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© 2011 MLMAttorney.com - Sponsored by Jeffrey Babener
The emergence of online penny auction companies have recently been under analysis in the direct selling industry. The Federal Trade Commission (FTC) has recognized the difficult and complex circumstances of online penny auctions. The FTC offers the following consumer information, stated verbatim, line-by-line, released in 2011 (http://www.consumer.ftc.gov/articles/0037-online-penny-auctions):
Not all penny auction companies are illegal.
How does a penny auction work?
In a penny auction, the site owner posts items and you pay to bid for them. Unlike a traditional auction, where only the winner pays, penny auctions require you to pay before – and as – you bid, win or lose.
You may have to pay a fee just to register for the site, and sometimes, it’s substantial. Then, you have to buy a “bid package.” For example, you may “buy” 100 bids for $50. Additional bids cost more money, often between 50 cents and a dollar per bid.
The price of auction items usually starts at zero, and each bid bumps the price of the item up a penny. Each bid also adds time – from 10 seconds to 2 minutes – to a countdown clock. The goal is to be the high bidder when the clock runs out. But because the clock resets with each bid, the auction process can be unpredictable and take time to complete.
What does “winning” mean?
Winning the auction doesn’t mean you’ve won the auction item: It means you’ve won the right to buy the item at the final price. For example, your $50 winning bid for a camera might seem like a bargain, but if you placed 200 bids that cost $1 each, your cost will actually be $250 – plus shipping and handling, and possibly a transaction fee.
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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.
Surprisingly, many of the giant direct selling companies in the industry today had humble beginnings, often with one individual’s dream. That individual usually had little or no money and became a MLM mogul after years of dedication; stirring laundry detergent in their bathtub or selling bibles door-to-door. Some were lucky enough to grow their companies without the financial backing of investors, but others were not. (Like the rest of us!)
For purposes of raising investment capital, the market section may be the most important part of your business plan.
Many MLM entrepreneurs are lucky enough to have a dream to start a MLM company but lack the capital needed to fund the project. Most people turn to family and friends, to co-workers, then to angel investors, and finally to private placement venture capitalists to find the money they need to grow their business. Investors may listen to the presentations, but the money is never a guarantee.
Searching for MLM Startup Capital – Funding the Direct Selling Company
What is the first step in the process to secure capital to fund the MLM startup dream? It is the business plan, of course! Before any sophisticated investor or angel financier will consider funding your marketing program, they will look for an organized presentation of your ideas, projections and abilities. A good business plan will be the backbone for any private investment of capital and will also help to bridge financial gaps as your company grows.
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At MLMLegal.com, we are continuously working on a project of maintaining over 700 MLM, direct selling, network marketing, party plan company profiles and keeping them accurate and up-to-date. Our unbiased MLM company profiles offer summary information about each company’s founding story, its impact on the MLM industry, products, compensation plan, as well as its growth and sales volume figures.
Please welcome ten new MLM company profiles to MLMLegal.com.
In addition, we work tirelessly to add new MLM companies as they launch into the U.S. and global marketplace. We hope that the simplified MLM company profiles help to provide readers with quick information about individual companies without requiring readers to have to wade through each company’s, sometimes complex, websites and compensation plans/opportunities.
Please welcome ten new MLM company profiles to MLMLegal.com:
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LydiaStyle
Beauty Society
Rastelli Foods Group – Rastelli Direct
NYR Organic US
YouDazzle
Xplocial
Frezzor, Inc.
Solavei
Nutrazon International, Inc.
This blog post is the companion post to the video: Success Stories in the MLM, Direct Selling, Network Marketing Industry, in which MLM Attorney, Jeffrey Babener, discusses the successes of leaders in the direct selling industry.
The great companies of this industry were started by charismatic individuals.
There have been many studies done in regards to what makes successful direct selling companies. Many case studies have been done about Mary Kay and her leadership, which have been cited at schools like the Harvard Business School and the Wharton Business School. Many schools have lectured on the institution of direct selling. Many people have added business modules on entrepreneurship in an effort to understand what it is about these renegade, visionary and charismatic individuals that cause people to flock to them, follow them and build this type of business for themselves.
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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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The question below is taken from one of Mr. Babener’s client’s distributors’ Q&A pamphlets:
Q: My friends and relatives often ask me if direct selling/MLM/network marketing is a “real business”… I would like to give them something meaningful to consider … your take?
A: People have always asked that question… and it is a fair question. Keep in mind we have nearly 16 million people in the United States selling consumer products and services in the range of $30 billion and more than 90 million people around the world doing this with sales exceeding $150 billion. This activity penetrates the fabric of our society. Earlier statistics, presented by the Direct Selling Association, have indicated that, perhaps, one in ten households have somebody who is doing this part-time.
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People often ask, “What are the top two reasons why MLM companies fail?” Many have speculated. However, we have been in the direct selling industry for a long time and the answer may actually surprise you. The reason for a company’s failure is not necessary always a legal one, which may sound odd coming from a seasoned direct selling attorney.
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We are often asked a question about the past and the future of direct selling, network marketing and the FDA. It’s a good question because so many major players in our industry, ranging from Herbalife to Nikken, to Melaleuca to Amway, are driven by health products and dietary supplements. The direction of the industry has generally been a very good one. Until the mid-1990s, companies were very concerned about what health claims they could make about products. It came to a head in 1994 when the FDA’s strictness regarding claims became so difficult that Congress almost unanimously passed a bill called “The Dietary Supplement Health Education Act (DSHEA)” of 1994, which recognized the importance of providing health information to the consumer so
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