MLM FundAMENTALS---EXCERPTS FROM EISENSTEIN BOOK, “SPRINT TO THE FINISH”
©David and Penny Eisenstein 2005. Reprinted with their permission. The book can be ordered by visiting their website at www.2eisensteins.com.
For those of an entrepreneurial bent, network marketing offers a potentially lucrative, more or less permanent stream of income, built primarily on effort, not capital. The advantages of this type of business allow people to get started with minimal investment, provide a ready product or service to sell, have accounting already in place, and provide marketing and training assistance for the distributor. Most distributors are able to work from their home on their own schedule.
I have been associated with and provided legal services to all manner of network marketing (also known as MLM) companies and their distributors. While many companies who pioneered this industry are well known, such as Avon, Amway, and Mary Kay Cosmetics, there are numerous new ventures offering wine, kitchen wares, lingerie, long distance services, internet services, vitamins and herbal supplements, prepaid legal services, to name a few. It is a highly volatile industry that has survived extremely strong regulatory scrutiny, and even attacks. This scrutiny has been good however in that some of the old “pyramid scheme” type operations are no longer able to operate.
The concept is supposed to work like this:1.)Through regular and loyal use and/or consumption you, yourself become a “product” of whatever flagship product the company for which you become a distributor is promoting.
Through regular and loyal use and/or consumption you, yourself become a “product” of whatever flagship product the company for which you become a distributor is promoting. 2.)You reach out to your warm market of relatives and close friends to recruit people into your downline organization of distributors to become a product of the company and to reach out to their relatives and close friends to recruit others who do the same thing.
You reach out to your warm market of relatives and close friends to recruit people into your downline organization of distributors to become a product of the company and to reach out to their relatives and close friends to recruit others who do the same thing. This is also known as the concept of doubling or duplication which in theory, and many times in practice, results in geometric growth of both product sales and distributors, both for the company and the distributor who got the ball rolling by being a product of the product and reached out to his or her warm market of friends and relatives to recruit them to do the same things, and so on and so on, for many generations of distributors who can trace their lineage to you.
It takes hard work, a great product line, a terrific compensation plan, and an energized field of distributors for a new network marketing company to become and remain successful. Once the product sales go flat as they inevitably will in this industry, a minority of companies make serious mistakes in the face of their flat sales, instead of making good decisions which further energize the field of distributors, such as coming out with innovative new products, or changes to the compensation plan which add value to the distributors.
The mistakes generally take the form of poor choice of new products being launched and/or negative changes to the compensation plan, amounting to arbitrary changes in the compensation plan which are actually a concerted program of “take aways” which are intended to rein in the incomes of the company’s key distributors to make up for the company’s flat sales or lost profits. The negative changes are all too transparent to the field of distributors as representing attacks on their “income streams,” their “residual income” that they have worked so hard to build.
Before starting with a new network marketing company or continuing with your existing company, check out the following:
1. DO make sure the company distributor contract has a one-year buy-back of products guarantee for at least 90 percent of the purchase price.
DO make sure the company distributor contract has a one-year buy-back of products guarantee for at least 90 percent of the purchase price.2.DO make sure the company actually emphasizes sales to third parties as a part of the company’s institutions in place, that it’s not just giving lip service to retail sales in its policies and procedures but actually has a track record of retail sales and training practices that emphasize such sales and has reliable and highly verifiable ways of measuring these sales.
DO make sure the company actually emphasizes sales to third parties as a part of the company’s institutions in place, that it’s not just giving lip service to retail sales in its policies and procedures but actually has a track record of retail sales and training practices that emphasize such sales and has reliable and highly verifiable ways of measuring these sales.3.DO make sure the company and its distributors are not involved in front loading (“garage qualification”) in order to qualify distributors for commissions. Legal network marketing companies require relatively little up front in the way of purchases from their new distributors.
DO make sure the company and its distributors are not involved in front loading (“garage qualification”) in order to qualify distributors for commissions. Legal network marketing companies require relatively little up front in the way of purchases from their new distributors.4.DO make sure the personal monthly maintenance requirement is no more than would be “reasonably” necessary for a distributor and his/her family to comfortably consume each month.
DO make sure the personal monthly maintenance requirement is no more than would be “reasonably” necessary for a distributor and his/her family to comfortably consume each month.5.DON’T sign up with a company that makes (or can’t or won’t keep its distributors from making) earnings representations that are not fully documented and disclosed as median or average earnings for a particular level of attainment within the company’s distributor ranks.
DON’T sign up with a company that makes (or can’t or won’t keep its distributors from making) earnings representations that are not fully documented and disclosed as median or average earnings for a particular level of attainment within the company’s distributor ranks.6.DON’T make any earnings representations yourself, and that includes waiving that commission check around. This information is considered inherently unreliable and misleading in that it does not reflect at all on the actual facts of what an average or median earnings figure is for distributors in the company.
DON’T make any earnings representations yourself, and that includes waiving that commission check around. This information is considered inherently unreliable and misleading in that it does not reflect at all on the actual facts of what an average or median earnings figure is for distributors in the company.
