What is Multi Level Marketing?
A MLM Company often involve recruiting people into a program. However, a business solely based on recruiting is illegal and hence MLM companies will always recruit people on the premise that the person buys a product from the company.
From a miracle soap to a medical bed to Internet Marketing course, MLM companies are everywhere and in almost every industry. The reason why people are always interested to join a MLM company is based on a “hope” that they can make money fast and with little work.
But to disappointment, 99% of the people who join a MLM company fails. The false hope is masked by the pretence that anyone can make big money and finally get out of the rat race. But the fact is that not everyone is suitable to be in the MLM industry and only a few who have a “die hard” attitude can succeed in the industry.
Let’s take a look at a simple setup of a MLM business. A MLM business is structured in such a way that you as a recruiter will earn a certain percentage of commission from different levels of your network. The picture below illustrates a standard setup of a MLM companies.
Success and Failure rate of a MLM Business
Of 1,000 people who join an MLM company, 500 people (50%) gave up within the first month, 300 people (80%) left the company in the next 6 months, another 150 people (95%) call it quits after 12 months, and only 50 people (5%) remain in the company.
Of the 50 people remaining, 25 people (2.5%) are barely making enough money to survive, 15 people (1.5%) are having a comfortable income and only 10 people (1%) are living the dream. These statistics are not figures that I’ve pluck from the thin air but was shared to me when I was in one of the talks given by a MLM company (I’m not sure why they even bring up the failure rate when they are trying to recruit me).
I, personally was involved in a few MLM companies previously and my experience with them by far was never positive. Each company have its unique product which always seem too easy to sell. But to my knowledge, it is harder than you think.
From here on, I will only be discussing on Online MLM companies
Over the years, online MLM have become popular due to the fact that selling online is much easier then direct selling. You will probably notice a few advertisement here and there mentioning that “I have made $500 in a day” but do not be fooled as they were never real, it is just a way to draw your attention to the program.
You might think that since selling online is easier and the rate of people succeeding in MLM will increase dramatically. Sad to say, the statistic remains.
Reasons why people fail in online Multi Level Marketing
1. False hope and unrealistic expectation
People who are recruited into an online MLM company are most often influenced by the flashy sport cars, luxury houses and the freedom that you can work anywhere and anytime you want. They were made to believe that success is easy and it is just a step away and anyone can make money almost immediately upon joining the program.
The fact is, none of those were true, in the end, it boils down to hard work, persistence and dedication. It is because of all these unrealistic expectations that lead to a high failure rate in the MLM industry. The truth of the required hard work and persistence to succeed will never be told as they are the deal breakers in the industry.
2. High cost
Almost all MLM companies I have encountered online have different levels of products. The MLM company will require you to purchase every product level in order to make money from it.
For example, a MLM company have 4 different level of products:
- Bronze Level- $27/mth
- Silver Level – $99/mth
- Platinum Level – $497 one time
- Gold Level – $999 one time
Given that you have only purchase the Bronze level, if you have referred someone who purchase all levels of the products, you will only make commission on the Bronze level and not the rest. You are practically forced to purchase all levels of the products to enjoy the full benefit of the system.
Most of the time, you will need to spend thousands of dollars to join the program and pay recurring fees to remain as a member in the program.
People expect to see results within a few days or a month since they have paid so much for it but it will always lead to disappoint.
3. No Guidance
In any typical MLM setup, a new joiner will be placed under a sponsor (a person who have referred the new joiner). The sponsor will be responsible to lead a team to drive more sales, but what happens if your sponsor do not have the appropriate training and the right attitude to drive the team? Who do you turn to for advice?
This is what happen in most of the MLM companies, and this is one of the biggest reason why people fail. Most of the new joiners are sponsor themselves and they do not have a clue on how to lead a team let alone guiding the team to success.
I would say that it is really difficult for anyone to succeed in MLM unless they are guided and trained directly under a very good leader.
4. No Interest
On any given business, it requires some form of interest in order for someone to succeed. Without an interest on what you are doing, most likely you will give up after a while.
In the case of MLM, most people are more interested in the amount of money they are “going to make” instead of focusing on the real question “Am I really interested in the product”.
If you were to ask a successful sales person about the product that they are selling, immediately you can get the vibe that the salesperson is really passionate about the product and this is what the MLM industry is lacking.
If you really want to join an MLM company, be 100% sure that you are interest and passionate about their product.
Comparison between network marketing (MLM) and Affiliate marketing
I would say that there are more success in the Affiliate Marketing industry then in the MLM industry. One of the main reason is that affiliate marketers do not need to pay high cost to join a affiliate program. Most affiliate programs are free to join.
Below you will find a comparison chart between MLM and affiliate marketing. This is based on what a beginner with no skills and knowledge can expect when they join the 2 industries.
Success rate is higher and it cost lesser to start up an online business. For affiliate marketing, all you need is a website and you are set to build your business. Most of the affiliate programs are free to join and you can make commission from every sale.
Unlike most MLM where they advise you to pester your friends and family to join, affiliate marketing is purely directing people to products they want to buy. If you want to understand more about affiliate marketing, you can read it here. You can also check out my Affiliate Marketing result proof here.
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BEWARE: There are many scams out there that offers Affiliate marketing education. It will lead you to purchase a product after another. If you want to avoid all these scams and proceed to learn about Affiliate Marketing, read my review here.
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