MLM

[NewtonTrino]

Got some figures to back that up? No, didn't think so.

If I'm showing someone the business and they ask what I'm making, I tell them. Of course, what difference does that make - you're quite happy to claim, with no evidence at all, that millions of MLMers around the world lie all the time about it.

Any evidence to back that up? No, didn't think so.

I'm not the one claiming it's a good business. The onus is on you to prove that this is a worthwhile way to spend time. Good luck with that

Right, so anyone can attack something if they've got no personal experience with it, but to support it you have to be actively and deeply involved and making money for it.

I like how you keep building this strawman with no personal experience. I have a TON of personal experience with amway in particular as you well know. Of course it "doesn't count" because I haven't worked with every single person that's ever been involved. I sold software to many many diamonds who have big organizations, I've been to many many "functions", listened to many many tapes and was directly involved with my Dad's business which is still ongoing after 30 years. The difference between us is that I consider it an unethical scam.

There's hundreds of thousands, probably millions, making money from network marketing around the world. You choose to ignore that. One more datapoint would make little difference either to that reality or your choice to ignore it.

Define "making money". Your delusional if you think millions of people are making a profit that on an hourly basis would compare to even something like working at Mickey D's. In fact most of these millions lose money. I would love for you to prove otherwise. Unfortunately you can't.

Again you are the one asserting there are millions "making money". More like millions making money for their upline and the corp (which is of course at the top of the pyramid).

 

[NewtonTrino]

But that's rather easy to do. You take the average MLM income and divide it into the average number of hours MLMers put in, and you easily find that working at an MLM earns less than working for McDonald's. MLM's average income is so low it is below most third-world countries' salaries.

Yes but they are still technically "making money". Right? This is standard spin tactics from Icerat, the most prolific MLM defender in the history of the internet (AFAICT anyway).

 

[icerat]

Icerat is pissed with Taylor not because it's the weakest work cited, but because it is the most forecful and the most embarrasing to MLMers. Icerat, of course, won't tell us how much he made in this "great opportunity".

What's embarrassing is that people with nicks like "Skeptic" fall for that piece of BS lock stock and barrel purely out of confirmation bias. Be a true Skeptic and actually analyse what he's saying and the quality of his data. I played the same game, using better source data than Taylor, and showed that the average Amway IBO gets all their products free plus extra cash!

But that's rather easy to do. You take the average MLM income and divide it into the average number of hours MLMers put in, and you easily find that working at an MLM earns less than working for McDonald's. MLM's average income is so low it is below most third-world countries' salaries.

Fine. If you use the all encompassing definition of "MLMer" to be anyone who simply signs an app, then to several decimal places the average number of hours MLMers put in would be zero.

The average income would be bigger than zero.

Average hourly income for an MLMer? Limit -> infinity.

A true "Skeptic" would not try to compare such disparate groups in the first pace. Skepticism to the model is fine, but then you should do some actual research to form an opinion and conclusion.

But I'm a little confused .... you cite Jon Taylor as an authority, yet seem to acknowledge, in contrast to him, that hours put in matter at least partly?

Don't you think also you should consider factoring in future growth, since a lot of time spent in network marketing is devoted to future sales, not current sales?

 

[icerat]

I like how you keep building this strawman with no personal experience.

Don't have such a big ego. I wasn't talking about you.

Again you are the one asserting there are millions "making money". More like millions making money for their upline and the corp (which is of course at the top of the pyramid).

Oh good grief. There's over 70 million people involved in direct sales in the world (which is, again, mostly MLM). Less than 1.5% of them need to be "making money" for my statement (which was a "probable", not an outright claim) to be correct.

 

[Skeptic]

Don't have such a big ego. I wasn't talking about you.

Funny. When you talk about my lack of personal experience in MLMs, you are talking about me. When Newtrino shows how much experience he has on the issue, suddenly you "aren't talking about him".

Newtrino -- your personal experience doesn't count because it wasn't positive enough, so you weren't doing it the right way. Only positive personal experience shows what MLMs are really like. Therefore, 100% of those who know what MLMs are really like think it's a great opportunity.

Simple, isn't it?

 

[maximara]

Peer reviewed papers? There were none.

