Warren Buffet in an interview with Forbes Magazine in 2010 calls energy deregulation “the largest transfer of wealth in history”. This unique situation in the energy markets may have also created an opportunity for you to earn residual income in the state you reside. Many of the United States are currently deregulated and offer their residents a choice of power companies.
But, what is energy deregulation? Energy companies have had a monopoly on their electric and gas markets for several decades by charging the local resident an uncompetitive rate in exchange for providing citizens everywhere with electricity and natural gas services. This monopoly by the incumbent utility companies is currently changing in several states due to energy deregulation and soon will disappear in all 50 of the United States.
With the Energy Policy Act of 1992, Congress tried to promote greater competition in the bulk power industry. Through the Energy Policy Act, states were permitted to restructure their power industry in order to create competitive rates. This has created opportunity for outside companies to come into the incumbent’s area and compete for business.
Or at least that’s what these newer outside companies want you to believe. After all, There are several companies who have attempted to take advantage of this unique opportunity by offering power customers an alternative to their Electric and Gas Company. You may have heard of some of these companies such as Viridian ENERGY, Reliant Energy, Stream Energy (Ignite), Spark Energy and many others. Some of these companies use sister companies to run their marketing and advertisement campaigns for them. It is here in the sales and marketing departments where they advertise that there is an opportunity to earn incredible wealth.
A new sales associate is hired based on whether they appear to have some level of influence on a group of people and can leverage their relationships to gain the family member or friend as a new power customer. From here the new associate is encouraged to sign themselves up as their first customer and then immediately approach a close friend or relative and pressure that person to do them a favor by changing power companies. The customer is not likely to be comfortable switching from the incumbent to an unknown company even if they promise to save them a few dollars per month. And so the existing relationship between the new associate and their relative or friend becomes tested when they are asked to change power companies.
Of course the associate wants to earn money and naturally the compensation plan rewards those who sign the most customers. But this is when it becomes clear to the associate that they have a very limited number of close friends or relatives that they have a chance to convert to the new energy company. The energy company also knows this and has taken this into account when they created the compensation plan.
It is here the energy company attempts to enhance the residual income formula. The associate can earn leadership money by getting additional associates to join the company and then they too are encouraged to go gather several energy customers and sign new associates in order to grow the company even further. The signing of new associates is considered building your down line. Naturally, the larger and more down lines the associate is able to sign or place under them the more money they can make. However, maintaining associates and all of their customers in order to maintain residual income quickly becomes the next challenge.
Some people would call this MLM or multi-level marketing but the power companies’ marketing departments want to consider it “relationship marketing”. This is probably because power companies do not want to be associated with MLM stigmas. Some of these marketing departments seem to be comfortable with using the “relationship marketing method” and rely on the strength of the relationships the new associate has with their relatives or close friends to expand the company.
The techniques of building down lines within these companies can be very interesting. Sometimes associates are encourages to post newspaper classified ads seeking people looking for a job in the sales industry. The reader of the ad responds by phone and is asked if they are available to come to a job interview.
Unemployment being what it is currently, it isn’t very difficult to get the person to show up at a local hotel lobby for a “job interview”. Once the recruit arrives they are greeted and they see that their job interview is actually a group sales pitch. If the person remains for the PowerPoint presentation they are shown charts and graphs which reflect the relatively new power company’s staggering earnings and growth throughout the past several years. Then they are shown portions of the compensation plan and are made to believe that with a little hard work and perseverance they too can earn tremendous money in the company through residual income. The presenter is more than prepared to answer the questions:"What is Energy Deregulation?", “What is residual income?” and “Why does someone need it in today’s economy?” The recruit is told that as long as they follow the business model they will do very well earning passive income of their own.
Next is the real punch line of the “job interview”. The recruits are told that it will cost them a few hundred dollars to join the company in addition to a few hundred dollars per year to maintain business websites but they can earn that back real quick by doing just a few things such as gathering a handful of customers and signing a couple new sales associates. And it continues over and over and again.
If you take the time to do a little research you will likely find that these new power companies that have seemingly come out of nowhere are often only providing the average customer about $10-$20 per month in savings. Sometimes the savings is only a few dollars and occasionally there would actually be an increase in service rate! Also, the customer is often required to sign a 12 month contract before they can benefit from any savings at all.
Maybe our nation’s struggling economy is in desperate need of these new power companies entering the energy markets and potentially saving some customers a few dollars per month. Maybe we should trust that our government is allowing the Energy Policy Act of 1992 to benefit the average American who pays an electricity or gas bill. And maybe many of us are in need of new ways to earn money. It is quite possible that many people who attend these presentations or “job interviews” will learn for the first time what is the definition of residual income. Or, they will realize why they want to earn passive income in today’s economy to begin with.
I am not optimistic that most customers will save significant money on their energy bill and I also don’t believe that most people who join one of these multi-level marketing schemes or “relationship marketing” networks are actually going to make significant earnings. I definitely don’t think Warren Buffet was referring to the customer or the sales associate in his interview with Forbes Magazine.
Sure, a few will do well but the entire business model makes it impossible for all involved to do well. These marketing systems are designed to take a lot of people’s money while paying a select few a lot of money. If a person is not already very successful in sales then I think it is very unlikely that same person will be very successful selling energy or building “down lines” in a MLM network.
I wish the best of luck to those who decide to join one of these marketing networks. I am absolutely certain that a few people will earn at least $10,000 per month in passive income. However, most people who join will struggle to earn $100 per month. If you enjoy traveling to several meetings per week and socializing with hundreds of new people per month then you should fit in very well but you probably won’t experience residual income flowing into your bank account.
Keep in mind there are other ways to truly earn passive income. Today’s millionaires use technology to create the true definition of residual income; building six and seven figure income streams through internet marketing. I strongly recommend that you educate yourself in internet marketing and learn how people are earning residual income. If you would like to earn passive income without having to travel to meetings and build MLM down lines then you should consider obtaining an online education.
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