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© 2011 MLMAttorney.com - Sponsored by Jeffrey Babener
Direct Selling News reported in a May 2013 article that technology is changing
Technology Helps Direct Sellers
the way direct sellers communicate and relate with their downline distributors and customers. The article summarizes two companies that are embracing technologies that will help assist distributors in their success:
Custom clothier J.Hilburn offers its style consultants a Style Kit iPad App featuring a “full catalog, individual client profiles, the ability to create style boards, and access to up-to-date stock information.” ViSalus enables iPhone, Android or Blackberry users to “promote the Body by Vi™ Challenge, access and manage your business on-the-go, shop, and enroll others” through its Vi-Net Mobile App. These are just a couple of many direct selling companies integrating mobile strategies.
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Contributor of Forbes, Jody (Coughlin) Greene reestablishes that success in MLM is significantly based on sponsorship and mentoring in her article titled “Success and Mentorship.”
Prospective entrepreneurs should recognize that upward mobility in any business enables its growth and success.
In multilevel marketing, individual consultants (or representatives, or distributors – which all generally mean the same thing) act as sponsors by recruiting other consultants beneath them, and then the process is repeated. The process of multilevel marketing produces a system in which top-tiered consultants benefit from the sale of products by downline distributors. In fact, multiple distributors can benefit from the sale of one product. Ms. Greene believes that the consultants who experience the most success are those who received mentoring by their recruiting sponsor.
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Each direct selling company has its own rules about what distributors can say and do on the internet. It is common for MLM companies to closely guard their trademark(s) and the company has the right to regulate the usage of all of their media, whether it appears in print or online.
At the very least, MLM companies are expected to regulate the advertising being made by consultants.
The internet has opened up incredible opportunities for both MLM companies and distributors. However, at the same time, MLM companies often wrestle with these opportunities. For instance, some MLM companies will provide a location on their homepage for distributors; some will require a link from the distributors’ homepage to the company’s main website. And, in some cases, direct selling companies won’t allow distributors to promote the company’s product or opportunity (compensation plan) on the internet at all. There are two reasons for this. If the company name appears on each distributor’s homepage then search engine results will produce thousands of “hits” on distributors’ websites instead of the company’s homepage. Amid the thousands of searches, MLM companies may be concerned that people won’t be able to find the company’s homepage.
This blog post is the companion post to the video: Why Do Distributors join MLM Companies? The following is the transcript of MLM Attorney Jeff Babener’s own words:
Many studies have shown that recruitment is essential to success, particularly studies done by the Direct Selling Association.
A common question we get is “why do people join direct selling and network marketing companies?” Many studies have shown that recruitment is essential to success, particularly studies done by the Direct Selling Association. Many would be surprised at the results. One may think that most people join MLM companies for the money. However, believe it or not, money as motivation ranks as four, five and six on polls.
The polls have showed that the number one reason why people join MLM companies is because they relate to the product. The second reason they join is because they relate to company management; the person who founded the company. The third reason distributors join is because they relate to the company vision. If the company proclaims women’s empowerment or wellness, then distributors will relate to that as well. It is also important that distributors relate to the field leadership and the people that brought them into the company.
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This blog post is the companion post to the video: Why Do Distributors Stay with MLM Companies? Find out how to retain the most important asset to your MLM company, distributors.
In the realm of any business, if people feel ignored then they vote. They vote with their feet and leave.
We are often asked the questions “why do people stay with MLM companies” and “why do they leave?” Retention is essential for a successful MLM company. We are in an industry that has a lot of attrition due to the nature of the work environment. Many distributors work part time and are competing for peoples’ time. Distributors (or representatives, consultants, etc.) come and go all the time. Losing a distributor is worse than being unable able to recruit new consultants, making retention essential.
There are interesting answers given by distributors as to why they stay with the company. You may think they stay for the earnings, but income often comes in fifth or sixth place in industry polls. As a general matter, consultants usually stay with a MLM company because they are connected and bonded with the products the company sells, as well as with the company’s mission and with top management/leadership. Distributors also like to be recognized for the work that they do. Recognition is very important in the direct selling industry. These are factors that really propel distributors to stay with a MLM company.
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This blog post is the companion post to the video: Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes. Expert MLM Attorney, Jeff Babener, answers the question, when it comes to pyramid schemes, how do you tell the difference between one that’s legitimate and one that is not? How do compensation plans affect a company’s legality?
You don’t just play the notes. You need to lose yourself in the music. And, that is true for every successful MLM company.
Jeff Babener: There’s a famous Supreme Court decision that where one of the Supreme Court judges was asked to comment on the definition of pornography. He replied that he couldn’t define it, but he knew it when he saw it. Sometimes you need a metaphor to understand the difference between an illegal pyramid, headhunting, recruitment scheme and a legitimate MLM company.
