Well it happened again. Humm….. I put down the phone and felt a little like a remorseful axe murderer. The death blow of a dream is not a pretty thing to witness, there are no winners when a dream dies only losers.
The problem is that after 25 years in the MLM industry I just know a little bit too much, and sometimes I long for the days of blissful ignorance when the only proof I needed to ignite the passion of a dream in my heart was a photocopied check from my upline for $200,000 a month.
That was at the time, all the proof I needed, and I also believed it was all the validation of the business model that anyone could ever need.
MLM Success If you can dream it you can achieve it
That tangible proof that the money was real was all that mattered to me, I mean good grief, if my upline could make $200,000 a month, I could do it too!
With a well funded company, a hot product, and a strong upline the sky’s the limit and the days of leisurely lunches on the beach of your private island in the Bahamas was not far away right?
I mean there can’t really be more to the MLM success equation that that correct?
Ah yes, the days of blissful ignorance………….
Well unfortunately there are a host of factors that can affect your MLM Success that you probably don’t even want to know about.
Well I’m wandering here, back to death of a dream…
Because of my background in the network marketing industry, I have people approach me all the time to teach them the path to high volume lead generation by using the internet and online training systems like Empower Network, or Funded Proposal Systems like My Lead System Pro or The Daily Income Team, so they can then apply what they learn to dominate their deal and finally get to the money they have been dreaming about for years.
It was in one of those discussions with a MLM hopeful, that they outlined their company and the incredible new product they had just released with the breathless excitement of one who knows they are but a step away from financial freedom.
The smell of money was in the air!
Then suddenly, the dread question reared its ugly head.
They asked me what I thought about their company and their chances for success.
My MLM Is Better Than Yours
Now I learned many years ago never to rain on someone’s parade.
Even back in the days of my direct “pit bull on the throat” approach to recruiting, I learned it was useless to argue “My Deal is better than yours” with anyone. It’s kind of like trying to win an argument with your spouse, you may prove your point but you will never win.
Today, since I work with so many people from so many different Network Marketing companies, I don’t ever give my opinion unless they ask.
MLM Success The Painful Truth
The problem here, of course is that I give no nonsense, straight answers (my opinion of course but not sugar coated).
Now I never approach this from the level of a company analysis, the bottom line is who knows who will succeed and who will fizzle, only time will tell us that, and it’s never based on a specific unique product they may have, or perhaps some sexy new version of a binary comp plan that’s going to revolutionize the entire industry. Rather I analyze it more from the standpoint of the general market factors that can dramatically affect someone’s income stream.
The Critical MLM Success Factors
Look it’s not the minute variations in the comp plan you have to worry about, all companies have top reps who make huge incomes with all types of comp plans. I mean, in a standard MLM business model there are only so many ways to slice the pie.
Also the critical factors for MLM success are not based on the pedigree of the Master distributor, or who the company owner is, or who the financial wizard funding the deal is, or even who the branding master of the company is.
I have seen all these approaches used in MLM marketing materials and you know what? In my book those are all meaningless window dressing designed to attract the un-informed newbie.
The MLM Black Hole Effect
I remember a few years ago a rep called me in a panic about the Trump Network (aka Ideal Health), telling me that everyone was saying that because of Trump’s branding, that the company was going to suck the majority of all MLM reps into his company and all the other MLM companies would probably just disappear, kind of like running into a black hole in space.
I told him relax, to take two aspirin and lay down for a while and it would pass.
The Hidden Success Potential of MLM Deals
In reality the “Success Potential” of the company, which is how high they fly, and how long they pay big commissions, is actually based on something most people never give much thought to.
The Hidden MLM Success X Factors
You know about X factors right? X factors are variables that most business people have nightmares about. They are the unknowns, the factors that we can’t control that can make or break our business success.
You know, kind of like the freeway exit ramp bypassing the street your retail business is on, or finding yourself the dominating the camera film market only to have digital cameras enter the market and in a heartbeat technology destroys a billion dollar empire (hello Kodak).
MLM Success X Factors – Product Type & Growth Dynamics
The product type an MLM company markets can make a huge difference in how long it takes to achieve your goal or worse yet can even make you or break you. Growth dynamics, well they also determine how long it will take to achieve your goals and how high you can fly.
The Role Of MLM Product Types In The MLM Success Equation
Now the role and importance that MLM product types play in the ultimate MLM success or failure of your business depends a lot on what business model of MLM your are pursuing, Standard MLM or Top Tier MLM.
The reason for this is inherent in the growth dynamics of the business model itself.
Now Top Tier MLM business models are not as subject to the effects of Product types since they generate so much income on the front end, but in a standard MLM it can take a few years of building effort to build a downline big enough to get you to the big money and in a slow growth environment the effect that product types have your income stream can be critical.
In standard MLM’s since you are basically playing a 5% ballgame from a commission standpoint and you are only getting pennies on the dollar, it’s going to take a fairly large downline to be able to even generate a $5,000 a month residual income.
