Do Levels of Commission in MLM Add to the Price of the Product?
If MLM companies pay commissions on multiple levels of distributors, does that raise the price of the product?
Of course it does. But there are two things that should be factored in when looking at this:
- Whether those levels add more cost than the traditional advertising budget does.
- Whether those levels add any value to the consumer.
Open and review this image. You see, all businesses have an advertising budget because each must find customers. For a company to “tell the world” about their products, they advertise on TV and/or radio and/or billboards and/or shelf space in a store and/or direct mail, etc. Each of those can be viewed as a “level” of expense that raises the price of their product.
In 2006 Nike paid out $702.4 million to 25 athletes to endorse their brand. So if someone claims that “MLM’s products are expensive because levels of commissions add to the price of the product,” what do they think $702.4 million dollars does to the price of Nike products?
MLM companies simply pay people like you and me the advertising budget instead of the popular method of paying celebrities.
Let’s pretend we have a company. We’ve set aside 50 million dollars to advertise the products. How should we spend that 50 million? In a traditional company we would pay some of those 50 million dollars to a celebrity to appear in our literature or in a television, radio or Internet ad.
By contrast, if we were an MLM company we would pay those 50 million dollars to people like you and me to advertise the product.
Which is better for the customer? If the distributor for an MLM company is a professional and builds their business in a first-class way by knowing their product and competing companies’ products, MLM is much better for the customer.
I’d be willing to bet that Catherine Zeta-Jones doesn’t know how T-Mobile is better than AT&T – yet T-Mobile paid her 20 million dollars for promoting their phone service. This adds no value to the customer whatsoever. But a knowledgeable sales person who can “un-confuse” a customer IS very valuable.
Recommended next page: Do MLM companies collapse?
About the Author
Tim’s experience in building his own downline of 56,000 network marketers helped him develop his signature training series. A public relations ambassador for the network marketing industry, Tim has also dedicated his time to debunking the false information spread about the network marketing industry.