People within the direct selling industry are often referred to as Independent Consultants, Distributors or Representatives (Mary Kay Inc. , 2012). Direct Selling has been around since the mild to late SASS. But because of the recent appearance of so many new direct sales companies, people have had mixed opinions about their legitimacy; how can the average American determine the difference between a trustworthy company and a money-making-scam? There are scams and completely legal companies; the difference between the two can occasionally be hard to find.
Today’s most thrown around phrase, in the business ethics scheme”?tends to scare consumers away from deciding to join, or even purchasing product from a direct ales company, while other testimonials claim that this Industry can change people’s lives (Album, 2008). Prior to Mary Kay I was managing a clothing store, at which I worked 60 hours a week, and was, at that same time, a full time college student enrolled in summer classes. My opinion of the direct selling industry was not a good one.
I thought there was little money in it, and assumed the people who actually did succeed were few and far between. I believed that the only people who would choose to do something like Mary Kay were either old woman, with blue hair, who had nothing better to do tit their time, or women who had failed at nearly everything else in life, and decided to give this a try. It was certainly not a Job for a successful 20-something woman with goals, ambitions, and a decidedly bright future.
The most common argument surrounding the “negative image” of the direct selling Industry would be the pyramid scheme. A pyramid, In the business world, “Is strictly a money game Tanat rarely deals In real commerce,” exclaims Wendy Harris, author of the Black Enterprise’s article, “Network Marketing or Pyramid Scheme? ” (Harris, 2004). Pyramid schemes are illegal; in fact, some top direct selling nannies have been accused of being a pyramid scheme.
The multi-level marketing plan has a similar structure, and because of the nature of their career path, it can be difficult to tell what makes a legit company and what makes a pyramid scheme? The easiest way to identify a pyramid scheme is to notice when a company focuses only on a recruiting basis, also known as a “naked pyramid”. The main characteristics and red flags of this type of pyramid would be the lack of product involved. The major reason for the illegality of a pyramid scheme is because the business plan is set up or failure (Ross).
The idea behind a pyramid structure starts with the few people who organize the fake company, then each of those people recruit, let’s say 10 people ?for simplicity purposes?and those 10 people invest their personal money into the fake business and are promised a large, immediate, return on their investment. All they have to do is recruit 10 more people who invest money that the recruiter will take from them and pass a percentage of that investment onto the top recruiters and keep the small remainder for themselves.
Then those 10 people will recruit 10 more people, and those 10 people will recruit 10 more people, and so on; eventually there will be no one else to recruit. The pyramid then collapses when the bottom people, the last of the recruits, realize they have no one left to recruit, and so their money is lost to the original “founders” of the pyramid. Only the top layer of team members walks away with any real money, and become extremely wealthy practically overnight ?which the lower people were promised they would become in turn?off the lower levels investment.
In the picture to the right you will notice a visual representation f an illegal pyramid structure, similar to the example I gave previously of a “naked pyramid scheme” (Ross). However, there are some pyramid schemes that do involve a product line; this is where the distinction between a pyramid scheme and a legal company can get skewed. The simplest way of revealing a pyramid scheme that does involve product, is to identify that the product line is not the company’s main focus? the focus will still remain on recruiting and dividing up the new gathered investments among the previous members.
The product is a tool used to gather people in groups when sharing the companies “incentives”. This allows the pyramid to reach a larger audience, and more potential investors, in a shorter amount of time. It also gives this scam a “real company’ camouflage while stealing money from unsuspecting recruits. The illegal company then offers large “bonuses”?the investments from newly Joining members?as the main salary (Ross).
Other than investments, this type of pyramid schemes product line is very lack-luster. There is no research behind the products being sold, which would normally create a highly sought-after and evolving product, and because of this, it does not attract reoccurring customers, therefore the company does not stand a chance in a competitive market, which would normally lead to bankruptcy in corporate America (Ross). A competitive market is what determines whether a company will have success in today’s economy.
The reason these companies have such a high success rate at the beginning, is because the pyramid is designed to only give the few people who started the company extreme wealth, while stealing money from the unsuspecting, and trusting, new recruiter team memoirs. A version AT ten pyramid scheme, Known as ten Point Scheme, has seen recent activity in today’s society. The Opinion Scheme, which is named after Charles Opinion, a scam artist in the sass’s, was an overnight pyramid. The east coast investor tricked thousands of locals into investing in his plans, by ensuring a 40% return on buying and selling international mail coupons in Just 90 days.
He claimed to take the investments he received and by using different postage amounts, and use those to buy and sell mail coupons internationally. Opinion would later acquire more investors down the road to invest in the same project but use that money to ay off some of the first round investors. The only reason he did pay back previous investors was to make the transactions appear legitimate. It was found later that Opinion only spent about $30 on mail coupons. In the end most people lost their money to Charles Opinion (Grants, 2009). The last recorded charges of a Opinion scheme happened in 2008 (Ross).
