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Sensationalism is everywhere and it's hard to know what's real, anymore. The economy is tanking, the marketing noise is deafening, and you just don't know what tomorrow will hold. This site is dedicated to a no-hype retelling of what's working for me in real estate, business, and life. Welcome.

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Archive for March, 2009

…However, I’m still not sure I want to dip my toe in the water…

First, a disclaimer – I am not currently involved in any MLM or network marketing businesses, but as I have blogged about MLM businesses before, I am fascinated with them.

Yes, I have become mesmerized because a friend of mine is making $650,000/year in her business, after only about 3 years.  Those kinds of numbers just catch your attention.

I have been actively trying to follow along with the new releases of “network marketing” gurus like Ann Sieg (The Renegade Network Marketer), Mike Dillard (Building on a Budget) and Mike Klingler (Merge Marketing).  At first I had a little bit of trouble following their product launches as I do not speak the “language” of network marketing yet, and am still a little stumped by the “business opportunity” side of network marketing — what are you selling, anyway?

However, I think I have finally begun to put the pieces together and am starting to understand the network marketing business opportunity.

Just for a little background information – MLM or multi-level marketing companies sell all sorts of products, usually something consumable like vitamins or juice, makeup, etc. that are generally paid for on a recurring monthly basis.  Clients buy these products… my question has always been – do they get a good value.  My fear is that a lot of MLM products are overpriced because of having to pay the distributors who sell them.

Distributors are sales reps for BOTH the products AND the business opportunity to become a sales rep.  “If you love our juice, buy it.  If you love it a LOT, you can make money selling it!”

The part I find questionable is that MLM seems to attract a lot of people who DON’T love the juice, who don’t even care about the juice at all, they just want to sell the business opportunity.

And, that’s a “rub” because most people who TRY the business opportunity fail.  We all know the odds are stacked against small business owners, but it would seem that they are even MORE against MLMers… probably because most people who “start” the business opportunity do so with unrealistic expectations of what it will take to build a successful business.

The usual network marketing business plan is:

  • Pay an upfront cost $30-$3,000 for the opportunity, franchise or job (however you want to look at it)
  • Pay a monthly residual fee so you can get an Autoshipment of the product (You believe in the product don’t you?)
  • Sell the product to people who will benefit from it (hard since they’ve never heard of it, and it is often pricey compared to other sources of similar products)
  • Start pitching the business opportunity to people you meet at networking meetings, trade shows, conventions, at the gym, etc.
  • Expect very few of the people you talk to, to want to start the business.  Expect most of those who start to quit.  You are only looking for a few “business builders” who can actually take the business to a successful level.
  • While you are new in the business, you can impress your prospects with the income figures of those in your “upline.” 

 

It seems like a great plan from the business’s standpoint, because they get a bunch of would-be salesmen consuming the product on auto-ship and sharing it with their family and friends.  However, it puts many people in the awkward position of pitching to their family and friends or developing a second job as a salesman hunting down would-be opportunity seekers to pitch the business model to.

My complaint is the perception (AM I WRONG HERE? – COMMENT FEEDBACK APPRECIATED!) that the products DO NOT stand alone and without your sister-in-law twisting your arm you’d never buy them.  The other side of that coin is, maybe Coca-Cola wouldn’t stand alone if advertisers didn’t spend an arm-and-a-leg selling it to you.  It’s not nutritious, they have a huge profit margin, and yet people are jumping all over themselves to buy it because it’s well marketed.

As an economist, I think it’s important to remember that people buy things of their own free will.

I think the parts that I find awkward about the MLM business model are:

  • When people pressure family and friends to buy things that they don’t really want
  • When people pressure family and friends to join a business opportunity that they’re not prepared to implement well

Clearly, there seems to be a problem with “pushy” sales people in MLM because they are not well trained, don’t have good manners, are short on real business prospects, or are desperate to recoup the money they’re investing in the business.

I guess I don’t like to pressure or be pressured.  And I don’t approve of the use of mis-leading or deceptive business practices.  Maybe I just need to sit down and read something that lays it all out, instead of getting the verbal sales pitch that seems to hide the ball.

I guess the other part that sometimes feels icky is the idea that the MLM compensation plan sets you up to be MORE rewarded for pitching the business opportunity than the product.  It seems like MLM is never about the product.  I suppose that doesn’t mean that they’re not good products but just that it benefits the company more when you sell the business opportunity.

Whew – this is getting long, but I am really feeling the gears clicking into place as I go through this, so thanks for humoring me. :)

So, where is all this going?

My sense is that Ann Sieg and the other “new wave” of network marketers are taking the MLM world away from “The 3 Foot Rule” of pitching everyone you run into, and instead using “attraction marketing” which is their word for “being found on the internet” to bring targeted traffic into their sales funnel.

How are they doing this?

Good old fashioned SEO.

By using search engine optimization and posting on free sites like Facebook, YouTube, Squidoo, Twitter, etc. they are able to capture attention, build credibility amongst people looking for information on MLM business opportunities, and drive traffic to blogs and squeeze pages so they can build a list and follow up.

