Thursday, June 4, 2015

Amway's Compensation Plan?

One of the major reasons why I think Amway is not such a good business opportunity is because of the unfair multi tiered compensation plan. I have heard that Amway pays out about 32-33% to their IBOs, but I find it unfair in that you get rewarded for sponsoring people who move volume more than you do for actually selling products. I believe this is why so many IBOs are desperately trying to sponsor people and in some cases, deception and trickery is used in recruiting, which contributes to Amway's bad reputation. They are desperate to sponsor so IBOs pull out all tricks to get someone to see the plan.

This multi tiered compensation plan also rewards a few people at the expense of the masses. If an IBO works really hard and sold 100 PV worth of goods, that IBO would get $9 or $10 in a bonus from Amway (and possibly some retail profit) and layers of upline would split up about $90 in bonus from Amway. I fail to see how that is fair, especially when IBOs seemingly say "do the work and get paid". In this case, you do the work and your uplines get paid more than you for your efforts.

I think Amway would be more efficient by giving all IBO's 20-25% back as a bonus, with the remaining 8-13% in bonus (33 - 20 or 25) going to certain levels of achievers. I believe that this would truly allow someone to change their buying habits and gain some value. It would also be good for retention of IBOs because a 100 PV would get you a monthly bonus of about $60. If you sold 100 PV to customers, you would get the retail profit plus the bonus. I believe there would be less of an emphasis on sponsoring and more of an emphasis on selling. It would put less pressure on IBO's to recruit and sponsor, and I believe that Amway's reputation could be repaired in this manner. While you would have less emphasis on "going diamond", those who did achieve it could still get handsome bonuses. IBOs would be able to actually make some nice side money by a combination of selling and consuming, and sponsoring a couple of others. Making an extra $150 or more per month would be achievable. Under the current setup, you would need to do a lot more to make that kind of money.

I believe implementation of this type of compensation would also eliminate the endless need for cds and seminars. Sure, product expos and some teaching on salesmanship might help, but I believe that compensating the "majority" of IBOs would keep them interested in continuing in the business and would lessen the need for tools. I believe this is a win-win for the majority of those in the business. Retention would be better and products would more of a focus instead of recruiting. But things won't change because Amway and the big diamonds are content to replace the quitters with new prospects and they money keeps flowing for them.

I'm sure some Amway apologists will find fault in my line of reasoning, but I believe this is a long term sustainable solution for Amway. Comments are welcome.


Anonymous said...

I agree with you whole-heartedly on this too. I have noticed with other MLM's as well that they tout such quality lines of products, but yet actually selling them is tabu. People do not realize with these MLM's that the only person they are really supposed to be selling products to is themselves. They are to buy the products from themselves (extremely high priced products I might add that ALSO put a financial strain on you as an IBO...if you used to spend $3 on shampoo and are now spending $9.95...ditto for dish soap, laundry detergent etc...). I always found that bothersome and just plain wierd. I never had a problem with the products, besides the price, and didn't mind trying to sell them...but was quickly told that selling the products was not the point. Huh???? I can sell a product that I believe in, even if it is high priced...and I could make money that way...but recruiting people into a tabu market that requires them to be constantly busy, buying expensive products and starter kits, attending functions all over the country, buying CD's and tapes and books...OY! It became not only stressful but in some cases embarrassing for I posted on one of your other blogs, I was in my very early 20's then and working at a gas station. There were times I literally could not afford a tape (back then it was still tapes). I would have to tell my "upline" I couldn't spare the $10 for a tape...I needed gas in my car and the babysitter was due to be paid for the week. MLM's do work for some people...but it is people who already have money to spare, have friends with money to spare or time on their hands or have some kind of community standing or clout at the office where they are considered leaders and people want to either emulate them or "suck up" to them. You have to know a lot of people for an MLM to work for you even to the smallest extent. You have to know people with money and have to be accustomed to spending a lot of money for your basic needs as you will need to purchase from yourself over-priced household goods. If you are not already comfortable to begin with...or wildly popular and respected up's darn near hopeless.

Joecool said...

The extremely high process are because Amway does not eliminate the middle man as they claim. Instead, Amway adds middlemen with the upline and downline, all of who get a commission if they move enough volume. In the meantime, IBOs are taking double damage because in addition to the high priced products, they are also expected to participate in the "system" which also drains your finances.

The system is touted as the key to your success but the reality is it is the one thing that nearly assures you of a net loss.