Amway – $13B – Avon $12B in Sales. Is MLM/Direct Sales a Good Thing?

There has been some controversy in the last year about the direct selling model in business. I have friends who won’t even consider a product sold through this method. The industry suffers bruising on a regular basis. In some ways, I don’t blame them.

1.) We’ve all had the uncomfortable experience felt when a friend or relative is trying to recruit you into an MLM company.
2.) Many distributors are very unprofessional.
3.) Most distributors fail.
4.) Prices are often higher than similar style products in stores.
5.) In the 1970s, Amway went through years of government hearings, claiming the same.
6.) Just this past year, high profile investor, Bill Ackman, dogged and shorted Herbalife, calling them a pyramid scheme.

But numbers don’t lie and both Amway and Avon are examples of companies who have used MLM and direct selling to build huge global businesses. If you look closely at the model, you can see advantages to using direct sales as a way to reach out to consumers. Think of these things…

1.) All companies have salespeople and salespeople often push people beyond their comfort levels. This is just the nature of relationships. When we’re confronted by someone in direct sales, it is usually our own prejudices that make us uncomfortable. We sort of make our minds up before even hearing anything. I’ve sort of gotten over that uncomfortableness. I just ask early on who they represent and, if I’m not interested, I let them know right away.

There have, however, been some scenarios where I have been interested. I joined right away, not because I want to recruit thousands of distributors, but because it’s a great product and a great idea. You can mail out personalized greeting cards right from your computer; no post office trip necessary. I love it and I consider the cost of starting up the same as I would the cost of a software license that would do the same thing. If someone wants to become a distributor for me, I’m happy to sign them up, but I don’t make my living at it. SendOutCards is doing great however using a traditional MLM / direct sales model. One thing that I like about my experience there is that, although they encourage distributors, I haven’t been dogged. I have very normal and professional  relationships with my “upline”.

2. & 3.) Surely there are tacky direct salespeople in MLM and direct marketing; a lot of them. But isn’t that a mirror of the world in general? I’ve encountered tacky car salespeople and tacky cell phone salespeople and tacky retail tradesmen. They’re all over the place; maybe just a percent higher in MLM. But regarding the idea that most MLM salespeople fail, isn’t that a mirror of business in general? Why do people who criticize direct marketing bring this up when it is a well known fact that only 5 percent of businesses started are still in business 5 years later regardless of the marketing methods they use? In fact, the percent goes down to about 1 percent successful after 10 years. The success of direct sales or MLM distributors is no less than business in general.

In addition to that, MLM companies regularly contract with and train people who can’t get hired elsewhere for various reasons. And many of those reasons are not really all legitimate. There are tons of highly intelligent and professional people who don’t have a four-year college degree and who are passed over because of that. Direct marketing companies hire* these people regularly and give them quality sales and marketing training. Many very successful business owners all around the country got their start as a “failed” Amway distributor or as a direct salesperson in some MLM company. MLM companies should be credited with helping many people who wouldn’t have a chance in hell in regular corporate America. But that’s usually ignored by critics.

4.) Prices are often higher for direct sales and MLM companies, but why are they criticized for that? What country are we from, Communist North Korea? Companies regularly price their products to cover the cost of sales. If the cost of sales includes a commission structure around an MLM system, then that’s just what it is. Do we criticize Proctor and Gamble for pricing their products to pay for sales, distribution, and marketing costs? No. This is a silly argument that is often used against the MLM industry.

Many online marketers today promote a “high priced product”. This is perfectly justified. Many entrepreneurs fail because they underestimate the value of what they bring to the table. There is nothing wrong with pricing your products to include the cost of sales. For that matter, there is nothing wrong with pricing your product at any price you wish. Natural markets, customers, and competition will decide whether you’re product is worth it or not for you.

5. & 6.) Amway came through that government inquiry intact. Likely they are a better company for having gone through that fire. Bill Ackman just doesn’t understand MLM and direct marketing. I’m not a big fan of Herbalife and he has many valid critiques of the company in his very long report. But the fact is that his report shows obvious prejudice and ignorance of what makes a direct marketing company tick. He is a big Wall Street, ivory tower, snob who doesn’t have a clue about the little guy looking for a job. He also has a great interest in seeing Herbalife fail (He has “shorted” the stock which means he gains if their stock loses).

MLM companies and the people behind them often save the lives (financially speaking) of the little guy. That’s a lot more than what Wall Street will do people. Does Wall Street hire the high school graduate, the college drop-out, the recent divocee or housewife looking for part time work while she raises her kids, or recent immigrant? No way, they ignore them. And MLM and direct sales companies prosper during hard times by giving these people a chance and by training them on how to succeed in life. They teach them how to work hard and to envision success and they give them role models and encouragement. There’s a ton that they do for thier recruits.

So, for those of you who are in multi-level marketing, be proud. Thank companies like Amway and Avon, who have been through the fire and have come out very successfully and learn from what they do. Don’t go broke trying though. There may be a time for you to get out. It’s ok. But be proud of what you accomplished and learned while you were there. And if you succeed, God bless you. And if you don’t, it’s ok. There is life after MLM. And if you just don’t care for the MLM lifestyle, just say so and stay out of it. But don’t bag on an entire industry and a very successful business model because it isn’t for you.

*Note: Often they are not actually “hired” but contracted as Independent Contractors.

About Joe Martinico

Joe Martinico coaches entrepreneurs in sales and online marketing.
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