Take the 30 second survey here.
Years ago, the president of the first NM company I was in had an audio every new recruit had to listen to. In it, he repeated over and over: This is NOT a buyer’s club. This is NOT a buyer’s club. I wondered then what that meant, and why it seemed to be such a big deal for him. But I think I understand now: he was looking for people who wanted to recruit and sell, not just buy the product wholesale.
Like most all MLM companies today however, this company’s income comes mostly from the regular, personal wholesale orders reps are required to make each month to stay qualified for bonuses and commissions. Whether they earn any or not.
A small percent comes from sales reps make – to new recruits and new customers.
So what does this mean for MLM and its business model? Is it a buyers club or a financial opportunity?
Take survey and let’s find out.
I’ll post the results in one week. Feb 7, 2009.
Hi Kim,
I am just getting started as a serious NW’er. I’ve been in several MLM companies for the privilage of buying wholesale, but now that I’ve seen the side of the profit I’ve change my vibe.
Thank you for your mail, it’s help me more than you know.
MJ
The premise seems to be that there is something wrong with being a buyers club. I don’t agree.
Two comments:
(1) I don’t understand the marketing model where the “retail” prices are ridiculous to the point no one ever pays them, effectively making the “wholesale” price the real retail price. This then removes one of the “ways you can make money” from the distributor.
(2) I agree that the majority of income results from regular wholesale orders. But it is the act of building a large organization that creates these regular orders. Thus, network marketing is about recruiting to find a customer base.
Walter Reade (from Wisconsin)
Slight Edge Networking Blog
Hi Kim
I filled out the survey and its a biased one. I suspect you brainstormed the questions. I know its not a scientific study so its ok, but I thought you deserved to know it comes across as biased. Want to know why? Just ask.
I understand your point clearly, and I think it is a valid one to make, but you are missing important parts of the value equation.
One of the first things NM companies offer is the opportunity to subsidize the use of a product you love by “marketing” the product to others. We do that ANYWAY with products we love, but NM offers an exchange for that. Even if someone does not pursue NM as a business, this has value.
The other part of the value equation that also works to subsidize the use of a quality product is the big tax advantages of owning a home based business. If you set things up right, by simply “marketing” a company’s product 4-6 hours a week and keeping very good records, your use of the product can be nearly paid for in tax savings.
With these two things working to make a premium product very low cost or virtually free, why not be involved even if the structure is more buyer’s club than retail?
Glenn, you write “The premise seems to be that there is something wrong with being a buyers club. I don’t agree.”
It’s less of a judgment call than knowing what the business model is. If it’s really more of a buyer’s club in fact, than people can stop screaming about how few people actually make any money. That criticism comes because MLM is sold by recruiters as a financial opportunity. But if that turns out in fact, not to be true for 95% of the folks in it, that criticism might be misplaced. Think?
A MLM company positions itself as an income opportunity, like owning any other franchise. The fact that the cost of entry is so low enables anyone who chooses to “own” one. Now, whether, in practice, I behave as a wholesale buying club member or as an active business owner who develops customers, is a decision that I make. It has no bearing on whether a particular MLM company, or even the whole industry, is designed to be a wholesale buying or an income generating opportunity. Steve
Its interesting that many more of the older NWM companies are expanding their base from “buyers clubs” and becoming less product focused to incorporating business builder recruitment into their mix. A trend I’ve seen more and more.