Perusing the MLM business
Ones the member becomes part of the MLM network, as time and desire permits, he can try to expand his down-line network by making more and more members join the network. This is the point at which he has to make use of all his contacts and connections among friends, relatives, associated to impress them and invite them to join the network.
This is similar to the method used by insurance and other direct marketing companies to expand network inviting unemployed, part time employed, housewives, NRIs, VRS persons offering an opportunity to earn part-time.
Business plan of the MLM network
Typically the down-line network of a member grows in a pyramid fashion. There is a restriction that one member A can directly appoint only 2 members under him (B and C or Right and Left). He can invite further members, but they have to be put under B or C. this is applicable to all members and this creates a situation where a member is forced to help the down-line while expanding his own business.
The first member A can enroll only 2 members B and C. If he gets another prospect D, he has to enroll him under B or C (here it is under B). There are some more rules like balanced expansion of Right and Left sides of the diagram for which more incentives will be applicable.
The % of income from each addition at lower level comes down, but by the time, the network would have expanded considerably to get good over all returns. Normally when the total size of down-line reaches 50 or 100, income levels will be in lakhs of rupees. Sometimes, there is a cap on maximum monthly earnings. All payments are net of Income Tax deducted at source and hence Governments also get a share of the earnings indirectly.
Company has a parallel income network where low value items like news magazines, movie tickets, theme park tickets are also offered for sale through the members. This is called daily income scheme, which keeps their income clocks ticking.
For example- If you sell 5 apples and you make $1 from each apple, you have made $5. To make another $5, you must with the same effort sell another 5 apples. Instead you recruit 5 other people to sell 5 apples each. For each apple they sell, you get $1. At the end of the day, if everyone including you sells 5 apples, you will make $5 from your own sales, plus $5 from every other person in your group. This equals $30.
The rewards are far better recruiting as many people as possible to sell the product, than to just sell it yourself. Large volumes of product can be sold by this method. This is multiplicationthe MLM factor.
Claim Factor
The claim by multi-level marketing (MLM) companies of offering consumers a viable "part time income" or an "extraordinary income" greater than most other businesses or occupations is their hallmark attraction. It is also their greatest defense against persistent charges of pyramid scheme fraud, mind control and deceptive promotions. The question is whether MLM is a social and financial blight or a benefit to consumers. Legitimacy of this business ultimately hinges on the truthfulness or falsehood of its income claims.
MLM companies seek to obscure their devastating failure rates by disclosing the number only of "active" participants and limiting the income figures to a one-year or even shorter time frame, thus concealing the factor of the ongoing and mounting losses of new investors. Most MLMs do not reveal any data at all on actual average incomes.
If all the participants over a five-year period are included in the calculations, the failure rate rises even further. Less than one in one-thousand will be shown to have gained any profit at all. The so-called successes in MLM are in the same small group positioned, year after year, at the top of the recruitment organization.
The business model and business practices of most multi-level marketing companies directly cause the financial losses suffered by millions of consumers, not normal competitive factors or the levels of efforts or talents of the participants.
The collective losses represent an enormous transfer of money from several million people in the US each year to a handful of owners and recruiters. Like any other force that contributes to general impoverishment, this income transfer damages credit worthiness, breaks up marriages, ends friendships and degrades communities.
Of the two categories of the MLM income opportunity, rebate income and retail sales income, the most publicized are the rebates, commissions and bonuses paid out on the purchases by "downline" recruits. This is the source that the companies claim has "unlimited potential" based on the opportunity to derive payments from an "endless" chain of recruits. MLM allows all distributors to recruit others and qualified distributors to receive rebates on the purchases made by multiple levels of recruits that recruit more recruits.
Ones the member becomes part of the MLM network, as time and desire permits, he can try to expand his down-line network by making more and more members join the network. This is the point at which he has to make use of all his contacts and connections among friends, relatives, associated to impress them and invite them to join the network.
This is similar to the method used by insurance and other direct marketing companies to expand network inviting unemployed, part time employed, housewives, NRIs, VRS persons offering an opportunity to earn part-time.
Business plan of the MLM network
Typically the down-line network of a member grows in a pyramid fashion. There is a restriction that one member A can directly appoint only 2 members under him (B and C or Right and Left). He can invite further members, but they have to be put under B or C. this is applicable to all members and this creates a situation where a member is forced to help the down-line while expanding his own business.
The first member A can enroll only 2 members B and C. If he gets another prospect D, he has to enroll him under B or C (here it is under B). There are some more rules like balanced expansion of Right and Left sides of the diagram for which more incentives will be applicable.
The % of income from each addition at lower level comes down, but by the time, the network would have expanded considerably to get good over all returns. Normally when the total size of down-line reaches 50 or 100, income levels will be in lakhs of rupees. Sometimes, there is a cap on maximum monthly earnings. All payments are net of Income Tax deducted at source and hence Governments also get a share of the earnings indirectly.
Company has a parallel income network where low value items like news magazines, movie tickets, theme park tickets are also offered for sale through the members. This is called daily income scheme, which keeps their income clocks ticking.
For example- If you sell 5 apples and you make $1 from each apple, you have made $5. To make another $5, you must with the same effort sell another 5 apples. Instead you recruit 5 other people to sell 5 apples each. For each apple they sell, you get $1. At the end of the day, if everyone including you sells 5 apples, you will make $5 from your own sales, plus $5 from every other person in your group. This equals $30.
The rewards are far better recruiting as many people as possible to sell the product, than to just sell it yourself. Large volumes of product can be sold by this method. This is multiplicationthe MLM factor.
Claim Factor
The claim by multi-level marketing (MLM) companies of offering consumers a viable "part time income" or an "extraordinary income" greater than most other businesses or occupations is their hallmark attraction. It is also their greatest defense against persistent charges of pyramid scheme fraud, mind control and deceptive promotions. The question is whether MLM is a social and financial blight or a benefit to consumers. Legitimacy of this business ultimately hinges on the truthfulness or falsehood of its income claims.
MLM companies seek to obscure their devastating failure rates by disclosing the number only of "active" participants and limiting the income figures to a one-year or even shorter time frame, thus concealing the factor of the ongoing and mounting losses of new investors. Most MLMs do not reveal any data at all on actual average incomes.
If all the participants over a five-year period are included in the calculations, the failure rate rises even further. Less than one in one-thousand will be shown to have gained any profit at all. The so-called successes in MLM are in the same small group positioned, year after year, at the top of the recruitment organization.
The business model and business practices of most multi-level marketing companies directly cause the financial losses suffered by millions of consumers, not normal competitive factors or the levels of efforts or talents of the participants.
The collective losses represent an enormous transfer of money from several million people in the US each year to a handful of owners and recruiters. Like any other force that contributes to general impoverishment, this income transfer damages credit worthiness, breaks up marriages, ends friendships and degrades communities.
Of the two categories of the MLM income opportunity, rebate income and retail sales income, the most publicized are the rebates, commissions and bonuses paid out on the purchases by "downline" recruits. This is the source that the companies claim has "unlimited potential" based on the opportunity to derive payments from an "endless" chain of recruits. MLM allows all distributors to recruit others and qualified distributors to receive rebates on the purchases made by multiple levels of recruits that recruit more recruits.