MLMs: Revamping the Model

I am often misquoted as being anti-MLM. I can understand the confusion for someone that might pop on the blog and read a scathing article about everyone's least favorite legging brand. It's pretty easy to jump to conclusions about my overall perspective of a program, any program, if you don't understand my thought process on the topic and what I strive to accomplish here. My background is sales and sales management. I'm managed and represented various products and brands over almost 2 decades, and have had a list of successes and challenges with accompanying titles starting with Territory Sales to National Sales Director. My mentality about business is deep-rooted in corporate structure. I wouldn't venture too far into calling myself a 'company girl', but I'd say that my balance is in finding what's best for both my customer and my company- whichever company that may be. I am often extremely critical of companies as a whole. From a corporate perspective, and with the structures in place that are afforded to traditional sales practice, finding a company that flubs as much as certain MLM programs isn't very common. Thankfully, most larger corporations have safeguards in place that prevent scandal from graduating too far into the realm of disaster before someone like me can pick it up and write and article about it. But I assure you, it happens- and I will be writing about those as well as the MLM issues I currently cover. My criticism of MLM begins with the very reason many decide to enroll with them. Often, these companies seduce an individual into joining based on their wants, needs, and deepest desires. In the case of LuLaRoe for example, we see a deep and aggressive push to the millennial stay at home mom and her peers. Why her, you ask? It is my opinion that stay at home mothers struggle at times with the concept of being "just" a stay at home mom. I can assure you that a SAHM's job is anything but "just a mom", but the hurt or ache to contribute more, or to be a breadwinner or viable source of extra income and to take some pressure off of their mate is real. It's difficult to be a mom, just from the emotional perspective of it, let alone to ever feel like your worth is diminished because your household can not rely on income from your very challenging (and often exhausting) full time mom-job. Don't get me started on single mother's wants, needs, and struggles as she is often burdened with moming and full time outside work in tandem. Many MLMs see this woman as their target. She wants to earn while being home with her children. Maybe she lacks the drive or finances to start her own business. Maybe she doesn't know where to begin. Maybe there is no product for her to sell, service to offer, or source of revenue to feed her entrepreneurial spirit. And so, the MLM says- "Own your own business. Start with the opportunity we are offering you. Be independent. Achieve your goals and dreams." And she says- "Ok, sign me up." This is not her business. I think it's cheap and manipulative for any company to induce a person into participation in their program by implying any means or method of business ownership. Each type of business has its own rules and laws that pertain to them. Many MLM offer programs that dance on the line between independent contractorship and franchisee. But at the end of the day, the truth is in the contract. In LuLaRoe's contract for example, there is a very significant portion of the verbiage that clearly states you are in no way buying into or franchising the business, there is no ownership implied or otherwise, and one must abide by the policies and procedures that the company itself has put in place for the way the independent contractor shall conduct their business. Many a debate can be had about the similarities between joining a MLM and a franchise opportunity- but the simple fact remains: Where there may be parallels, the law and your governing agreement state otherwise. As the common phrase goes: It is what it is. What it is NOT is your business, no matter how hard you wish it to be so. But that doesn't prevent the marketing and the propaganda from swaying you to believe that you have ownership, does it? Psychologically, it makes sense. If it's YOURS, and you OWN it, you're going to take it more seriously. I think this is the most manipulative tactic that an MLM can employ. It creates an extremely emotional connection to the brand- which benefits the parent company, but can have lasting negative emotional effects on the consultant who wasn't as successful as she would have hoped- even if the reasons were out of her own control. Which leads me to the next point. Outside reasons an otherwise adept salesperson would fail in MLM. First: Trend -Is this product or family of products based in trend? Some examples would be: leggings, charm necklaces, lockets, or bracelets, nail wraps. -Is this product seasonal, or based on current fashion or lifestyle trend? -Does the brand offer other items that will still be popular when this particular trend has passed? -Is the demand for those items enough to support the brand wholly once the trend item is no longer a hot commodity? Second: Representative Saturation -How many total reps are there? -Is there any