Besides purchasing the inventory, there are registration fees, welcome kits, training seminars, marketing materials and product parties. In order to sell phone service for ACN, for example, sellers must pony up a $499 application fee. To become a Mary Kay beauty consultant, you have to buy a $100 starter kit. And most companies have a laundry list of requirements, including sales quotas of hundreds or thousands of dollars a month, that must be met to stay an “active” seller and to qualify for coveted commission checks. Who are the salespeople? In 2011, roughly 15.6 million Americans worked as salespeople for multilevel marketing companies, according to the Direct Selling Association. In the past, the typical direct seller was a middle-aged woman, and the DSA’s data still backs that up. But things are starting to change. Ackman: Herbalife goes after the poor While a vast majority of salespeople — 78% — are still women (many companies like Avon and Mary Kay target women almost exclusively), the percentage of men who are entering the business is growing. In 2011, about 22% of salespeople were men compared with 14% in 2008. And the ages of sellers are starting to skew younger as well, according to the DSA. Mariano said that young people have been drawn to the flexible work schedule and ability to use social media and other new media as marketing tools for the products. Meanwhile, critic Robert FitzPatrick, who runs the website Pyramidschemealert.org, attributed the change to the rough jobs climate for college students and recent graduates.
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And others regulate MLMs by way of lottery, consumer-protection and/or anti-fraud statutes. Several states have MLM registration requirements, and some go so far as to require that the MLM obtain a surety bond prior to opening their plan up to participation, while others are less demanding. By way of example, Wyoming simply requires that the MLM file a Notice of Intent to Conduct Business. In contrast, Texas requires that the MLM file, in addition to other items (1) a financial statement; (2) a complete description of the program participant-compensation structure; (3) disclosure of all persons with a 20% or greater ownership interest in the MLM; and (4) copies of all program promotional materials. At a minimum, the states that require MLM filings generally require that the MLM appoint the Secretary of State as its agent for service of process. Federal Regulations On the federal level, regulation has largely come through actions initiated by the Federal Trade Commission (FTC), Securities and Exchange Commission (SEC) and U.S. Postal Service. The seminal FTC MLM decisions are In re Koscot Interplanetary, Inc., 86 F.T.C. 1106 (1975), and In re Amway Corp., 93 F.T.C. 618 (1979). In both of these cases, the FTC sought to identify and distinguish the characteristics of a legitimate MLM from those of an illegal pyramid scheme. Separating MLMs From Pyramid Schemes Pyramid schemes are characterized by the requirement that participants pay money in return for two things: (1) the right to sell a product or service; and (2) the right to receive, in return for recruiting other participants into the program, rewards that are unrelated to the sale of applicable products or services to ultimate retail customers. In other words, pyramid schemes predominantly compensate participants, either directly or indirectly, for the recruitment and enrollment of other participants. Two red flags that regulatory agencies often look for in ascertaining whether an illegal pyramid scheme exists are: (1) inventory loading, in which a companys incentive program forces recruits to buy more products than they could ever sell, often at inflated prices; and (2) a lack of retail sales, so that sales only (or primarily) occur between people in the applicable marketing venture or to new recruits, not to consumers in the general public. In contrast to an illegal pyramid scheme, a legitimate MLM has a real, marketable product or service to sell one that is sold to the general public without requiring consumers to pay an additional fee to join the MLM program. MLMs may pay commissions to a long string of distributors, but these commissions should be paid for actual retail sales, not for obtaining new recruits. Initially, a two-pronged analysis is helpful in determining whether a given marketing plan could be considered to be an illegal pyramid scheme. First, determine whether the subject plan, as written, appears to compensate participants merely for recruitment, or instead, to compensate them for the retail sale of goods or services to end consumers. If the program compensates participants solely for sales to retail consumers, it will pass the first prong of the test. The second prong of the test involves an operational analysis to determine what type of activity the plan induces; specifically, this second prong asks, What do distributors spend their time doing? It is often more difficult to reach a definitive conclusion with respect to this prong of the analysis, than with respect to the first. Several different factors may contribute to the determination of whether the second prongs test is fulfilled, but the basic question is, What does the plan emphasize? If the plan emphasizes recruitment, even though distributors do make retail sales, it may be found to be an illegal pyramid scheme. Incorporating the safeguards that are set forth in the following paragraphs will help your program pass the second prong of this analysis. Safeguards In addition to distinguishing a legitimate MLM program from an illegal pyramid scheme, the FTCs decision in Amway also sets forth several safeguards that should be incorporated when endeavoring to establish and operate legitimate MLMs: There should be no entry or headhunting fees; There should be no large inventory purchase requirements; The venture should adhere to the 70% Rule, whereby each distributor should be required to sell, at wholesale or retail, at least 70% of its purchased inventory each month; The venture should adhere to the 10 Customer Rule, whereby each sponsoring distributor should be required to make at least one retail sale to each of (source) 10 different customers each month; Inventory Buy Back: Distributors should be required to buy back any unused and marketable products from their recruits upon request.
