Do The Math On A Matrix

Posted by Neville on June 14, 2011 under Money, Reviews | 2 Comments to Read

Messing Around With Figures:

I recently investigated the promises made by a program selling itself as a membership site and list-building tool.

Matrix maths

Among the selling points was the possibility of making money by referring new members and building a team of members. I believe that this program was one that generated a heated discussion in a couple of Social Business Networks when some of the mathematical aspects of the plan were pointed out .

The information provided in this post is based on information provided by the site, and is presented here simply as an example of what can be discovered by digging deeper and doing some Mathematics on the data.

I will leave it up to you decide if the other aspects of this this type of program counteract any shortcomings exposed by doing the maths.

The Promise:

By recruiting 2 members, and then helping them to recruit 2 members each, and then helping those people to recruit 2 referrals each, a team soon will be built. Each person joining contributes a small monthly subscription, part of which is passed up to each person above them in the team.

When you look at the figures presented in the sales pitch on the site, a member would have their membership payment covered when the downline has reached between 2 and 3 levels. The promise of a monthly income of more than $6,000 comes when the team has reached 15 levels.  Even greater returns are shown if the member recruits 3 or 4 and then has those people duplicate that down the team.

Money BagsThat’s all very impressive and enticing, if it can be achieved. And the program suggests that it’s not too hard to do.

If you were trying to sell this program to others you would point out the money that you could make, and you might even suggest what prospects could do with that money. How about promising that you could retire in a few months?

Let’s look at it another way.

From the point of view of the promoter.

For every member that builds a team down to the recommended 15 levels, after all 65,000+ members have  been paid out, the promoter takes home approximately $39,000. Not a bad return, even if the promoter uses up to half of that for expenses and advertising. That $39,000 comes from just one person building a complete 15 level team.

Multiply that by the number of people who have a filled team. I wonder how many that will be when this thing really gets going?

What is even more interesting is that the promoter actually takes a greater proportion from any incomplete team that has not yet reached 15 levels.

My spreadsheet calculations tell me that when a complete 15 level team is paid out each month the promoter of the system takes out 30% of the cash turnover. That looks like a pretty solid income earner, all from other people’s money!

But what if the teams don’t reach 15 levels? Surely there that won’t work so well for the owner. Think again!

For teams that manage to get down to 5 levels, the take home for the owner is 79% of turnover. If the teams only build down to 3 levels, the owner scrapes off 88%.

That tells me that the owner of the system has a vested interest in encouraging lots of members who have very limited success at building their teams.

And I haven’t even touched on the greater returns for the promoter when members do as they are encouraged to do and build a matrix with 3, 4 or more on each of the levels.

The Big Question:

Where does the cash come from to pay the owner, and those people who have managed to build a team big enough to give them their monthly subscription back?

I’ll let you work that one out, but I don’t see any product or service to generate sales and profit made to hand to members.

Well you might say that the membership is a service. But that’s stretching it a bit. I think some members even recognize that and add things to pass on to their list to justify their participation.

 

 

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  • Warren Contreras said,

    The argument you present is not new and the mathematics do support your argument, but matrix programs have been succeeding since the Internet began and the reason they do is because most people give them a half hearted try and give up. In this case, the task is so simple that more people reach a profitable level and those who build even small teams are seeing exponential growth. Sure I can dream of reaching $6,000 a month some day, but in the meantime an extra $50 is not hard to take. It’s actually worth the $2 a month for entertainment value.

  • Neville said,

    Thanks for your comment Warren.

    Yes, the basic mathematics is worth considering when making a decision to take part in a program. But as you perhaps point out, Human Nature doesn’t always do that as the promises of untold riches are thrown at us.

    In the case you are discussing, the initial and continuing outlay is small, and better spent on this than a million other frivolous ways to spend $2 a month.

    With the bonuses that you offer and the entertainment (and learning how to network) that is provided that $2 is chicken-feed.