Moderated MLM Crap :(

pipelineaudio

Philosopher
pipelineaudio
Joined
Feb 23, 2006
Messages
5,092
I have an industrious cousin who does well with his businesses. He has a new one starting where the demand is pretty high and his margins are win win for both him and the end customer. His only issue is getting enough capital to get the supplies at an even cheaper price.

The way he sees solving that problem is by creating a sort of MLM. Not just selling distributor kits to people directly, but selling the ability to sell the distributor kits, and of course the next level down, selling the ability to sell the ability to sell the distributor kits, etc.

A lot of the common arguments against MLM's won't work since his actual end product just about sells itself pricewise coming in at WAY under half what they'd pay retail.

I need some help. To me it still seems like this thing will bottom out like any mlm, but worse, I see this system as an administrative nightmare compared to just selling the distributor kits or the end product and being done with it.

I guess I should mention I'll be handling all the tech and IT side of this and really don't want the issues of a policy that would take serious policing
 
That's how Amway does it. They are still in business. I knew in laws of my in-laws who became diamond distributors. That is where you are up the totempole a ways, and get kickbacks from all your underlings, and underlings of the underlings, etc. They did very well. Very well indeed.
 
pipelineaudio said:
his actual end product just about sells itself
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I really couldn't be more skeptical about this. Sorry, and no offense is intended. Step back, think long and hard about it, get a second and third opinion, and then think about the best structure. Why not just hire smart people in different places to distribute it? Why not establish the business online, where it's immediately global? Why in the world would MLM be the best way forward, unless your cousin is pimping a scam?
 
carlitos said:
Why not just hire smart people in different places to distribute it?
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That's my issue, I believe this is the way to do it and need arguments against MLM's. It doesn't even need to be a smart salesman, this is a product a good chunk of the population buys every day and its a no brainer to anyone who has seen it so far. The sales are already high enough to me, to make it worth it to wait till we gain the capital to reach the bulk price, no MLM needed

To clarify, this thread is about arguments why MLM's are a bad idea, especially for a business where the product IS the business, not like a typical MLM where paying for the ability to sell the ability to sell the ability to sell a product is the business

Why not establish the business online, where it's immediately global?
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That's another issue I have. If he does it MLM, I won't be able to offer the correct prices on the online shop, where i believe we will make a load of money compared to selling the ability to sell the sbility to sell the sbility, etc...

We can't go global with this setup because it takes advantages of some of the unique situations endemic to Hawaii

Why in the world would MLM be the best way forward, unless your cousin is pimping a scam?
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Because he is surrounded by MLM idiots, even though he made his money by actually selling real products and services, he believes that this MLM model will cause "explosive growth" compared to selling the product outright, which is what i would perfer

Again, to clarify, this thread is about arguments why MLM's are a bad idea, especially for a business where the product IS the business, not like a typical MLM where paying for the ability to sell the ability to sell the ability to sell a product is the business
 
What is his business? Answer should be "Selling blue widgets."

What is the business of an MLM? Answer is signing up people.

Is that the business he wants to be in?

For MLMs the product is not the most important thing. Most MLMs do not have killer products because there is added overhead going the MLM route. And if it's a killer product, someone else will sell it without the MLM BS for a cheaper price. He may end up being dependent on the MLM to make money not the product. Is that what he really wants to do?

ETA: If the product is good you want to control distribution. For MLMs to work you need to flood the market with distribution.
 
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Spindrift said:
What is his business? Answer should be "Selling blue widgets."

What is the business of an MLM? Answer is signing up people.
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This. If he wants to sell the item he needs to contact the sales reps in his field and give them promotional materials for the item. If it is as good as you say then he won't need to play games like MLM.
 
I need reasons why it wont work as an mlm. There was a really neat chart either on this forum or one of the other skeptics boards or podcasts that showed how mathematically it just cant work. I need something like that
 
It can 'work' as an MLM. But why? What you want, if you have something that will actually sell, is the shortest possible line between you and the money. Anything you introduce between those two things will dilute your profit.

The counter argument will be volume and "passive" sales. That's fine, but with the Internet, you aren't stuck with MLM to gain those advantages as well. If he is stuck with the idea, there are professional MLM marketers who look for products to taint with their operations.

My best argument against what he wants to do is that MLM is a skill set all on its own and there's no reason to add this baggage. In essence, he's going to lose control over his own business by letting others take charge of sales -- does he really want this?
 
pipelineaudio said:
I need reasons why it wont work as an mlm.
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You mentioned above that it was something mainly to do with Hawaii. There aren't enough people in the state to support an MLM. Pyramids only work with an unlimited supply of marks. Islands tend to limit that supply somewhat.

