Sep 19, 2006

Direct Sales/MLM Thoughts

I stumbled upon a website today via a Google Ad - It's a website to sell a program developed by a former direct sales consultant (outside the scrapbook industry). She made some excellent points on her front page. Many of them are things that I have believed all along but have never put them into words before.

A few stats on her site stood out:

According to LSU School of Marketing research and MLM annual reports, only 2% of network marketers ever earn a substantial income. Duh - when they parade the trips and cars in front of you, ask what percentage of TOTAL consultants ever get that. One of the new rules in a law currently being formulated says that a company must tell prospects what the AVERAGE income of their consultants is. Right now, you usually just get the HIGHEST income figures. The average person isn't earning much if anything.

Other research shows that 97% of direct sales/MLM people never earn positive cash flow. WOW! But, then, that makes sense. Ask anyone with a basement full of products from keeping up with their quota purchases if they are making POSITIVE cash flow - the answer is probably, "no".

She also says that according to the Direct Selling Association that there is a 70% drop-out rate for MLMs. WOW! Again, no surprise, but still shocking.

I have no idea what this consultant's business info is about or if I would even agree with her "method". But, she makes a valid point when she says that Direct Sales companies don't teach you ANYTHING about business and that 13 million Americans are running businesses with NO INFORMATION on how run a business beyond what their MLM tells them. Direct Sales companies are not in the business of business education, they are in the business of SELLING THEIR CONSULTANTS AS MANY PRODUCTS AS HUMANLY POSSIBLE!!!! That's why they have quotas you must meet and why they strongly encourage you to recruit. They also give you bad advice like, "You fail because you don't contact enough people." As Ms Sieg says, pretty soon you drive everyone around you away because they live in FEAR you will bring up your business to them.

A few months ago, an Aunt called us up to sell us a long distance phone service through a MLM. She wasn't even nice about it - we were told that we WOULD help her earn money by signing up and when did we want to start? Apparently, she had already strong-armed some others in the family into it because when we said, "No, we pay less than that for long distance with our current plan - no thanks" (then we got the guilt trip about helping her out - who cares if our phone bill went up - it was all about helping HER meet her goals), she said, "Well, then your brother won't be able to call you anymore since HE has the plan and will have to pay EXTRA to call people outside the plan and he can't afford it!" So.... we'll call him.

The point Ms. Sieg soundly makes is that the "If you just BUY more, you'll SELL more" and "If you just contact 5 prospects each day, you'll be a success" mantras are wrong-headed ways to run your business. You MUST run your business LIKE a business and that might include ignoring everything your upline is telling you. In most cases, your upline is reading from the company manual on training and merely reciting what she's told to (probably because SHE doesn't know the first thing about running a business either). She isn't actuallly TEACHING you how to run a buisness - just how to run a business the COMPANY'S way - which is probably something about buy, buy, buy and then buy some more!

Honestly, when I was with a direct sales company years ago, my upline was WAAAAY too serious about herself and her little flock of down-liners. Instead of helping me launch a business, I was rounded up for little "goal setting meetings". The goals were things like "introduce your business to FIVE people this week" or "have 2 parties this week". They were straight from the big book of direct sales and did NOTHING to teach me how to REALLY run my business. They merely put me on the treadmill and told me to start running. They promised that if I ran FAST ENOUGH, I would win. If I didn't win, well, then, I just wasn't running fast enough. Maybe the race is all wrong in the first place.

One of our early ScrapBiz members who came from a direct sales background said it was a COMPLETE and TOTAL relief to get off the recruiting treadmill. Yes, it's never required, but you are internally driven to do it with the promise that you'll MAKE MONEY off of someone if you do. She said that she didn't realize how much time she spent posting recruiting messages all over. Joining ScrapBiz not only gave her MORE profit (50% vs 20-30%), but it also gave her MORE TIME because she didn't feel driven to plug her business opportunity everywhere.

So, if you're on the direct sales treadmill and getting uncomfortable with the race you seem to never win, maybe it's time to check out ScrapBiz and learn how to run your business LIKE a business and not like a MLM.


Stacy Armstrong ~ Come on in, The Studio is Open ~ said...

I just want to shout, "AMEN!!!" ( and I'm forwarding this to my dearest friend, who is on the Mary Kay treadmill.

Kim Guymon said...

Thanks! I came to the conclusion after writing this that direct sales is "Business for the masses". Someone told me that American's don't know GOOD food because it's all flavored down to please as many people as possible to sell as much as possible. It's true - our diet is pretty "bland" compared to the rest of the world. Well, direct sales is the same way - it's watered down so that ANYONE feels like they can do it. The problem is that, unless you get a fantastic upline with extensive business knowledge, it won't work in most cases.

At least Mary Kay pays decently. I do have the highest of respect for Mary Kay Ash - however, I have also been stalked by many a MK consultant...

Ken said...

I retail a vet formulated premium dog food. I don't sell the business to others at all. The pet food is so much better than the brand names we know, that my customer retntion is very high. I treat it as a retail business and a few customers start in the business, not to get rich quick but to cover the cost of their pet food purchases. It's not that tough to earn $50-60 a month in commissions!