The Great MLM Lie about Systems and Duplication
(And why even skeptics should take a serious look at TamPogo)
by Steve McCardell
Article Summary:
Virtually all network marketing companies are closed systems, which means all the money paid to those involved comes from those involved. Basic math tells you that the average person has to lose money; and since some people make quite a lot, most are losing almost everything they spend.
You can only change this with an open system, which brings in profits from traditional retail settings and shares those profits with company reps. TamPogo is the only known business offering this model. Combining breakthrough products with extensive distribution, they're able to help all members earn money. During promotional periods, this even includes those members who never share TamPogo and never sell products.
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In network marketing, or multi-level marketing (MLM), it is well known that 95% of all members in a company will lose money in their attempt to create a residual income. And the thing that keeps people coming in or coming back is the possibility to earn, even if the odds are stacked against them.
To entice people into their networks, however, many networkers have begun promoting the message that the reason for such high failure rates is that there haven't been the necessary systems in place to create duplication. And using technology through the internet, they've designed systems to do as much work as possible for new reps, making the business look easier than it was in the past. This, they say, will allow anyone to earn money in the program.
If these people know better, then they're lying. If they don't, then they're mistaken. But in either case, they're wrong for several reasons.
The first thing to take a look at is that number, 95%. It's no coincidence that this is basically an identical failure rate to traditional brick and mortar businesses. In other words, it's not just home networkers that failure at miserable rates. It's business people that fail at these rates. And this has to do with the fact that people have to learn how to be successful. If they don't figure it out the first time around, hopefully they'll make it work next time.
In traditional brick and mortar, though, there usually isn't a next time. Those businesses are so expensive to start, most people won't be able to afford a second venture if they failed in the first. In network marketing, people can enter business after business — and failure after failure until they've learned the ropes — because these businesses are relatively cheap to get involved with. One year in a high-end, overpriced MLM will typically cost someone less than one month's rent (never mind all the other expenses) of a brick and mortar business.
MLM is a business, like any other. And yes, it is a social business. But in reality, all successful businesses today are discovering that they're in the social business as well. Relationships have a great deal to do with business success in any arena. So it is true that you generally have to begin developing charisma and leadership qualities if you want to hit the biggest bucks in network marketing. There are other ways, of course, but this is a powerful tool in all of life, and certainly in networking.
But the bigger truth on this topic is that most networking marketing business models are designed for most of their members to fail. Yes, they are designed so that anyone who builds a large team should do well financially. But here's the simple fact to recognize: since all company sales are made to people inside the organization, all the income and thus payments must come from inside the organization. This is called a "closed system." There's no money flowing in from the outside, so on average, everyone is losing money. But since some people are making a lot of money, that means most people are losing almost everything they spend.
The only variation on this theme is that many companies allow you to also sell to customers, and in this case, there is some outside money flow; but compared to a typical retail set-up, it's a small amount. It's also worth pointing out that those who know how to reach customers are typically those who also know how to grow a large team — again, it comes back to personal skills and connections.
But bottom line, almost everyone will lose money, and customer income is minimal compared to the amounts being spent and lost by company representatives. (Of course this doesn't mean that the reps aren't enjoying the product or service they're buying, and they should — or else they're selling something they don't believe in. But this gets to my strong feeling that you shouldn't join any company you're not glad to spend your money on, regardless of your income success.)
Do systems simplify a lot of the work for reps? Yes, good systems can and should do this. I don't argue the importance of having systems in place. But they don't replace work; they simply streamline it. Work and personal development are still involved in success. More important, systems do NOT change business models. No matter how large a group is grown with systems, most of the people will keep losing money because it's the only way that people above them can succeed.
This only changes when you introduce an "open system" to the business model. This happens when the company begins selling products in retail settings and bringing profits in from a much larger population in order to pay its reps. In this case, it is entirely possible for all representatives to earn money. And right now, TamPogo is the only company I'm aware of that offers this.
Whole articles are given to explaining the breakthrough nature of many Pure Chemistry products. (This is TamPogo's manufacturing partner, whose products they share profits on.) Many of them tap into the new science of biostimulation, which gets results in wellness, gardening, and home cleaning never seen before — and with all-natural, green ingredients. These are in a growing number of malls, and by the end of 2010 are likely to be in countless brick and mortar retail settings. As they sell to the world, they raise profits that are shared with members of TamPogo.
As it should be, those who earn the most from these retail profits are those who do the most to grow the company. As with any "real" business, this means growing the number of products sold — in this case, growing the number of representatives who buy products. (But with TamPogo, since there are no costs of becoming or remaining a representative, being a rep is like being a customer with one small purchase requirement each month, which can be under $20.)
With TamPogo, though, the business model is to "share the wealth" in ways you've never seen in a business before. Literally, they offer promotional periods during which someone who never recruits other reps into the business can still earn profit-sharing positions in the company.
In other words, you buy a product for yourself (usually at or below competing retail prices) and you get paid for doing so. I don't think most of us have been paid for buying ourselves products in the past. Since promotional periods are limited, shares are limited; so as promotional product sales grow, profit-sharing members see monthly checks increase over time.
Now I'm happy to have anyone spend on any product or service they want to, in any company. If something is overpriced but worthwhile to them, I can't blame them for spending on it.
But I can call them to task on spreading the word that it makes a great income opportunity since most of those who get involved will lose a lot of money. This "open" versus "closed" system issue should be the central one to think about when looking at an income opportunity. Without bringing in substantial "real world" sales to the reps that make up a company, average income will always be less than average expenses, making this the prime consideration as to income potential in MLM.
