THE POWER OF INFLUENCE AND TEAM-WORK IN A MULTI-LEVEL MARKETING ORGANIZATION
In the world of business there are many different approaches taken in order to influence the sale. Some businesses take the big box store approach selling and advertising their merchandise through a larger entity such as a Wal-Mart, Home Depot or Best Buy. Some take an exclusive approach selling their merchandise only through exclusive retailors such as Nordstrom’s. With these types of businesses there is always a middle man between the manufacturer and the final customer. In a direct marketing organization the middle man (the retailor) is shut out.
In the direct marketing approach a sales ...view middle of the document...
These companies only sell via word of mouth not with billboards, not with television ads and not with full page newspaper clippings. So how do businesses like these recruit new representatives? The same way they sell their product direct sales.
Many of the companies that use direct marketing use a complementary strategy to recruit new sales people; they recruit via word of mouth. Hiring new employees by having current employees recruit friends and family to help build their personal business and work on their team. Whenever somebody recruits a new member for their team that member becomes a part of their “downline.” The original recruiter then gets a portion of the profits this person generates and that of those down his/her downline as well. This makeup is referred to as that of a Multi-Level Marketing (MLM) organization and today over 70% of direct sales are done within MLM organizations (Bhattacharya, 2000).
In a Multi-level marketing organization each individual has an Upline and a Downline. The Upline consists of the person who recruited him/her and the person who recruited that person etc. all the way up to the CEO or Owner of the organization. In these organizations typically there are no bosses or presidents. Employees do not get fired, but their success depends on the amount of work they want to do to be successful. Most do not do enough, but promises of potential riches keep them coming back for more. Now many may feel as if this sounds like a pyramid scheme, and it does. According to the US Federal Trade Commission the one distinguishing characteristic between an MLM and a pyramid scheme is that MLM’s lead with the product whereas a pyramid scheme leads with the business. Compensation for MLM companies is based on volume of products and individual distributor sells directly and through his/her network while pyramid schemes compensate those distributors mostly for recruiting others then charge them high fees to join (Scheer, 2006).
In a pyramid scheme the new recruits are influenced into buying into the company for some large initial investment. In a pyramid scheme “distributors rarely sell products to outside customers, only to other new distributors they bring in, who must bring more recruits in to make money” (O’Donnell 2011). These individuals are then told to go out and recruit others to do the same with promises of large pay-days when their network grows large enough. In most of these organizations the incentive for selling the business is much more than that for selling the business. Those at the bottom are encouraged to attend conferences and events they must pay for along with more selling materials which may soon leave them with a large investment and many times nothing to show for it. “New entrants are “effectively required” to purchase more products and event tickets from the high level distributors.” (O’ Donnell, 2011). Once the scheme is developed those at the top will be made very wealthy off the investments made by...