Are we hoarding information like the Ku Klux Klan?

The Ku Klux Klan was a group whose power — much like that of political or real estate agents or stockbrokers [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][or network marketing recruiters -KK] — is derived in large part from the fact that it hoarded information. Once that information falls into the wrong hands (or, depending on your point of view, the right hands), much of the group’s advantage disappears.” -Levitt & Dubner, Freakonomics .

After telling how the KKK secret membership codes were exposed to the world, making members too scared to use them lest they be revealed as members, the authors describe how another secret exposed drove down the price of term life insurance in 1996. Cause? Internet companies like making ALL the prices available to the right eyes – us. The public.

Regular people could suddenly compare and price shop for something whose cost options had been kept secret by the insurance companies. Once all the prices were out in the open, the high priced companies had to come down to match the lower ones – if they wanted any of the business. And they did.

“It is common,” write the Freakonomics authors, “for one party to a transaction to have better information than another party.” This is typically used to the disadvantage of the novice.

This situation leads to many crimes which the authors describe as “sins of information. Most of them involved an expert or a gang of experts, promoting false information or hiding true information…”

Here’s how a network marketing recruiter commits a sin of information.

Consider this common exchange:

Prospect: “So how much does the company pay me on a customer order I bring in?”
Recruiter: 30%-40%.
Prospect: Great! Sounds good…I’m interested.

Information typically kept back by the recruiter (depending on the company pay plan):

1. The percent offered is NOT of the face dollar amount of the customer’s order . The 30% (pick number) is of the order’s “PV” (purchase volume) – a value assigned by the company to product. That might be 50% or 75% of the face dollar amount the customer pays. But this is not known by the new recruit until later.

Here’s why this matters. On a customer order of $100, the prospect thinks they’ll get $30. But in fact they will get 30% of $75 (=PV). That’s only $22.50. Later, when it comes out, the recruiters talk about the “complex play plan, you know, blah blah blah.”


2. The percent offered is not paid until AFTER person has done a minimum amount of business (i.e. product bought by them or others). It might be $500, $1.5k (pick number) in business.


3. The new recruit is required to maintain certain sales (volume) levels each month in order to get the percent offered. If they don’t, they revert to a lower commission level.

Examples of such hoarding of information abound in our business.

Isn’t it just like the strawberries that look so good from what’s on top? Then you get them home…

In today’s marketplace, there’s a new focus by the avant-garde: being transparent.

Isn’t it time to find people who will not dangle the half truths like those above, just to get someone in? Everyone finds out the truth sooner or later, and I am convinced that this unpleasant discovery of how things really are is a VERY BIG reason the drop out rate is so high.

How much to tell? After all, you don’t want to make it complex on that first date.
So how about this?

How much do I make if I bring in a customer order?

“They pay between 30-50%, depending on your sales. The more you sell, the more you make. You understand that idea, right? (Then this if it applies): They have certain requirements to maintain those percents, but before we get tangled up in our underwear about that part, how about first decide: Is this a product you can see yourself marketing to others, if you knew what to do?”

That’s straight, isn’t it? First things first, yes? You lead with THEIR interest, not your pitch.

Tomorrow’s topic: Scary thought. ‘Twill be posted right here. Can you guess what it’ll be? Hehe.

Use Comments below. I’ll post the winner…hehe.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

About the author

Kim Klaver


  • About witholding information,

    Yes I agree with your views,
    another big one is the “downline migration” from one company to another, when things look greener on the other side of the fence. I am new to the industry , and not clear on all ramifications, but would enjoy your take on that lesser known side of NM. I sense sometimes that the biggest/best “recruit” is one already involved in the industry that brings his(hers) whole downline with them..any comments Kim?

  • What’s scary to me, or at the very least disturbing, is that there are direct sales companies out there with the type of marketing plans described in your blog. When I retail $100 worth of products, I make 50% — or $50. No manipulation of percentages so there’s nothing to “keep secrect” from a potential recruit.
    Linda C — Indep Herbalife Distb

  • Robert –

    You wrote:

    “I sense sometimes that the biggest/best “recruit” is one already involved in the industry that brings his(hers) whole downline with them..any comments Kim?”

    Two things:

    1. There’s the classic case of bringing someone up on stage who says, “I used to be a tuna boat fisherman…” or “I used to be a waiter…” OR

    “I’ve been in 6 months, and I’ve already made…BIG BUCKS…”

    The intent is to give you, the audience, the feeling, “If SHE/HE can do this, so can I…”

    What they hold back is that they’ve had 15 years experience doing the business, or that they brought over 900 people from their last business.

    For every person who stands on stage making it look easy, who has years of experience, or a sphere of influence like Bill Clinton or Billy Graham, they are committing a “sin of information”.

    2. Doing that (making the business look easy) strikes me as SO dumb. Why degrade the business by making it look like “anyone” can do it? In ANY field, you name it, those with experience will tend to do better than those just starting out. Those starting out must learn and get the experience so they can BECOME good. That’s how life works. So decide first on doing something you love. THEN you will do what it takes, all the deliberate practice it takes, to get good.

    Building any business, NM or otherwise, takes skill, perserverance, and years to get it cranked up to where it throws off regular income. But what income it can be…:) So, do you love doing some part of it?

    Then go practice and get good. 🙂

  • I wonder — what is the drop-out rate of insurance salespeople, or real estate reps, or any other position that is highly sales-commission dependent?

    I think the high drop-out rate in MLM is definitely due to the fact you state — too many people are mislead to think it is easy money and freak when they aren’t on track for the “Super-Duper High-Speed Plan” they are shown in the presentation. Or worse, they must be a failure since the tuna boat fisher was able to retire in six months in the business. Then cognitive dissonance sets in and now that person tells everyone that network marketing is a scam.

    For the first distributor meeting I hosted, I rented a hotel room for 40 people and worried it wouldn’t be big enough. Two of my upline flew in to give the presentation. And guess what? No one showed (except for two distributors from another town). I felt like puking, and had every reason in the world to quit. Fortunately, no one in my upline told me it would be easy. And I’m glad I didn’t quit. For my second meeting, I had 9 people show up. Three signed up as distributors and the other six signed up as customers. That definitely put some wind back in my sales. [Like the pun? 🙂 ]

    — Walter from Appleton, WI

  • A $100,000 plus (annual) income earner in my company has what I think is a quality answer to the question “How long did it take you to reach the 100k level?”
    Debbie replies, “All my life. It took me all of my life to become the person, to gather the wisdom and skill sets, to accomplish what I do now.”
    Classy, yes?

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