So What’s Multilevel Marketing?
Multilevel marketing (MLM) offers an opportunity to eliminate stores and store employees. It’s also a way to diffuse your enterprise, so that each unit in your downline is an independent small business. This minimized their employment, reducing expenses — American employees are the most expensive in the world — and making each business less susceptible to Bolshevik-style regulation.
The businesses outlined in the plan at ChollyByGolly.com is a franchising operation structured as a stairstep-breakaway MLM.
All of the downline franchisees rely on a single business, the one without an upline, for training, research and development, product development, manufacturing, standardization, and so forth.
Manufacturing can be contracted overseas to avoid large concentrations of employees and many of the more onerous regulatory impediments. Many services also lend themselves to this kind of outsourcing: Information technology, engineering, and personal assistant/secretarial services spring to mind. Moving as much of the business out of the country as possible can keep it competitive and keep socialist government regulation from shutting it down.
The main problems with this kind of business organization seem to devolve on three perceived features: 1.) a feeling that MLM plans are pyramid schemes, and that any advantage to you would accrue to your position in the pyramid, rather than to your hard work and intelligent marketing, 2.) a veil of suspicion cast by scams involving MLM, and 3.) a pervasive feeling that even an honest MLM serves primarily to crassly exploit one’s family and friends for the upline’s personal gain.
In my personal experience, very few people have a clear concept of just what it is they’re objecting to. There are at least four major flavors of MLM. You can get a great overview by Daren Falter, in his book How to Select a Network Marketing Company. He has condensed the network compensation plan parts into several videos dealing with Unilevel, Matrix, Binary Part 1 and Part 2, and Stairstep Breakaway.
The thing that makes MLM come across as some kind of incomprehensible pyramid scheme is that there are numberless hybrids and modifications of all of these basic types, so that even if you know the primary outline of a given opportunity’s plan, you don’t necessarily know how it’s been implemented. Nevertheless Falter’s videos will inform you about, for example, the fact that no company has ever survived the matrix plan, or that some implementations of certain plans can cap your income.
The stairstep breakaway is the oldest and simplest MLM plan in existence. The companies using it have made more millionaires over the past fifty years or so than any other American company except Microsoft.
It works by seting up its public-facing representatives as independent business people, who sponsor other business people. The people who sponsored you and their sponsors are your upline; the people you sponsor and the people they sponsor are your downline.
Since you are in business for yourself, you make profits on the items you sell to your customers. Your profits are not shared with anyone, upline or downline, and are not, strictly speaking, part of the MLM opportunity.
The stairstep breakaway involves a stepped bonus that bonus pays across your entire downline. Each group in your downline is eligible to achieve these bonuses based on the production of its downline. At a certain point, called the “breakaway,” the company reaches a maximum bonus level and breaks away from the stairstep bonus. It then receives a fixed percentage of the profits of its entire downline.
Falter points out that only a small percentage of representatives get the highest bonuses, but fails to mention that only a handful of top executives make the big money in non-MLM businesses, or that 97% of all new businesses, MLM or no, go a-glimmering. That is to say, there’s nothing special about MLM per se that makes it better or worse than any other kind of business organization. It does, however, make a socialist system of government easier to deal with.
Let’s compare a stairstep breakaway bonus to one paid by a completely fictitious large retail outfit with stores: Call it World of Wally, SA (WOWSA). WOWSA pays its bonus stores to be prorated among the employees according to each store employee’s earnings.
The problem with WOWSA’s bonus is that it’s a collective bonus: It rewards the performance of the group. I’ve seen at least one article about a similar store chain to the effect that a 7-year employee there is no more productive than a three-year employee, but costs 55% more to employ. If that’s true, It means that the owners and managers of that unhappy chain are doing nothing to increase the value of their employees. And as far as the bonus is concerned, at least some of the money is being awarded for longevity alone.
The stairstep breakaway MLM opportunity pays an individual bonus that rewards individuals for what they actually produce. Upline businesses realize that their job is to train their downlines, and if they don’t make those downlines successful, they themselves will have to make do with the profits from their personal sales alone.
Note, however, that whenever you join, and however many businesses you have in your downline, you get the same break as anyone else: You make the same percentage of profit anyone else would receive for selling a given item, and you receive the same bonus rate for making your downline successful as anyone else with a similarly successful downline. You succeed or fail solely on your own merit as a marketer and your ability to teach and lead others.
Ah, but what of scams? you ask. I’ve been researching MLM scams for years, and have observed that illegal arrangements tend to fall into one or both of two categories. One of these is the Ponzi (after some guy named “Charles,” which means “some guy”) scheme, the mother of all pyramids that pays early joiners out of fees contributed by later joiners. The other one pays joiners out of membership fees — sometimes rather hefty membership fees — paid by later joiners. There is an argument that the latter plan is neither immoral nor dishonest, but it is illegal, so I consider those arguments moot for purposes of this post.
In this arrangement, you make money by selling tangible products, not memberships. There almost have to be ways of gaming the system we offer, but even if I could imagine what these might be, I still doubt seriously that anyone would have as much to gain from them as he or she would gain by avoiding them. If you can think of one, let me know so we can build in safeguards.
Finally, as to the matter of shamelessly exploiting your family and friends, I truly believe this springs from a notion, implanted in us all by our poor dads (as opposed to our rich dads — See the works of Robert Kiyosaki) since before we ever got to kindergarten. The idea is that salespeople are persons who smoothly and slickly talk anyone dumb enough to trust them into buying stuff they don’t need with money they don’t have.
If this is what you’re thinking, allow me to assure you that members of the Cholly By Golly team value their customers and prospects, winning business by winning respect. These are teachable behaviors, and applying them in the context of this business is one of life’s greater pleasures.
The same principles have to carry through your dealings with your downline. The bonuses are your paycheck for making them successful, just as the WOWSA store managers bonus accrues to his or her leading the store to success. Our MLM bonus structure makes this an individual award, rather than a collective one. Be good to the people around you, and they’ll be good to you.
Welcome to the team!
