Are you a fan of multi-level marketing? You should be!
Multi-level marketing is “a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits’ sales. The recruits are known as a distributor’s “downline.” All distributors also make money through direct sales of products to customers.” (Investopedia.com)
I will be showing you the general population’s view on these companies, what experts and business-men think about multi-level marketing (MLM), and what people who are a part of MLM have to say about it. I will be using the terms multi-level marketing, direct sales, and network marketing interchangeably throughout this research essay.
I posted a survey online to gauge public knowledge of MLM. Participants were ages 20 to 48. This survey consisted of ten questions and took approximately two minutes to complete.
- 60% of responders work 40-55 hours per week, and 10% of responders work over 55 hours per week.
- 70% of participants know someone who is a part of multi-level marketing
- 60% think that MLM is a good way to make extra money.
- When asked to answer from 1-10 how much they know about MLM, 70% of responders answered between 1 and 5.
This tells me that although most people agree that MLM is a good way to make extra money, the public does not understand how MLM can change your life forever. They most likely do not understand the impact that residual income can have in your life. They could potentially cut back from working 40+ hours per week if they choose to do so. They can have less stress, more money, and more free time if they open up their minds to something new. Plus, when you join an MLM company, you own a business! Owning a business can have many tax benefits!
“With network marketing, there are no big capital requirements, no geographical limitations, no minimum quotas required and no special education or skills needed. Network marketing is a low-overhead, homebased business that can actually offer many of the tax advantages associated with owning your own business. Network marketing is a people-to-people business that can significantly expand your circle of friends. It’s a business that enables you to travel and have fun as well as enjoy the lifestyle that extra income can provide.” (entrepreneur.com)
“I believe that the entire industry is poised for explosive growth and can be one of the most significant solutions to America’s current retirement savings crisis.” (Forbes.com)
I interviewed three people involved in three different MLM companies. All three of them are different ages and are at different levels in their company. All three of them had varying answers, but all are extremely happy that they joined network marketing.
- The first girl I interviewed was just getting started in MLM. She had only been with her company for about one year. She is in her early twenties, has no kids, and has a degree in nursing. She joined her company so she could make extra money on the side. Her tip for anyone wanting to join network marketing is “Just do it. If you want to start your own business, these are the first places to start.”
- The second person I interviewed has been with her company for two and a half years. She joined when she was twenty years old. She has an associate’s degree in Liberal Arts and she will be graduating with a Bachelor’s in social work in April 2016. She is currently taking 18 credits, making a four-hour commute twice per week, working an internship, and raising her step-son, so she is a very busy lady! The great thing about network marketing, especially the company she is with, is that you can integrate it into your daily life, so being this busy is not a problem! Before joining her company, she thought network marketing was a complete joke. After seeing a family member have great success she began researching the company and found that their values lined up perfectly with hers. She joined, and hasn’t looked back! Her goal when she joined was to make an extra $200 per month. She earned that within her first month, and continues to make more every month. Now her family has more in their savings account than they have ever had, thanks to this business of hers.
- The third person I interviewed is in her early 70’s. She does not have a college degree, but she says, “I received a ‘college education’ working in direct sales! I have a wealth of knowledge on how to connect with people and how to sell. I have been told by several [people] that I should write a book!” She has been with her present company for two years. Previous to this, she was with a company for twenty-eight years. She was one of the four top leaders in her first company. It took her six years to make $60,000 [per year], “but that was back in 1992”, she says. The most she ever made in one year was $148,000. I’d say that’s pretty darn good for someone without a formal college education!
Interviewing these three ladies from different parts of life proves that anyone and everyone can do network marketing and be successful. You’ve got to find the right ‘vehicle’ for you, and as Nike says, “Just Do It!” You won’t regret it. It takes a lot of work to make enough money for this to replace a full time career, but with hard work and determination it is absolutely possible! One of my favorite parts of network marketing is that the harder you work, the more money you will make! In a ‘normal’ career, you get paid the same salary no matter how hard you work!!!
One of the most common concerns I hear about MLM is that people think it is a “pyramid scheme”. I am here to lay that issue to rest, right now.
“Fraudulent pyramid schemes — like Ponzi schemes — are illegal but often try to disguise themselves as MLM (multi-level marketing) programs. Traditional MLM programs are legal because there is a real product that is being sold through the channel…The main idea behind the MLM strategy is to promote maximum number of distributors for the product and exponentially increase the sales force. The promoters get commission on the sale of the product as well as compensation for sales their recruits make. The compensation plan in multi-level marketing is structured such that commission is paid to individuals at multiple levels when a single sale is made and commission depends on the total volume of sales generated. In the case of pyramid schemes, money is charged simply for enrolling other people into the scheme and no real product is actually sold. Only a few people (those who are involved in starting the scheme) make money, and when no new individuals can be recruited, the scheme fails and most of the promoters, except the top ones lose their money.” (Diffen.com)
The Federal Trade Commission has set up strict guidelines for deciphering the difference between pyramid schemes and legitimate business models. We will discuss these guidelines later on.
When you are joining an MLM company, your main goal is most likely going to be to make some extra money.
That’s where the compensation plan comes into play. There are many different types of compensation plans, but all types involve making a commission off your sales and your team sales.
- The uni-level model is the simplest compensation plan. It is designed so that a person can recruit unlimited front-line distributors for the product. These distributors are encouraged to sign more distributors, and the cycle continues. Commissions are paid up to seven levels deep.
