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Most Network Marketing Professionals Are Earning A Commission Check

Most Network Marketing Professionals Are Earning A Commission Check

An argument often used by the anti-network marketing gang: “Only 1% make money”.

It’s a myth and to bust the myth we have analysed, Distributors Earning disclosures and Annual reports 2018 from a number of public network marketing companies.

Those companies facts and figures are reported to their share holders and are seen as reliable.

Nu Skin has started to qualify their distributors, in a new way and has qualified only 6% of their members as Sales leaders. 94% is either customer or a basic distributor, purchasing products for personal use.

NU SKIN Annual Report 2018:

Outside of Mainland China, individuals can elect to participate in our business as follows:

  • “Distributor-Direct Consumers”—Individuals who purchase products directly from an independent distributor at a price established by the distributor.

 

  • “Company-Direct Consumers”—Individuals who purchase products directly from the company. These consumers are typically referred by a distributor and may purchase at a discount. These individuals do not have the right to build a Nu Skin business by reselling product or by recruiting others.

 

  • “Basic Distributors”—Distributors who purchase products for personal or family use or for resale to other consumers. These individuals are not eligible to receive compensation on a multi-level basis unless they elect to qualify as a Sales Leader under our global sales compensation plan. We consider these individuals to be part of our consumer group, as we believe a significant majority of these distributors are purchasing products for personal use and not actively recruiting others, and their purchasing levels are similar to our “Company-Direct Consumers.”

 

  • “Sales Leaders and Qualifiers”—Distributors who have qualified or are trying to qualify as a Sales Leader. These distributors have elected to pursue the business opportunity as a Sales Leader and are actively recruiting consumers and distributors and building a sales network under our global sales compensation plan and constitute our sales network.

 

  • As of December 31, 2018, we had a global network of approximately 1,244,000 Customers“Customers” are persons who have purchased products directly from the Company during the three months ended as of the date indicated.

 

  • Approximately 73,400 of our Customers were Sales Leaders. As of December 31, 2018, approximately 810 Sales Leaders occupied the highest level.
Nu Skin Sales Leaders per region 2018

 

Herbalife has a similar approach to separate members from business builders:  

  • As of December 31, 2018, prior to our February re-qualification process, approximately 687,000 of our Members have attained the level of Sales Leader, of which approximately 561,000 have attained this level in the 93 countries where we use our worldwide Marketing Plan.
Herbalife Sales Leaders 2018

 

The advantage of strong distributor qualification is that companies show the world, and in the USA the FTC :), a large part of your business building distributors are earning a check.

Rule of thumb: 90% + of the members of a mature network marketing company have no intention to build a long lasting business, why should you qualify them as a distributor?

 

It ruins your credibility and might trigger regulators to look into the company.

Comments (13)

  1. It’s abundantly clear that distributor numbers have been overstated historically. What we are witnessing now is a sea change as companies are running scared of greater regulation. It’s clear that with the move to greater digitalisation and the rise in importance of social media that the route to market is evolving. In order to meet this challenge networks need to adopt new tools and practices. One of the key ways to create a new paradigm is the adoption of automated marketing whereby leads are generated programmatically and nurtured in a software system based on artificial intelligence and conditional logic. The outcome is that warm and hot prospects can be rapidly identified and team members in the downline can move swiftly to “close” these prospects expeditiously. The ultimate goal of automation must be to empower and optimize the work of the downline so that all can replicate the best practices of leadership and enjoy much greater productivity and long term engagement.

  2. For context… I love network marketing; I’ve been involved one way or another since 1995. I remain a staunch advocate. I love NuSkin, having enrolled in 1999. I consider NuSkin my network marketing home.

    However, this analysis is terribly flawed and horribly misleading. The companies are simply changing definitions, not solving the problem.

    I wager that the vast majority of the 94% customers (by the new definition) joined with the intent to earn income. I know I did. I even advanced a few ranks in the compensation plan and built a team. I still consider myself a distributor and have for 20 years. However, the company changed definitions and no longer considers me a distributor. But how many ‘customers’ spent several hundred dollars to become customers? Probably quite a few of the 94%.

    And the worse part is, the 94% is just the tiny tip of the iceberg. Ask yourself, how many people who were previously recruited for the income-opportunity don’t show up in the Income Disclosure Statements at all? How many people did ‘previously-considered-distributors’ like me recruit for the income opportunity who are no longer considered Sales Leaders or Customers and therefore not included in these statistics?

    Our industry MUST face the facts. As practiced, almost certainly less than 1% of the people who join the industry with the intent to earn income ever earn more than $100. Many of them pay hundreds, if not a thousands of dollars, to join on the advice of their sponsor and upline. The industry needs to be honest and address that problem. New definitions may give companies legal cover, but it’s NOT leadership. It certainly doesn’t change the actual results in the field.

  3. What Tom said this the naked truth. You joined with a lot of money and the result is minimal if you dont build a team of strong marketers.

  4. Well said!

    The issue is companies are not transparent on real income being paid to its “sales leadership” as they put it.

    1st if a companies sales are (X) for the year they should include this is what we paid out to the total field this year that generated those sales. Including all compensation paid out to the field (not company employees) See I don’t care what the sales of a company are. I care what the field sales force gets paid out of those sales that tells a lot about a company. But that’s very hard to get that information. Why is that maybe because it’s not that good. If it was good they would promote it!?! Don’t you think?