Flat out lie. Every one of the below are peer reviewed, Icerat:


Carl, Walter J. (2004) "The Interactional Business of Doing Business: Managing Legitimacy and Co-constructing Entrepreneurial Identities in E-Commerce Multilevel Marketing Discourse" Western Journal of Communication, Vol. 68.
Cruz, Joan Paola; Camilo Olaya (2008) "A System Dynamics Model for Studying the Structure of Network Marketing Organizations"

Ryan (Editor), Leo; Wojciech, Gasparski (Editor); Georges, Enderle (Editor) (2000). Business Students Focus on Ethics (Praxiology): The international Annual of Practical Philosophy and Methodology Volume 8. New Jersey: Transaction Publishers. pp. 75 (college textbook)

Terry Sandbek, Ph.D. "Brain Typing: The Pseudoscience of Cold Reading" American Board of Sport Psychology

Woker, TA (2003) "If It Sounds Too Good to Be True It Probably Is: Pyramid Schemes and Other Related Frauds" SA Mercantile Law Journal Volume 15 Issue 2 pg 237-249

Take your lies elsewhere, icerat. I have little tolerance for them and I doubt the people who run this board will either.

 

[maximara]

Oh right, so you make "empty claims that are not supported by peer reviewed papers and books or articles in reliable publications" but it's up to me to prove your claims wrong through such references. Uhuh.

SO you are claiming the Western Journal of Communication, American Board of Sport Psychology, SA Mercantile Law Journal college textbooks, and papers presented at the System Dynamics conferences are not peer reviewed?!?

And if that piece of insanity wasn't enough you are also claiming The Times, USAToday, Newsweek, and Wiley are not reliable publications?!? :

Do you have ANY idea how insane this makes you sound?!?

Worse the System Dynamics conferences expressly spells out its peer review process: "Papers may be submitted from January 2, 2007 to March 26, 2007 and must be in sufficient detail for the referees to judge their meaning and value. Submissions must be in English and should be 5 - 30 pages in length (there is also a maximum 2 MB electronic file size). Abstracts will not be accepted. Submission of models and other supporting materials to enable replication and aid the review process is encouraged in all cases (maximum file size 2 MB in addition to the paper). [...] All works submitted will be assigned for double blind peer review. The results, with the oversight of the program chairs, will determine whether a work will be accepted, and the presentation format for the work." Other than the dates the 2009 requirements are the same.

Are you say that the System Dynamics conference magically dropped the peer review process for 2008 just so Cruz could bad mouth MLMs?!?

This nonsense makes the people who think the government is sending black helicopters piloted by the Greys form Area 52 led by Elvis after them look rational.

 

[maximara]

Oh good grief. There's over 70 million people involved in direct sales in the world (which is, again, mostly MLM). Less than 1.5% of them need to be "making money" for my statement (which was a "probable", not an outright claim) to be correct.

As I pointed out before by this loopy logic pyramid schemes are "better" because 18% of the people involved in one of those "makes money". Come on, legality asside if pyramid schemes are a bad idea at 18% then how can MLMs at 1.5% be better? To paraphrase an old saying "The logic cannot hold"

 

[NewtonTrino]

Funny. When you talk about my lack of personal experience in MLMs, you are talking about me. When Newtrino shows how much experience he has on the issue, suddenly you "aren't talking about him".

Newtrino -- your personal experience doesn't count because it wasn't positive enough, so you weren't doing it the right way. Only positive personal experience shows what MLMs are really like. Therefore, 100% of those who know what MLMs are really like think it's a great opportunity.

Simple, isn't it?

The funny part is that I'm one of the few that can claim to have made money from amway. Not from selling products but by selling my product (software) into the pyramid. Because I was in bed with a number of diamond level distributors who made my software the de facto standard for their organization it was like having a monopoly business. You do what your upline tells you to and if they say to buy x program then you do it. I made money hand over first (did I mention we had a required yearly maintenance fee of $100 per business). At least I was supplying a real service to them (they could track how much money they were losing Actually it was mostly used by directs and above hence all of the support in it for tracking tools sales using several different methods including a pure price break based on pin as well as a volume based approach.

Part of the reason that I have an unusually good understanding of this business is that several of my beta users had quite large businesses (tools). I got to see the numbers while debugging the program....

 

[icerat]

Flat out lie. Every one of the below are peer reviewed, Icerat:

It amazes me the utter lack of ethics in some people who sit and accuse others of it.