- The stair-step Breakaway model is designed to encourage individual and group sales. A group leader is assigned multiple recruits under them. The goal is to achieve a set volume of sales in a set amount of time. Once that is achieved, the distributors move to a higher commission level. This pattern continues up to a certain limit.
- Matrix models are similar to uni-level models, except that there is a limited number of distributors that can be sponsored at any level. Once that limit is reached, another matrix can be started.
- Binary models allow only two distributors to be sponsored in the front-line. At any level, only two distributors are required to complete the compensation plan. Also the compensation must be balanced between the two distributors, so that the volume of sales does not exceed a pre-determined percentage of the distributors total sales.
- There are also hybrid models, which combine any of the above mentioned compensation plans. They tend to take the best aspects of every plan and make their own “perfect” plan. This is my favorite plan, because it gets rid of most of the ‘downsides’ of the other plans.
During my research, I stumbled upon a business-man who has written many best-selling books and has been featured on television shows such as Oprah, CNN, The Doctors, and more. His most well-known book is Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! The author and entrepreneur’s name is Robert Kiyosaki.
Robert is a self-made millionaire. He teaches people the difference between the way rich people think, the way the middle class thinks, and the way poor people think. He also teaches how to change your mindset from poor-people thoughts to rich-people thoughts. I watched a YouTube video that was broadcast by Robert. He talked about why he endorses network marketing. He states that it is because network marketing is a business for helping others build their businesses. This is exactly what Robert’s company “Rich Dad Company” does. They assist other people get started on their businesses, and then send them on their way.
Robert also states that Network Marketing will give you the sales skills, communication skills, the self-esteem, and the emotional courage to go knock on doors and talk to other people. If you don’t have these skills, you probably won’t succeed in network marketing. Not only that, but you won’t succeed in any business without these skills. Network marketing takes the average person and gives them the skills and the courage to run a business. It teaches you how to take rejection, and to not care as much about what other people think of you. Network Marketing gives you the skills needed to be a leader, and it is extremely important to be a leader before you can be successful in this world.
I also came across a story about Lizz Perkins. The article was originally published in Shape Magazine
Lizz had always had an entrepreneurial spirit, but after owning a hair salon for seven years, she realized the hefty price to pay for owning a brick-and-mortar business. Friends suggested that she try network marketing. Lizz did try a few companies, but none of them worked out for her! Her team members would quit whenever they weren’t making money, so Lizz couldn’t make a consistent income. All of that changed when she found her current company. Within ten days of starting, she got a paycheck that was four times the amount she was currently making at her shop. She has since quit her job and is working for the network marketing company full time.
Lizz’s story is not typical. It usually takes some time and lots of work to make a significant income with network marketing, but it IS possible to have success very fast! One tip that Lizz had for anyone considering joining network marketing is to not quit your job until you are confident you have replaced your income. Lizz worked part time at the shop for three months to be sure she could continue to make ends meet before she left. Also, everyone missteps and has bad months. Never take that as a sign to quit. It only means you need to work harder to get back on track.
The Federal Trade Commission posted a very interesting article about network marketing. It stated things that you must consider before joining any type of network marketing business.
- Doing your research is the number one thing you must do before joining. Is there a product offered? If so, it is likely a legitimate business.
- Is the product something that you could pick up at the local drugstore? You want to make sure that the company is offering something new and different, otherwise you will not draw customers to you as easily.
- Are the prices competitive to similar products on the market?
- Be sure to talk to distributors at all levels in the company, and not just your potential up-line! Talk to a distributor who won’t make money off of your sales so you can get a less-biased opinion.
- How long has this company been around?
- What are the estimated annual sales of this company’s products?
- Is the company in debt? How much? For how long?
- Have there ever been any lawsuits against the company. Investigate the company through the Better Business Bureau, if possible.
Throughout my research I kept finding information that reassured me that I made the correct decision by being a part of multi-level marketing, and more importantly, I made a great choice when I decided to join my current company.
I did find a few pieces of information about companies that are currently undergoing lawsuits due to malpractice. I am choosing to not tell you details about this, as I do not want to throw a company “under the bus.” However, I am proud to say that these types of lawsuits would never happen to my company because they have such great integrity and do things “by-the-books” or better! You are more than welcome to do your own research in this topic.
I mention this now, at the end of our discussion, to make it clear that there ARE scams out there! Please take the advice of the Federal Trade Commission and do thorough research on any company you are considering joining.
I am thrilled that major companies, like Forbes and the Federal Trade Commission, support MLM as long as they are done in a legal way. I love that there are millionaires out there that agree with the MLM way of thinking and living. I truly believe that I will always be a part of MLM, in one way or another. It has been a great way to supplement my income and I wouldn’t have it any other way.
Definition of multi-level marketing.
-Michael L. Sheffield. “Is network marketing just a scam?” entrepreneur.com 24 December 2000.
-Robert Laura. “Would you join a Multi-Level Marketing Company for Retirement Income?” Forbes.com 29 August 2014.
Discusses why multi-level marketing is a good option for retirement income.
-“Opportunity knocks: Imagine helping others thrive while growing your own bottom line. Here’s how one reader found her dream job.” Shape. 2013. Web. 17 October 2015.
Story of Lizz Perkins.
Discusses the difference between legitimate MLM and pyramid schemes.
Analyzes different compensation plans that are used in network marketing.
Robert Kiyosaki’s business website with information about him and his business.
-Kane, Allyson. Personal Interview. 2015
-Paynter, Megan. Personal Interview. 2015
-Brown, Carole. Personal Interview. 2015