Multi Level Distribution

The main difference between pyramid selling and multi-level marketing (MLM) is that pyramid schemes make money from bringing more people into the scheme whereas MLM concentrates on selling product. This is only an option where your product has a universal, emotional, or sensual appeal.

It has to be universal for people who join halfway down the chain to sense that there are plenty more prospects to sell to. It has to have a wide sensual or emotional appeal because there are just not enough people with enough selling ability. Intellectual requirements have to be elementary, with little or nothing to learn, think out, or remember. If you have such a product and contemplate multi-level distribution, accept that at a very early stage you will lose control. There are just more sellers than you can vet.

One Success Story

So take a tip from Claude Ganz of Dymo. When he was very young, Claude bought a chunk of shares in a new company working out of a garage in Berkeley. They were distressing vinyl tape to form letters for signs. The other vice presidents didn't want anything to do with Claude, but he held a considerable chunk of the shares. One day when Claude asked yet again for a role, the others suggested he take over international sales. Claude, being adventurous, booked a world tour. Wherever he went, he demonstrated his plastic nameplate-making gun and appointed distributors.

Over a period of seven months he ran up a tab that frightened even him. When he finally got back to Berkeley and tentatively tapped on Dymo's garage door, he proffered his expense account in great trepidation. The vice presidents, much to his astonishment, welcomed him with open arms. Sales in two of the fifty countries he had visited had more than repaid his trip.

Armed with fresh confidence, Claude went back into the world, fired the non-performing agents, and (with more experience) appointed better ones. At the end of his second trip, seven countries were profitable. The rest is history. Claude eventually became president of Dymo worldwide.

The moral, however, is not just one of persistence. For every home country, there are over a hundred foreign ones, some with even larger populations. The odds are wonderful. So, while international corporations can't bank on success, there are always a few conspicuous successes. If you have one good home market of 100 million and only five out of a hundred small countries of 20 million come good, you have doubled your market.

Let's say each representative for your software has to bring five additional people on board each day. Allowing for such a modest conversation and no work on weekends, in less than four months every person on the planet would be signed up. Table 15-2 demonstrates this scale of recruiting.

The theoretical numbers generated by the techniques are enough to make a stoat gloat although the practice rarely delivers. If it did, we'd all be at it. However, as a one-off, one-step, limited time incentive, it can form the nucleus of a very effective sales promotion.

Table 15-2 Recruitment Demonstration for MLM

Stages

New Recruits

Total Recruits

1

1

1

2

5

6

3

25

31

4

125

156

5

625

781

6

3,125

3,906

7

15,625

19,531

8

78,125

97,656

9

390,625

488,281

10

1,953,125

2,441,406

11

9,765,625

12,207,031

12

48,828,125

61,035,156

13

244,140,625

305,175,781

14

1,220,703,125

1,525,878,906

15

6,103,515,625

7,629,394,531

16

30,517,578,125

38,146,972,656

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