Wednesday, August 3, 2011

An Excellent Amway Explanation

I worked Amway for a while, back in college. I have to say that, while a few do indeed make some good money---at least for a while---off the business, the real money doesn't come from the products sold; the real money comes from the "pyramid": basically, you getting other people in, who in turn get others in... ad nauseum. Basically, it's the business version of a chain letter.

Sure, if you can collect ten dollars from a thousand people, you end up with $10,000. The problem is, in order to do it, you are presenting it as though all of *them* can *also* get ten dollars from a thousand people... and while you're at it, selling them their "kit", promotional tapes and materials, motivational speaker materials, etc. So what happens in the end is that you don't dump in ten bucks, you dump in anywhere from a hundred to a thousand (depending on how fast you get out, and if you go to a "conference" with hotel stay, gas money, etc.)... so right off the bat, you've got to get a ton of people in who will put in at least a hundred bucks each, just so you can recoup your losses... because you only get a small percentage from each of them---your recruiter gets a piece of their money, and his recruiter, and so on, and the company gets their piece, too. So, if you make ten bucks off everyone you recruit, you've gotta recruit ten people just to make back your first $100 YOU put in. Let's say you manage that, and in turn, each of them recruits one person, from whom you get 5 dollars per... so now you've made $150... but in the meantime, you've also put more money into travel, more stuff for your kit, more more more etc.

Very few people have the sheer charisma to recruit hundreds over the course of a year. In the end, the bulk of the money those "diamond" distributors make comes from folks who have tried it, put money and time and dedication and enthusiasm into it... and end up leaving, worse off than they were before.

The higher ups do two things that ultimately trip most people up:

1. They tell you that if you *really* believe in the products, and *truly* work hard, you'll make it big.

2. They tell you that anyone who's washed out simply didn't have the right attitude, the right enthusiasm, they didn't work hard enough, they didn't want it badly enough... etc.

The reality is, most people don't have the charisma, and sooner or later, most people realize that if they're making money, they're making it off lying to other people about *their* chances in the business. For some, that doesn't matter... but for a lot of people, it leaves you feeling like you just conned your grandmother out of her savings bonds... even though you got conned as well.

The promoters make it seem like "believe it, work for it, and it will come" is the magic formula. They play on your dreams and your misfortunes. If believing and trying hard were all there is to it, then a whole lot more of them would be successful. The fatal flaw is in the pyramid/recruiting system itself, because sooner or later, someone has to pay the price... and often it's you, your friends, your family, and whomever else *you* persuaded to join up.

Feel free to show this to your friend. He will likely counter with their prepared idea: my viewpoint comes from sour grapes, because I "didn't make it" with the company. (They think of everything in trying to hang onto recruits for as long as possible.)

Something that *might* reach your friend is this:

Has he ever participated in a school sale: candy, oranges, stationary, wrapping paper---the kind of thing that schools, bands, and clubs do to raise money? Very likely he has. Ask him to think about how many kids actually sold enough to win the bike, or the skateboard, or whatever grand prize was offered. Ask him how many only managed to sell a little bit, and how many had to hit up every relative, neighbor, and parents' coworker they could in order to sell even a decent amount, for just that one promotion. Then ask him what happened when those kids had gone to everyone they knew, their parents knew, their families knew, and every neighborhood they could hit... where did those kids go after that?

Eventually, in that kind of thing, with enough people trying to sell something, you run out of people to ask. What happens then? How do you find more? What happens when, out of every fifty people you ask, maybe only three take you up on it? How many people does he actually know? Most of us only know maybe 10 to 50 people to ask something like this of in the first place... what happens when there's no one left to ask?

There's a reason companies that manufacture products sell them through stores, or through the internet, or catalogs---you don't have to personally know people to sell them your goods, and ALL you're selling them is your goods. People seek out the stores, websites, etc. because they *want* or *need* to buy something, AND because the method of purchase is convenient and requires the least amount of effort on their parts.

Pyramid sales, on the other hand, aren't just selling a product, they're also selling what amounts to a membership---and a lot of your income depends on recruiting new members yourself... which depends on "personal" interaction and sales. Not to mention, it requires a lot of effort on people's parts... even if it's just in delivering product and collecting money from folks who will buy the product, but won't join up.

Let's put it this way: it's lots easier to go buy laundry detergent at the grocery store, than to contact someone, place an order, pay for order, and wait for delivery of order. I go to the store, I get my stuff (along with lots of other things offered), I pay, I go home; done deal. It takes me maybe an hour at best, start to finish. Purchasing through a pyramid distributor takes a whole lot longer... and I might not remember I need detergent until I start doing laundry; so do I wait the week for it to come in, or do I drive up the street and get it at the grocers? Doesn't matter that your soap is better than what's on the shelves---the sheer inconvenience and time involved make it the less-desirable option.


Anonymous said...

Probably not going to read this, but thanks for the info and great analogy with the school sale! I'll keep it in mind if anyone mentions they want to join Amway.

Simon Rea said...

Not an excellent Amway explanation :

Firstly you have from what you wrote haven't got a clue what your talking about. Have you even been involved with Amway? Your analogy of the school sweet sale is so of mark it's laughable . Let me ask you this , if we created two lists , one of all the people you know and secondly of all the people you don't know . Which would be the bigger list? This is a business like any other , you don't open a coffee shop and sell to all your relatives and friends and then close up business. Your business would run on and sell to daily , you guessed it Strangers ( that 2nd list)
Amway is not on trial , their a 12 billion dollar , debt free country operating out of over 80 countries globally. The question is do you have the ability like the kid who wins the prize at school to do what needs to be done to succeed ? From what you wrote here , probably not . Don't knock what you don't understand or know anything about .

Joecool said...

Amway did 12 billion, but the distributors are "independent" so Amway's sales doesn't mean squat to them.