Here is the list of references you gave that I was responding to -

Carroll, Robert Todd (2003). The Skeptic's Dictionary: A Collection of Strange Beliefs, Amusing Deceptions, and Dangerous Delusions. John Wiley & Sons. pp. 235–36. ISBN 0471272426.

Coenen, Tracy (2009). Expert Fraud Investigation: A Step-by-Step Guide. Wiley. pp. 168. ISBN 0470387963.

Cruz, Joan Paola; Camilo Olaya (2008) "A System Dynamics Model for Studying the Structure of Network Marketing Organizations" (peer reviewed paper that refers uses Taylor as references)

Ogunjobi, Timi (2008). SCAMS - and how to protect yourself from them. Tee Publishing. pp. 13-19.

Peterecca, Laura (Sept 14, 2009). "What kind of business do you want to start?". USAToday (Gannett Company): pp. 4B.

Ryan (Editor), Leo; Wojciech, Gasparski (Editor); Georges, Enderle (Editor) (2000). Business Students Focus on Ethics (Praxiology): The international Annual of Practical Philosophy and Methodology Volume 8. New Jersey: Transaction Publishers. pp. 75. ISBN 0765800373.

Taylor, Jon M. (2002). "Comparing Recruiting MLM’s with No-product Pyramid Schemes, and with Gambling". Consumers Awareness Institute.

I replied -

Peer reviewed papers? There were none. Closest was a conference presentation than regurgitates info, without commentary, from Jon Taylors self-published rubbish, which says a lot about it's quality alas.

compare that list to the list you're now giving to claim I'm a liar for saying the above list isn't peer-reviewed! The only commonality is the Cruz paper, which I did acknowledge in my response (and you edited out when quoting me!) and the Praxiology book, which I acknowledge I missed ... not surprising since it's so obscure.

The other's weren't even listed!

Carl, Walter J. (2004) "The Interactional Business of Doing Business: Managing Legitimacy and Co-constructing Entrepreneurial Identities in E-Commerce Multilevel Marketing Discourse" Western Journal of Communication, Vol. 68.
Cruz, Joan Paola; Camilo Olaya (2008) "A System Dynamics Model for Studying the Structure of Network Marketing Organizations"

Ryan (Editor), Leo; Wojciech, Gasparski (Editor); Georges, Enderle (Editor) (2000). Business Students Focus on Ethics (Praxiology): The international Annual of Practical Philosophy and Methodology Volume 8. New Jersey: Transaction Publishers. pp. 75 (college textbook)

Terry Sandbek, Ph.D. "Brain Typing: The Pseudoscience of Cold Reading" American Board of Sport Psychology

Woker, TA (2003) "If It Sounds Too Good to Be True It Probably Is: Pyramid Schemes and Other Related Frauds" SA Mercantile Law Journal Volume 15 Issue 2 pg 237-249

And then YOU have the hide to say this ....

Take your lies elsewhere, icerat. I have little tolerance for them and I doubt the people who run this board will either.

Even then, NONE of the "peer-reviewed" papers you present now support the claims you made which I challenged, things like -

The failure rate of over 99% is well documented
and
The moment you realize that MLMs increases the number of middle men then you realize that there is no way for every one to make money

How about I claim everyone in MLM makes millions and then just cite a peer-reviewed JAMA paper an alzheimers? Makes as much sense ... well, except JAMA actually has an impact factor. Does anything you cited?

 

[icerat]

Do you have ANY idea how insane this makes you sound?!?

Any idea how dishonest it makes you when you make claims about things I've said that don't remotely reflect what I was talking about, and make other claims, and then claim they're supported by papers that don't say what you're claiming?

Are you say that the System Dynamics conference magically dropped the peer review process for 2008 just so Cruz could bad mouth MLMs?!?

I think you and I may have had words on the Cruz paper on wikipedia. It does not provide any evidence at all to support your claims - it simply briefly cites Taylor's non peer-reviewed, long discredited claims. Citing a paper that cites crap does not turn the crap into gold - particular when the paper was presented at a conference about system dynamics and you can pretty much guarantee the reviews had next to no expertise in network marketing.