MLM Income Steams The Real Truth
On average, all the special comp plan perks aside, it’s going to take a minimum of 2000 distributors in your downline to earn you $5,000 a month in residual income, and if you want to take your income to that magical success benchmark of $10,000 then it’s going to take on average 5,000 to as many as 10,000 in your downline.
Now unless you know some magical way to go out and sponsor 5000 people in the next 30 to 60 days, then to achieve that big of a group you have to rely on duplication and therein lies the problem.
In my opinion, MLM product types dramatically affect distributor longevity and that that in turn affects your bottom line income.
MLM Success – Product Types
So let’s talk product types. Well just about every type of product imaginable has been plugged into the MLM structure from 3-D cameras to pantyhose, sanitary feminine care products (yes its true), to real estate sales (Keller Williams), and so many other unique products it would make you head spin.
However generally there are about 3 broad product types that I think are the pivotal ones that probably 90% of all MLM products fall into.
Skin Care Personal Care
Now there is a 4th Product type area called Info (Information Products) but since those tend to be the mainstay of the Top Tier MLM business model and not Standard MLM’s we are going to ignore those for a moment.
In the years I have been in the Network Marketing industry I had the advantage of spending 17 years with one highly successful company that ended up using a strategy called “Divisionalization” in which they actually started sub-companies or new divisions over a series of years and branched into three different core product types and separately branded each of them.
Now this was great, since in effect it gave me the ability to work with the 3 product types mentioned about without ever leaving the “mother ship”.
MLM Product Types – The Time Factor
So as I recruited and started building an organization with the different divisions of this company, I found that a totally different distributor group evolved out of each company division and each had a different distributor profile. Also the growth rates and income streams that grew out of each were dramatically different.
Case Study 1
Skin Care/Personal Care
Visual – Emotional – Consumable Products
This was interesting, I was in my 30’s and pretty much a soap on a rope type of guy, promoting a skin care company. I did not want to be branded a Mary Kay Man (that was not the company by the way) so I used an aggressive “Top Down” business building approach and grew a huge organization that was generating over a million a year in income in less than 3 years (see Nuskin Review)
In effect I focused on the business opportunity and income potential not the product, and no, I did not do product demos. Well, OK, I did a few, but not after one Ah-ha moment in which I found myself in the house of some strange woman in Aurora Colorado giving her a face lift demo and it suddenly hit me like a ton of bricks “how is this ever going to get me to $800,000 a year!
MLM Product Types – Product Ordering Longevity
I found that even years after attrition had eroded this distributor base, that there were still a good percentage of people buying and using the products because they were emotionally attached to them. They products affected how they looked and felt about themselves so once they started using them, they never put them down, they had an emotional attachment to them.
Case Study 2
Nutritional Products: Consumable Products
When the company branched into this division I loved it. It gave me the chance to get me away from that skin care image. I was a big believer in nutritionals, and I still eat handfuls of vitamins when I sit down to dinner that can scare people when I pull out of this baggie filled with pills.
I became a scientist of nutrition and turned my downline into the same. I mean I could talk to any nutritionist about leucoanthocyanins, and grape seed extract and the effect of Conjugated Linoleic acid on weight loss, etc, etc, etc.
I loved this stuff but after about 2 years the organization I built was hit by so much attrition that it became a revolving door and my income stalled.
Now a word about attrition here….
It’s an ugly word that we all hate in MLM and although we try not to acknowledge it, it’s kind of like divorce, it happens.
People come into network marketing with the dollar signs in their eyes and then 5 of their friends say “NO” and they are out of the deal. They say “You know, this is way too hard, I will just keep my day job and just use the products”.
So product type will totally dictate how long they stay in the consumption mode before they totally disappear and with nutritional products this cycle seems to be about 2 to 3 years.
MLM Product Types – The Nutritional Gotcha!
So here is the problem, nutritional supplements are a logic sale. We eat vitamins because we know they are good for us. They are not, visual emotional products. I mean I never ate a vitamin pill and woke up the next morning and said
“WOW, I feel great, my life has changed and I look so much better, I think I will eat this forever!”
So what generally happens in a nutritional company is that they may get ramped up and going pretty well but then as 50% ++ of your group falls back to just consumption and then within 2 years totally stop buying, your income stalls out and can go backwards in a hurry.
This was actually confirmed by one of the owners of a nutritional MLM who gave me the actual stats for his company, first year orders for a new distributor $1600 dollars , 2nd year orders about $900 dollars, 3rd year orders on average $0.
Now listen carefully here, those were not my numbers those were from one of the owners of a billion dollar MLM company.
MLM Déjà Vu – Been there done that, no thanks
Now once again I am not trying to rain on anyone’s parade her, there are lots of great nutritional companies out the in the MLM sphere with great products, but you just have to understand that if you choose to build them they will be affected by a particular type of growth dynamics based on product type.
They only ray of hope in the nutritional market has been the superjuices (See eXfuze Review, Kyani Review, Zija Review, and Jusuru Review) since they in fact can be an emotional product since probably 60% of the people that use them claim to get a tangible feeling effect but they seem to suffer from the same ill effect as the other nutritional products and over time still seem to become a revolving door of distributor attrition. See my company review on MonaVie
Diet products are another market area that seems like it should fill the bill of Visual Emotional Consumable, but diets are so trendy, that people love to jump from diet to diet, and so this product type tends to grow quicker and then die even quicker.
