Multi-Level Marketing is a huge component of the home-based business industry but here's why most don't work, no matter what the MLM Gurus say...
In the home-based business arena, MLM (otherwise known as Multi-Level Marketing or ‘Network Marketing’) is easily the most controversial. After Amway started in the late 50’s we’ve seen an explosion of this industry that continues to this day.
With this growth there has been so much misinformation and outright lies thrown around. What (and who) should you believe? Is it a viable business model? Is it a scam?
Let me tell you what MLM is…what it isn’t, and whether or not I see it as a viable business model…
Network Marketing is Not a Pyramid Scheme...Much to the Delight of the MLM Guru
Let me just dispense with this unintelligent pap once and for all…
This whole ‘MLM is a Pyramid Scheme’ comment thrown out there is from people who are usually ignorant and have no idea what they are talking about.
Here is the definition of a Pyramid Scheme from Wikipedia:
A pyramid scheme (commonly known as pyramid scams) is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.
Pyramid schemes have existed for at least a century in different guises. Most multi-level marketing plans fall into a sub-group of pyramid schemes.
The first part of Wikipedia’s definition is fairly accurate: bringing people in to a ‘scheme’ with the promise of payments without any real sales of products and services IS illegal. The second part… ‘Most multi-level marketing plans fall into a sub-group of pyramid schemes’ is frankly fucking ridiculous and plain wrong. Legitimate MLM’s do not operate on ‘promise of payments’ and no products sold. I can’t be any more clear than that.
Bernie Madoff ran a pyramid scheme. Amway and Herbalife don’t. There is a huge difference.
So Should You Promote an MLM?
Good question. Let me give you my blunt take on it:
I would NOT promote and represent an MLM (not matter what the Guru says) where the pay structure pays more than 3 levels…ideally two. Why? There is simply not enough commissions to be distributed UNLESS you inflate the value of the product.
Now, let’s say you have a deep pay plan (more that 3 levels) that doesn’t inflate what you’re selling: The other major deterrent is most people will not build a deep enough group to see enough commissions. It’s very hard to do and almost never done.
You may want to do it. Go for it. Me? I’d rather be paid on my own efforts.
To this day I have never seen a pay plan that is more than 3 levels that I would promote.
So You Want to Promote an MLM??
Here’s what you do *pulls out Etch e Sketch*…
a. Promote a company with a pay plan that pays the BULK of its commissions on the first 2 levels (2 is even pushing it).
b. Promote a non-MLM program such as product licensing and/or affiliate marketing where you make the majority of commissions and promote an MLM on the side as your long-term business. Wait...this is a non-MLM answer. Well...
When Would I Promote an MLM?
I would need three things to consider promoting an MLM company with a deep pay plan:
- Quality products or services where the pay plan didn’t unreasonably inflate its value (next to impossible, again not matter what the MLM Gurus say…that’s why most mlms don’t work)
- Most of the commissions would be placed on the first 2 levels
- A management structure that truly understands marketing (most don’t)
I Get The 'Spirit' of Multi-Level Marketing But…
The ‘traditional’ model of MLM has yet to prove to me that it can work for the average distributor who is willing to work hard. The statistics bear this out.
Yes, there are some quality products being marketed using this strategy. I just see it largely as a flawed business model.