Forum Moderators: LifeinAsia
A company that chooses MLM does so because they think they can achieve a bigger market share at a lower cost than through normal distribution channels. For most of the companies that use MLM, that is probably true. Instead of spending money on traditional marketing channels, they now have to manage a network of independent sales people, and share a commission with multiple levels of associates.
MLM is not usually associated with low-margin products because the associates take a significant cut of the final retail price. Having fewer "levels" means not having the same potential for explosive growth; more levels spreads the commission.
Any company that is burdened by an expensive distribution channel is going to be vulnerable to a new entrant that finds a cheaper way to sell their wares. With vitamins, I have typically found that MLM outfits do not last very long; if the product is any good, cheap knock-offs or substitutes can be sold much cheaper through traditional channels while still making an allowance for sizeable advertising budgets.
That's the fundamental economics- MLM is not necessarily all that more efficient. People that argue the contrary typically have no business experience, and no idea what typical channels cost (or how much cheaper affiliate marketing can be).
There is another fundamental problem with the way MLM is marketed, that one on an ethical level. Simple math does not seem to be the strong point of most people that have tried recruiting me... Taking a 4-level deep hierarchy with the need to sign up 3 people in your downstream, how many people can be at the 4th level with a full complement of sales people working for them? 3 on the first level, 9 on the next, 27. 39 subordinates for every successful general- and everyone must make a cut!
Worse, the market is rarely 100% of the population, and some people may buy your wares without ever signing up to sell them. This is why any ethical MLM, in my opinion, has to make it worthwhile for a lowly vendor to actually make money. Otherwise, it is just a lottery to see who can make it to the top, and finally make good money.
To finally answer your question, insurance is an industry facing increasingly tight margins. Better customer retention and cheaper customer acquisition will determine who succeeds in that market, and there are plenty of ways for companies to do so. Not only could you be a bore for telling all your friends and family to get life insurance, they could get a better deal by going to a broker... not a good way to win friends and influence people.
