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Motivating Laggards

To best understand how specific direct-sales operations work, read the contracts and documentation carefully, and ask lots of questions before you start. Now that you have a basic understanding of direct selling, ask yourself why you want to get started in direct sales and the amount of time you want to put toward this endeavor. Do you enjoy the idea of entertaining in your home while at the same time making some money to offset the cost? Are you trying to build a full-time business and hope to earn a significant portion of your family's income from direct selling? Are you primarily interested in direct selling because you love certain products and want to buy them at a discount?

There are no right or wrong answers to these questions and they're all legitimate reasons to get started in direct sales. Whatever scale you determine for your direct selling endeavor, the determining factor in its success will be you. Ask yourself if you have the personality of a salesperson.

Meet Primerica, The New Wall Street IPO That's Really A Multi-Level Marketing Scheme

Contemplate if you can balance family and work all in one place. To answer whether you have the right personality for a career in sales, you must be persuasive and have a pleasant yet persistent manner. You will need to work to overcome objections while still gracefully handling, and learning from, rejection. You must be self-motivated and able to set and reach goals for yourself. If you are unsure about your skills and aptitude for sales but want to learn, direct selling can be a good place to put them to the test because of the relatively low initial investment and positive support network of colleagues.

For some new direct sellers, choosing a product is not an issue. They love a particular product and want to sell it and also buy it at a discount for themselves. Even when that is the case, though, in order to be successful you need to think through the pros and cons of your product choice.

Understanding compensation plays a very important role in choosing a product and formulating your business plan. Some compensation plans emphasize sales, while others focus on recruitment. Convert currency. Add to Basket. Book Description Condition: New. Seller Inventory S More information about this seller Contact this seller.

GPS Failed

Publisher: OP Publishing , This specific ISBN edition is currently not available. View all copies of this ISBN edition:. Synopsis About this title In an industry growing by leaps and bounds, the multi-level commission plan remains a mystery to distributors and leaders alike. About the Author : Mark L. Review : The commission plan is the mysterious silver bullet in the network marketing industry.

Buy New Learn more about this copy. Typically, self-employed, unsalaried, and independent MLM distributors are entitled to earn money in two ways Brodie et al. The attractiveness of multi-level marketing has several reasons: for companies it seems an attractive marketing strategy, consumers appreciate buying products from friends and family members, and for distributors MLM companies offer an easy way to try an entrepreneurial experience as well as a way to buy products cheaper. To overcome these problems, governments have taken regulatory actions. Although we agree that such measures would indeed help to alleviate certain problems, we seek to add a different factor to this discussion here.

Often it is by means of this network, rather than by MLM headquarters, that distributors are trained and socialized in particular both ethically and legally sound as well as problematic ways. The main goal of our conceptual paper is to introduce an extended model of MLMs that includes the DN. We structure our paper as follows. In the next section, we first share our observation that several legal and ethical problems of MLMs persist despite implemented countermeasures.

To do so, we provide an overview of problems and countermeasures. Since the beginnings of the industry in the early twentieth century, a broad range of actors, such as industry associations, consumer watchdogs, and governmental agencies, have dealt with problems of the MLM industry.

The first code of ethics for MLM, for example, was already created in the s by an early industry association in the USA, responding to the public critique on how companies and their distributors operated Biggart Buyback policies, regulated by governmental rules and Codes of Ethics company and industry level.

Misusing trust in professional settings and reducing professional independence. First, we include existing countermeasures. Fourth, we briefly indicate why business practices that seem ethically neutral in non-MLM contexts become ethically problematic in the context of MLMs. In its defense, Amway produced several guidelines to mitigate the problems, convincing the FTC that it was operating legally. Ever since, however, researchers Juth-Gavasso ; Keep and Vander Nat ; Koehn ; Vander Nat and Keep ; Walsh a as well as consumer advocates 8 have questioned whether the FTC decision, the legal standards that have been developed since then, and MLMs self-regulation efforts are sufficient to prevent such illegal practices see for a comparable recent case the Herbalife settlement; Ramirez 1.

Whereas the distinction between legal and illegal practices needs to be made per company Keep and Vander Nat , three main characteristics are used to distinguish legal MLM companies from illegal pyramid schemes Keep and Vander Nat ; Koehn ; Vander Nat and Keep ; Walsh a. The first and most important characteristic is that illegal schemes focus on growth by recruiting new members instead of growth by selling products to clients.

Like the classic Ponzi schemes, systems based on growth by recruiting are unsustainable.


When the number of new recruits increases, market saturation is quickly reached. As a result, it gets more and more difficult for new members to earn money by recruiting and thus to gain a return on their investment. Whereas the increase of organizational members might be an ethically neutral business practice in many situations, in the case of pyramid schemes it is problematic and illegal. The reason is that consumers join these systems based on untruthful promises.

First, consumers are promised an income opportunity. However, income is very unequally distributed Hyman ; Lorenz and Mazzoni and growth based on recruitment implies that by exponential progression only those at the top can earn back their investment Bosley and McKeage ; Pareja Second, consumers are promised that everyone can reach the top, not only the first to join. However, research indicates that those very few members who earn money are the early adopters, whereas those who join later lose money Bosley and McKeage To summarize, distributors are misled as they are made to expect something different than what they encounter Hyman Investing money for starting up a business is a normal and as such ethically neutral practice.

