What's MLM

[susieq]

Please, I have to ask you this, what are these things? MLM schemes Please

[Andy]

MLM is Multi-Level-Marketing.

Basically, there is a product line that is sold by a distributor network. The network is comprised of ordinary people who signed up as distributors who are encouraged to buy the product to get familiar and enjoy it's benefits. Then they go out and try to recruit new distributors and train them to replicate the system.

The payment structure resembles a pyramid without the legal ramifications where you can make alot of money if you build a deep pyramid (downline) of distributors.

Generally there is good quality training provided to ensure you duplicate a proven system. A downside is that you can spend a lot of your time making very little money if it doesn't work out (like 90% of businesses). But, you can have a great social life. Just don't push your freinds too hard to buy into it!

I speak from experience.

[Dnyarri]

I've had the exact opposite experience on MLM.

Basically, all you do is buy a product and sell it. Oftentimes most people sell to people in their 'downline' or those that they've recruited. Every MLM on the planet pushes 'warm selling' where you, basically, call your friends and family and try to get them to join in. Statistically speaking, 90% of those that join will fail. Those 10% that make it, rarely do more than recoup their initial expenses. Less than 1% of people that join groups like Quixtar actually make money, and it's rarely from outside sources... but rather from those that join below them (that aren't actually making any money). Many times the only people that make money in a gold rush are those selling the equipment.

Unless everyone involved heavily sells the product outside of the pyramid it will become a negative sum game. In otherwards, money moves up the pyramid until the bottom collapses and the system dies. Sadly this isn't subjective, it's a mathematical fact.

This means that you've got to be comfortable selling and recruiting. Even if you try online recruiting, most of those that join will never make money nor will they sell outside of the recruitment efforts... so the pyramid will eventually collapse.

Some systems used something called a 'forced matrix' where you can only have X number of people in your immediate downline. Anyone else becomes a downline of one of your downlines, thus creating an automatic downline for others in the group. This can be effective, but you've got to be careful to manage your group, and motivate and train your team. Again, statistically, people in MLM have little serious business training and thus make poor team managers. That is a statistical generality and may not apply to your individual upline. Oftentimes it's little more than a Tony Robbins hype session... people get excited in the meeting, then face their first prospect in the field and crumble due to no training substance. Combined with poor regulations and it becomes a total waste of money.

IF you're going to get involved in an MLM you need to do your homework first. Most will be dead within the first year. Find a company that has been around and has a base of outside customers. Investigate what sales training is available, find out WHO your upline will be and make sure you like them and are comfortable with their level of education and knowledge about sales and the products they're selling.
They will be the ones directly promoting your success, so you've got to be comfortable with them.
Never be afraid to walk away... it's quite possible to love the MLM group, but hate the office you're
working with. Before you sign ANYTHING, before you PAY anything, make sure you can see a long-term business relationship with these people even if you never make a dime. Assuming that it's a regional MLM and not an online one. I've never seen an online MLM succeed. Ever.

Personally I dislike recruiting and direct selling, and the side-effects of MLM seem very negative to me... but that's an issue of personal taste. I do, however, have a PPL plan (pre-paid legal) that I've come to count on as a small business. I did not want to resell the plans, but since they've got a decent product... they may be one of the groups to check out. I've also heard positive things (for an MLM, positive is relative in this sense) about Primerica (a financial services MLM).

[Hope]

For the most part MLM are questionable. There are a lot of laws on this. Many MLM online are illegal in the US. You don't know about this until such a time as there is a complain about the company and it is investsigated. If the primary focus of the MLM is to build a downline and not sell a product, then it is illegal in the states. I am sure it is the same in many other countries also. I would advise avoiding MLM as they are not worth the investment or the time.

[Andy]

In Skybiz, my downline grew 100+ deep over many countries (I went GLOBAL!!!) but somehow I managed to make next to no money out of it! I was building one leg deep with a view to building the other leg later, then filling in the middle to explode my income as I was advised.

Dynarri mentioned that no one makes money from online MLM's, well I have to report that I did in fact make $60 virtual profit from another online MLM. The downside was that the company behind it vanished into cyberspace and took my money with them. I joined the pre-launch phase where the people at the top are still waiting for their airline tickets to arrive.