 

[icerat]

Ryan (Editor), Leo; Wojciech, Gasparski (Editor); Georges, Enderle (Editor) (2000). Business Students Focus on Ethics (Praxiology): The international Annual of Practical Philosophy and Methodology Volume 8. New Jersey: Transaction Publishers. pp. 75 (college textbook)

I just read this paper -

It's a commentary on MLM in China. It's in fact quite complementary about companies like Amway and nowhere does it offer evidence support your claims.

Terry Sandbek, Ph.D. "Brain Typing: The Pseudoscience of Cold Reading" American Board of Sport Psychology

This article, which is not an academic paper, is not about MLM and merely mentions it and some anti-MLM website claims in passing when discussing the author of a book. nowhere does it offer evidence supporting your claims

Woker, TA (2003) "If It Sounds Too Good to Be True It Probably Is: Pyramid Schemes and Other Related Frauds" SA Mercantile Law Journal Volume 15 Issue 2 pg 237-249

Just read this, it nowhere does it offer evidence supporting your claims. Indeed it even says -

Multi-level marketing, also known as "network marketing", is a form of direct selling in which independent distributors sell products on a "party plan" basis, or over the telephone. Distributors usually generate an income from their own sales as well as from the sales of those whom they recruit. This is a legitimate way of selling products and there a number of successful businesses that operate in this way

Take your lies elsewhere, icerat. I have little tolerance for them and I doubt the people who run this board will either.

Pray tell, what tolerance do they have for you?

 

[Kevin R Brown]

Icerat: You were comparing owning a McDonalds franchise with 'owning' an Amway 'business' (in reality, a theoretical business - one predicated on your ability to get people into a downline). Let's think about the differences in the distribution channels here:

A McDonalds restaurant, assuming you set it up in an area that is well frequented and with low competition, has a huge demand (anyone who is hungry) with a very narrow distribution channel (a hungry motorist, especially one in a hurry, can only have their needs fulfilled by a fast food chain restaurant like McDonalds - they can't go just anywhere to get cheap and rapidly served food).

This means that the owner of a McDonalds is, essentially, guaranteed to make money. He/she doesn't have to do anything special at all; just keep the business running and people will come to you to have their needs fulfilled.

Amway sells cosmetic products and total quackery. The demand for these products is extremely low when compared to fast food (everyone, at some point in the day, gets hungry; comparatively few people need to put on make-up every day), and the distribution channel is huge - if you live in a city, it's probably never more than a 10 minute drive to a local business that sells comparable products for lower prices that you don't have to wait to be shipped to you. Moreover, as a direct seller, you're at a huge disadvantage to the brick & mortar store operator because you're immediately putting any potential customer on the defensive - while the McDonalds operator has people literally walking into his establishment with open wallets, already prepared to buy a Big Mac, the Amway agent needs to convince people to buy the make-up, vitamins, detergent, etc.

There is no parity here - Amway, MLM scheme or not, is not as viable a business practice as jumping in on an established fast food franchise.

 

[Skeptic]

It's more than that. The MLM business structure means that, by design, the quality and appeal of the product do not matter. 99% will lose money no matter how good the product is.

McDonald's franchise are contractually guaranteed a certain area where McDonald's will not open another restaurant; and McDonald's will only sell a franchise if it thinks there's a fair chance for it to make money in terms of potential clientele. If McDonald's thinks there's enough supply in a certain area, it will not sell anyone a franchise.

If tomorrow it is discovered that McDonald's hamburgers give their clients eternal life, demand will skyrocket and so will the number of franchises that will be opened. But even if McDonald's then opens, say, 100 times as many franchise as it already has, it will stop at some point -- at the point where the franchise earner can make money by having enough customers. Perhaps in such a case the potential clientele would be 100 times what it is today -- perhaps it would be the population of the entire planet -- but it would still be finite, and McDonald's would not open more than the number of franchises that are needed to deal with it.

MLMs don't care. They live on everybody recruiting their own competition without the slightest regard to actual demand for the product. So even if MLMs were selling a product that everybody on the planet wanted (in reality, not in MLM BS propaganda about how this is a "product everybody wants") -- if MLMs were selling an elixir that gave eternal life and happiness for a buck -- 99% of MLMers would still lose money, since the whole point of the MLM is to recruit a downline.

In such a case, recruitment would be easy, and -- let us say -- half the planet would join and become distributors. But each would then nly have one potential customer except for themselves, on average. Who would make money? They few on the top of the pyramid who joined early. Who would lose money? Everybody else, who now have nobody left to recruit or to sell to.

