Multi-level Marketing

I was reading Wikipedia’s article on multi-level marketing a few days ago. The article reads like it wants to stay neutral and unbiased, but the negative points stand out much clearer than the positive ones. I cannot speak for all MLM companies because I have only ever been in one, Nikken.

MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company’s products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members’ enthusiasm and devotion.

I usually use the term network marketing instead of multi-level marketing or MLM. For my purposes here they mean the same thing.

I agree that many network marketing companies are the subject of criticism, and Nikken is no different. Everything is criticized in our society. It has always been easier to sit back and criticize things we don’t understand. It takes effort and motivation to try to understand something.
I love the illegal pyramid argument. A pyramid scheme is one where you pay to join and you get paid for everyone you get to join. There is no product. To avoid pyramid schemes you just need to find companies that have a real product or service to sell that doesn’t require you to “join” to buy it. Nikken has a whole catalog of real products and I sell them all day long to customers who probably have no idea that there is something they could join. Further, I don’t make a penny from anyone joining my team. All of the money to be made with Nikken comes from somebody on my team selling product to customers or buying the product for their own use.
Price fixing in network marketing was a new one for me. Apparently it is illegal for companies to force independent re-sellers to sell their product at a specific retail price. That is why you can find different stores selling the same item at different prices. Nikken’s items have a wholesale price and a suggested retail price like any other item you can find. I usually sell them at 5% less than the suggest retail price and sometimes offer a bigger discount.
If you come across a multi-level marketing company with high initial start-up costs then you have to consider what you get for that money. If you have the money and can justify that you get something valuable for it, then I think you are probably OK. Again, that isn’t a concern with Nikken. It only costs $35 to start a Nikken business in the US, and close to that in Canada depending on the current exchange rate. For that small price you get access to everything in the online back office to manage your business. There are small optional monthly upgrade fees that I think are worth the money for the additional features. Again, those fees all go to the company. I only make money if someone buys or sells product.
Emphasis on recruiting vs actual sales varies from person to person. Some people focus on building a huge team and getting them all on a product autoship. Other people, like me, focus more on retail sales. The top level distributors in Nikken, the Royal Diamonds, have recently started teaching a great marketing plan that focuses equally on recruiting and retail sales.
Nikken doesn’t require anyone to order the product and I have someone on my team who has not ordered a single item for himself since joining my team. Nikken does strongly encourage you to order product though, and I believe that they should for one reason – how are you ever going to sell something if you have never tried it for yourself?
The next one was potential exploitation of personal relationships. Don’t all salespeople exploit their personal relationships if they can? Why would people in multi-level marketing be any different? With that said, many network marketing companies do teach new people to build lists of friends and family. I don’t recommend that practice unless you know that they are already predisposed to follow you. It probably took three years before my mother would try Nikken’s product and almost five before my father would. Neither of them are sold much on network marketing, which is fine. The best way to convince your friends and family of the benefits of either the product or the business is be successful with it yourself. Then they will either join you or not.
Some network marketing companies do have some rather complex and convoluted looking compensation plans, and Nikken’s compensation plan may look that way too to new people. I can’t really say much about other companies’ plans. Nikken’s is really straight forward though.

  1. You keep the retail profit from any item you sell.
  2. You earn 0% – 20% commission based on your rank.
  3. You earn commission on your downline sales equal to your commission level less their commission level.
  4. At higher levels you earn 6% bonuses up to 6 levels deep on your breakaway teammates.

Like I said, it may look confusing from the outside though it really is easy to understand once you see it in action.
Finally, the Wikipedia article mentions “cult-like techniques” to increase enthusiasm and devotion. I have never heard of anything like this, so if you have any stories to share on this I would love to hear them.
There is one more thing mentioned later in the Wikipedia article that I want to address. It says that very high percentages of people who join a network marketing opportunity never make any money or even lose money. That is probably true but I think their numbers are heavily skewed. For one, at least with Nikken, people are allowed to join just to get the consultant price for the product. They are not required to build the business and as long as they save more on the product than they spent for the business kit they are very happy. When Nikken generates their reports though, they will show that these people never made any money.
A second group of people sign up for the business opportunity and for one reason or another don’t stay with it long enough to make any money. Every business takes some amount of time and effort before they turn a profit. Some businesses have to run for a few years before they can even begin to think of turning a profit. If done right, a Nikken business can, and should, be profitable in its first month. The key is to not spend more money than you have.
Of course, there are some who have done very well and made a lot of money. I hope to be one of these people soon.
There you have it. I would love to hear your thoughts, so please leave a comment below. You can find out more about working with me and joining my Nikken team here.
Wayne Woodworth

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