Multi Level Marketing and Network Marketing explained - vital information for the potential new MLM recruit.
The problem of MLM "market saturation"...
Early indications to a future problem...
I didn't know anyone who was using my MLM's products when I signed up with the company. That should have meant something to me. My MLM has been in Australia for more than 20 years. In hindsight, if everything worked even moderately well to my MLM's plan, surely someone I knew in Australia would have been using them?
My MLM's product penetration into the marketplace here in Australia is only moderate by any measure, so I don't believe that product saturation of the total potential market is really an issue. Logically, there seems to be plenty of room for these demonstrably good products. So why, and how, do I think that market saturation is a problem?
Defining the market...
I believe Australia and many other countries have become "saturated" with a poor public perception of all MLM's. Even though the actual market for their products appears to be substantial, what I call the available market is, I believe, largely limited to those who have not yet come into personal contact with negative MLM opinion.
Defining "market saturation"...
Whenever the term "saturation" is brought up in conversation with a pro-MLM'er, the instantaneous reaction is one of "...don't be ridiculous! If the market were saturated we'd all be rich and living in the Bermudas!" or "...saturated! You've got to be kidding! Don't you know how many people there ARE in the world?!" Market saturation is actually a very complex subject and people need to phrase their questions a little more exactly.
The first question a prospective MLM'er needs to ask is,
"How many distributors are required to properly service the population of the Earth?" (Most likely answer you will get: "When the problem comes up, we'll figure out what to do about it!")
The second question should be,
"How many distributors currently exist in my (locality - suburb, town, city, region, state)?"
The third question should be,
"How many distributors have been recruited in (my locality), since the company began operation?" (This will enable you to establish an idea of the number of people who have failed.)
The fourth question should be,
"How many distributors will be actively working (my locality) for recruiting and retailing?
As it is impossible for any of these questions to be properly answered by any distributor at any level, all you will get is an answer designed to distract you from asking the next question. Yet how is it possible for you to set up a business without knowing the slightest thing about what your competition is at the moment or what it might be in the future?
Let's look at these questions with an eye to finding out how market saturation can occur without anyone really knowing about it.
Why ask Question 1? The internet can make almost any MLM an international operation. If you don't know how many people are required to properly service the entire population of the Earth, how do you know if you are not already superfluous the moment you join?
Why ask Question 2? Your local area, be it suburb, city, region, state or country is your target area for sales, (unless you come from another country and have a broader knowledge of the world).
a) If you do not know how many distributors are already in existence in your locality, you do not know whether or not to concentrate your efforts in your local area.
b) If you do not know how many distributors are in your area, how can you recruit more without sharing this lack of knowledge with them? Surely, you become a liar by omission if you don't tell them?.
Why ask Question 3? If you do not know how many people have tried and failed in your area, how can you make any decision at all to start an MLM business? If you knew that 10,000 people in your neighbourhood had tried and failed, and you didn't know how many were still currently operating their businesses, would you then make the decision to start your business?
Why ask Question 4? This is the big one. In MLM it is IMPOSSIBLE to tell how many people might target your local area, state or country at any given time - or any other area anywhere in the world. In MLM there are no "franchise boundaries". Anyone from any state or country serviced by that MLM may recruit or retail in any other state or country. Because of the nature of the geometric progression recruiting structure, it is possible to very quickly recruit hundreds of people into your group. If others are doing the same at the same time, then the resources to find recruits, i.e., the internet and public media, become quickly saturated with advertising.
This situation can occur when a "new wave" of interest is generated by an MLM, possibly because of a "different" approach to recruiting that makes it all "easier". People are blindly led into signing up, not knowing that any number of people in their street, their suburb, their town or city have signed up in the same period. No-one knows how many people have signed up. No-one but the MLM company's computer will ever know.
• No-one knows ALL the people who have been signed up.
• No-one knows HOW MANY people have signed up.
• No-one knows where all these new distributors live.
• No-one knows where these new people (or any other distributor), should advertise effectively to recruit new distributors or to retail product.
So no-one really knows where to spend their money to build their business. But spend it they will, because their upline tells them it is the way to succeed. And what you SHOULD KNOW is that your upline will be ecstatically happy with this state of affairs. The system is working at peak efficiency on their behalfs.
What happens now?
Everyone wants to succeed. Everyone is operating blindfolded. Everyone is using the same media resources (including the internet) to get recruiting and retail sales leads. The market becomes saturated for recruiting in dozens of places, but no-one is quite sure which places they are. And no-one knows which place will be targeted or saturated next. And if someone finds a place to advertise that looks attractive because it seems not to be saturated already with competitive advertising, how can they possibly know that it might well have been saturated (without result) last week or last month?
