Excellent Penn & Teller program on multi-level marketing. BTW, NSFW. Those who are easily offended, shouldn't watch it. Any of it. Not one minute.....
As Penn & Teller rightly point out....
Easy Money Is BS
These multi-level marketing schemes aren't limited to home parties for sex toys, BBQ accessories, and household cleaners, of course. They are rife on the internet. If you've spent any time in internet marketing circles, you'll have seen hundreds, no doubt.
Worst business ever.
What Is Multi Level Marketing?
Multilevel marketing is where the salesperson sells items on commission - with a twist. The real "opportunity" - supposedly - is to be had recruiting a downline. A downline consists of other commission-only salespeople who try to recruit other commission-only salespeople. And so on. Some may even sell a few products!
Apparently you're not allowed to refer to the triangular-shaped Egyptian icon anymore....
The Problem With Any Marketing Opportunity
One major problem with MLM, or any market opportunity, be it affiliate or otherwise, is the size of the market.
All markets are limited. All markets are limited because the number of people is finite. Some markets are significantly more limited than others. For example, the number of people who have $2K, or whatever, to spend on, say, a rapid-mass-cash-code-instant-money-generator is quite small.
That isn't to say there isn't money to be made, however the more people trying to flick products, or recruit a downline, and the more people trying to rank well in the SERPS, the less chance a paying customer will arrive via any one site. Claims about making a lot of easy money on-selling such products, therefore, should be taken with a large grain of salt.
Evaluating Market Size And Potential
Over-hyped marketing opportunities often fail because they attempt to sell commodity product into very saturated markets. Or, there may be very little demand for the end product. If there was a lot of demand, surely they'd invest money in experienced salespeople in order to grab market share ahead of competitors.
So how do you size up a market, MLM or otherwise?
If there was an easy way, well....life would be too easy :) Really, it all comes down to some educated guesswork.
Here's one simple way of thinking about it:
Market size = the number of buyers in the market x quantity of product purchased buyers in the market per year x price per unit
You could get a rough idea of the number of buyers by looking at search volume against keywords you deem to have some level of buyer intent. Estimating the quantity they buy depends very much on the product. Does it need to be replaced often? i.e. a battery. Or is it a one-off? i.e. A house? When multiplied by the cost, you can estimate the potential size of a market.
There are a number of methods you can use. Some more complex than others. All involve guesswork. However, it's important to have a rough idea when deciding where to best focus your efforts.
Quantifying the potential of a market is somewhat more difficult.
I could find out the size of the car market in the US using the above equation, but that doesn't mean I could successfully enter that market. I would also have to evaluate my abilities, the level of competition, and the level of investment required.
This is often the mistake rookie affiliates/multi/level marketers make. They get suckered by the potential numbers, without stopping to think if those numbers make any sense. Even if they do, then does that mean the marketer can successfully enter that market?
Really, the marketing approach - be it MLM or otherwise - is irrelevant. The key questions to ask when considering any market are fundamental ones: how big is the market, how many competitors are there, and how can I compete?
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