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The Cult of Multi-Level Marketing
In these businesses, people often experience success from their own sales as well as the sales of those they recruit into the business. According to the Direct Selling Association , over 80% of these independent contractors are women. Most work part-time although some do enjoy a full-time opportunity with direct sales companies. Multi-Level Marketing Companies There are hundreds, if not thousands, of multi-level marketing companies. Most of these companies are based around home shows where a hostess invites her friends to her home for product or service demonstrations. Attendees are then offered a chance to purchase while the hostess of the party earns incentives and credit toward her own product purchases based on the sales of her party. The demonstrator will earn a commission based on the sales of the party. Direct selling businesses include toys and clothing for children, kitchen supplies, home decor, jewelry, crafts, adult novelties and much more. There is a direct selling business for virtually any interest and many companies within each category.
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How they are run is at odds with what they say a person can achieve. A minor example that has always rubbed us wrong, little to none of the new member setup tends to benefit the referring affiliate. And, given that almost everyone fails, that long tail of revenue bypasses all of those doing the work.That was our rub from many years ago. Another discrepancy for us is that they are always presented as chances to be independent business owners. You arent a business owner, though. You are a contract salesperson. Business owners run businesses and build assets. Putting a Price on Friendship Perhaps the modern-day MLMs should call themselves social shopping organizations. Calling them network marketing hits pretty close to home, though, as people are expected to sell to their network of direct relationships. We spoke to one marketer, and they explained it so well. This person said basically that you are expected to delve into their emotional issues and figure out how you can position the business as a solution to some of their problems. The conversation ended with the comment, I cannot believe how many friendships I have seen this business ruin. These models want and demand the personal sale. They do not want a person to use more scalable techniques. Those that do can actually run afoul of certain programs guidelines.
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7 Proven Multilevel Marketing Lead Generation Secrets
You can then direct your marketing efforts to their needs, desires and aspirations, fears and dreams. Create a month-to-month budget for your “multilevel marketing lead generation” process. You need to figure out how much money you can afford to put into a business in your company to make sure it runs smoothly. Look for inspiration in your organization. Imitating individuals who are successful will only bring you get to the top. Consider outsourcing your multi level marketing lead generation process as well. You might not be equipped with adequate resources or manpower to do this type of marketing. Try to get people that specialize in different areas into your network. They will also be more open to any recruiting efforts you have.
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My Experience With Multi-Level Marketing
Many people who get into network marketing dont have the personality or the tenacity to make a go of it. They chicken out of making cold calls or meeting strangers at Perkins. They dont want to invest all the time into their home business that would be necessary for it to succeed. Or, they get divorced and end up splitting their downlines. You see, I worked for a network marketing company for a few years. But not as a distributorI stayed with a steady paycheck from the corporate offices. It was there that I met a company executive who had gone from abysmal failuresleeping in his carto becoming a millionaire with these MLM products. And when he did, his sponsor, the man who recruited him, became a multi-millionaire. I chose this particular MLM company to work for because their products: Were environmentally-friendly Tags: Amway , Avon , Cabi , DSA , DSEF , JAFRA , MLM , multi-level marketing , network marketing , Pampered Chef , Partylite About Holly Doering Holly Doering has worked for the Better Business Bureau Serving Eastern Washington, North Idaho, and Montana for half a decade.
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Multilevel marketing 101: What you need to know
How reputable is the outfit? Are there pending lawsuits and of what nature? Has it been around for a considerable length of time or is it a company that is merely riding high on current hypehere today and gone tomorrow? How many of your friends and relatives are already part of it and how are they faring with their sales efforts? Here is a caveat for those embarking on a multilevel marketing career. To be good at selling something, you must believe in it with passion. And because you want to succeed so much, you then have a tendency to talk about nothing else but the product you are selling. If you are not careful, you will transform yourself to a boring, predictable person to your friends and relatives who will tend to scamper in all directions when they see you, thinking up all sorts of excuses to avoid being sold to. Keep your balance even as you try to succeed in a multilevel sales career. An early warning flag that the organization may not be what it claims to be is if you are asked to pay an up-front fee just to get in on the ground floorin exchange for a starter kit consisting of some brochures, a video and sample products. You might as well kiss that money good-bye. Organizations with good solid reputations in existence for some years with no major lawsuits might be your best bet.
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