MLM Technology Products – Consumable Products
This one will fool you, it did me. I love technology and so does the general public. We are all awed by, and in love with technology. Our rabid purchasing of those sexy gadgets has always helped to power our economy.
But think about that, technology changes so rapidly, no one has a lock on that market.
Companies can go from billion dollar valuations to bankruptcy (Poliorid, Eastman Kodac, etc, etc) with just a slight shift in new technology that makes the old one obsolete, virtually wiping it from the face of the earth. If you don’t believe that main stream technology can become obsolete, then go try to retrieve some data you have stashed on a floppy disk or a zip drive.
Now because of our techo-love this MLM product category can if fact be one of the easiest to recruit for, but the flip side is that the volume can die in a heartbeat.
Now the argument for this type of product, that I have heard from several reps building this type of company in today’s market, is that people are already using this type of product already and so it’s a no brainer to just offer it to them cheaper and so why wouldn’t they switch?
Now this is true, but that is also a double edge sword, what happens when your slight edge over the competition fails or the market shifts.
With Technology you are marketing a commodity that is usually price sensitive and also easy to quantify in relation to the competition.
When the price shifts or newer sexier technology comes along, you’re done!
Sorry but as love as I may be with my new smart phone or my Sprint cell service, the love affair is over once there is a better device or a lower price.
Not convinced? Do you remember Excel Telecom? Huge, explosive MLM growth story that rode the wave of telecom deregulation. They rode that wave from 0 to a $ billion dollars++ and then back to 0 (out of business) in a pretty short period of time.
So what is a hard working MLM Success seeker to do?
Well in my humble opinion you have 2 choices:
Build fast or
Change Your Business Model
The Truth & Illusion Of Network Marketing
Look network marketing is a business and just like any other business there are risks and rewards. The problem is that most hopefuls in MLM have been sold an illusion.
The illusion of Walk Away Residual income…….
You know, put in the time, hit the mark, retire to the Bahamas and have your grateful company wire the money to your bank account while you sip Rum Runners on the beach (now I have to tell you, I love that vision)!
Sorry this is a business and you are going to have to run it and keep building.
MLM Success – Business Models & Growth Dynamics
Now Growth Dynamics are the 2nd part of the MLM success puzzle. Now remember the example I gave where to generate an income of $5000 per month took over 2000 people in your downline? Well the critical factor that effects how quickly you can develop that army of distributors is company growth dynamics.
Growth Dynamics & The Momentum Growth Curve
The truth is that a standard MLM’s are totally dependent on growth dynamics, and continued consumption because it takes about 4,000 to 10,000 reps in your downline to make you $10,000 a month.
Now if you don’t want to take several years to get there, the only way you can hope to speed up the duplication process in a standard MLM is to hope the company hits one of those legendary accelerated growth curves often referred to as “Momentum Growth”.
MLM Momentum Growth – The Fast Track
This is the main reason that MLM Pros tend to focus on new companies that have just launched, since they have a better chance of hitting an accelerated growth curve in the early days.
Now I know some large companies claim this is not true but let’s face it, from a business standpoint it’s a pretty well known fact that the go-go growth days for any company are usually in the early days where if they hit the mark they can rapidly expand into their easy market. However once they have grown to let’s say 500,000 or 800,000 distributors or so, the continued growth becomes slower.
Now this S shaped growth curve is a fact of life for all companies not just MLM’s.
However the only way you can take advantage of Momentum growth is to be properly positioned with a large enough group when it occurs which means you have to become a high volume recruiter.
Since you can’t foretell the future or control what happens with your company you have to learn how to build fast (10+ reps a month), bank the money, and realize that no matter how much you love the company, the time may come when you have to start over.
Also if you don’t see the growth dynamics materializing after a reasonable period of time just more on.
The Top Tier Network Marketing business model, is not as dependent on company growth dynamics and consumption patterns within your organization. (See my Blog Post on Top Tier vs Traditional MLM, which is better) So you can generate a higher level consistent income stream sooner, as in a few months as opposed to 2 years or so.
The only downside to the Top Tier MLM business model is that its generally a pay to play ballgame so for you to be able to get the big dollar commissions of $1000 to $10,000 per transaction you need to have yourself bought those products.
Also when you go looking for $10,000 or $20,000 buyers you are fishing for the big tuna and you will generally sponsor fewer per month unless you just cast a bigger net (that’s how they do it with tuna by the way) and increase your lead flow and if you do it right, with high volume comes huge bucks!
Now one very attractive model that has come into the MLM market recently is the Top Tier Direct Sales MLM model (see Tidom). Now this model shares the best parts of the Standard MLM models with the same huge income potential that you get in a Top Tier MLM.
So in the final analysis you pay your money and you make your choice, and there are a lot of great companies out there that you can make money with. However understand what you are buying and what the risk factors are with a deal before you buy in.
I constantly advise students to look first at the business model and success factors before they simply fall in love with a product or a photocopied check.
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