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Amauri DaRocha / February, 2007
The truth is that traditional business models and multilevel
marketing share a lot in common. However, there is one
fundamental difference and it is the root cause of controversy
surrounding multilevel marketing companies.
The most widely held assumption about the difference
is that multilevel marketing companies encourage their
sales representatives to recruit additional sales representatives
(downline) and are paid commissions from their downline.
Thus, as recruits get new members to join their downline,
and their downline recruits get their own downline,
the levels continues to grow and, a pyramid structure
is formed.
However, recruiting is not, in and of itself, the fundamental
difference. In fact, most sales organizations have managers
that profit from the efforts of their sales team. And
these managers are also responsible for recruiting sales
agents that will help them increase their profits. And
those managers have managers above them that are paid
based on their performance too. In fact, most companies
are based on a pyramid structure, that rewards individuals
based on the performance of those people recruited,
from the CEO on down. So how can getting paid for recruiting
be the fundamental difference?
All companies that grow must recruit. However, most
companies recruit upward, where as multilevel marketing
recruits outward. Let us use a hypothetical example
to help illustrate the point. In this example, we have
Mark who just graduated from high school and started
working at Best Buy as a customer service representative.
If Best Buy used the multilevel marketing model, than
Mark would be encouraged to start recruiting his downline
(other customer service reps) before he ever finished
his paperwork with HR. Even though Mark is not a proven
salesmen, a proven recruiter, or a proven manager—three
skills sets Mark must possess in order to be successful.
Now, in the real world, if Mark was hired at Best Buy,
he would have to prove himself as a good customer service
rep and leader, before he would ever be promoted into
a management position. Only than would he be responsible
for hiring new customer service reps. Why? Because traditional
companies absorb a significant part of the cost to develop
their employees into assets. This forces them to be
efficient in their recruiting process, because they
can not afford to hire millions of deadbeats in order
to find one diamond in the rough.
Multilevel marketing companies, on the other hand,
do not worry about having an efficient recruiting process,
because they are not absorbing the cost for developing
employees into assets. That burden is placed on the
employee (sales representative), and often times to
the benefit of the company. Millions of deadbeats are
recruited who they know do not have the necessary skill
set to be successful. Why? Because they are structured
to generate revenues from the recruiting process (recruiting
for recruiting’s sake). Thus, they recruit outwards—trying
to suck in as many warm bodies as possible, with the
expectation that only a few will actually stick.
Here’s why this model naturally creates controversy.
“And that's the trouble with multilevel marketing.
You make money on your ability to use people. Once you
sign on, you hardly have a choice. Not that you want
anyone to fail, but you can't hit the jackpot unless
you build the network, and that means signing up as
many recruits as possible--most of whom have no chance
of making the grade. http://www.inc.com/magazine/19980601/941_pagen_2.html
Many multilevel marketing companies are perceived as
being leaches, because they are structured to profit
on the misfortune of others. Not that they want people
to fail, but it’s inevitable. Let’s face
it; the great majority of people in the world are not
cutout to be good salesmen. Just like the millions of
people who tryout for American Idol, who will never
make it because they just can’t sing worth a lick.
Being a good salesmen is hard—it’s not for
the faint of heart. Which is why the great majority
of people are destined to fail in multilevel marketing.
And while the companies know this will happen, they
continue to churn-and-burn through new recruits in order
to maintain their growth.
Additional controversy surrounds those companies who
also profit by selling their representatives motivational
tapes, books, and seminars. They use the rationale that
anyone can be successful if they just know how. And
anyone can know how, if they just pay to learn. This
is a false promise, because most people will never be
good salesmen, no matter how much training they receive.
It is nothing more than another way for the company
to profit from the misfortunes of their recruits.
Imagine going into Starbucks to get your morning cappuccino.
