I was having a conversation with one of my CarbonCopyPro applicants via Facebook last night, and he asked me a very interesting question after having read the Coffee House Letter.
He asked, “Ferny, do you really believe that the MLM is dead? Do you really believe that the internet killed it? Cause I’ll tell ya’, it’s alive and well here in Malaysia”.
Before I get to my answer, I want to first say that I don’t believe MLM is ever going away, unless of course, it is outlawed or severely restricted by the FTC – not likely to happen.
Here’s my position and my answer to him, MLM is NOT a business and it never was. All the internet did was magnify the truth and for all intents and purposes, killed the potential for a longterm sustainable income for 99.999% of the people in the industry, when they rely on solely the training and guidance of their company & upline.
Once upon a time, it was a great money making opportunity, (not a business), because for the most part, organizations in the industry were insulated from negative feedback, news and advertising, outside of their friends and family.
Once the internet came into the picture, all of a sudden distributors within organizations and their prospects were bombarded with online ads, online editorials, rumors and negative websites attacking specific companies and the industry at large.
The company and the upline leaders were no longer able to control the conversation. In fact, if you chart the growth and eventually decline of most big industry giants over the 90′s (like Amway), you’ll see a very interesting trend.
In the early 90′s, Amway was on top of the world and greatly benefiting from the recession, but as the internet started gaining market penetration, you’ll notice the size of organizations, and company sales take a nose dive. The internet nearly killed off some of the biggest companies in the industry. Diamond distributorships literally disappeared and once successful 6 & 7-figure networkers, were forced to get jobs and start all over again.
These companies have yet to recover and the money they now spend in the United States on commercials and new ideas to survive in the US market are heavily subsidized by the revenues generated in foreign markets where the job markets are no where near as good as in the US (even when compared to our current recession) and where sales is a common means of making a living, (i.e. no difference between a job and a distributorship).
Which brings me to another point – when you join an company, you are a sales rep (no matter what they tell you) and you are not in business for yourself.
Real business is reliant on systems, which you control and have developed. In a real business, you make 100% of the decisions on how to advertise and market your business. This is not the case when you are a networker. And your company may at anytime, end your distributorship without notice or justification – leaving you without any legal recourse.
So if we’ve established that MLM isn’t a business and that the internet is accelerating attrition rates throughout the industry, what is a networker to do?
Well, I know what I did.
I left the MLM compensation model behind and adopted the model, which top industry earners from across the world are now adopting. In marketing pieces it is referred to as GPT, which is cloaked way of referring to Top Tier Direct Sales programs like WMI which is powered by Carbon Copy Pro.
But here’s why this is my model of choice for building a networking business over the MLM comp model.
- 100% of the marketing and advertising is controlled by me – primarily free traffic sources like SEO & Social Media.
- People join my team because they trust me as a trainer, mentor and coach. Not because of hyped up pre-launches bulls**t. My brand is what attracts, not the company’s.
- The company I’ve chosen to partner with, pays huge commissions upfront for your efforts and the majority of your income does not rely on how big your downline is or the activity of your team members (but it does help a lot if that happens!) I have the control in my business and I simply choose to represent a product and opportunity as part of it.
- Most Important: I can spend quality time mentoring and coaching my team members, because I can make 4 times the income of a full-time aerospace enginner, by sponsoring only 4 people per month.
So the simple truth is that if you want to build a serious business for yourself, create a multiple six-figure income (or more) and are tired of the hype and tiny checks of your MLM distributorship, read the Coffee House Letter.
Hope this was helpful.
peace,
Ferny
P.S. If this has provided value to you, I’d love to hear from you. 
Please leave a comment.
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12 Comments
Anonymous
on 7th Sep, 10 09:09pm
Anonymous
on 7th Sep, 10 09:09pm
Joanne Ott
on 13th Aug, 09 11:08pm
Hi Ferny,I think the problem with MLM is that most distirbutors are still taught old school methods. MLM needs to get with the times, although having said that, I do know several six figure income earners who got that way with old school. But it doesnt work for most.
Fernando Ceballos
on 13th Aug, 09 11:08pm
Agreed, but it's not just the networker, it's the companies as well. They're unwillingness to evolve and stacking on the restrictions on how a networker can promote the business is the root of the problem. I don't see them changing, because of potential liability issues.
Kapil Desai
on 14th Aug, 09 12:08am
I think it will be interesting to see what happens to the Network Marketing industry if (when?) the economy gets REALLY bad. Now obviously – there will be far more people looking for alternative ways to make an income. Assuming that Network Marketing does in fact, become their "drug of choice", I'm wondering if "Direct Sales" will really be a popular choice? (relative to traditional multi-level marketing and internet affiliate marketing). If the economy gets REALLY bad, and most people are struggling to keep up with costs of living, then will people really be looking to invest $1,000+ dollars into an opportunity?….or will they be more inclined to get involved in something that will cost far less?….and may have far less overhead? (i.e. traditional multi-level marketing). On top of that – while companies like Quixtar and Herbalife may have outdated comp. plans, they still have the 'brand' name by their sides.
Kapil Desai
on 14th Aug, 09 12:08am
Affiliate marketing may also be a great lure for the masses due to its low cost entry and "non pyramid" identiy. I guess the point I'm trying to make, is that if the economy gets REALLY bad, then traditional MLM and affiliate marketing may have far more appeal for the masses than the Direct Sales industry….ESPECIALLY for those DS companies with 1UP or 2UP comp. plans.