While helping a customer in my clothing store one day I found out that she was a sale director with Mary Kay. I was familiar with the company; I had been using the products for years, and had Just happened to be out of everything. I had Just moved to a new area and no longer had a consultant; she was a blessing in disguise. The Mary Kay director took down my order and information and said that she would let me know when my product had arrived. The very next day Melissa, the Sales Director with Mary Kay, walked into my store and had my entire order that I had placed with her the day before.
After getting my payment, Melissa then asked me if she could buy me a cup of coffee and tell me a little bit about her business. I immediately put on my brakes and told her I was definitely not interested in selling Mary Kay. I thought, “Oh no, she wants me to throw away my money by selling a product for old women. ” Melissa let me know that there was no obligation to Join, but she had a goal Just to share with 40 women that month. She seemed so genuine and kind that I couldn’t help but go to coffee with her.
With so many scams occurring in a less developed market than corporate retail, you can imagine the accusations against even the ethical, and successful, direct sales companies out there. Rather than convincing you of overnight wealth, a true direct sales company generally shares, what the industry calls, “the business opportunity’ (Album, 2008). Most direct selling companies offer several incentives to join, which include: a generous sales commission, recruiting commission, recognition, self-growth, car programs, advancement, and flexibility.
It almost seems too good to be true, but you do have to do the work to obtain these benefits. You cannot simply convince people to buy in to your company; you must find hard-working individuals that will prove their self-worth, similar to a corporate Job and different than a scam. In the direct selling industry, a hefty sales and recruiting commission is one great Erik that generally wins over a prospective team member. The sales commissions vary greatly, from as little as 1%, to as high as 50%. The second form of income derives from recruiting commissions.
Although similar to a pyramid structure, the commission structure is known?and taught in VIVO’ League Business Schools?as a dual-marketing plan. The recruiting commissions and bonuses do not come out of the new Joining member’s investments, but rather out of the corporate office’s profit, which is made by the new team member’s sales. Another generous appeal to new members is the company recognition. The recognition appeals to many consultants Decease AT ten lack AT recognition given In everyday elite?personal Ana professional.
Often at a corporate Job you are not recognized for the hard work you put in, but only seen by your superiors when something goes wrong. Recognition in the Direct Selling Industry comes in many forms, from applause to giving away diamonds and all- expense paid trips. One commonly known form of recognition is the car programs that this industry offers, made famous by Mary Kay Ash and her infamous Pink Cadillac (Mary Kay Inc. , 2012). The standards for these prizes are posted by the company, and when you achieve them, you received recognition.
The frequent struggle to the top of the corporate ladder can be nauseating to think about. Quite often, when a corporate office lists positions within the company, simply meeting the requirements will not guarantee your pay raise, position and responsibility. But in a dual-marketing company, in order to make more money and move into a new leadership role, simply fulfill the requirements and promote yourself to the new position and pay grade. These requirements again vary from company to company, UT are specifically laid out, and when accomplished are rewarded accordingly.
The most positive element of becoming an Independent Business Owner in the Direct Selling industry is the self-growth aspect. These companies are set apart from corporate life because of the ease of success; however, success can only be achieved by those who wish to achieve it. These business plans are simple and effective. The product is highly sought after, and backed by a passionate sales force. But the true reward for working your business as a business, and not as Just a hobby, comes from he Journey you take while expanding your comfort zone, helping customers find Just what they need, and managing from a servant-leadership mentality.
These traits can be inherent, but the bonus of signing up as an Independent Business Owner, is that they don’t have to be. These companies do not run on a constructive criticism curriculum. Rather than seeing the leaders reprimand their team members for wrong-doings, the individual team members learn from their own mistakes. This gives a trusting environment for new and old team members to reach out for help hen they do not know how to complete a task in their own business. This gives every person a chance to grow at their own pace.
The company wants the sales force to be successful, and offers all the tools necessary to do so; all you have to do is communicate, and you too can find financial freedom, on your own time?in an ethical way. The truly successful companies operate as members of the ADS?Direct Selling Association. The ADS is the national trade association of firms that sell directly to consumers?direct selling, or person-to-person selling. Their mission is “To rooter, serve and promote the effectiveness of member companies and the independent business people they represent.
To ensure that the marketing by member companies of products and/or the direct sales opportunity is conducted with the highest level of business ethics and service to consumers ” (ADS, 2011). By these standards you can assure that these companies that choose to be a member of the ADS are trustworthy. The ADS has a code of ethics that not only ensures to the validity of a company, but also spells out the rights that a customer and a sales person should have in the involvement with that company (ADS, 2012).
Before even considering starting any business, naturally, the first step would be to research the industry, and create a business plan. There are over 300 members in the ADS (ADS, out Tanat doesn’t mean Tanat all scams nave Eden reallocate. Do ten research before starting a business, and all the incentives given out from the direct sales industry can be accomplished. The beauty behind starting a direct sales business, compared to becoming an entrepreneur, is that there is already a sturdy foundation from which to build upon. And a commission structure set in stone from which aging profits from can immediately start.