In the case of pyramid schemes, however, it is ethically problematic.

AG - Multi-Level Marketing or Illegal Pyramid Scheme?

The reason is the same as with growth by recruiting, i. Consumers invest because they are promised that they can expect to earn far more than they invest. As explained above, this is not the case in schemes that are based on recruiting Bosley and McKeage ; Hyman ; Lorenz and Mazzoni ; Pareja Thus, the deception does not lie in asking future distributors to make up-front investments.

The problem is that distributors make these investments based on wrong information. A third characteristic of illegal pyramid schemes is inventory loading by internal consumption Keep and Vander Nat ; see also Muncy Members are enticed to purchase products, which they are neither able to consume nor sell in a reasonable amount of time. Whereas some authors argue that internal consumption is a widespread and ethically neutral business practice Albaum and Peterson ; Crittenden and Albaum ; Peterson and Albaum , the ethical problem—once more—is not the business practice as such.

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The problem arises in the context of MLMs that connect internal consumption with a business opportunity, i. In both cases, buying company products is stimulated by income motives, not by consumption needs.

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Companies that have only few end consumers and a high level of internal consumption are actually buying clubs Hyman When such companies promote membership as an income opportunity, they misrepresent their true nature. The ethical and legal problem is thus deception: distributors join a company to earn money, but overspend by buying company products they neither need nor are able to sell for empirical evidence see for example Bhattacharya and Mehta ; Cahn ; Pratt a ; Ramirez The rule is meant to a prevent inventory loading, b prevent a focus on recruiting, and c support the sales of products to end consumers as such sales ensure a sustainable form of income to distributors.

In addition, many MLM companies restrict the amount of downline levels for which individual distributors receive override commissions.

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This solves, according to a several authors Peterson and Albaum ; Sparks and Schenk , the problem of exponential progression and unsustainability. Finally, industry associations DSE ; Seldia ; WFDSA and governments 9 have set up buyback policies to ensure that returning inventory is easy and financially sound. Whereas overstating the quality of products and services might be a common and also ethically neutral business practice, in the MLM context overstatements seem to be so widespread, that they have been discussed as ethically problematic Koehn Newcomers and existing distributors are motivated by exemplary calculations demonstrating the ease of recruitment, the ease of selling, and the high market potential.

In motivational material handbooks, leaflets, videos, etc. This promise is ethically problematic in the case of the MLM industry as actual numbers demonstrate the low likelihood of success, the low average income, and the unequal distribution of income Biggart ; Hyman ; Lorenz and Mazzoni ; Pratt a ; Ramirez ; Taylor They are attracted by the promise that everyone can succeed in the business: a promise that lacks the material substance for most distributors, as described above.

However, as the FTC states, more needs to be done. In relation to customers, whether internal or external customers, two central ethical concerns can be found in academic and popular literature. Whereas the tendency to exaggerate might be typical for the marketing activities of most companies, MLMs seem to be particularly prone to overstating product qualities Biggart, Although a lack of knowledge can occur in any job or trade, and as a consequence might lead to incomplete, bad, or even harmful advice, the ethical risks connected with lacking knowledge are built into how MLMs work, i.

Whereas people in any job or profession might sometimes lack the knowledge to do their job properly, at MLMs distributors are not even required to have any knowledge or education. The in-house trainings provided by MLMs themselves cannot compare to company-independent, certified professional education on health or financial issues.

Accordingly, the risk that distributors might unwillingly give limited or wrong information and useless or bad advice to consumers is real in MLMs. A lack of truthfulness becomes particularly problematic, when distributors make illegal claims, for example that nutritional supplements cure all sorts of severe health problems.

In its investigation into 62 companies selling nutritional supplements that are members of the Direct Selling Organizations, the watchdog organization TINA found more than problematic product claims made by 60 different companies.

In the USA, health professionals, e. However, it is ethically problematic when distributors exploit their professional status and their trust relationship with their clients to increase their profit.

Top 4 MLM Compensation Plans Explained

Under these circumstances, they might not provide the best advice and treatment to patients, but the treatment with the highest profit margin. Thus, as Koehn , p. Aside governmental rules prohibiting certain health claims as illegal 19 , a variety of countermeasures exist to prevent the issue of harming customers. These countermeasures relate to health professionals in general as well as to those who are MLM representatives.

However, as a consumer advocate documentary on LifePlus in Germany illustrates, Medical Boards may simply lack the financial resources to investigate cases of misuse. A fourth problem, often discussed implicitly in existing research, is the use and misuse of trust in private social relations. Customers and prospective distributors are mostly approached by people they know: family members, friends, acquaintances, or former classmates Biggart ; Friedner ; Grayson ; Pratt and Rosa That is, selling products and promoting a business opportunity in private settings entails using and potentially misusing situations of relatively high trust DiMaggio and Louch ; Kong Private social ties can make it more difficult for friends and family members to refuse an offer to join a meeting, buy products, or get involved in a company Bhattacharya and Mehta ; Biggart ; Bloch ; Friedner ; Lan ; Pratt and Rosa ; Walsh a.