Graduation Year

2025

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Patrick Van Horn

Reader 2

Roberto Pedace

Rights Information

2024 Lydia M Benton

Abstract

This thesis examines the role of incentivization on the profitability and sustainability of multi-level marketing firms. Specifically, a case study was performed with four “successful” MLMs and four “failed” MLMs. Using a fixed effects regression model, I assess the relationship between firm revenues and profits with their incentivization costs, the number of independent business owners (IBOs) they possess, and the maturity of the MLM as a publicly offered company. The analysis showed that variations in capital allocation to IBOs, measured as a percentage of total costs, were statistically significant, particularly for failed and young firms. The data indicated a negative relationship between the increasing years since initial public offering and dollar generation across almost all company stages. Finally, pure incentive costs, when analyzed separately from total costs, were better predictors of earnings, highlighting the critical role of outstanding operational costs in determining MLM success or failure.

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This thesis is restricted to the Claremont Colleges current faculty, students, and staff.

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