Circular Logic – Compensation Plans That Make Your Head Spin
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At the time of this writing, Multi-Level Marketing is more than 50 years old. It’s truly amazing that such a ludicrous business model has survived, and even experienced incredible growth, over such a great length of time.
On the surface, this type of business has a lot of appeal. Many people are attracted to the idea of selling quality products and sharing a lucrative opportunity with their friends and neighbors.
But once you take a good hard look at the nuts and bolts …
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MLM, affiliate program, compensation plan, business opportunity scam
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At the time of this writing, Multi-Level Marketing is more than 50 years old. It’s truly amazing that such a ludicrous business model has survived, and even experienced incredible growth, over such a great length of time.
On the surface, this type of business has a lot of appeal. Many people are attracted to the idea of selling quality products and sharing a lucrative opportunity with their friends and neighbors.
But once you take a good hard look at the nuts and bolts of how 99% of these so-called ‘opportunities’ intend to pay you for your efforts, much of the initial appeal goes right down the drain. It’s fairly common for an MLMer to sell a $50 bottle of herbal tonic and make only a few bucks for themselves.
A big reason for this is the complex structure of most network marketing programs. Money is divided among so many different parties that it’s difficult to squeeze a decent profit out of a retail transaction.
For example, you might sell a bottle of your program’s super tonic at $50, but three of your upline sponsors have to get their share of the profits before you get paid. And of course there will be at least one heavy hitter in your upline tree who gets to claim some type of ‘over-ride’ bonus; this will mean more of the money you generated goes into someone else’s pocket.
And let’s not forget about the clever ‘one-up’ option many MLMs build into their payment structure. In this scenario, a member’s first sale gets credited to their immediate upline.
I’ve looked at many compensation plans that require a member to retail nearly $200 in product before they are even eligible for a commission. In other words, if they fall short of this monthly quota by even a few bucks, they don’t get paid!
The solution to this dilemma, according to the always jovial sponsors and team leaders?
Just buy the minimum amount of product yourself so that every real sale you make generates commission. And then of course you are told to encourage anyone you refer to the business to do the same.
How reasonable does that sound to you?
Sure it’s great to use and believe in a product you are trying to sell. But buying $200 in vitamins or face cream every month just so you can qualify for your distributor commissions borders on the idiotic, in my opinion.
If the potential monetary gains were significant in most cases perhaps I’d have a different attitude. But more often than not participants of an MLM system are paid 10% or less of the money they generate for the program.
In essence, the company owners and the professional network marketers who have helped them launch their business are keeping most of the money created by the retail and referral activity of their members.
You don’t need to join an online business opportunity to put money into somebody else’s pockets. That’s what a J-O-B is for.
The web is full of affiliate programs that pay their members a fair percentage on each successful transaction. There is absolutely no reason to settle for some kind of bogus MLM system that asks you to work your tail off for pennies on the dollar.