MLMs are guaranteed, by design, to go blissfully past the point of market saturation and leave 99% of the distributors with nobody to sell to, since by design, it is a tool for the 1% at the top to make money from those in the "donwline" of the "great opportunity". Nobody knows or cares what the saturation point is. It's all about recruiting "downline" without limit, and the hell with how much money they can make, as long as they pay me.

And don't tell me the lie about how the upline "doesn't make money unless the downline makes money". In reality the upline makes money by forcing the downline to buy the MLMs' products "for themselves" without any regard to demand or possibility for retail sales, the product's alleged superior quality being merely a cover for the true nature of the moving-money-from-bottom-to-top of the pyramid.

The product's quality might determine the size of the pyramid; but not the proportion of winners to losers within it.

It takes talent to create a business model where 99% of those involved in its sale are guaranteed to lose money regardless of the product's quality. A traditional business run by a strange cult where all members must burn a $1000 every night as a sacrifice to the gods would probably fail, but it is conceivable that some businesses would still make it despite this, if demand is high enough and the product good enough. In an MLM, that won't help.

That's because MLMs are not a business. They're a cult. You can only make money by having a downline below you losing money. Begging friends and family into losing money to benefit you is called, you guessed it, "building the business". Somehow beating the odds and having thousands of people losing money so you can make it is called "being a success".

What a scam.

 

[Kevin R Brown]

Well said; I was only trying to point out that, even if we gave Amway the maximum benefit of the doubt and assumed it was being used as a 'direct sales' (I've always hated that term; it's 'door to door sales', or canvassing, and it's never been a successful practice) vehicle rather than an MLM pyramid (a model which Mr. Dunning so elegantly eviscerated in his podcast), it still doesn't have any advantage or even comparable value to setting-up a fast food restaurant.

Yourself and Mr. Dunning are quite right, of course: the problem inherent in pyramid schemes is that they would require an infinite customer base in order to work - and frankly, economics would be a rather moot topic if everyone had access to an infinite number of customers.

EDIT: To expand on this with an example:

Let's say I own a car dealership in the downtown hub of my city. We'll say that the weekly total peak demand (so, the demand the city has when everyone is most eager to buy a new vehicle) for my cars is represented by a value of 100 (the numbers here are arbitrarily picked; the values themselves aren't particularly relevant), and we'll also throw in a caveat that 35 points of my demand value can only be tapped into through good salesmanship (the maximum demand is still fixed - being a good salesman just means that you have access to more of that demand than the rest of my employees that are competing with you, it can't somehow magically increase the city's demand for cars).

Let's also say I adopt an MLM 'network' scheme for my employees - every person they recruit for my car lot is put into a downline for themselves, and they get residual income from the sales of those directly below them. Each sale fulfills the city's demand weekly demand by a value of 10.


I hope the problem is immediately obvious to our objector. Your peak demand is fixed, so the total number of cars your could ever possibly sell is also fixed (in my example, fixed at about 10 per week, for the best salesmen - the rest of the employees only have access to 3/4s of the demand); the person at the top of any downline will rake in a lot of cash because they make money off of every sale, including their own, but those every one level down are much, much worse off because competition very quickly crowds out their ability to make sales (good salesmen will initially do much better because they have special access to a certain portion of the demand, but even they will crowd each other out quickly enough). Eventually, even people at the top of their own downlines will start getting crowded-out as new downlines are established (ever wonder why many of the high level positions in Amway and other MLM schemes are well protected by sales volume requirements?), and pretty quickly the only person making big money is myself, the dealership owner, who has a pile of free labor selling his merchandise for him.

 

[maximara]

Skeptic and Kevin R Brown are correct as the list of peer reviewed that cite either FitzPatrick or Taylor are legion and here are some more:

Koehn, Daryl (2001) "Ethical Issues Connected with Multi-Level Marketing Schemes" Journal of Business Ethics 29:153-160.

Wong, Michelle. A. (2002) "China's Direct Marketing Ban: A Case Study of China's Response to Capital-Based Social Networks" Pacific Rim Law & Policy Journal

Even abstracts are critical: "The wake of the recession has witnessed a boom in direct selling schemes also known as pyramid selling, multi-level marketing or network marketing." Sarker, Rinita (1996) "Pyramid Selling" Journal of Financial Crime 3:3 Pg 266 - 268.