indication that the company will halt or slow enrollment once a certain saturation level is reached? -Is there any implied or protected territory assignment? Often, enrollment is nothing short of a free for all with reps overlapping reps for market share. -What happens when the saturation level has reached a peak? In the examples of long standing companies like Avon or Mary Kay, hundreds of thousands of reps enroll yearly, just to find little to no success within the program. Could it be that there are too many reps that have been in the company far too long for a new person to make a dent? I would argue that it plays a big part. Third: Supply -Supply can be manipulated by the individual company's business model. Does this business only offer sales through a consultant? Does it offer the product for sale directly through a retail store (Like Tupperware) or by way of internet ordering directly from the brand website? -What, other than loyalty to a consultant, would prompt a potential new customer to seek out a consultant when one could simply order directly from the company website or walk into Target and buy your Tupperware there? Fourth: Demand Simply put- do you sell something anyone actually wants? Do your spice offerings surpass those that can be bought at a local spice shop? You may think so, but are they REALLY? Fifth: Compensation -Is there a compensation structure in place that is both lucrative to the company and the consultant? -Is the compensation program within guidelines set forth by consumer protection agencies? The DSA? The government? -Are goals attainable? -Is compensation based on recruiting primarily? -Can you earn a living just selling product without having to recruit? Sixth: Inventory -Is there an inventory purchase requirement? -Are there minimum quotas to hit? -Autoship? Seventh: Customer -Who IS this company's end consumer? Is it designed to be sold to distributors for consumption- as witnessed by the Herbalife controversy in the late 90's? -Does the company serve the end consumer as well as they serve the sales rep? -What guidelines are in place to protect the consumer's interests? Refunds? Warranties? Is this backed by the company or is the burden of warranty left on the contractor? At the end of the day, if the parent company won't back their brand with a refund or replacement guarantee, they probably aren't going to stand behind a representative either. Eighth: Price Protection -Can you stock up at a discount as a rep? Buy at a discount and sell illegally on ebay or amazon? -Does the brand have safeguards in place to protect pricing and maintain a MAP across the board? By reducing the amount of inventory in the marketplace, a brand can minimize the unauthorized sale of merchandise through discount channels and protect the brand value as well as the investment (if any) from their respective reps. These bullet points scratch the surface of the types of issues I address when approached by a DS or MLM company for consultation. That's correct, I consult for MLM companies that wish to alter the outcome of joining their program. From policy and procedure revision, to building a better business model, I work- mostly in a confidential capacity, to improve the MLM structure for their participants and the businesses as a whole. I'm often quoted as being anti-MLM by those that don't seem to grasp my extremely critical position. I think there is much, much room for reform and improvement in MLM and DS structures. Legislation needs to step up and bring some sort of guidelines to an otherwise open market free for all of an industry. But alas, no. Not anti- just extremely critical of a volatile market inundated with participants that mostly can not afford to lose copious amounts of their hard earned money. Much opportunity exists for the mismanaged or nefarious natured company to swoop in and prey on mothers, veterans, elderly, and disabled- even immigrants- and this is the root of my concern for the industry. I think it's completely irresponsible to waste energy attempting to eradicate the existence of MLM type organizations from our lives, but instead, I believe that by teaching the well-intentioned companies who have chosen this channel to deliver their product to market THE BETTER WAYS to do business, we have the opportunity to not only remove by way of force- those that wish to to harm, but allow those that truly do wish to help their loyal earn an actual income- to step forward and shine. The statement that 99% of participants in MLM lose money is skewed. It's a number that represents ALL participants, but no real study has been done to get to that number. Rather, I believe the top tiers in a program are figured against number of participants, and it draws a very, very skewed end result. Many MLM do not require a significant financial investment. Certainly if you enroll for say, $100- and received a kit- such as Younique's- then never, ever attempted to sell one thing, the statement could be made that you actually lost money. But is that a fair statement to make? I'd argue not. Where I am critical of the programs, I am also fair. Having been involved inside many of them- having purchased kits and watched, studied, learned the various methodology, terminology, and individual cultures