    They should break it up starting at 100k a year how many at that level. Then move up 250k, 500k, 750k and so on! How many people not percentages (People) at those levels.

    Then people can make an informed decision about how much the company pays out and how many people have gotten to the levels they want to get too.

    People care about what they can make, hype might sell but it’s the real numbers that makes a sustainable business and that what I wanted and I’m sure everyone that joins to build a business what’s to do it once and not jump around all over to have it for one reason or another.

    It gets harder and harder to find that business that is sustainable that gives you the best results for the effort.

    Good luck everyone and take your time to look at where you will build a lasting career. It’s a business so act like a business owner!

    Derek

  5. Not all companies require a large up front investment or push products you don’t want or need.

    I represent a company that offers products pet owners buy every month and you can start for $1.

  6. Yes mlm is super you don’t sell you join the company to benefit health people will ask and share testimonies then its when you get commission. Its like when you see sale in the shop you told others but nothing you will get

  7. A commission check is meaningless without knowing the operating costs incurred by a distributorship. Operating costs include more than just the cost of goods sold. Selling, general, and administrative expenses must be taken into account as well before a sound assessment of a business opportunity can be made. IRS data from income statements filed by MLM retail distributors for 2014 suggest that gross retail margins must exceed 56.67% for a typical distributor to fully offset her/his operating costs. Seventeen years of identical IRS datasets reveal that the data for 2014 are not atypical.

    No MLM firm I’ve researched offers gross retail margins that exceed 50%: and cryptic commission discounts, i.e. Herbalife’s earn base reduction take real-world gross margins even lower.

    Short story: MLM critics are correct when they assert that fewer than 1% of MLM distributors net a profit. In fact, the data suggest that it is statistically impossible for MLM distributors to net a profit on retail sales. This begs the question: When MLMs pay out total commissions in excess of 65%, why can’t retail distributors fully offset their operating costs? The answer is simple. Upline commission payouts to sponsoring/recruiting business opportunity participants eat up more gross margin than the monetary value sponsors/recruiters add to products at the point of retail sale.

    1. Each individual distributor is self employed. Therefore their costs are not known by Amway. The business plan, if the business owner has bothered to make one, should make it possible to keep within budget and return a profit.

      A traditional business and an MLM business must follow the same business rules to operate profitably.

      The problem as I see it is people get swept up in the emotional component and blindly following upline with not much more experience than themselves.

      When starting or building any business you need information and advise from people and sources with proven experience.

      Retail sales alway return a profit. I buy in Amway products and resell with a minimum profit margin of 20% after expenses. These profits I split 3 ways. 1 for tax 1 for business networking growth and 1 to save/self. For me MLM is a win win and very rarely have I reported a loss. It does happen and usually because I chose to overcommit.

      This is my experience not my opinion. I don’t understand why so many people fail. Simply think and operate MLM like any other business.

  8. ??????? ???????? ? ????????? ????????, ??????? ???????????? ??? ?????? ???????? ? ??????.
    ???????? ?????, ??? ???? ?????? ?????? ??????, ?????? ?? ?????, ?????? ??????. ? ?????? ??? ?????? ? MLM ????? ??????? ????????? ??????? ?????, ??? ?? ??????? ??? ? ?? ????????!
    ????? ?????? ? ???????? “Total Life Changes” ??? ??? ?????? ???????? ???? ??????? ??? ?????? – ???????????????!

    1. I think that today, the situation is such in Russia, it is very difficult to do your business, work for hire does not give a good income for life. Only a networked, legal business can provide a great opportunity to change life for the better, you can create a large income for the family.
      Today, many network companies are promoting unique products, such as Total Life Changes from the USA.
      Soon the company will be in the market of the CIS and Europe, this is a great opportunity to change your life, if you are ready for this – join the team.

  9. Endlich gibt es ein Unternehmen wo wirklich jeder erfolgreich werden kann, einem Marketingplan der mehr als fair ist, egal ob Partner oder Kunde, geringe Startkosten, einfaches System, tägliche Auszahlung, einzigartiges patentiertes Produkt und ein sehr kompetentes, loyales Team im Hintergrund, mit jahrelanger Erfahrung in Vertrieb, Forschung und Teamaufbau, danke AREGO, ich bin angekommen.

  10. I am always surprised at people’s naivety (but you are right, also by the bad faith of the vast majority of mlm). I practice for 30 years the mlm, but also conventional business franchise. Obviously the money is always in the massive multiplication and therefore reserved for an elite of recruiters, commercials, entrepreneurs, animators. Sellers are cannon fodder, nothing new under the sun must be pro massive development, direct selling is unprofitable. Especially do not make mlm if you do not like the idea of ??massively recruiting, to animate permanently, and to repply the future leader to place them in the stable. There simply can not be success in a business model or retail is secondary …. that’s for direct sales at home. And that’s the drama !! …. because without a loyal customer base for everyone the sand castles almost always crumble. No mlm plan should allow any form of compensation without a minimum of personal monthly sales to real customers. This is the hypocrite ball since tupperware in the 60s …. people dream to make a fortune without too much work and the other companies maintain this idea. The ultimate bullshit in mlm is crypto and speculation …. is the crowds fall in .. for sale, everything to win with thousands of ants that blissfully imitate. And to say that in the 90s we thought that the mlm was a model to learn how to undertake and get out of his condition with great hard work …..

    1. Why do people think and believe retail is secondary with MLM. Quit the opposite. Without the retail sales there is no business. So simple.

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