Multi-Level Marketing Realities – Part 15
At the end of part 14 I said I would talk about the 20/20 story on the MLM company and how the MLM company raised the price of their popular dietary supplement to their distributors at about the same time. But first, I must review some interesting events that happened before this. Early in 1999, the MLM company decided that they were changing their marketing plan from a 6 level plan to a 3 level plan. That means that instead of making commissions from 6 levels of distributors you would now make commissions on 3. They would grandfather in any existing distributors so those with more than 3 levels already would not see a major cut in their commissions. This didn’t affect us much as most of our distributors were on our first level, though our future commissions would be affected.
The compensation plan change was to increase the profits of the MLM company so that they could contribute more to political campaigns and try to influence policy in Washington. I guess they were starting to get a lot of heat from the FDA about ephedra (ephedrines) and they wanted this problem to go away. They felt that they could influence the FDA with the help of some congressmen, senators, house members, and whoever else would take their political contributions. And of course these contributions came from commissions they weren’t paying their distributors.
At the end of September 1999, the company announced that they were going to raise their price, supposedly to help them make additional political contributions. They said later that this was to weed out fake distributors or marginal distributors who were selling at too low a price. We told our distributors that they should buy extra product in October because of the price increase and we ourselves borrowed money and bought 12 master cases. All of this pushed our commissions for October to nearly $20,000.
In October, the MLM company went on 20/20 to tout their product and their evangelical following of distributors, only to have it backfire on them. The news show was able to find a customer that had a stroke while taking the product, which left them disabled for life. In addition, they profiled the founders of the MLM company, who were earlier convicted of producing and selling meta amphetamines. This was a complete disaster for the company and was a turning point for the popularity of the product.
As of November 1st, we increased the price of the product on our website thinking that the MLM company’s increase was permanent. We were now priced right with the corporate website, at $45 for a single bottle sale. This was strategic as I was thinking that if we were able to sell 12 bottles a month that we would at least get our commissions, and we would push harder to sponsor new distributors. Unfortunately, this eliminated sales on our website and our November commissions were virtually zero.
In part 16, I will talk about our Disney trip in December of 1999 where we told everyone we were unemployed without an income.