Highly respected publishers like Wiley have also had books slamming MLMs as have Juta Academic in works like Higgs, Philip and Jane Smith (2007) Rethinking Our World

Even those that don't hold that all MLMs are pyramid schemes have said there are series problems with them:

DeJUTE, ANTHONY M. ROBERT D. MYERS† DONALD K. WEDDING (2008) "Wheeler-Lea Versus Pyramidal Sales" American Business Law Journal Volume 10 Issue 3, Pages 207 - 220

And the list of peer reviewed articles and articles in reliable publications questioning MLMs and their methodology goes on but yet like homeopathy which has even more evidence that it doesn't work they are allowed to run amok.

 

[Bluto]

Having just sat through my umpteenth (and absolutely LAST) goddam Amway meeting (with the requisite high-energy, ultra-positive, goodlooking, 30-something jock giving the de-rigeur pep-talk and rags-to-riches story), I felt the need to comment.

I had already done the whole MLM venture (complete with the normal bubble-bursting and crest-falling once reality set in) back in the '70s as an inexperienced teenager, but, with an adamant, demanding sister who somehow at the tender age of 60-something, just now has seen the light of "direct marketing", I did attend so as to keep peace in the family for the moment.

After this most recent (and virtually identical to my experience 30+years ago) brush with MLMery, I'm left with the same question I had way back when. That is, just what is it that the "Independant Business Owner" brings to the party?

I mean, with a REAL business, the business owner usually provides either goods or services or a combination of the two. With Amway, what is it that the IBO provides? Hell, you can get the products any freaking where, there's no real service being provided. So what value is the IBO adding to the mix for which he should get remunerated?

It seems to me all the MLMers do is try to get in line ahead of somebody else so they can put their hand out. Is this REALLY a sound business practice?

Uh un...

 

[icerat]

Icerat: You were comparing owning a McDonalds franchise with 'owning' an Amway 'business' (in reality, a theoretical business - one predicated on your ability to get people into a downline). Let's think about the differences in the distribution channels here:

It's predicated on your ability to get people to use the products, not building a downline.

A McDonalds restaurant, assuming you set it up in an area that is well frequented and with low competition, has a huge demand (anyone who is hungry) with a very narrow distribution channel (a hungry motorist, especially one in a hurry, can only have their needs fulfilled by a fast food chain restaurant like McDonalds - they can't go just anywhere to get cheap and rapidly served food).

McDonald's has no competitors? Really?

This means that the owner of a McDonalds is, essentially, guaranteed to make money. He/she doesn't have to do anything special at all; just keep the business running and people will come to you to have their needs fulfilled.

Then why does McDonald's spend millions on marketing?

Amway sells cosmetic products and total quackery.

While there's been the occasional one off in the past, I'm not aware of any "total quackery" products in the hundreds available from Amway today (with the possible exception of one in the current US market)

The demand for these products is extremely low when compared to fast food (everyone, at some point in the day, gets hungry;

So? Our competitors are in the same market space, which isn't fast food.

comparatively few people need to put on make-up every day), and the distribution channel is huge - if you live in a city, it's probably never more than a 10 minute drive to a local business that sells comparable products for lower prices that you don't have to wait to be shipped to you.

And this is where you've got things wrong. If you were correct, then I'd agree with you. Our two biggest brands are Artistry and Nutrilite. Artistry is significantly *cheaper* than the competition, and Nutrilite massively differentiated and cheaper than the closest competition.

Moreover, as a direct seller, you're at a huge disadvantage to the brick & mortar store operator because you're immediately putting any potential customer on the defensive

Huh? Last night I was with a friend and was hungry, I had a chocolate protein bar in my pocket, I pulled it out and begin to eat it and offered her some. She asked what it was and said it sounded good, where could she buy them. I told her she could buy them from me. She asked me to get some.

Real defensive customer that.

- while the McDonalds operator has people literally walking into his establishment with open wallets, already prepared to buy a Big Mac, the Amway agent needs to convince people to buy the make-up, vitamins, detergent, etc.

What you're describing is how NOT to succeed in sales of consumables.

There is no parity here - Amway, MLM scheme or not, is not as viable a business practice as jumping in on an established fast food franchise.