What many distributors do not seem to understand is that every single person they recruit has the potential to become the recruiter's strongest competition. You see, it is the recruiter's responsibility to train each of his recruits to duplicate what he does to succeed. Every new recruit has to compete against you, your group, your upline's groups and your MLM's groups. And against other MLM's with similar products. And against the traditional retail outlets.
Under these conditions, recruiting "saturation" can and does occur on a regular basis. It follows that the same must happen with retailing. Eventually, people begin to drop out because they cannot make their business income grow quickly enough to keep up with their business expenditure.
Remember, MLM is a business that MUST cause the failure of the majority in order to avoid growing itself to the point where there is no-one left to buy their products and/or “opportunity”. True, some distributors will not do the work required of them to succeed, but the majority CAN'T do the work that is required of them because of the excessive competition the MLM concept brings to bear against them.
Remember also that as the chaos of excessive competition continues, upline members are rewarded for creating it. Every failed distributor lines the pockets of their upline to some degree. Which all goes to make MLM a cynic's paradise.
Where does negative public opinion for MLM originate?
Over the past three to four decades, a fair guess is that several millions of Australians have joined various MLM's and started their own businesses. The vast majority of these people no longer have their businesses. They "dropped out" or "failed". The company rarely gets a kind word from these people, particularly when these people are called on to explain their actions in conversation. Negative opinion develops down the line.
The customers of these distributors, who are often family, friends and acquaintances, have at least suffered from an interrupted line of supply due to the drop outs. This has resulted in MLM distributors often being seen as unreliable sources of product supply.
From MLM company legal challenges:
Over these same years, MLM companies have attracted a great deal of poor media exposure with many legal challenges to their operations. Many companies have become defunct as a result of these court cases.
From internet exposure:
The internet enjoys widespread usage in Australia. The proliferation of internet based MLM organisations and their many consequent and often very public failures as a result of legal challenges, is adding to the weight of negative opinion towards MLM in Australia and elsewhere.
SPAM, the bane of the internet, is most often used by internet based MLM distributors to advertise their "opportunities". MLM and SPAM are almost synonymous in conversation nowadays. In hustling for new business outside of netiquette rules, MLM operators are unwittingly creating the groundwork for their own demise by unduly annoying people.
The growth of Anti-MLM websites (see my Research Links Page), offering details of current court cases, allegations of legal abuses, and in-depth explanations of the problems associated with being an MLM distributor is hastening community understanding of the negatives associated with the MLM marketing concept.
From a lack of Product Recognition:
MLM products compete in a sophisticated market in Australia and in any developed country. Leading products establish product credibility through achieving high brand recall and gain general market superiority (market share), by careful pricing, saturation advertising in public media and a host of variations on promotional themes. They also ensure ready retail availability of their products through retail chains and independent stores.
In contrast, MLM products do not have high brand recall, pricing advantages, comparable product availability or media promotion. Product credibility is the responsibility of each independent distributor. Without pre-established credibility, the distributor involved must supply it at the point of sale. Distributors cannot operate from a retail shop-front. Brand recognition of MLM products is so low it hardly registers on the scale. (MLM company names, however, are growing in recognition).
From the "poor" sales behaviour of many MLM distributors:
The average MLM distributor is not a sophisticated sales person. Some people are "naturals" at sales, most are not. Each distributor is instructed to "tell his story" relating to his own product result in order to gain sales. If he hasn't a "success" story of his own, then he is encouraged to use someone else's story. Sales are achieved mainly through the use of these anecdotal stories, to be told with "excitement and enthusiasm". All too often the stories told are perceived as exaggerated, particularly those told by many new distributors. The perception gained by the potential new customer results in either scepticism, or a sale. If the products do not live up to the customer's perceptions gained from the sales pitch, the result is a refund or a reluctance to re-purchase and a "lost" customer who has at least a slightly negative attitude towards the distributor, the product and/or the company.
The above factors, and more, contribute to a growing lack of credibility for any MLM company and its products. This lack of credibility eventually extends over a significant portion of the population. It is impossible to accurately quantify this without distributor figures from all companies involved, but it's becoming a rare person indeed (who isn't a current distributor), who will speak positively about MLM - be it the company or the product.
MLM’s won’t despair. Every day brings new young into adulthood, and every day some enterprising soul finds another way to disguise the MLM reality. It’s true that there’s “...nothing new under the sun...”, but naivety and lack of understanding often makes many people think there is...