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

June 29, 2010 at 9:06 pm | Posted in Lifestyle, MLM | 1 Comment
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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 Direct Selling News

 

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 …

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What is it about MLM that gets people so emotional?

June 21, 2010 at 6:20 pm | Posted in Lifestyle, MLM | Leave a comment
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It seems to me that for many people there is just an immediate, emotive response that is just not supported by any serious analysis; and even more interesting, despite this apparently almost universal knee-jerk distain, not only are there more and more people involved in MLM, but most of the people actually seem happy with the experience.

So, what are the facts?

2008 (the most current figures that I could find):

In the U.S.

  • 15.1 million people involved in some form of direct sales (that’s 5% of the US population!)
  • $29.6 billion in sales

Global

  • 65.3 million people involved
  • $114 billion in sales

Satisfaction surveys run by the Direct Selling Association in the U.S. revealed –

  • 80% of sellers say direct selling meets or exceeds their expectations; and
  • 85% of sellers report a good, very good or excellent experience with direct selling

And most revealing, 74% of U.S. adults have purchased products from a direct seller!

If, as is asserted so loudly, most people would have nothing to do with MLM, why would 74% of adults buy products and services from such an apparently distasteful distribution channel? It makes no sense!

In 2009 the world experienced an epidemic of layoffs, down-sizing, and corporate failures but not one person involved in MLM lost their job. What happened instead reflects the basic integrity of MLM.

A recent update on MLM in 2009 commented “direct selling is still strong around the world. Seventeen countries now have more than US$1 billion in sales annually through this channel of distribution.

The results are indisputable. Business in North America is gaining representatives; Asia is decreasing slightly in revenues, but growing in direct sellers; South America continues to rise; and Europe is doing well.”

With a history that goes back over 50 years, MLM has been scrutinised by probably more regulators than almost any other industry, and continues to be subject to intense scrutiny, MLM has grown to be the distribution method of choice for many companies:

  • Robert Kiyosaki has applauded the industry. Check out his video clip.
  • Donald Trump has even endorsed and promoted a MLM (ACN, the world’s largest direct seller of telecommunications services) and featured one of their products on Celebrity Apprentice.
  • Warren Buffet has bought several direct sales companies including Pampered Chef and is reported as saying “dollar for dollar, it’s the best investment I’ve ever made.”
  • Sir Richard Branson, founder of Virgin Records and a host of other Virgin companies, founded Virgin Cosmetics in the UK — a direct sales company.

And, seriously, it sure as heck can’t be related to the unreasonable expectation that everyone who joins a MLM company is going to make a bucket of money – that is just impossible!

Let’s face it; do you remember the job interviews where you got the pitch about the great career prospects that were on offer for you in the company? And how you could go all the way to the top?

The reality is that it didn’t happen and wasn’t ever likely to happen. We just knew that believing otherwise is just fairy tale stuff.

The standard business structure is the same – a pyramid shape – where the chance for most of us ever crawling up the pyramid to the top is about zero.  Of the 350,000 who work for GM only 1 gets to the top – no level playing field; no chance for an aspiring new recruit; and very long odds.

In a MLM business everyone starts with the same opportunity and can reach the top levels regardless of when they start and what their background is – as long as they have a determination to treat their business as a business not a lottery.

And the odds of making it to the top? About 1 in a 1,000 – better odds than 1 in 350,000

So, what is the real reason so many apparently have a negative attitude towards a good, solid, open business opportunity that gives someone willing to invest some time the chance to live life for real?

More on that in my next post.

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