[Dnyarri]

Yea. Virtual profit is funny that way. A lot of companies do that. Or the first set of people make money, and everybody else ends up subsidizing them. Considering the amount of time and money that it takes to get involved and start recruiting, it usually ends up costing money. Think about it, you made $60 'profit' (never seen, but...) but spent... how long working it? More than day? Think about how much your time is really worth, you know.

[Andy]

These days I build websites by myself since they have true residual value in that they don't go away (assuming you keep paying the hosting fees etc.) and people keep visiting even when you stop work on them. It's truely getting paid while you sleep. Unlike most mlms.

[Dnyarri]

Yep. I do the same thing. Designing several as we speak. Most businesses do this, sooner or later. Especially franchised stores in high traffic areas. Insurance can also be a source of residual income. Real Estate, of course, is one as well.

[Andy]

A lot of people want to work their way out of a hole.

Network marketing is one way for some few.

The best way in my opinion is to develop your own product, but this is is difficult.

No way is easy!

[Dnyarri]

Climbing out of a hole? That's the exact reason why someone should avoid MLM or NM... well, for the most part. Because, in the end, that desperation leads you to do risky things which end up only pushing you deeper into the hole. Life's shortcuts are never worth taking. There's a reason why difficult things are worth more, because fewer people have accomplished them.

Agreed tho, developing a product or service is the most reliable way to make money. It is, however, also the most risky dollar for dollar. Why? Consider the amount of time and money spent to develop even the most simply product. Then consider the number of products and services that end up failing. This is why a lot of people turn to franchises and distributorships in the legitimate business world... there's some investment, but a managed dollar risk.

With that said, network marketing and MLM try to immitate that system. Unfortunately most of them develop products or services that are overpriced and of poor quality. They count on the 'distributor' to market the product to friends, family and anyone they meet hoping to keep it going long enough. Looking at the numbers however most MLM and NM groups don't survive that long. We only hear about the ones that survive long enough to get some outside marketing done, and even many of them die within the first year.

There are some that have been around for a while. I'm sure you can think of the names yourself. These, I'd imagine, are probably a better 'investment' but even then... you've really got love the product and be comfortable selling to your friends, family and everyone you meet. I am not comfortable doing that. I am not, like many people I know, comfortable trying to trade on my relationships with others. If you are comfortable doing that then you might make money from the system. But the system as a whole always loses money. That's mathematical fact that I can prove. It's a negative sum game unless you sell enough product/service to people outside of the system to offset the losses within the system.

*IF* you're going to get involved in an NM or MLM group, make sure it has been established (none of this 'ground floor' nonsense) for long enough to have a positive track record... and make sure they actively push their recruits to sell outside of the organization. Make sure you like and respect the people, especially your upline, and appreciate their training. Make sure you actually enjoy selling and recruiting. There's a large checklist of things to look into before you actually persue an MLM or NM. If everybody that joined took the time to do this, the uplines may make less money... but the new recruits would keep more of their own.

[Andy]

Dynarri, your advice is welcomed but MLM allows companies to save a large amount of money on advertising and paying staff wages so can offer immense savings to consumers.

I only know about the UK, but here we have Telecom Plus, a UK PLC (stock-market listed company) that provides me with a mobile phone at around £3 per month and the UK's cheapest gas and electricity. I have been with them for a few years now saving a lot of money on my utility bills.

Also there is Betterware, CleanEasy, Amway etc.

[Dnyarri]

And like I said (surprise surprise), some of the larger better known ones have a positive track record.

But actually, playing the odds... most legitimate companies typically don't make MLM distribution a success. Even they end up spending more than they make. Consider that there are MANY failures for each success we hear about. I can quote numerous ones. There was one, a year back, called JangleFish. Ever hear of it? They were an MLM based around digital music. They lost their broadcast license... I don't think they're even still around much. I personally know 5 people that lost $300 a piece on this so called "opportunity."

Anyway, yes it may allow a few companies to market cheaply to some degree, but statistically speaking the *distributors* lose more money than they make. It's a mathematical fact. As I've said before, I'm quite happy providing the data that backs up these assertions if you'd like it. There's nothing secret about it, most people that join MLM fail to make back their money. I find it interesting that someone would even debate that, the evidence is just so overwhelming. It flys in the face of reason. I've always found it funny when my friends explained this as the 80/20 rule. Appearantly 20% of the people will do 80% of the work. That's just a convenient way to excuse an 80% failure rate in my book. But there's enough suckers out there that think this sounds good... and so they'll sign up believing that plain ol' hard work will save them. I've got a bridge to sell ya, too.