But instead of getting the very knowledgeable and friendly
barista who greets you every morning, you get an ex-convict
with the customer service skills of a chimpanzee. After
making a complete mess of your cappuccino you ask to
speak with his supervisor. When the store manager comes
out, you discover the manager has only been working
at Starbucks for a couple of weeks and hasn’t
a clue on how to run the register, offer you a comp
card, or even how to fire the chimpanzee he just hired
last night. Needless to say, if Starbucks hired and
promoted as freely as multilevel marketing companies
do, they would have a severe reputation problem when
it comes to customer service.
Unfortunately for consumers, most products and services
being sold through multilevel marketing are significantly
more complicated than coffee. Now imagine a 70 year
old salesmen who has never turned on a computer trying
to sell you the latest Dell notebook. How effective
will he been in satisfying your needs as a consumer?
How many Pre-Paid Legal sales reps have more than a
basic knowledge of the legal system? How many Herbalife
sales reps have backgrounds in nutrition?
When someone lacks the necessary knowledge to sell a
product or business opportunity, they will naturally
fill in the holes when put on the spot with something
that sounds good, but is often unrealistic or simply
not true. It’s hard to sell something with “I
don’t know.” But that is the unfortunate
reality most sales representatives face in multilevel
marketing.
And the problem is not only caused by ignorance related
to the product or business opportunity. Most traditional
companies—especially post Sarbanes-Oxley—ensure
their employees are being trained on ethical behavior.
While this does not eliminate unethical behavior, it
does help prevent it. In multilevel marketing companies,
ethical behavior goes unchecked. So even when people
have knowledge about the product or business opportunity,
they do not have the ethical integrity to stop themselves
from misleading consumers.
Would you accept a job offer from a company if you knew
you didn’t have the skills necessary to be successful,
and you would likely be fired within a few months? Most
people wouldn’t. But that’s the reality
of multilevel marketing. And when coupled with the need
to churn-and-burn through mass numbers of new recruits,
multilevel marketing companies are left with few options
other than to mislead potential recruits into believing
they will be successful. How do they do it?
Most people are not just money motivated, but are money
‘desperate’d—and as such, they can
be easy targets for people selling the “dream”.
Who wouldn’t want to make more money while working
less? It’s a completely legitimate pursuit. However,
multilevel marketing opportunities will rarely “make-good”
on this promise. No matter how hard you try to change
the laws of economics, it’s just not as easy as
they want you to believe. And if you are having problems
seeing this, ask them what percentage of representatives
are successful. The numbers will not lie.
In fact, the only way multilevel marketing companies
can make you believe you’ll be successful, is
to keep you focused on the dream and not the facts.
They’ll bring in a highly charismatic speaker,
and just like your church minister, he’ll have
you laughing, clapping your hands, and stomping your
feet. But at the end of this highly entertaining and
motivating presentation, little will have been said
about specific details on how to make it work. They
oversell the dream and undersell the business plan.
Next, they’ll bring up a bunch of people to give
testimonials on how successful they’ve been. Why?
Because, testimonials are an easy substitute for real
statistical facts. Testimonial is only the truth of
one person, whereas statistics are the truth of everyone.
If I bring in 10 people to tell you how much they love
a product, you’ll start to believe that product
is the best thing ever. But when I tell you those are
the only 10 people out of 100 that love the product,
you’ll know that product is worthless. Testimonials
are the equivalent to fools gold in multilevel marketing.
An old proverb says to avoid mixing business with pleasure.
Why? Because personal relationships (friends and family)
are typically not built to endure the trials and tribulations
of the business world. This is never more true than
when you are an unqualified salesmen trying to sell
your friends and family the dream. They will either
resent you for trying to involve them in a scam, or
they will blindly follow you into an opportunity that
is destined to fail. And at the end of the day, you
may have paid the price for your failures by burning
bridges.
Multilevel marketing is a legitimate and legal business
model. It has been proven successful by a number of
companies in a variety of industries. And, like any
business model, those people who are qualified, passionate,
and determined will be successful. However, the great
majority of people are not. The question you must ask
yourself is, “are you one of those people?”
Or are you just so infatuated with the dream, that you’ll
allow yourself to believe anything?
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