One of the primary reasons I believe Amway is not a viable investment is because of the company's unfair multi-tiered pay model. I've heard that Amway pays out approximately 32-33 percent to their independent business owners (IBOs), but I believe this is unjust because you are rewarded more for sponsoring others that move volume than you are for actually selling things. In my opinion, this explains why so many independent business owners (IBOs) are frantic to sponsor people, and in certain situations, dishonesty and trickery are employed in recruiting, which further tarnish Amway's already disreputable reputation.
This multi-tiered pay model also favours a small number of individuals at the expense of the others. If an IBO works extremely hard and sells 100 PV worth of goods, that IBO will receive a bonus of $9 or $10 from Amway, and the layers of upline will split the remaining $90 between them. What I don't understand about this is how it's fair, especially when IBOs appear to state "do the work and get compensated." In this scenario, you perform the work, and your uplines receive compensation.
Rather of providing everyone a 20-25 percent bonus, I believe Amway would be more efficient if they gave everyone an 8-13 percent bonus (33 - 20 or 25), with the remaining 8-13 percent going to the highest achievers. I feel that this would allow someone to significantly alter their purchasing patterns while also gaining some benefit. It would also be beneficial for IBO retention because a 100 PV would entitle you to a monthly incentive of approximately $60. If you sold 100 PV to clients, you would receive the retail profit in addition to the bonus. I feel that there would be a greater emphasis on selling rather than sponsoring in the future. It would relieve IBOs of the need to seek and sponsor new members, and I believe that Amway's reputation might be restored in this way. While there would be less emphasis placed on "becoming diamond," individuals who did reach this status would still be eligible for generous awards.
I believe that the implementation of this sort of compensation would also eliminate the necessity for a never-ending supply of CDs and seminar materials. Sure, product expos and some salesmanship training could be beneficial, but I feel that rewarding the "majority" of IBOs would keep them interested in the business and reduce the need for tools in the process. I believe that this is a win-win situation for the vast majority of those involved in the industry.
I'm sure some Amway apologists will point out flaws in my line of reasoning, but I feel this is a long-term, sustainable answer for the Amway organisation. Any and all comments are welcome.
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