a product?
Having multiple levels of compensation seems like a dream scenario, regardless of the product you’re selling, but one does have to wonder if it is more profitable to earn money from selling a valuable and interesting product, or if “selling the dream” is a more lucrative venture to pursue.
So what draws people toward MLMs? Is it greed, desperation? Could be. Truth is, there are many types of people that are drawn to MLM. Most of these people are ordinary people just trying to make a buck. Selling the prospect of a prosperous lifestyle is what brought them to this “business” in the first place.
The product may or may not be extraordinary, but being part of a business and having the title of “entrepreneur” slapped on them seemed all too irresistible. But when more emphasis is placed on the promise of success than the value of the product which you’re selling, problems can certainly develop down the road.
Is it all “doomed by design?”
The truth is, when more emphasis is place on the promise of success than actually selling a valuable product, the further down the line you go the less successful the marketers will be. Eventually you’ll get to a point where the market or network at the bottom of the “pyramid” is saturated with “sellers.” You’ll pretty much end up with a bunch of people thinking of themselves as entrepreneurs, hustling for a worthless product.
In this scenario, selling a valuable and helpful product doesn’t matter, and when based on the idea of simply recruiting and selling the idea of being financially successful instead of participating in a value focused business, then there really is no basis for support from loyal customers, which is the foundation of the success of a sustainable business.
All alone at the top.
When I look back on the empty boxes of useless products in my sister’s room, I can’t help but think that she was most likely at the bottom of the pyramid. Marketing and talking seemingly enthusiastically about a product that she probably wasn’t all that interested in to people that weren’t interested either was probably a recipe for failure.
The people that can and do succeed at MLM are the very few at the top of the pyramid. The further you go down the line, the least likely you are to gain anything worthy of being called a “business” out of the scheme. Pretty much 99% of all the people who participate in MLM are below the top brick, which is pretty much everyone else who tries.
Why you probably won’t make any money with MLM… 🙁
A MLM scheme has to sustain itself somehow, which puts a lot of the startup cost on your shoulders. Most multi level marketing networks have a fee to join, and on top of that, you have to purchase supply in stock for you to then sell. How good are your marketing skills? Many people who buy into this scheme for the first (and last) time may overestimate the supply versus demand. Which means you potentially end up overpaying and underselling.
Overpricing items fuels the system
The marketing scheme just wouldn’t work without jacking up the cost of the products. selling overpriced and untested products is what makes the multiple levels of compensation possible. Inflated prices make it possible for your down-line to be able to earn you a cut and continue perpetuating the system.
In order to keep the enterprise going, it is important to continue selling the product, talking about the product to everyone you know, posting about it on your twitter account, and whatever else it takes to get the word out. Such efforts can be really tiresome, and this alone can cause a lot of people involved in MLM to drop out. Sadly, these people where fooled into thinking that this is what it takes to run an actual business.
Multi Level Marketing isn’t real entrepreneurship
A true business is built on the foundation of a product that has value and is helpful to consumers. Having people buy into a “scheme” that is masked by the falsehood of a “unique” so-called product adds no value to the marketplace and does nothing for consumers. You are not an entrepreneur when you take up MLM. Word of mouth is not a far-reaching enough marketing strategy and will be difficult to grow beyond your immediate social circle.
In Multi Level Marketing, you don’t own the business and you do not choose what to sell. You only have one or a few low quality products to market and to a limited pool of potential customers. When you run and own your own business, you are the boss, you choose what you sell, you can give your business a brand, you can create your own website, scale your business as much as you want, and pretty much control the destiny of what you are involved in.
Most people that join a MLM network, aren’t aware of how a real business works. They don’t know how to build a website. They’ve never built something that they can call their own. MLM does not encourage the trust of the consumer. A true business gives value to consumers, and a relationship of trust eventually develops.
You have to ask yourself, if a business had a great product, why would they need to resort to such unusual ways to market it? Why would anyone by an extremely overpriced product when they could just go somewhere else and get a similar and probably better quality product for a 1/6 of the price they’re offering. That’s nonsense! A valuable product is what keeps customers coming back. When your business gains trust, “word of mouth” marketing happens naturally as you expand and your products, services, or blog gain popularity.
How does MLM affect relationships?
Honestly, when I think of MLM, I think of pushers and hustlers. Not only are you a hustler/pusher, you are also a pimp. And I don’t mean that in a complimentary, edgy, new-age sort of way. You hustle for the network (your pimp) and you also pimp out your down-line, who also have to hustle to keep the scheme going.
Pimping with love…
People don’t like to be constantly pitched to by their friends and family. How good does it feel to have to pimp out your friends and family in order to make money. How good does that even feel to say? Multi Level Marketing has the potential to turn people off of you. It really leaves a bad taste in the mouths of many of the people you know when relationships are seen as merely a pretext for a potential marketing target and your own family is seen as dollar signs.
When the community is transformed into a place of gimmicks and schemers, people will eventually run out of ideas, money, people’s trust, and eventually… friends. People push a failed marketing strategy to their families, friends, coworkers and then attempt to market to total strangers, but once they run out of people to add to their network, the well dries out, the MLM fraud crumbles to the ground, the machine runs dry, and they are left holding the empty bag… or boxes full of products that nobody wants.
To wrap up…
In my opinion, MLM is a SCAM! (just don’t call it a “pyramid scheme“) The people who tend to fall pray to scams over and over again are the type of people who are desperately looking for a way to live the dream. They try and fail at scam after scam, because they desperately want to start a business and be successful, but don’t know where to start. Just remember that a successful business brings value no matter what and that there are other options when it comes to starting a business that will grow and last.
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