MLM (Multi Level Marketing)

NigeWick

geordie_joe wrote: »

We all know that MLM companies have to continually recruit new mugs to replace the ones who leave.

Incorrect. Companies make profit on goods or services sold and one can earn a decent amount purely from one's own sales. Any company that must continually recruit new distributors is more likely to be an unlawful pyramid scam.

Quentin

NigeWick wrote: »

MLM is a form of selling.

Isn't MLM close to pyramid selling? (Or just a way round the illegal aspects of pyramid selling?)

And isn't the idea supposed to be based on the idea that you build your own pyramid - you at the top, underneath all the people you recruit to be agents, and underneath them all the people they recruit etc etc.

Each sale from everyone in the pyramid giving a commission to their recruiter above them and so on, so that the one at the top does very nicely thank you without actually doing the recruiting down the line?

NigeWick

Quentin wrote: »

Isn't MLM close to pyramid selling? (Or just a way round the illegal aspects of pyramid selling?)

And isn't the idea supposed to be based on the idea that you build your own pyramid - you at the top, underneath all the people you recruit to be agents, and underneath them all the people they recruit etc etc.

Each sale from everyone in the pyramid giving a commission to their recruiter above them and so on, so that the one at the top does very nicely thank you without actually doing the recruiting down the line?

With a legitimate company a person can earn money from his or her sales and obtain enough remuneration to live on. I could recruit you and thereby receive a small percentage of your sales volume. You could sell goods or services yourself and recruit people to such effect that you earn more than I do from your own group and their sales volume, even though you are still part of my organisation. I suppose if there was only one original distributor taken on by the company, it would be a pyramid of sorts but it could be a very lopsided one as people beneath that original individual could earn more. I have personal experience of this in one company I am with.

The system works or fails on sales volume. not the number of people in the organisation. The company gains because it does not have to pay a wage if there is no "production." The company does not have to pay for advertising. Associates only earn if they "produce." But, if they are highly productive for the company, they get well rewarded. It has to be said that just like with an ordinary business model, most do not earn much. This is usually because people think it will be easy. It is simple, not easy. Also, they tend to put little effort in because the initial outlay to get started is so small. Lastly, most people will not learn the necessary interpersonal skills to make a success of their chosen business.

Darth_Trader

Personally, I don't see any problem with MLM as a business model, and even well-known companies such as Tiscali and Scottish Power run part of their business through this method.

If I understand it correctly, with an MLM you earn according to what you start - either through sales of goods yourself, or commission from the distributors you introduce. Importantly, though, because of this it is irrelevant where on the so-called 'pyramid' you enter the business - contrasted with an illegal pyramid scheme where the people on top (or in earliest) make the money, and everybody else gets mullered!

In this respect, it is best to forget about who is above you in the network. As OP said, they have a stake in your success, and normally offer support, training and business leads to referees who are struggling. The parent company usually runs in this mode, and cuts back on traditional advertising costs, so that distributors (who enthusiastically shout about their company, though not on MSE forums PLEASE!) can share in the higher profit margins.

I think pretty much any company can be called a pyramid if you think about what the guy above you is earning. Your manager earns his higher salary directly off your hard work, and so it goes up any traditional organisation, until you get the CEO sloping out of the company in disgrace with a £700K pa pension - now THAT's a pyramid scheme.

Oh, I think the 'mugs' referred to earlier are the ones who enter MLM thinking it's not a job, not hard work, and they're gonna get rich quick. Nope. Selling is hard work. Recruiting distributors is near impossible because of the confusion about whether MLMs are pyramids/illegal/for mugs etc. So the real mugs are the ones who end up leaving having not really bothered to work at it, and will obviously 'bad mouth' the scheme rather than admit to their own laziness - human nature I guess.

[@OP - I didn't see your sigfile advertising your scheme, but gather others were upset about it from subsequent posts. I'm not even sure that MLMs are allowed in the 'Referrers Thread' here as this site is designed to be ad-free, but you might want to check the rules of that thread to find out.]

Quentin

NigeWick wrote: »

With a legitimate company a person can earn money from his or her sales and obtain enough remuneration to live on.

In your company, we have discovered you get something like £2.50 for signing up someone as an electricity customer, but if you sign up 3 more "distributors" you get around £1000 in bonus! (Plus of course the ongoing commission from all their customers/distributors).

The "system" would seem to be heavily skewed towards building the pyramid beneath you as far as the rewards go!

Darth_Trader

Quentin wrote: »

In your company, we have discovered you get something like £2.50 for signing up someone as an electricity customer, but if you sign up 3 more "distributors" you get around £1000 in bonus! (Plus of course the ongoing commission from all their customers/distributors).

The "system" would seem to be heavily skewed towards building the pyramid beneath you as far as the rewards go!

Ooooh. That might be close to the bone! I was under the impression that a company is not allowed to offer cash simply to get new distributors. Although it's still better that the company pays than getting the new recruits to 'buy themselves in'. The latter would be even dodgier. (Some do this - especially the big companies - in order to deter timewasters. Normally the fee is given back after a certain number of sales have been made, but care required as these sales might have a set timescale associated with them.)

I think the best model is no fee to get in an MLM; go for services rather than goods, otherwise you hold inventory paid for with your own money; one that steers clear of paying to get distributors - sales and commissions are fine though, as they add value to the company and the people involved.

NigeWick

Quentin wrote: »

In your company

The "system" would seem to be heavily skewed towards building the pyramid beneath you as far as the rewards go!

Please do not use any specific company as an example as we could then be accused of advertising for it.

To answer your point. No. The system is skewed to getting as many paying customers as possible for the least outlay.

You keep using the word pyramid and that is not a correct description of what the system is. Think of it as a group of people with some being more "successful" than others when success is measured in cash. Some will be more successful because they spend more time to working. Some will be more successful because their skills are more advanced. Some will be more successful because they live in a more densely populated area. Some will be more successful because they live in a small community and don't mind talking to everybody they know. The permutations are virtually endless.

Everybody's wants are slightly different and they will tailor their efforts accordingly. For many, an extra £50 per month will be all they want from their business. Others will want to have time flexibility to be with family and friends. Yet more will want to earn large sums of money for whatever reason. The system caters for each individual's wants.

NigeWick

Darth_Trader wrote: »

I think the best model is no fee to get in an MLM; go for services rather than goods, otherwise you hold inventory paid for with your own money; one that steers clear of paying to get distributors - sales and commissions are fine though, as they add value to the company and the people involved.

Some people would argue that having a much higher joining fee would deter time wasters.

Many companies now send goods directly to customers who order their own products. I work with one such and just keep a small supply of samples I hand out to those who mention something where what I offer may help. I agree with the point about not buying/keeping stock for sales purposes though. I tried a couple of that type of company and detested the outlay, delivery time and accounting of it all.

Sales and commissions should be the "be all and end all" of this sales method in my view.

Rael

Joining fees tend to be used to encourage 'fast-starts' so people hit the ground running. Money-back guarantees on joining fees try to encourage new members to follow the replication plan to encourage success. Their is obviously a cynical way of looking at this tactic too, but generally it does work well. Most people who fail with MLM are those who pick a bad scheme, or give up early when they don't make an instant fortune.

nexuss

It is illegal to tell people they can make financial gain by recruiting others.