And that's even with the larger, more well known firms. Heck, there are thousands of startup MLMs per day that never make it that far. I know this because I used to work in a business where I dealt with these "bizops" on a daily basis. Amway is one such firm (Actually Amway no longer exists here, it's Quixtar in the US now)... consider the cost to start up and the average failure rate. Where's that money going? Only into the pocket of an upline. That's why it ends up being a negative sum game unless you find enough people outside of the network to sell to. The money merely flows up the pyramid to the top... right before it all tips over.

I am not in the least bit concerned about the end customer or company when computing this data, tho. Neither of those were considered in the original question posted so long ago. Their concern was only if they, the potential distributor, stood to make money.  One large problem with MLM distribution is that the products because oversold. They may be decent, especially in cases of the larger (more established) names, but at some point the distributors end up competing against one another... and thus the market becomes saturated and sales drop. For the customer and the company this means lowered prices, lowered costs, more sales and better profitability. For the distributors it's a tough climb... for all except the top 10% or so that have established themselves. It's climbing on the backs of the desperate, poor and uneducated. It's exploitation plain and simple.

Anyway, will the distributor make money? Some of them do, many of them don't. Like all business ideas there are things you can do to mitigate your risk. Risk management is something that EVERY potential business man or women should learn. If they can't, or won't learn it... then they can expect to fail over and over until they do. It's like watching a broken record. But some people won't learn. They want to believe that they're all knowing and can never fail, their "I know everything" attitude ends up costing them a lot of money.

The way you manage or mitigate your risk with MLM has been clearly outlined above. Again, this is based on a great deal of experience. I've personally talked with literally thousands of people that have been involved with MLM at some point and failed, and if I want to bring this all to one single cogent point it's this:

Be careful about WHAT you're getting involved in BEFORE you get involved in it. Don't let desperation, greed, fear, or any other sales pressure convince you that things are safe... people WILL lie to you. They want your money. Many times that's ALL they way. The company I last worked for (and walked out on because of it) was ran by a guy that told me "Do whatever it takes to get their credit card. Lie to them, make them feel special, tell them you love them and want to marry them... I don't care. Just get their money. You're not selling them a job, you're only selling them hope. So hype them up and get the numbers."

So folks, watch your back and NEVER be afraid to do your homework. Never be afraid to walk away. Really, learn to trust your instinct. If it smells fishy, it is fishy. Does that make sense? I mean seriously... who would argue with that? Are you honestly going to tell people NOT to do their homework? If some MLM or NM group is really that awesome, why would you be afraid to let them do that? Like I've said before, in the past several messages... DO YOUR DUE DILLIGENCE FIRST. That includes a personal (physical and emotional) evaluation as well as evaluation of the group. I mean really, is there anyone here in this group going "Oh no, I disagree. Never do your due dilligence. Just send me your money and forget about it!"

Personally, I avoid MLM all together and would rather develop real business models that allow for positive system cashflow and real employment. That, however, is just my opinion. Yours may (and probably does) differ. That's fine. If you enjoy recruiting, then you might really enjoy MLM. I, again,
HATE recruiting people.

And again, in 10+ years of this crud (actually I guess it's been since 1992... wow) I have never seen an online MLM succeed. Ever. Anyone remember Referralware? Free Stores Club. Oh man, the names are endless.

[Andy]

I know what you mean Dnyarri.

As employees, MLM seemed our only way out. Then there were stocks and shares, dot coms and spread betting.

I am coming to the conclusion that finally I will have to risk all and start my own idea of a business. Alternatively, I can sell my home and live in Goa!

Have you any other suggestions?

[Dnyarri]

Hehe. Never been to Goa. Considered Bolivia once, tho. LOL.

I think some MLMs can be successful if you're the type of person that enjoys it. If you like recruiting and all. I don't, I hated it. I felt slimey trying to sell to my best friends and family. I hated the feeling of trading on personal relationships.

I work with a lot of small business startups now. Do you already have a product/service idea?

[Andy]

Yes! 

Well this isn't yet destined for MLM marketing .

But I need to know what MLM's are working for another website I'm working on. Please post....