Moderated MLM Crap :(

[ConspicuousCarl]

It looks like you avoided trouble, but I will answer anyway for future reference.

MLMs are not necessarily going to fail or cheat people. Multi-level marketing is when a seller can recruit underlings, and gets a bonus based on their sales, and then those sellers can in turn recruit a lower level of sellers, etc. Membership fees are common, but not required by definition. If the product is worth selling, the MLM structure could in theory be stopped at some limited number of employees, and then everyone could say, "that's good, now let's start selling stuff".

It becomes a "pyramid scheme" (which is mathematically doomed to failure for most "members") when the primary motivation for joining is the collection of sign-up fees or commissions from future members (i.e., nobody actually wants to buy or sell the "product") and infinite recruiting is needed to pay each member what they thought they were going to get. Sometimes the sign-up fee is hidden as a requirement to purchase the "product". This is the arrangement for which there are charts showing the mathematical impossibility of success based on the need for absurdly large populations to support success at only a few levels of membership.

MLM should be avoided by potential joiners because it is such an attractive method for real criminals to offer, and because even honest people starting such a business can be self-deluded when sloppy bookkeeping allows the sign-up fees to hide the fact that their product doesn't sell well (and they are thus cheating their members without knowing it).

People considering starting such a business should avoid it because even if they have competence and good intentions, the system is too easily abused and misrepresented by their sellers. Note that the motivation of those joining is a key to turning an honest MLM business into a scam, and it is hard to be sure of what your members are thinking. The whole setup begs for false hopes, abuse, and disaster.

It is important to acknowledge the difference between "MLM" and "pyramid scheme", and also how one can become the other, because I think it is easy for honest people to start something bad. If you just say "MLM is always a scam", an honest-yet-misguided person will correctly reject the blunt assertion and possibly go on to do something horrible.

 

[NewtonTrino]

If you just say "MLM is always a scam", an honest-yet-misguided person will correctly reject the blunt assertion and possibly go on to do something horrible.

So are you saying it's always a scam but don't say that because people will think you are crying wolf? Or do you know of some that actually aren't a scam?

In my experience amway is definitely a scam. Then again I got to take a look at their books because I wrote the software they ran their business on.

 

[ConspicuousCarl]

So are you saying it's always a scam but don't say that because people will think you are crying wolf?

I very clearly explained that it is not necessarily a scam, and that people can start MLM businesses, or join them, without intending to be crooks. Try reading it again if you have to.

 

[NewtonTrino]

I very clearly explained that it is not necessarily a scam, and that people can start MLM businesses, or join them, without intending to be crooks. Try reading it again if you have to.

I totally agree about intent. In fact most people who join don't really know what's going on and don't get into the scam party until much later, if ever.

However, at best these are crap business opportunities. At worst they are cults that conspire to suck their members dry.

 

[ServiceSoon]

How do you figure?

Do you not agree that MLMs are designed to profit the guy at the top?

Or do you not agree that it's a good idea to be at or near the top of any legal MLM that offers such an opportunity?

Or do you have some other objection, even less readily apparent to me?

You admit it's a flawed system stacked against anybody but the people at the top, but advise the OP to get fast to get paid. Your advice reeks of greed.

 

[Emet]

<snipped> the whole MLM propaganda lecture explanation about the difference between MLMs (legal pyramid) vs. illegal pyramid schemes.

(my text in quote box)

IIRC, there is at least one member here who is involved in an MLM.

I would guess the vast majority of members here are well educated in MLMs.

Perhaps you might be one to characterize the well-known anti-MLM educators as "anti-MLM zealots".

Would that be a fair assumption?

 

[Skeptic]

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.

There is no such thing as a product that "sells itself". There is only a limited demand for any product. If the product "sold itself" he could get a loan to start a company to sell the product, if nothing else.

Now, let's see, here's the regular business model:

Producer --> wholesaler --> retailer --> customer.

Here's the MLM model:

Producer --> wholesaler --> MLM company --> Joe --> Mike --> John --> Harry --> Moe --> The guy down the street who joined last week, which you should listen to his every word because he is your "upline" and therefore knows everything --> you --> customer.