and values assigned to many of the leaders in the MLM world- I can safely state that there are also tons of what the industry lovingly dubs "kitnappers" often buying enrollments into companies for the sheer purpose of securing a discount. Surely those individuals' investments should not be figured into the bottom line of the 99% lose out argument. I think what's even more fair to argue is the claim that those at the "top of the pyramid" make more money than those at the bottom. Certainly they do- and should. Why do I say that? As compared to a standard business model, the chain of management is also built in the same pyramid shape, is it not? Is it fair to argue that the CEO of a standard business would make the most money, the different directors or senior leaders then below the CEO, managers below them, and finally the sales team? Sales are built from the field and salary builds as you go higher in the structure of the organization. I think the reason my fellow critics often refer to MLM as a pyramid scheme is because of the predatory nature of many of the accidental leaders within. Often, leadership in an MLM begins with someone who is good at recruiting hyping an opportunity to those that trust them. Then those go out and recruit, and so on. By the time the line has stopped, the original leader may have amassed quite a downline. Does that lineage somehow magically a leader make? No. It certainly doesn't. I believe that outside of the structure put in place by the actual ownership and management of the company- the next biggest issue within the MLM world is the leadership by way of enrollment. There simply is no real training in many companies of this type. Training for many is a dog and pony show of hype and fluff. No real substance takes place outside of flaunting the season's new additions to the product lineup. There is no formal training mandated- even if it's available for the team to utilize. There simply is no chain of command, no accountability, and no reason for a terrible person to be held responsible for their misbehavior or mismanagement of their team. After all, a 1099 contractor is just that- a contractor. Leader or not. The independent contractor agreement is even designed with severability in mind. Usually, any party can end the contract at any time with minimal notice provided to the other party. In some instances, the contract can be revoked or cancelled without notice or reason. And thus, bad behavior runs rampant in the ranks. Many times, disgruntled downlines walk away from an otherwise positive experience simply because they either could not get along with their upline, or found them to be cruel, rude, or inept. Surely with a better vetting process for candidates in place, less of the nightmare stories would happen. I appreciate that MLM uses a lax system to avoid any sort of confusion regarding the status of employment- contractor versus employee- but the fact remains that being particular about candidacy even if the hopeful will be a contractor doesn't immediately indicate an employee/employer relationship. Many factors need to be met for a contractor to be considered an employee, and simply being a little more particular about the type of individuals that are allowed to participate in an MLM might help to remove a lot of the friction experienced by MLM and DS dropouts. The short story: MLM needs work. Lots of it. It is beyond imperfect in structure- but not hopeless. Many models exist, some less offensive than others. It is my position and commitment to drawing out the good and either helping to fix or eradicate the bad. Essentially, learn to play nice with all the kiddos or get the heck out of the park. At some point, there has to be a line drawn in the sand to clarify what's considered "good" or acceptable, and what is considered "predatory". By definition, I don't believe they are all predatory- but they have the potential to be without safeguards and standards in place. In the meantime, there are way too many participants in the industry to ignore the fact that someone, MANY someones are making money. Regulations need to be mandated to ensure that those someones aren't doing so in a way that can harm or bankrupt an unwitting participant. I believe the beginning steps to making those changes begin with the basic structure as I outlined above. My personal warning to any MLM hopeful is to start with price of enrollment or the requirement for an excessive amount of inventory purchase to enroll. One simply can not guarantee that they will earn their money back in a certain amount of time based on the points I mention above as well as individual effort and performance. In layman's terms: If they tell you you'll make your money back- guaranteed, run. If they tell you you need to invest a large portion of money to enroll or purchase stock or inventory, run. My challenge to the MLMs out there that may inadvertently fall into those two categories is: Evolve or evaporate. Offer more programs that aren't as much of a risk to the enrollee, and start to develop a standard for who you'd like representing your brand. Build from the ground up in solid principle and embody the culture you all sell with your wares and perhaps we can, indeed alter the face of MLM to better serve us all.