With this list of “MLM” prospects, they can sell generic “How To Be Better At Your MLM” programs (people selling this made all the money in Amway/Quickstar, you know…) as a generic front-end money builder, and then use their MLM opportunity as a back-end sales pitch.

The nice part about this model, is that it is easy to teach and duplicate, so the new MLMers can turn around and create their own blogs, websites, and social bookmarking pages to hunt for their own “opportunity” leads.

 

The new revolution in MLM is taking it from a door-to-door sales and cold-calling type of business, to an automated online business. 

It’s the same thing that a lot of other businesses have done in the last few years.  Now it’s just easier for “the little guy” to get up and running on the web, so it is a more DUPLICATABLE (hot word in network marketing) as a business model.

In fact, for many who dislike the pressuring and rejection that comes with the old MLM model (and who doesn’t!), this is a MORE duplicable model than the old one.  True, it takes plenty of time to implement, but that’s the case for any business.

It’s funny that I finally get this because I have been involved in AFFILIATE marketing online for years.  That’s where I build a website about dog gifts, recommend a blue collar and give you a link to buy it on.  If you buy through my link, I get a 10% commission on your purchase.  That seems very easy and straight forward.

The difference is, most affiliate marketing programs only go 1-2 levels deep.  They are NOT MLMs for that reason.  They also do not require money to join or remain a part of.  This keeps the focus on the product, and not on selling the business opportunity.

The new MLM model has just taken this standard Internet Marketing model, and changed out the back-end product to be an MLM business opportunity, instead of a dog collar.

To me, that makes sense.

I hope this has been as informative to read as it has been for me to write. 

I’d love to get your comments and feedback below, as this has a lot of interesting topics swirling around in my mind.

 

Thanks!

Emily

Categories : Starting A Business
Comments (2)
Mar
04

Are You Getting Out of The Market?

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I promised I’d keep you up to date on the stock market insights passed along from my Father who spend a good deal of his time immersed in the financial news of the day.  And there is some heated political commentary here which I don’t apologize for since I think the misguided “fairness” policies of the Obama regime are in large part responsible for a lot of the pessimism in the stock market now.

My parents are so upset that my Dad really shocked me when he told me last night that he was stabilizing his financial position by getting SIGNIFICANTLY out of the stock market, selling shares at a loss, and going into secure assets like cash and treasury bonds.

OUCH!

He suggested that he is concerned that the stock market will continue to do badly for the next 2-5 years or more and that the recession that we’re currently in will turn to a depression shortly.

This might be a good time for you to review one of my most popular posts – What to invest in during a recession.

Given that Ben and I are much earlier in our investing careers and not approaching a retirement horizon as my baby-boomer parents are, he admitted that it might make more sense for Ben and me to not SELL in order to increase our cash position, but to continue to stock pile cash, rather than dollar-cost-averaging into the market as it continues the Obama-fueled free fall.

Assuming the market has another few bad years ahead of it, we don’t need to be in a rush to continue buying in.

Take away lesson – look for security in cash, government bonds, and precious metals.

Inflation and Deflation

Also, he mentioned that we face both inflationary and deflationary risk.

Deflation will come in the short term – this is caused by economic contractions in which people lose their jobs and can not afford to pay as much for things like houses, cars, food, recreation, etc.  Deflation will cause the cost of goods to go down.  This is bad for businesses and people who hold real estate, as the prices they can charge for goods and services will decrease.

Inflation will come over a longer period and Dad thinks it is somewhat inevitable at this point.  Inflation means that the currency loses it’s value and spending power.  Milk used to cost $3 a gallon and now it costs $4.  This erosion of the dollar will massacre baby boomers’ retirement funds.  (This is unfortunate for Obama’s so-called “Investor Class” since it punishes the people who have worked hard and saved and done the responsible thing all their lives…)  Anyway, inflation will be one of the few “tools” that the government has to dig us out of this mess with.

When inflation strikes, leverage can be your friend (the opposite is true during Deflationary economies).

Bottom Line: Cash Now, Buy Later

It’s an ugly time in the US economy right now.  The smart money is on storing up cash until “the bottom” – whenever that might be – and keeping an eye out for a turn around, both in stocks and real estate.

For the stock market, the news today said that we’d know we were close to the bottom when the market didn’t keep having these giant downward slides like it has for the last couple days, and we started to see stronger interest in buying into the market.

The real estate market is a little slower moving and even easier to time the bottoms on.  There’s some great information about knowing when to buy, sell and hold real estate here.

 

Family Budget Best Bets:  Keep your job, look for extra ways to earn income – such as babysitting, lawn mowing, delivering pizza, starting a business, etc.  Then sock it away!  According to my friends in MLMs, network marketing or “direct selling” as it’s called now, does well during a recession because people are willing to put the time and energy into making a second stream of income during lean times.

 

Good luck!

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About Emily Cressey

Emily Cressey is a real estate investor and licensed real estate agent living in Seattle, Washington. After graduating Phi Beta Kappa with an Economics degree from UNC-Chapel Hill (Go Tarheels!) her focus has been on building business for cash flow and investing in real estate for wealth. If you have questions about real estate investing, personal finance, or would like some flat-rate, affordable advice on one of these topics. Please fill in the Contact form.