If the market is limited to the islands then he really just needs one salesman per island, maybe two each for the big island and maui.
 
pipelineaudio said:
I need reasons why it wont work as an mlm. There was a really neat chart either on this forum or one of the other skeptics boards or podcasts that showed how mathematically it just cant work. I need something like that
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For an MLM-style pyramid to remain profitable for new members, there needs to be an exponential progression in terms of new distributors. He may not be doing the pure pyramid structure, but if so, this picture from wikipedia may be what you were thinking of:

http://upload.wikimedia.org/wikiped...ramid_scheme.svg/350px-Pyramid_scheme.svg.png
 
Iamme said:
That's how Amway does it. They are still in business. I knew in laws of my in-laws who became diamond distributors. That is where you are up the totempole a ways, and get kickbacks from all your underlings, and underlings of the underlings, etc. They did very well. Very well indeed.
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Realize that what they did very well on was probably the "tools" and conferences scams. The MLM? Probably not so much.
 
Iamme said:
That's how Amway does it. They are still in business. I knew in laws of my in-laws who became diamond distributors. That is where you are up the totempole a ways, and get kickbacks from all your underlings, and underlings of the underlings, etc. They did very well. Very well indeed.
Click to expand...


Ive looked into and seen alot of MLMs and it seems you need about 6 levels of people under you to hit that "very well" mark. Not that easy to do
 
I have always wondered how adding more layers of middlemen to a business would benefit anyone?

Sure, the subordinate sellers could add sales through home parties and such, but if there is a real competitive product that should not be necessary. And no, I do unfortunately not have a mathematical breakdown of the sales structure in a MLM business.
 
pipelineaudio said:
The way he sees solving that problem is by creating a sort of MLM. Not just selling distributor kits to people directly, but selling the ability to sell the distributor kits, and of course the next level down, selling the ability to sell the ability to sell the distributor kits, etc.

A lot of the common arguments against MLM's won't work since his actual end product just about sells itself pricewise coming in at WAY under half what they'd pay retail.
Click to expand...

The actual end product sells itself? That's one of the most common statements made by the industry.

pipelineaudio said:
To clarify, this thread is about arguments why MLM's are a bad idea, especially for a business where the product IS the business, not like a typical MLM where paying for the ability to sell the ability to sell the ability to sell a product is the business
Click to expand...

Sorry, but this statement is more MLM propaganda. You don't have to recruit, you can just sell the product. Then just sell the product, and eliminate the MLM portion of the endless chain.


Because he is surrounded by MLM idiots, even though he made his money by actually selling real products and services, he believes that this MLM model will cause "explosive growth" compared to selling the product outright, which is what i would perfer

Again, to clarify, this thread is about arguments why MLM's are a bad idea, especially for a business where the product IS the business, not like a typical MLM where paying for the ability to sell the ability to sell the ability to sell a product is the business
Click to expand...

Well, he probably will do well since he will be at the top of the pyramid. But no matter how he spins it, if he incorporates MLM into his business plan, 95-97% under him will lose money as he gets richer.

If the product is the business, why is he incorporating the endless chain business opportunity?
 
pipelineaudio said:
I have an industrious cousin who does well with his businesses. He has a new one starting where the demand is pretty high and his margins are win win for both him and the end customer. His only issue is getting enough capital to get the supplies at an even cheaper price.

The way he sees solving that problem is by creating a sort of MLM. Not just selling distributor kits to people directly, but selling the ability to sell the distributor kits, and of course the next level down, selling the ability to sell the ability to sell the distributor kits, etc.

A lot of the common arguments against MLM's won't work since his actual end product just about sells itself pricewise coming in at WAY under half what they'd pay retail.

I need some help. To me it still seems like this thing will bottom out like any mlm, but worse, I see this system as an administrative nightmare compared to just selling the distributor kits or the end product and being done with it.

I guess I should mention I'll be handling all the tech and IT side of this and really don't want the issues of a policy that would take serious policing
Click to expand...

MLM is most profitable for the guy at the highest level.

Arguments against MLM directed at people at the lower levels are totally irrelevant to the people at the higher levels. That is, in fact, the whole point of MLM.

If your cousin truly is at the top of a (legal) pyramid scheme, then my only advice to you is to get in on as much of his payoff as you possibly can.
 
theprestige said:
MLM is most profitable for the guy at the highest level.

Arguments against MLM directed at people at the lower levels are totally irrelevant to the people at the higher levels. That is, in fact, the whole point of MLM.

If your cousin truly is at the top of a (legal) pyramid scheme, then my only advice to you is to get in on as much of his payoff as you possibly can.
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This is just :jaw-dropp
 
Issue luckily avoided.

Sales were so strong that the few salesmen who had signed up just hired guys to work for them and took care of itself. No pyramid, no MLM, no scheme, no problem. I get to tech a structure where everyone pays the same price, no more crazy calculations based on floating ranks and whatever
 
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