MLM Business Model

Ever since the birth of the modern day corporation the business model of choice has been direct sales marketing. This business model was the standard for decades, so when network marketing arrived on the scene it seemed logical to apply the direct sales model to this new form of marketing. But was direct sales the best MLM business model for this revolutionary approach to business building?

In an article by Cindy Krishcher posted on July 3, 2008 at the MiamiHerald.com site titled, "Balancing Act - Direct sales businesses boom as economy tightens", she illustrates a perfect example of the tired notion that MLM is all about selling.

In this piece Ms. Krishcher sites several entrepreneurs as a growing group of people who, spurred on by various strains on modern day living, have decided to seize the reins of their financial future by means of various "direct sales" businesses with a variety of products.

This increasing surge toward creating extra income from home through some sort of "direct sales" business, & so becoming one's own boss, is nothing new. For the past 50 years every economic down turn has sparked just such an event.

What has changed is the mind set of what this industry is all about. Early on network marketing was built by people who had clawed their way to the top in the corporate world. In one way these folks were forward thinkers. They sought to create a new type of business where one could reap the benefits of owning a corporate franchise without paying the corporate price. This was true genius. If only they'd thought it through.

The mistake here was not in the creation of a new form of business, but rather in the application of an old business model to a new breed of business. After all, it was the lumbering nature of corporations maintaining the status quo that this new idea sought to liberate it's users from. In fairly short order distributors learned that the corporate (direct sales) model was not a good fit for this new kind of business.

So why is the direct sales model bad for MLM? Here are a few good reasons:

The Independent Distributor -they're self-employed, so they can't be fired. Corporate types hate that.
Big Egos - this privilege over production mindset creates an adversarial environment.
Corporate Greed - image being everything, as companies grow so do their image needs. The income to meet those "needs" comes from the monies generated by the distributors.
Corporate Structure - in the corporate business model (direct sales) income is based on corporate position rather than personal production (as in the network marketing model).
Corporate Mind Set - when times get hard corporations look for ways to keep up their lifestyle while "trimming the fat". In MLM this usually means restructuring the compensation plan to give the company more money, or termination of distributors making huge incomes.
Industry Experience - many former corporate big shots forgot the lesson of building a knowledge base by starting from the bottom & working their way up. Thusly, people who had no clue what it takes to build a distributorship as a rep were telling reps what to do.
Poor Customer Relations - the whole scenario with greedy companies & desperate reps puts customers off, especially when the product is over priced due to the previous stated problems.

So what has changed? Once again, the mind set. The days of the DSA are by no means over, but by the same token it is also true that the DSA no longer serves the best interest of today's MLM company let alone the distributor base.

This void gave rise to the advent of the Distributor's Rights Association (DRA). The DRA started as a grass roots movement to expose & rectify the failings of the DSA & the MLM companies clinging to the direct sales model.

Today the DRA advocates for the rights of distributors who otherwise have no voice. Furthermore, the DRA seeks to raise awareness within the MLM industry & among the community at large that the new business model of choice is relationship marketing.

Network marketing companies focused on the relationship marketing model recognize the need for:

Company Management Experience - corporate leaders who are building a distributorship alongside other distributors.
Company Management With Integrity - leaders eliminate ego from their vocabulary.
Honor Where It Is Due - financial reward for product movement is put first.
Maintaining Low Overhead - this maximizes profits so the comp plan can benefit the distributors the most, rather than keeping a lavish life style at the expense of the reps.
Creative Compensation - companies look for ways to increase income to the distributor base where ever possible.

There are still a substantial number of companies in the MLM industry clinging to the direct sales model. In fact, many new companies start up each year using this model. They refuse to acknowledge the adversarial relationship this puts between the reps & company. Predictably, most of these companies fail due to their backward thinking. And still others go on to become monsters that suck their reps' dreams & wallets dry.

So how do you recognize a forward thinking company? It's pretty simple. DSA member companies & their leaders either don't know, or don't care that they are living in the Stone Age. They're only interest is their bottom line. On the other hand, company leaders who are DRA members seek to generate a profit in ways that are beneficial to all parties.

Many of these topics are covered in the ebook "Success In 10 Steps" by Michael Dlouhy.
Over the last few years, with over 100, 000 downloads, the book has become a network marketing classic. A lot of folks in MLM have used it as a lead-generator to build their business. The book was written with frustrated network marketers in mind who haven't had the success they'd like in the business. Obviously, that is a mega market. The frustrated MLMer learns many pivotal points of network marketing success, and gets a step-by-step plan for changing their results from bad to good. There are no companies or products promoted in the book, so it has been a very popular and effective lead generation tool for a lot of people in MLM.

For a free copy of the classic "Success In 10 Steps" ebook go to:
http://michaeldlouhy.net

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