Network Marketing Strategies

Social Internet & Face to Face Business Development

Getting Started: What’s in a Name? Possibly the Missed Opportunity of a Lifetime!!

The direct selling industry gets a bad name from two main sources. Oh yeah, and its all over the web too but even there the more substantive criticism still stems from these two issues (the less substantive is just freaks who have nothing better to do with their time but gripe -get a life people.)

The first place the bad name comes from…

…is the burnout people got from getting hoodwinked into pyramid schemes back in the 70’s and 80’s. Thankfully, pyramid schemes have been outlawed in most countries including the U.S. It would be difficult for the average person to get involved in a pyramid scheme today however there are still some companies that skirt the edge of the same idea. The second source is just former (and even current) business owners who just couldn’t make their businesses work and they like to share that with the world.

Pyramid schemes are unsustainable business models that suggest a great deal of return from very little investment. Pyramid schemes are primarily focused on selling franchises instead of products. Here’s a common and simple con: If I sell you a franchise for $100 (the franchise could be anything, like an opportunity to sell some cheap widget in a particular market) and then you sell two more franchises to your friends for $100 each then you have doubled your investment, right? Sure; you spent $100 and you made that back on your first friend and then you doubled your investment when your second friend signed on. How wonderful for you. Unfortunately, however, the people toward the bottom of that pyramid quickly discover that everybody on the planet is already a franchise owner and the $100 franchise that they purchase is worthless because, not only were there never any customers for the widget in the first place, but EVERYBODY ON EARTH is a distributor. Thats why these schemes are illegal, its just fraud.

There are many versions of the game and they all look good until you actually do the numbers (all of the numbers.) An easy way to identify pyramid schemes (and even the ones that just skirt the legal edge) is to listen carefully to the business model: Are the proponents truly interested in selling products or are they more focused on selling franchises (or distributorships or “opportunities.“) The farther away that you go from being product oriented the closer you are to simply building a pyramid of franchises which will ultimately result in the loss of a great deal of money and usually by the very poorest and least sophisticated people in your community.

An odd evolution of this basic idea uses the seemingly enticing draw of a pyramid-style dispersion system of wholesale franchises to distribute products (at an inflated wholesale price) to a team of personally recruited marketers. The products in question have an artificially inflated retail price (that wouldn’t ordinarily be supported by the market) to justify the inflated wholesale price (which is actually the true market-bearing retail price.)

So, for example, I’m willing to sell you some consumable product -say, some specially imported rare coffee- that “retails” for $50 per pound (WOW, thats some special coffee! Here, taste it, isn’t it great!?) But wait! If you would like to become a distributor and purchase a bulk amount of the product then I’ll give it to you for $39, the “wholesale discount” -and a 22% margin is great right!? So now we’re talking $39 per pound of coffee -a real deal for this special and incomparably rare coffee. And then you could recruit more people to distribute this coffee and offer them the same deal (thereby increasing your personal volume) AND!! We’ll pay you a commission (or bonus) based on the orders that your team members place and now we’ve got you making money without even having to sell anything! Even better right? But wait!!! If you actually succeed in recruiting “X” number of people then we’ll FURTHER drop your wholesale price right down to OUR OWN wholesale cost which is $25 per pound, WOWWWWW!!!! And you can then offer the same opportunity to your team members increasing your volume and thereby increasing your commissions and ending up with a life-long residual income that is the stuff dreams are made of! This is such an incredible deal, I just can’t believe it!

Well, what’s actually happening here? Are there truly any real consumers that would actually pay $50 for a pound of coffee? I mean coffee of any kind. Is there even anybody who would pay $39 for a pound of coffee? The answer is no. There might be a barely accessible market that could possibly pay $25 a pound if it was a truly novel varietal and we’ll assume that it is a novel varietal -or maybe they’re just getting it at Safeway for $7.99 a pound, who knows?- and there you go. So as a distributor, after you’ve done all the hard work of getting all these team members on board so that you could all purchase large amounts of very highly priced coffee at what is actually the market-bearing retail price for an extraordinarily rare varietal you walk away with a few commissions in your pocket but zero product profit (gee, I wonder who is making the profit here?) What you have actually done here is you’ve just helped this company sell a ton of high-priced coffee and you’ve done it for next to nothing. Thank you so much, you’re the BEST!

It is truly appalling to me what some companies will do to use nice people.

So, again, the red flag here is the greater focus on distributorships over products. In Mary Kay (well, in my unit anyway, but also in every other unit that I’ve ever been in contact with) we’re trained not to even mention our opportunity unless we’re talking to somebody who already uses and loves and desires the products. That doesn’t mean that there aren’t some fired-up MK ladies out there pushing the pitch of joining Mary Kay to anybody that fogs a mirror, some people do that. And I have certainly worked some deals to get consultants on-board just so that they can get their products from the company at the company wholesale price and I have encouraged them to recruit team-members as well. But the key is that in every case my consultants have desired the products -even if only for their personal use- and the opportunity to become a distributor was a bonus for them, not the cause. The other mainstream direct selling companies are the same. They actually do have great products and the consultants actually do make money selling just those products without ever recruiting anybody. And we all also do make commissions from our companies for team members that we recruit to become distributors and there is a sliding scale of commissions that is dependent on our team size and volume however it is always proportionately secondary to the margin that we make on our products.

Mary Kay (the wholesale company) makes a TON O’ CASH in this business. Thats just for real. I don’t really care what they make as long as I (and my team members) have a real opportunity to make some great dough as well and we absolutely do have that opportunity based on product sales alone.

Here’s my Mary Kay deal in a nutshell:

  • I make a 50% margin on my Mary Kay product sales to my clients and I will give away some free products to promote my business and I will also do some discounting to great clients -its nowhere near my wholesale cost though and I ensure that my volume finances those promotions. As a consultant I will receive a 9 to 13% commission on team member wholesale orders and as a director I can receive up to a 24% commission on those team member orders -nowhere near the 50% margin that I make on product sales though.
  • As a low-level consultant I can “receive use of a career car” (thats MK’s jargon -its just a free car, they pay the lease and I pay a $40 a month co-pay for the full-on all-inclusive comprehensive insurance for the car. And they’re nice cars) as long as I maintain 12 women on my team who are placing product orders of a sufficient volume to indicate that they are making significant product sales in their market. As a director I can qualify for the famous Pink Cadillac under similar (however larger volume) conditions.

Thats it. The great direct selling companies have similar deals and the one that you consider should have as good or better (if not, call me.) Now you have to sell your fanny off to make it but you should be in a very willing market and its no different than working for any retailer in that respect.

That brings me to the second reason that direct selling companies get a bad name (and its a short subject.) Some people don’t make it in this business. Its not for everybody. You have to work and its hard sometimes. Some people fail. Thats all.

But some people make it. Some people make it big and many people can earn a great living in the direct selling industry.

So what’s in the bad name of the direct selling industry is an actual opportunity if you’re smart about it. Miss out on it and you’ll never know how far you could have gone doing something that you enjoy. I encourage everybody to seek out a direct selling company that has products that interest them. Its truly a great industry to work in and support.

-Love, Tony

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