The Reality of Online Network Marketing

Q: The Internet seems to be teeming with multilevel marketing (MLM) possibilities, many of which are based on self-replicating Web sites.

A number of them seem like fantastic business possibilities, but they are almost too simple.

I was considering joining one of them, but I had some reservations.

Is it possible that they are Ponzi schemes, or are they genuine businesses?

A Ponzi scheme, by definition, is a fraudulent scheme in which an operator presents a business opportunity but pays participants' dividends with cash flow derived from other participants as they sign up, rather than deriving profits from offering real-value goods or services and then sharing those profits with the distributors.

The first question you should ask yourself before joining up is, "Does this business provide anything of genuine value, or is the primary 'product' the pyramid scheme itself?"

If the latter is true, then that is one chance to pass up.

MLMs that sell home items, for example, do not fall within the criteria of a Ponzi scheme.

This is how they work:

Instead of going to the grocery store, you purchase your monthly supply of laundry detergent from the MLM and then sell a few bottles to your friends and family.

Your downline performs the same thing, and you receive a cut of the profits.

There is no issue now since the MLM offers a genuine product.

It's simple to determine if it's valuable.

It's legal if you use it and your clothes get clean.

MLMs that sell information are a more difficult prospect since evaluating the quality of the content is a more hazy concept.

When you hear the presentation, it seems simple: sign up ten individuals, and the "multiplier effect" kicks in.

Is it, however, that simple?

No, it does not.

Regardless of whatever program you are a member of, there is a 20-80 ratio that applies here.

To begin, you must not only recruit 10 individuals, but also recruit 10 active people to form your first tier of downline.

There's a 20-80 ratio here, which implies that just one out of every five individuals who join up will stay active.

That implies that instead of ten, you should sign up for fifty.

Now, approximately one in every five people who hear your presentation will sign up, so you'll need to give a presentation to 250 people to acquire those 50.

Of course, not everyone you question will agree to listen to a presentation, so using the 20-80 ratio again, you must ask 1,250 individuals whether they would listen to your presentation.

Do you have a list of 1,250 people?

Does it still seem like a simple method to earn a million dollars?

It's not a dismal situation; some MLMers earn a good living.

I've known individuals who have earned a lot of money this way, but these are the people that are continually doing road shows in hotel conference rooms and restaurants, which requires a particular kind of mentality.

In reality, the vast majority of MLM participants do not earn the millions of dollars that are dangled in front of you.

These road presentations are often deceptive since they concentrate on the program's small number of millionaires and do not provide accurate data.

The majority of participants will earn an additional hundred or two dollars each month.

There's nothing wrong with earning an additional hundred dollars each month; we could all use a little more money.

But there's something wrong about earning $100 per month when you were anticipating millions.

Look into the Melaleuca program to gain a sense of the real potential of MLM.

This is the only MLM scheme I'm aware of that is completely open about the income possibilities, and the metrics they give are pretty uniform regardless of whatever program you join.

They have an eye-opening document that sets out the precise statistics for everyone to see, indicating what the typical wages are for each level, how long it takes to reach that level on average, and what proportion of individuals accomplish each level.

I have yet to come across another software that will generate such a document.

In their "developmental" level, for example, the lowest rung on the totem pole receives an average of $92 per year, with a low of $24 and a high of $1,538.

The third developmental level makes $427 per year on average.

One in every five people advances to the "leadership" level, which has many rungs.

The lowest level of leadership earns $1,511 per year, while the top earns $170,229 per year.

And just 1.3 percent of those who attain leadership position reach the pinnacle.

Can you make a lot of money by operating these kinds of programs?

Sure.

But don't be deceived.

Know how much effort is required ahead of time, and be prepared to make public presentations.

Above all, don't overestimate your potential.

Those who are aware of the game's reality before of time are more inclined to stay with it for the long haul.

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