Claudine Lopez
on 14th Aug, 09 04:08am
it's all worki've done 2 mlmstill selling 2anti-aging creams – arbonneand liquid vitamins – no pills, just powder in your waternot made too muchbut when the kids are grown up – i might have time to work themmore internet mlm sellingand advertisingare youy in a mlm
WIllie
on 3rd Sep, 09 03:09pm
Ferny,
Would you consider the MLM business model the minor leagues and GPT or Top tier direct sales the big leagues?
Would you be more apt to have someone in your GPT who had previous MLM experience as opposed to someone who is brand new to this type of business model?
The reason why I ask these questions is because in defense of MLM, I would say that personally MLM has taught me some business basics along with some online marketing basics that I today still use.
GPT sounds great, but from what I know if it, it is for those who have had some marketing success that do well.
I also agree with what you said about the fact that we are just sales reps for a company. Though that is NOT how it is sold, the reality is…
Ferny, excellent post as usual.
Ferny
on 4th Sep, 09 05:09am
Hi Willie,
I don’t disagree with you on any of your points.
MLM does have value, you can make money and it is an awesome training ground for entrepreneurs.
I would consider GPT more leveraged because of the potential for income you have in a very short period of time, mostly dependent on your efforts and skills as a marketer. So I guess you can call it Big Leagues, because it requires serious dedication – not a hobby type approach that most MLM’ers take.
Thanks for your comments, Willie.
-Ferny
Tim
on 11th Sep, 09 07:09am
Great article. I have a friend who is constantly losing money by joining MLMs and likes to think he runs his own business and knows about business and marketing. He doesn’t and it’s annoying.
I have gone to the MLM meetings and never signed up for one, as tempting as they are. I always have the same question and I thought you might be able to help me out.
Why don’t these MLM companies ever try to build a substantial, dependable customer base?
To me it seems like their goal is to just create new sales people and the money that’s being made at the top is coming from the people buying “franchises” or whatever they may be called. Perhaps its just the companies I’ve been exposed to. The MLMs I’ve been exposed to are usually geared toward the health industry and the products use ridiculous ingredients and make very bold claims that always come with an asterisk.
Ferny
on 11th Sep, 09 07:09am
Hi Tim,
Some MLM companies do focus on building up a customer base. Herbalife is a great example of having the focus on the products and they are well positioned in the weight loss niche – of course, recruitment is also a big component of their model.
More recently, Amway has shifted in this direction, because of the trouble they are having recruiting people and of the constant scrutiny they are under by the FTC.
Ultimately, the companies that do survive and have longevity, have to develop a solid customer base. Most of the time, the customer base comes from ex-distributors who didn’t want to jack to build the business, but liked (got used to using) the products.
So by recruiting a bunch of people, you by default will get customers, which is why Amway has done so well over time, despite its focus on recruiting and reputation.
For this reason, most new companies don’t bother focusing on developing customers, because what helps them grow fast is the massive influx of people looking to start a business. The product is just what legitimizes the business in their eyes (and in the eyes of the FTC).
For new companies, the model is simple. Recruit people, get them on a minimum autoship of $200 and then get more people. The people that don’t do anything, become wholesale customers and those that build make money. Usually, the company begins with just one phenomenal product… then a few years later, they launch a new product to create excitement after the excitement of the initial launch dies down… rinse repeat.
But very rarely, will this formula create longevity, especially if a newer, better product via a company with a “better” comp plan comes around. As a leader in the company, you hope that the company plays their cards right and has all the pieces in place for longevity.
However, as a leader (possibly making 30-40k per month), you can never view what you have as a business, because it could all be taken from you.
Which is why, the financially responsible thing is to take the money you make and invest it in real residual income streams like Real Estate or other investments, (the idea behind the GPT model). Encourage other leaders under you to do the same.
And build your name and brand as a leader, which is valuable separate from the company. If they company ever goes away, you can move your organization to another (possibly better) opportunity, and you can do it again.
Essentially, the company is NOT the business. It is you – the trust and relationships you have with your group/list is the business, which you can count on.
Hope this helps, Tim.
-Ferny
BigDinSoCal
on 11th Sep, 09 11:09am
Perhaps Malaysia hasn’t yet been affected by the conversations that take place on the internet.
Companies that use the GPT form of marketing can also be affected.
The difference being is you earn more upfront commissions to weather the storm of shrinking downlines.
I dislike sounding like a broken record but unless you “brand you” “inc you” or establish yourself as some sort of authority, mentor and/or trainer…you too could become a casualty of MLM and GPT programs.
Certain regulatory agencies have shut down companies of all types. (MLM, GPT, AIG
If the principals of a GPT style program run off to Necker Island with their secretaries or are in shady business deals with shady business partners under the umbrella of that particular GPT style company…Their associates will need to seek a new home to sustain their income.
In that respect MLM & GPT associates are all salesmen to their respective companies. Typically they don’t control the product offerings, the management, or the overall direction the company decides to pursue.
The only thing you can control is you and how you are perceived in the industry.
The internet is both a blessing and a curse.
I recall Mark Yarnell swearing off the internet many years ago. He felt it was detrimental to his industry.
What probably took Mr. Yarnell 5 years to build…took a guy like Dillard half that time to achieve the same financial results.
The internet is still relatively new.
MLM is such a powerful industry as a whole so I expect it to overcome & adapt to the changing climate.
It could very well mean that some MLM companies will move towards the GPT model of compensation. Perhaps a hybrid of sorts which could very well be seen as front loading in the eyes of the FTC, Attorney General, etc..
~BigDinSoCal