People often get the miss-informed idea that because MLM companies must set the product wholesale and retail price before the product goes to market, that the price is arbitrarily high. MLM companies get accused of price setting because of this element of their marketing strategy. This page will clarify how prices are set for both MLM companies and retail outlet stores:

Products marketed by MLM companies have more mark up and are more costly because of the MLM structure: The sale price, or retail cost, of a product is base on the economic factors of supply and demand. Demand is based on product performance and product competition. To understand this topic you need to understand four prices: the Retail Store Wholesale Price, the Retail Store Retail Price, the MLM Wholesale Price, and The MLM Retail Price.

Retail Store Wholesale Price: This price is what a store buys product for.  This Price will always be lower at the beginning of a product campaign to entice stores to carry a product, but the price will quickly rise as demand rises, demand is generated by large capital investment in advertising made by the producing company.  If this price exceeds what the market will allow, the demand will quickly drop, and this price will drop back to a market stable price.

Retail Store Retail Price: This price is what a store sells a product for.  This Price will always be lower at the beginning of a product campaign to entice customers to try a product.  This price will quickly rise as demand rises, to cover the rising wholesale price, and to add to the profit margin of the retail store.   If this price exceeds what the market will allow, the demand will quickly drop, and the price will be need to be drop back until a market stable price is achieved.

MLM Wholesale Price: This Price is the price that a MLM companies distributors pay for a product.  Distributors Preferred Customers may also qualify for this price.  The MLM Company sets this price at the beginning of a product campaign.   This price will likely remain the same during the whole marketing campaign.  If this price rises it will likely be due to increased product production costs.  This price will always be higher than the beginning Retail Store Wholesale Price because unlike the beginning retail store product marketing that is funded by investors, the MLM Wholesale price has all the costs of marketing built in.  The MLM Wholesale price must be in the ball park of the final Retail Wholesale Price would have been had the the product been marketed via Retail Store or the MLM Company will fail.   If a statement is made that the product was sold in a retail store at a retail price that was much lower than the MLM Wholesale price and therefore MLM prices are higher and this is a scam to take money from consumers.  They are either un-educated on the matter or they are trying to deceive likely for personal gain.  They are failing to take into account that they are comparing apples and oranges.  The initial MLM Wholesale Price must be compared with the Final Retail Store Wholesale Price not the initial Retail Store wholesale price.  

MLM Retail Price: This is a price that MLM company’s distributors can charge for a product.  The MLM Company sets this price at the beginning of a product campaign.   This price will likely remain the same during the whole marketing campaign.  If this price rises it will likely be due to increased product production costs.  This price will always be higher than the beginning Retail Store Retail Price because it has all the costs of marketing built into it.  It must be in the ball park of what the final Retail store retail Price would have been or the company will likely fail.   If a statement is made that this product was sold in a retail store at a retail price that was much lower than the MLM retail price and therefore MLM prices are higher and a scam on the final consumer.  They are either un-educated on the matter or they are trying to deceive you likely for personal gain.  They are failing to take into account that they are comparing apples and oranges.  The initial MLM Retail Price must be compared with the Final Retail Store Retail Price not the initial Retail Store retail price.

The Retail Store Product Marketing plan compared to the MLM Product Marketing Plan: A company trying to sale a product through a retail store must first make the large investment in a marketing advertisement campaign to create product demand.   Both Wholesale Price and Retail Price will be low at the beginning of the marketing campaign to allow quicker sales generation.  As the demand for the product raises both wholesale and retail prices will rise to allow higher margin for the retailer and allow a return on investment (ROI) for the producing company.    Large investments in marketing and advertising are not required in the MLM marketing plan and it is this key difference that drives a company to choose the MLM marketing route.   The marketing cost (in the form of commission checks to distributors) will be a expense after sales revenue has been generated.  The MLM Company’s task is to identify a retail price that is reasonable and a wholesale price that covers the compensation plan and pay the other product overhead costs.  If they estimate the prices too high the company will fail.

Product Cost of Production:This is always a classic angle negative people use regarding a product to prove that it is a scam.  They are either un-educated on the matter, or are trying to deceive likely for personal gain.  Don’t kid yourself.  If you see a product on a store shelf with a cost of $100 that product lickly cost below $25 to produce.  If the product manufacture has a patent on the product the difference between these two numbers will even be greater.   Patents and the protection they provide is how a free economy gives motivation and incentive to inventors and creators.  Non free markets in the world try to steal this technology and intellectual resources to get gain.  These actions, although unethical, are profitable in the short term but will never lead to long term growth and prosperity as such practices take away incentive and motivation of product creators.  In a free economy,  those who hold the patent benefit and will continue to invent and create.  Statements are also made that this product is made from common easy to find and easy to use items that everyone can get for a lot less cost.  If this is true then the individual is welcome to do so and to use these products for personal use.  The probability of getting the exact composition, the exact preparation, and the exact method, is extremely low even with sophisticated lab equipment and extensive testing.   If a company has the resources to “obtain” such a recipe, the patent, in a free market takes their incentive to do so away as they will  have no way to market the copied product.