* $8.2 billion in sales
* global leader in it's primary brand, sales 3 times the nearest competitor
* Top 5 globally in it's second brand
* <a href="http://www.amwaywiki.com/Awards_and_Recognitions">wins consumer awards around the world</a>

Claiming something is "not viable" when 50+ years of history already shows your wrong is, well, a bit odd.

 

[icerat]

I mean, with a REAL business, the business owner usually provides either goods or services or a combination of the two. With Amway, what is it that the IBO provides? Hell, you can get the products any freaking where, there's no real service being provided. So what value is the IBO adding to the mix for which he should get remunerated?

What you are describing seems to be, by definition, an IBO that is NOT doing the "B" part - operating a business. The job of the IBO is a mix of the services of marketing (that's why it's called network marketing) and customer service, with these days an additional (limited) role in distribution.

And you cannot get the products "any freaking where". In Europe for example the only place you can purchase Amway's brands other than via an IBO is from the flagship store in London. In the US only off the website, and that volume is credited to an active IBO.

From a corporate perspective the IBO is an incredibly cost effective marketing channel - there is little in the way of marketing expenses until AFTER a sale is made. How is that not "value"?

 

[icerat]

Well said; I was only trying to point out that, even if we gave Amway the maximum benefit of the doubt and assumed it was being used as a 'direct sales' (I've always hated that term; it's 'door to door sales', or canvassing, and it's never been a successful practice) vehicle rather than an MLM pyramid (a model which Mr. Dunning so elegantly eviscerated in his podcast), it still doesn't have any advantage or even comparable value to setting-up a fast food restaurant.

Kevin, we are in 100% agreement that MLM/NWM would not be a sensible model for the fast food industry.

Let's say I own a car dealership in the downtown hub of my city.

Not sure that car sales is particularly suited to MLM either. Indeed I think not - consumables with decent margins are the go. Nevertheless let's look at your example.

We'll say that the weekly total peak demand (so, the demand the city has when everyone is most eager to buy a new vehicle) for my cars is represented by a value of 100 (the numbers here are arbitrarily picked; the values themselves aren't particularly relevant), and we'll also throw in a caveat that 35 points of my demand value can only be tapped into through good salesmanship (the maximum demand is still fixed - being a good salesman just means that you have access to more of that demand than the rest of my employees that are competing with you, it can't somehow magically increase the city's demand for cars).

Your assumption of "maximum demand is still fixed" is incorrect. That's the role of marketing - to increase demand. Furthermore, there's a great deal of fluidity within the market, so you want to increase demand for cars you sell. Even if there's static overall demand you can make money by increasing demand for your brand (and decreasing that for the competitors).

This happens all the time across all industries.

I hope the problem is immediately obvious to our objector. Your peak demand is fixed, so the total number of cars your could ever possibly sell is also fixed

I would suggest if you look at the history of the motor car industry, that demand has not been fixed at the same rate at all.

(in my example, fixed at about 10 per week, for the best salesmen - the rest of the employees only have access to 3/4s of the demand); the person at the top of any downline will rake in a lot of cash because they make money off of every sale, including their own, but those every one level down are much, much worse off because competition very quickly crowds out their ability to make sales

This is only true if there's a very small market. If the market size far exceeds the ability of one person to service it, then it's of theoretical interest only.

(good salesmen will initially do much better because they have special access to a certain portion of the demand, but even they will crowd each other out quickly enough). Eventually, even people at the top of their own downlines will start getting crowded-out as new downlines are established (ever wonder why many of the high level positions in Amway and other MLM schemes are well protected by sales volume requirements?)

I'm not sure what you mean by this? "high level positions in Amway" are not "protected" at all. They are defined by sales volume obtained. Don't get the sales volume, the "position" is gone.

, and pretty quickly the only person making big money is myself, the dealership owner, who has a pile of free labor selling his merchandise for him.

I think your argument is one purely concerned with the issue of potential market saturation. Market saturation and demand is of concern in ALL industries, not just ones that use multilevel marketing. If demand for your products decreases or becomes saturated, and you wish to expand your business, then you need to either (a) increase demand or (b) move in to different markets. Dosn't matter whether your marketing through traditional advertising or through word of mouth and MLM. I think the problem is your looking at "recruiting" as the goal of an MLM business rather than MLM compensation and recruiting as simply a marketing strategy, and a flexible one at that.