Also people say they ruin lives, how?
In: Economics
I’ve spent years consulting some of the top MLMs on their technology stack. Here’s what I’ve observed:
– the “marketing” (or commission structure) budget is usually between 36%-40%. This is pretty consistent with most retail marketing and sales budgets.
– most MLMs sell their opportunity more than their product. You can tell by their gross receipts. In my opinion, commissions should only be paid on customer sales, but I’ve seen as much as 90% of revenue coming from sign up fees, renewal fees and distributor packs. That is a pyramid and is unsustainable as most people indicate. The best practice right now in the US is having less than 60% from selling the opportunity. I still think that’s way too high.
– MLMs are great for “high touch” products. A novel product with no market traction can gain traction through an MLM, but at some point it hits critical mass and really should transition to retail… But that’s not generally what happens. This explains the initial high price… But when I can buy Fijian noni at GNC for $10 why would I continue to buy *** noni for $30?
– most products from MLMs start out as great ideas and often with great materials, but at some point I see most companies adding fillers or sourcing sub-par suppliers. In other words…a knife from an MLM is not necessarily any better than a knife from Target.
In the end, I see MLM as a legitimate “go-to-market” strategy, but I haven’t really seen any company do it right yet… They either don’t understand product lifecycles, competitive landscapes, or they incentivize bad behaviors with opportunity-leaning comp plans, or at some point don’t deliver the value they claim.
Latest Answers