Why Some MLMs Fail

How can you tell if the network marketing company you're interested in will succeed or fail? Take a look at these reasons.

Here are the cold, hard facts on failure in direct sales ornetwork marketing. If a new network marketing company flops, itwill be for one or more of the following reasons:

  • Inexperienced management
  • Insufficient capital
  • Ineffective distributor team
  • Inability to recruit distributors
  • Incommensurate compensation plan
  • Ineffective products
  • Lack of uniqueness

Now, it's true that any one of these things can bring acompany down, and it's also true that when a company fails,it's generally a result of more than one of these factors. Butto me, the saddest circumstance, because it is the mostpreventable, is when companies with great management teams, goodcapitalization, exciting compensation plans, powerful marketingsystems and competent "can do" distributors fold becausethey are strapped with an outdated "me too" product.Regrettably, I have seen this happen all too often in the 30-plusyears I've been in this business. These companies learned toolate that, with respect to the market, they were the networkmarketing equivalent of Where's Waldo. Lost against a backdropof a lot of other "me too" merchandise, they couldn'testablish unique differentials and secure a proper brandposition.

In other words, network marketing and direct sellingorganizations may peak and pass away for a lack of outstanding"hey, world, look at us" ideas.

On the other hand, there are numerous examples of companies withunsophisticated managers, insufficient capital, inexperienceddistributors and an average to poor compensation plan and marketingsystem that have emerged as network marketing giants because theyhad the right product at the right time.

Perfect products can compensate for an imperfect company.Quality products, fairly priced and delivered as promised, cancover a lot of flaws in an organization. The customer can forgiveinexperienced management, unsophisticated distributors and lessthan snazzy packaging if they really love what's inside.

Good companies will always have some form of product researchand development in progress. It must be an integral, ongoing aspectof their business. Just remember, there is no perfect company, butif you believe their products are exciting and fill your potentialcustomers' needs, you'll most likely get off to a goodstart with your initial customer base. But don't be afraid toask questions on all aspects of their business before you make yourdecision. They won't be perfect on everything you would like tosee, but good companies are always improving their business model.It is very possible your own suggestions will help them to enhancetheir business model, making for a strong and potentially long-termopportunity for you.

Michael L. Sheffield is the CEO of Sheffield ResourceNetwork, a full-service direct sales and multilevel marketing (MLM)consulting firm. He is also the co-founder and chairman of theMulti Level Marketing International Association (MLMIA). He can becontacted through http://www.sheffieldnet.com.

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