Thorns in the Flesh

The multilevel marketing system was essentially designed by two salesmen. Amway.

It was designed to make individuals into salesmen for the company, or manufacturer's reps... or something like that. It required that you start up as a business... learn the product line, learn sales techniques, etc. Things most people are not good at.

The system of rewards are patterned after sales commissions. For all the talk about how the system is new, it really isn't much different that the way some Insurance companies recruit agents.. recruit everybody who answers an ad.. cull out the obvious ones who can't understand the business, then toss the rest to the wolves and see how they do. It's cutthroat, and not many survive.. the ones that survive tend to do quite well. It's the closest parallel to MLM I know of.

Why do most people who get into MLM fail? Because they quit. Why do they quit? Because they don't perceive the rewards, if any, as worth the investment in time and money. The shameful scandal of "garage qualifying" for higher commissions indicates a fundamental misunderstanding of the objective. The objective of the business has to be to SELL as much of the product as possible. Distributor inventories are good for no one but the company that sells the product. At best, it generates short term income for the upline.. which is probably why the so-called heavy hitters tend to "surf", changing companies regularly when the money stops. This is called various things: Market saturation, or just drying up. Those are the excuses of salesmen, not of marketers, and certainly not of managers. Salesmen operate mostly on adrenaline... hype. Hype is not a bad thing, mind you.. this is not a criticism of that, just an observation.

We have to stop thinking like salesmen, and start thinking like leaders. Putting a salesman in charge of a company is just as inadvisable as putting an accountant in charge.. one is too heavily motivated to close sales and keep score with money, and the other is too concerned with the bottom line on a balance sheet. There has to be a leader who directs these people.

Why are there so many MLM companies? Because they are easy to start.. all you need is a computer and a telephone, and a relatively small bankroll. Most of them are essentially the sales department of a manufacturer... a manufacturer's representative. The ones that work the best.. make the most money for the most people.. often get the most criticism for the way they push distributors. They treat distributors like salesmen.

The way Amway operates, and the thing that gets this company the most negative press, would be viewed as excellent for a sales force. The "functions" are nothing more than sales meetings, and most sales meetings are highly organized pep talks for the sales force. Successful salesmen are held up as an example, following the company guidelines is preached as gospel, lots of hype, lots of adrenaline pumping.

The problem with this is that sales is a hard profession. For people who don't like the game, the pressure is too high, and the hype doesn't last. Coming off an adrenaline high is like coming of any kind of high.. a price is paid in emotional and physical exhaustion. When this is combined with a lack of expected rewards, real or perceived the result is strong. I believe it results in either depression or anger. When it results in anger, the anger is most often directed at the company in particular or the industry in general, or both.

There are other systemic problems. For example, what kind of people do we try to attract? What is the most common method of recruiting? Money. The beaches of the world. We tell people that they will probably end up broke and friendless in their old age, and they don't want that, do they? We cite statistics that compare the retirement prospects of most Americans with the potential riches that MLM can give them. We "fake it till we make it" so that it will appear that we have realized at least some of the riches even when we haven't. In short, we set most people up for disappointment and failure. Frequently, we kick them when they are down as well. They are "negative" or lazy. Again, a salesman response.

The promise of MLM is that it is egalitarian. It is the business for "everyman".. anyone can do it. This simply isn't true, and it never was.

As I see it, the solution is to look at the attrition rate as a systemic problem rather than a problem with individual sponsors. The loss of downline distributors is indeed the result of a lack of upline support in most cases... but that upline is somebody's downline as well. If we were all both salesmen and sales managers, there would be no problem.. sales managers motivate, and salesmen respond to that motivation. Remember how and who we recruit: People who respond to the promise of riches and independence... which is damn near everybody. We certainly don't advertise for salesmen! So we get what we get, and most of them fall out. This is leadership?

A systemic problem must be solved by looking at the whole system. There are some interesting things about systems in general that are worth considering. Systems tend to become more complex as time goes by. Successful systems eventually will become self-serving, bent on survival, completely separate from the individual parts of the system. In many cases the original objective of the system is forgotten. In my opinion, the Federal Government is a perfect example of this.

So a good MLM, an ideal MLM, will not be designed as a sales force. Some companies are so-called "consumption companies" and I think this may be the right track. The problem is they are still oriented to salesmen or investors. You pay a price to play... a startup fee or whatever you want to call it, or you willingly pay a high price for products in exchange for the hope that profits will mitigate that price when you build up your downline. Orienting a company toward consumption isn't enough by itself.

The price has to be high, retail high, in order to pay commissions to a large number of players. The commissions have to be paid to motivate building downlines. This motivation is still sales motivation, not consumption.

Step one, then, is to get the price down so the product and the price are competitive enough to motivate people to buy. I don't believe product quality has ever been a serious industry wide problem, so that quality must be maintained, but the price dropped. This will make the company and product an easy sell. What if I could sell you a new car for, say, half of what it would cost you elsewhere? How hard would it be for me to sell it to you?

To get the price down, commissions and overrides have to be lower, and not paid to so many people. Sales commissions are a cost of distribution. Manufacturing costs are not something we can manipulate much... but the whole purpose of MLM is distribution of the product to consumers.. we can manipulate that. The distribution objective needs to be lower commissions on higher volume.

What of a company that sold a good, consumable product line.. like the original Amway line.. household products, cheaper than what was available in a grocery store? What if the compensation plan for that company was ten percent on the first level, two percent override on the second level, and that's all. What if all you had to do to become a distributor was buy the stuff? The MLM company wouldn't make nearly as much money as is common now, for one thing, at least not initially. Eventually, it would make a decent profit. This would be motivation for the COMPANY to support distributors, and to stay in business. The easy sell would make recruiting a side effect rather than the primary objective. Different motivators could be used to motivate distributor/customers to spread the word. Look at the Saturn as an example.. the marketing for that isn't so much the car as the "family" you join when you buy one. People are responding to it. Look at credit card marketing that promises a portion of the fee for each purchase will go to some worthy cause. These motivators, I believe are the kind we should be using in MLM, not sales motivation.

(EDITOR'S NOTE: You can read the follow-up to this article by clicking HERE.)