MLM May Not be a Residual Income Investment Idea for you
Multi-level marketing (MLM) is a strategy where in addition to profits made by direct sales, profits are also made from the sales generated by salespeople that have been recruited. The recruited sales force is often called a down-line and participants are remunerated according to the level or tier within which they fall.
Although network marketing or MLM is largely promoted as an opportunity for anyone to create a passive residual income, MLM is often not what it is hyped up to be. If MLM is one of the residual income investment ideas that you’re considering, then it’s necessary that you understand how a MLM operates and then determine is appropriateness for you. I recently watched the documentary ‘Betting on Zero’ which provided some really interesting insights into the workings of MLM businesses. I have included the movie trailer below and if you are considering an MLM business as a residual income investment idea then I strongly recommend that you watch this documentary.
Within MLM circles It’s not uncommon to hear network marketers talking about becoming millionaires without working hard, getting rich super-fast and retiring on a beach whilst the down-line does all the work. With MLM it is in fact the exception to the rule if you are part of the small elite that reap the millionaire lifestyle.
Multi-level marketers are also trained to sell opportunities instead of selling the products. Most people who join multi-level marketing are only allured by the promise of getting rich, and very rarely by the products which are often over-priced to factor in multi-level commissions. Any business strategy that does focus on product quality and price will eventually flop.
The inherent design of MLM schemes means that only people high up in the MLM organisation really profit from the business and this is what results in the overall disadvantage to new people joining a MLM business. It’s really not that you can’t make profit with the MLM strategy, the problem is that MLM businesses are designed to ignore the saturation point, which eventually leads to a collapse due to no more recruits joining the scheme.
The Allure of Product Discounts
MLM products and services are often promoted by providing large discounts. The problem is that the discounts that are given are not aligned to customer needs. When a MLM product (with discount) is compared to a similar product on the market, it will still likely fall short of being close the market price of the alternative product.
MLM schemes must recruit new people or they will fail
A number of MLM companies have been largely criticised (and in some instances sued) because they have focused on recruiting lower-tiered sales people (instead of focusing on actual sales) with misleading information, price-fixing, and high initial start-up costs for new recruits. MLMs have also been associated with exaggerated compensation schemes, cult-like techniques and the exploitation of individuals.
Other Residual Income Investment Ideas
There are a number of residual income investment ideas that are not associated with a MLM of any kind. For a full list of residual income investment ideas that you may like to employ to help you with your financial freedom have a look at this site www.passiveresidualincomefreedom.com