Does your MLM company encourage endless recruiting? Or does it encourage you to sell its products to end consumers? Which is better? Recruiting or Retailing?
A steady residual income in the long term requires a good balance of both. Residual income in network marketing is your reward for building a sales force or distribution channel where large quantities of your company’s product gets into the hands of many happy, loyal customers.
Endless recruiting IS NOT a sustainable business model. If your company emphasizes recruiting, you’ve got a tough job ahead because you’ll be recruiting for the rest of your life just to combat the attrition that will plague your downline. Here’s why…
With recruiting, you are offering your prospect a money making opportunity. With retailing, you are offering the benefits of your product or service to the prospect. There’s a world of difference.
It’s important to understand that all legal network marketing companies sell a tangible product or service that promises benefits to the end consumer. Therefore, money is only made when the product or service is sold. Now if the customer likes the product, he or she will keep coming back for more.
Long term residual income is built by first creating and serving a loyal customer base, then multiplying that customer base through a distribution channel, that is your downline.
Retailing has become somewhat “taboo” in the MLM industry because the big promise of network marketing is “never-work-another-day-in-your-life” passive income. Many consider selling products to be J-O-B. But here’s the irony… On average, it takes about 10 new reps recruited into your downline to make the same commission as one sale to a customer.
Which one requires more work? Recruiting ten people who are likely to drop out after three months… or aquiring one customer who falls in love with your product and will keep buying from you?
So why do some network marketing companies want their reps to recruit, recruit, recruit? In fact some companies set the margin between the retail and wholesale price (the price at which distributors buy from the company) so high as to encourage prospective customers to be come distributors. Why is that?
It’s because the MLM company makes more money with recruiting. With retailing, the distributors make more money.
Some MLM companies with high staff numbers, factories, and big buildings, run with such high overhead that they need to take the money that otherwise could have been given to distributors, just to keep themselves in business. Some companies’ compensation plans are geared such that 80% of money goes to the top 2% of king pin distributors and the company while the field of hard working reps get virtually nothing.
Is that a company that has its distributors interests at heart? Would you be happy to be a distributor for this sort of company?
If your MLM company encourages you to recruit, recruit, recruit over having a good balance of retailing and sponsoring, I would urge you to reconsider being a distributor for that company. It’s simply not a sustainble business model. New, part-time distributors will not make returns commensurate to their efforts with this practice.
New distributors should be trained to lead with their company’s products first and acquire customers before being trained to sponsor people into their downline. This will ensure they get instant profits and remain in the business.
To your MLM success,
Wayne Wu
Founder, The Profitable Networker
P.S. I would love your input! If you have an opinion that would contribute to this discussion, please leave me a comment below.
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