Friday, February 8, 2013

The Amway Business Is "Fair"?

One of the bogus things my upline taught us was that the Amway opportunity was fair. That it was a completely level playing field. On the surface, that sounds right because "everyone starts at zero". While everyone does start at zero, the compensation plan is unfair and in my opinion, should be revamped so lower level IBOs make more money. It would probably help with IBO retention and maybe, some higher level leaders wouldn't have to work so hard to keep replacing people who quit. If more IBOs were profitable, it makes sense that more IBOs would stay in the business instead of quitting.

If you are a new IBO, then you might not be really familiar with the Amway compensation plan. Amway pays out about 30+ percent of their gross as bonuses. Thus if you move 100 PV in goods, or about $300 in sales, then Amway pays out about $100 in bonuses. You as a new 100 PV IBO, would receive about $10 and your uplines, some of whom don't even know you exist, will split up the remaining $90 in bonuses. It truly is not a case of doing the work and gettung paid. Of course, an IBO doesn't have to share any retail sales profits with upline, but still, the Amway bonus might be paid out to many people who may not have helped generate the volume at all.

Something significant to think about. In what other sales profession are you compensated so low (3%)? I can only think of real estate, but in real estate, your sales are likely in the hundreds of thousands of dollars. In just about any other sales related profession, you get a much higher cut than 3%. Yes, your bonus or comission can be higher if you move more volume, but then you are likely receiving more money because you are now exploiting people doing 100 PV who get only $10 back.

And then even after you consider the unfair compensation, you must factor in the cost of tools. Most uplines promote tools (cds, voicemail, functions) as vital to an IBO's success. Some uplines push the tools harder than others. But the tools purchases will often be the primary cause of IBO financial losses because the cost of tools will normally exceed an IBO's bonus. It is very common in the US for monthly tool purchases to exceed $200 a month on average, and very very few IBOs will ever reach a high enough level in the Amway compensation plan to earn enough just to break even. Also, the tools apparently do not work. There is no unbiased evidence to suggest that tools have any causal relationship to IBO success.

With Amway's reputation and the unfair comepnsation plan, IBO retention is very poor. About 1/2 of IBOs don't last even one year, and very very few will ever last more than another year or two after that. What happens is IBOs begin to figure out that recruiting downline is next to impossible and therefore, generating more volume is nearly impossible, even for individuals with skills. If you are a new IBO or a prospect, I encourage you to sit down and really look at the math and factor in the cost of tools. There are many ways to earn a dollar. In my informed opinion, the Amway opportunity is not a good way to do that.


Anonymous said...

I think they can change the compensation plan anyway they wish but you still wont make money on this. Products not sellable. Low cmmisions. 10 years to get to diamond. Almost impossible to maintain qualification. Working 7 days a week. Its a dog's'business. Not sure i agree with your 'unfair' view. The ibo generally does not retail. They self consume so im not sure they deserve much of a bonus. Its all about recruiting others to self consume also and to buy tools

Joecool said...

Agree but if an IBO self consumes 100 PV and generates $100 in bonus, why should uplines get $90 and the IBO get only $10?