Friday, May 8, 2009

Amway Global - Analysis Of A Platinum Group

Many people who are in Amway, or were in Amway at one time is very likely to have seen the 6-4-2 plan. I understand some modifications may have been made in certain groups but the basic premise of this post will still hold true. An IBO who sponsors 6 who sponsor 4 who sponsor 2 would have a group of 78 IBOs. All told, this group would allow the platinum to earn about $47,000 (before expenses).

The plan assumes that IBOs all move 100 PV. 100 PV costs about $300, thus each month, this group would spend $23,400, or $280,800 annualized. Amway takes in the $23,400 in sales and returns about 33% in bonuses, thus the bonus on $23,400 is
$7722, or $92,664 annualized. These bonuses are returned to the IBOs based on their volume with IBOs receiving various amounts based on their level. The majority of IBOs will receive $9 or $10 and a select few will make some significant money.

Now let's say this same group purchases tools such as standing order, KATE, functions and other system materials. Lets say the average business building IBO spend on average $200 a month on tools. This same group would spend $15,600 a month on tools, or $178,200 a year. NONE of this money is returned to the IBOs, thus somewhere upline keeps ALL of the profit on the tools.

Thus this group spends $23,400 a month on product and $15,600 on tools. That is a total of $39,000 a month a group of IBOs spends on products and tools. Annualized, this same group spends $468,000 on product and tools.

Amway gives back about $7722 a month in bonuses or $92,664 a year in bonuses and the LOS such as WWDB, BWW, or Network 21 gives back zero to the IBOs.

Thus a platinum business spends $39,000 a month to earn $7722, or annualized, spends $468,000 to earn $92,664.

Simple math CLEARLY shows that only a few can receive any significant bonus. Guess what? If this bonus money were divided evenly, it would result in each IBO receiving $99 each, per month. Amway reports the average active IBO earning about $115 a month. There is a minor variance, but this post clearly shows that Amway groups as a whole, cannot collectively profit unless many products are sold to people who are not IBOs.

Some if not most IBOs are taught to "buy from themselves".


MichMan said...

Joe, good analysis.

Some will state that not all of the ibos will be part of the system and spend the $200 per month on tools as you show in your example.

And that is why the AMOs teach YOU to be a leader. "You should stock up on them since your group may not do it."

In other words, ibos are taught to be a leader and buy extra tools/tickets/etc to promote to their group.

For instance, when a new contacting CD comes out, you are encouraged to purchase 10-20 for yourself. "But if you want to grow, what are you going to do when you sponsor someone and you have none left? You need another 10 on hand for that person you sponsor. Don't make them wait days or weeks to get started. Be the leader! You can't sell a thousand dresses unless you buy a thousand dresses!"

Three months later at the next major function, you find out that the CD has changed. And the process starts all over again.

You are encouraged to buy another 20 for yourself and even more for your group... because you're the leader!

Joecool said...

Michman, thanks. IBOFB uses that argument that a real group like this doesn't exist, and it is a valid concern.

My answer is to add 78 IBOs to this group who sign up and do nothing. Then you have a more real picture, but this "model" just shows how the Amway plan doesn't work. The 78 IBOs are interchangeable with those who quit and are replaced, etc.