Company payout (in commissions & bonuses) per sale for the total of all upline participants equals or exceeds that for the person selling the product – resulting in inadequate incentive to retail and excessive incentive to recruit. Jim can make more money getting commissions off the product that distributors beneath him are required to buy from the company than he could from selling the shakes at retail to customers outside of the business.
The all-too-obvious point here is that management of supply and demand, and keen insight into realistic market penetration and saturation are crucial to any business, for any product or service. Mismanagement of this aspect of a business will eclipse good market access, excellent product design, human resource assets, production quality, and so on. Simply stated, a failure to "hit the target" of supply and demand can ruin a company if the market is oversaturated.
If you get an MLMer to admit that they’re having to pay a lot of money to be a part of an MLM company, they’ll all often say something like, “Well, this is just like buying a McDonalds’s franchise. When you buy a McDonald’s franchise you have to pay the company a large franchise fee to start and then buy the product (fries, burger patties, Flurry mix) from McDonald’s.”
At the end of the 1990s, network marketers were learning to harness the power of the internet. The implementation of online shops and electronic orders made employing social networks much easier for individual distributors and businesses. Since the rise of social media platforms, it’s become common to see advertisements by people in your network for companies like Rodan + Fields or ItWorks.
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Seeing the disastrous end of market naiveté in Russia should help clarify the fundamental problem with the MLM approach. In the real world, the profit of a company is directly related to the skill and prescience of the "hand" on the "supply knob," so to speak. In the USSR, that "hand" could not react fast or accurately enough to market realities through the best efforts of the bureaucrats.
When someone gets pitched to join an MLM, the recruiting distributor will do what’s called “selling the dream.” They’ll emphasize all the money you can make working as a distributor. They’ll share video testimonials of a distributor talking about how they paid off their loans and bought a nice car and take their families on nice vacations every year. (Watch this soaring, inspirational video, and notice how you’ll have to keep reminding yourself: this is a pitch for an essentials oils MLM.) The pitchman will have charts that show the earning potential once you recruit a certain amount of people. And best of all, they’ll tell you that this beaucoup income is passive. Yeah, you’ll have to work a lot in the beginning, but you’ll eventually reach a point when money just appears in your bank account magically without you having to do anything.
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I am 70 years old and have arthritic pain and stiffness in my hands. I work part-time for a delivery company and spend 4-5 hour shifts removing small and large packages from a belt think of Lucy and Ethel at the chocolate factory. I bought the 3000 MG tincture about two weeks. I started out with 6 drops @ 2X per day 30MG. It took the edge off of aches and pains from working and arthritic pain but increased the dose to 7 drops @ 3 times per day 52.5 MG. Although I still felt some aches and pains it decreased considerably. Today I have started 7 drops 4X per day 75 MG. I anticipate getting much better results. All-in-all I am quite pleased with the 3000 tincture oil. I feel that the oil has given me more energy to do things around the house probably because I am now experiencing much fewer aches and pains in my body and hands. By the way the reason I am taking the oil 4 times a day is because I read that the body will not absorb more than 15 MG at a time and discards any oil above that amount. It may not be true but thats my story and Im sticking to it.