Bev's Blogs.

What is it about MLM that gets people so emotional? (Part 2)

Despite the vocal condemnation of Network Marketing, it so far seems that the facts speak clearly to the contrary view.

• We have seen that the industry is huge and supported by over 65 million people worldwide.
• Those involved seem to have, overwhelming, a positive opinion of the industry
• By and large, the industry weathered the GFC well and continued to grow.
• And, significant business commentators and educators seem equally positive in their assessment of the industry.

Let’s take a look at the financial stability of the industry. After all, if this is a questionable business it would be reasonable to expect that the players are equally questionable.

An extract from a recent investment banker report (October 2009) sheds interesting light on the state of the industry. It is worth noting that many of the major players are publicly listed corporations.

Direct selling companies have been gaining momentum this year driven by their ability to recruit in times of rising unemployment, coupled with their broad global diversity, providing access to the consumer-growth markets of the world. Underlying momentum should continue to build, with reported results poised to benefit from recent currency headwinds becoming tailwinds beginning in the fourth quarter. We have seen steady and marked acceleration in results for our direct sellers (Tupperware Brands Corporation (TUP­—NYSE), Herbalife Ltd (HLF—NYSE), USANA Health Sciences Inc. (USNA—NASDAQ), Nu Skin Enterprises Inc. (NUS—NYSE) and Avon Products Inc. (AVP—NYSE) that are on calendar quarters vis-à-vis expectations over the past couple of quarters after what we believe was the fundamental bottom in the fourth quarter of 2008.

Direct sellers, on average, beat consensus EPS by more than 21.5% on an equal-weighted basis in the second quarter of 2009, up from more than 8.9% in the first quarter, after missing by nearly 1% in the fourth quarter of 2008.

The complete article can be read at

 

Once again, this seems more like the assessment one would have expected of the more robust end of the business spectrum; hardly indicative of a shaky business model.

Now, this isn’t really a great surprise given that the business model is so compelling.

I believe that the biggest challenge for people looking at MLM for the first time is to acknowledge that the business model is different and although we can compare and contrast, the reality is that it is different – and different by design!

There are primary and fundamental beliefs in this business model:

the recommendations of a friend or trusted person have the greatest influence on our buying decisions;

wealth is created by either putting money to work or people to work; and

significant numbers of people want to be in control of their financial future.

Creating leverage in any business requires a business model where every person has the same amount to gain. Where one person has more to gain than another then that disparity of opportunity will always result in an equal or greater disparity of effort and commitment. The typical business model pays an employee just enough to have them turn up every day and go through the motions.

If this seems outlandish for any of you – how big a pay cut will it take for you to start looking around? And that assumes that you are currently happy with what you are paid.

Hence the “equal playing field”.

Everyone has the same opportunity to reach whatever income they desire. This does not mean that everyone does but anyone can, provided they are prepared to do the work.

As an aside, when I started with my current company there were already almost 500,000 registered associates but in less than 6 months I was in the top 100 income earners. Obviously timing was not the issue, nor location, nor gender – just a willingness to do the work.

The products and services that MLM companies take to market are promoted by people who are already committed users of the product (“a product of the product”) which ensures that the promotion is based on personal experience and credibility, not a slick advertising programme.

It also places on the company the obligation to create superior products and services that are innovative, creative, segment leaders with clear consumer benefits.

In many instances, the products are unique, patented, and only available from the associate – and almost without exception consumable, ensuring automatic repeat business.

Given that the industry continues to grow, typically above the growth rate of the retail sector, we have to come to the conclusion that the products represent outstanding quality and value.

The alternative, highly improbable given the unprecedented regulatory scrutiny that the industry operate under, is that there is a huge group of people worldwide who are either oblivious of, or uniformly ignore, the quality, efficacy, value considerations and prostitute themselves and their relationships in their quest for a dollar.

Ok, let’s now look at the “marketing” part of MLM.

Next blog …