This story is a good example of the difficulty in defining pyramid schemes. And, you may come to your own conclusion. Here is a metaphor that I use a lot to help people with the definition of pyramid schemes:
The metaphor is about a gentlemen, will call him Party #1, and he sells a case of canned tuna fish to Party #2 for $10. And, Party #2 sells it to Party #3 for $20, and Party #3 sells the case of canned tuna fish until it gets to Party #10, who buys the case of canned tuna for $500. And, Party #10 opens up the case of tuna fish and it’s rancid. It’s inedible.
He goes back to Party #9 and complains, “I bought this case of tuna for $500 and it’s rancid.” Party #9 tells him to take it to Party #8, and Party #8 tells him to take it to Party #7, and so on until Party #10 goes all the way back to Party #1 and says, “You’re the one who started all of this! I have a problem!”
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This blog post is the companion post to the video: How to Tell if a Company is a Pyramid or a Legitimate MLM.
You may have been recruited for a network marketing opportunity or you are a recruiter. Inevitably, this question will come up, is the company a pyramid scheme or a legitimate business opportunity?
MLM Pyramid Schemes – Everything You Need to Know All in One Place
Although this is a complex legal area, let me share a simple metaphor that draws a clear line in the sand.
The metaphor is about a gentlemen, will call him Party #1, and he sells a case of canned tuna fish to Party #2 for $10. And, Party #2 sells it to Party #3 for $20, and Party #3 sells the case of canned tuna fish until it gets to Party #10, who buys the case of canned tuna for $500. And, Party #10 opens up the case of tuna fish and it’s rancid. It’s inedible.
He goes back to Party #9 and complains, “I bought this case of tuna for $500 and it’s rancid.” Party #9 tells him to take it to Party #8, and Party #8 tells him to take it to Party #7, and so on until Party #10 goes all the way back to Party #1 and says, “You’re the one who started all of this! I have a problem!”
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This blog post is the companion post to the video: Role of Compensation Plan in a Successful Direct Selling Company. The following is the transcript of MLM Attorney Jeff Babener’s own words:
Hi, I’m Jeff Babener of MLMLegal.com. I’d like to talk to you today about the compensation plan. It better be good.
There are obviously significant legal issues in evaluating and implementing compensation plans. Review of the compensation plan a competent MLM lawyer is essential.
Does a compensation plan make or break a startup MLM company? History suggests that a good compensation plan is helpful and absolutely necessary. Does it drive financial success? Probably not. Will a bad compensation plan contribute to failure? Probably, together with other unlucky breaks. As industry expert Michael Sheffield notes with respect to a good compensation plan, “Its absence will be noted more than its presence.”
Is there anything new under as far as compensation plans are concerned? Probably not. The goal is always the same regardless of the type of compensation plan: motivate varying behaviors of distributors, ranging from direct sales, to building wide to building deep, to supporting a downline, to maximizing sales volume production and retention.
It is of key importance is that the compensation plan is easy to explain to recruits and that it is perceived as fair and balanced.
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This blog post is a companion post to the video: Debunking Direct Selling Industry Myths
Over the years some very interesting myths have occurred. Usually, they are generated by over-enthusiastic, well-meaning distributors and perpetuated by the same sorts of individuals. One such myth is that within the next ten years, 95% of all the products that will be moved and sold in the United States will be through MLM.
Another common myth is that MLM is such a powerful method of marketing that the business schools have chosen to feature it as the chief business model of the future. And yet another myth, schools such as Harvard and Wharton now teach MLM, which they don’t. However, direct selling has its place in the education system and there have been significant case studies that have been done and corporate America is clearly discovering the benefits of MLM.
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Expert MLM Attorney, Jeff Babener, discusses how companies should handle discussions about compliance with their distributors. It is important for direct selling companies to be clear about what claims/statements distributors, consultants, members, representatives, etc. can and cannot claim about their earnings and products.
Interviewer: What I want to do now, Jeff, I want to turn our attention to compliance. Because this is an important key issue for any company, for any business owner, for any consultant or distributor, to know that their business is compliant. What would you say are, in your mind, the top issues regarding compliance that someone needs to be adhering to in order to make sure that they themselves are being compliant in the marketplace?
Jeff Babener: Okay. Well, maybe we ought to talk about this issue from the perspective of the company and from the perspective of the distributor. But in fact they’re one and the same. We have two goals: one is to help make them successful, and secondly, to help keep them in business. We’ve represented a lot of the leading direct selling companies. We’ve helped to start a lot of MLM companies.
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