Why mlm VoIP sales usually don't work.

A fair and balanced critique of mlm and why it may not be the best choice for a home based voip or wireless sales business, unless...

[part one | part two | part three]

You might see some companies offering VoIP or wireless cell service using a multi-level marketing approach, or what is also described as network marketing.  These companies typically have similar structures with affiliates or marketing reps getting paid on recruits that they bring into the company, as well as the

recruits that their recruits (down line) bring into the organization.  The payment scheme usually goes multiple levels deep (hence the term multi-level), with some companies having more levels than others.

A closer look at network marketing for VoIP sales...

Financially, MLM organizations generally offer new recruits relatively low set-up/start-up costs compared to other small business/franchise start-ups, which for many home based business entrepreneurs is a plus.  The actual costs will vary by program, some being lower than others.  In any case there will always be some costs associated with any business start up.

• Start up costs can be relatively low compared to franchises or other businesses which is a plus.

Not all companies are the same and certainly not all companies offer the same exact products, but generally in VoIP and wireless sales the products are in a similar category.  That by itself is not a bad thing, but competitive pricing forces a limitation on what can be charged for a service and still be able to market it successfully.  It is true that you have a low, medium and higher priced services tier, and especially in the residential voip offerings pricing needs to be within a range.  This pricing limitation may be less critical on products that can be marketed as totally unique, which is something mlm organizations like to allege, typically which are vitamin milkshakes and other exotic juices, a far cry from VoIP and other communications solutions.  Some companies tout that they have unique VoIP services or an income source that is unique, but in most cases the service or income revenue conforms with other VoIP companies and is not significantly different or uniquely special.

Take as an example a $25.00/month service with lots of features and unlimited long distance US calling.  A fantastic deal for anyone looking for phone service.  A typical monthly reoccurring 20% or 25% would equate to $5.00 and $6.25 respectively.  One hundred accounts would bring in respectively $500.00/mo. or $625.00/mo. as a reoccurring monthly revenue stream.  But, not in a mlm business.  The "partner" or upline "mentor" would get his share, as well his upline mentor, etc., etc., splitting the $6.25 down to a lot of very small slices.  Actually, too small for any consequential revenue for the individual who sold the VoIP service.  And even though they might get an additional one-time sales bounty for signing a new VoIP service account, usually in the realm of $25.00 to $50.00 the amount of "partners or managers takes away too much of the hard won revenue.  And even then with this revenue, typically the upline would get a portion with their upline getting a portion. So, what could have been another income of 100 times $50.00 equals $5,000.00, would not be the case, further disparaging the "actually selling rep". 

• VoIP has a pricing structure that will not allow excessive monthly service fees for customers.
• Too many managers having to be paid off of too few sales people.

This brings us to the why most mlm (multi-level) marketing reps need to sign up additional new recruit reps; it's the only way they make any money of any consequence.  And here-in lies the first flaw why VoIP mlms do not work well. (This caveat may hold true for many different mlm products, but we are focused on VoIP and wireless cell phone service mlm sales organizations.)

Charging a business start up fee or "initial joining fee" covers some good things like a replicated site with an order process, help and guidance, sales literature, and "training*"; so this business cost actually has a value for a new business entrepreneur.   But, once into the sales organization the new recruit rep quickly finds out what the marketing rep that brought them in found out, without signing up additional new recruits, they are not going to make any money.  At least not anywhere close to what is touted as a potential income when they were given a sales pitch.

• The focal point of the mlm business quickly becomes signing new reps and not selling VoIP.  The churn of affiliates and revenues generated from the new affiliate's initiation and monthly fees becomes the focus.
• The training focuses on creating a down-line "organization" and quickly becomes more about multi-levels of revenue with fancy large unrealistic income numbers, not on learning about VoIP and communication sales; which could be a benefit for the rep both in the short term and long term.

We continue our mlm critique here.