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Earning potential in MLM enterprises

Abstract

Government regulators and other concerned citizens warily view multilevel marketing enterprises (MLM) because of their close operational resemblance to exploitative pyramid schemes. We analyze two types of MLM network architectures — the unilevel and binary, in terms of growth behavior and earning potential among members. We show that network growth decelerates after reaching a size threshold, contrary to claims of unrestricted growth by MLM recruiters. We have also found that the earning potential in binary MLM’s obey the Pareto “80–20” rule, implying an earning opportunity that is strongly biased against the most recent members. On the other hand, unilevel MLM’s do not exhibit the Pareto earning distribution and earning potential is independent of member position in the network. Our analytical results agree well with field data taken from real-world MLM’s in the Philippines. Our analysis is generally valid and can be applied to other MLM architectures.

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One comment on “Earning potential in MLM enterprises

  1. Chris Lindsay
    September 7, 2015

    The 80/20 rule makes sense. If you join the organization early, you have a greater potential for becoming a winner. The other 80% are likely to become losers. I wrote a short post on MLM called “The Moral and Ethical Problem of Multi-level Marketing. If you would like to read it, here is the link: https://christopherjohnlindsay.wordpress.com/2015/09/06/mlm/

    Like

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This entry was posted on September 3, 2015 by in Publications and tagged , .
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