Saturday, March 17, 2012

The return of multi-level marketing

Multi-level marketing has been around for a long time. Its popularity rises and falls and currently it's on the rise. This has been fueled by a still struggling economy as well as new regulations in the energy industry that require producers to make their products available to wholesale customers.

In the energy and utilities industries, you may have been approached by one or more purveyors of this business model. Essentially a cable provider, phone company or utility company agrees to sell x amount of accounts to a company at a wholesale rate. This company then recruits individuals, acting as sole proprietors, to go out and sell. In some cases they may offer the same service, with the same company you're already with, at the same or lower price, depending on the margin they're going for. In almost all cases, the person selling to you will encourage you to become a saleperson yourself, although they rarely use the term salesperson. They then get a piece of your sales.

The model is also used in cosmetics, travel, cleaning supplies, nutritional supplements and other areas. Here are some things to keep in mind before you sign up. First, many will claim they can undercut the competition because they don't spend money on big ad campaigns. That's true. They don't have to. Why should they spend money on a bunch of 30 second ads that might reach 1,000,000 viewers when they can get 1,000,000 individuals like yourself to schedule one-on-one sales appointments and pay them for the privilege? You're doing the marketing. You're investing the time, making the copies, scheduling and doing the appointments and making the pitch. Resources are being spent. Yours.

Your time is not free. If you spend a total of 40 hours in a week thinking about the program, attending expos, networking groups, seminars, generating leads, scheduling appointments, going to and from and conducting the appointments, and the result is a net of $200 to you (after expenses) in said week, you made $5/hour.

What are the barriers to entry? If you can become an "associate" by filling out a form and paying a fee, guess what? So can anyone else. If the company you're working with is reselling a commodity, guess what? Anyone can start a company just like it. If it's really that easy to make a whole bunch of money, the rest of the world isn't going to sit back and just leave it to you. You'll get more and more competition until the margins are squeezed right out of the game.

Now you can do well with these kinds of things if you're a talented salesperson. But that's all it is. It's a marketing and sales competition. If you enjoy it and you're doing well at it, more power to you. But don't be under any illusion that at some point you'll be able to just sit back and collect checks. Multi-level marketing is a high turnover business. Even the "Platinum" players have to work it full time to stay there. The most successful ones are those who are excellent motivational speakers. They get your assistance there too. When they come to your town, they can count on you and your fellow associates to fill the hall rather than having to spend a lot of money on media ads. After all, they're going to help you close your prospects, right?

Bottom line, if you think it's something you might enjoy, have at it. Just understand what you're getting in to. Do the math. Factor in your time and expenses. It's not magic. It's not passive and the product doesn't "sell itself". If it did, what would they need you for?

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