For some reason I don't think the end product will be cheaper this way than if it is sold in the regular way.

P.S.

MLMs always talk about how what they're doing is LEGAL. They never talk about how what they're doing is profitable. After all, buying dental floss with every last penny you have is also perfectly legal, but not a good investment (I suppose...). Can you imagine why?

 

[Skeptic]

Or do you have some other objection, even less readily apparent to me?

Yes: that it is immoral to scam people for personal profit, as those in the top of the MLM pyramid do to those below it.

 

[Skeptic]

If the product is worth selling, the MLM structure could in theory be stopped at some limited number of employees, and then everyone could say, "that's good, now let's start selling stuff".

No, that's how a REAL company does it. It has a product, it estimates how much demand there will be for the product, it hires employees to produce, manage, and sell the product.

Using the MLM method for recruiting means your sellers, instead of being made of qualified people who passed some sort of interview or requirement, is a bunch of friends of friends of friends of the guy who started the company. It's nepotism towards people you don't even nepote with. It's hard imagine a worse way to recruit a sales force -- even if you stop at some point.

And it never is the MLM's purpose, anyway. Nobody cares if the guys in the bottom of the pyramid sell anything. The MLM business is simply for the guys at the top to sell the guys at the bottom of the pyramid tons of overpriced products and -- worse -- "educational" materials.

 

[icerat]

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

If so, then it's not a legitimate MLM, it's an illegal pyramid. The "business" is whatever you make your money from. If it's coming from sign up fees rather than product sales, it's a pyramid not an MLM. Note that many pyramids call themselves MLM in the hope you won't notice they're pyramids.

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.

From the manufacturer's perspective the whole idea of MLM is there is decreased overheard, not increased.

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:

Uhh, that's a picture of a pyramid scheme .. ok, I guess you said "MLM-style pyramid", which means not legitimate MLM For an MLM to remain profitable for new members, there needs to be exactly what their needs to be for any new business startup - a market.

Do you not agree that MLMs are designed to profit the guy at the top?

You have to define "top" to answer this question. Legitimate MLMs are designed to profit the guy who generates the most business. The people earning the most are pretty much never the ones who are at the "top" of the "line of sponsorship".

I would guess the vast majority of members here are well educated in MLMs.

It's my experiece are that a lot of members here (and people elsewhere for that matter) are well educated in illegal pyramids, and they falsely believe MLM operate the same way and attribute the failings of illegal pyramids to MLM. The fact pyramids try to disguise themselves as MLM doesn't help.

There is no such thing as a product that "sells itself".

Entirely agree. Though if there theoretically was, you need to let people know the product existed. MLM may or may not be a way to do that, but if a product is that good, it's probably not the most profitable way, no.

Now, let's see, here's the regular business model:

Producer --> wholesaler --> retailer --> customer.

Here's the MLM model:

Producer --> wholesaler --> MLM company --> Joe --> Mike --> John --> Harry --> Moe --> The guy down the street who joined last week, which you should listen to his every word because he is your "upline" and therefore knows everything --> you --> customer.

That is correct so far as "word of mouth marketing" goes, but is not correct as far as distribution of profits. It's also a rather limited view of regular business, which often has importers/exporters etc, and, crucially, marketing expenses, which is really what the $$$ of modern MLM is about. The FTC's investigation into Amway more than 30 years ago showed that the actual number of profit sharing "levels" in Amway was remarkably similar to traditional distribution networks, ie usually around 3 to 4, and generally no more than 6 or 7.

To the original topic though, MLM is best suited to a consumable type of product that requires some kind of consumer education/explanation to outline the features/benefits compared to any competitors, and where that education/explanation cannot be done more cost effectively through other means, ie traditional mass marketing.

It's advantage for a startup is that you effectively don't pay marketing expenses until after a sale is generated. It also can lead to explosive growth - however the downside is that managing your field (and thus reputation) can be a much more difficult task than it may initially seem.

If someone has capital and a product that truly "sells it self" then a mass market campaign is probably a far more sensible option.

 

[NewtonTrino]

Hey Icerat, how much money have you made from scamway this year?

 

[Mike!]

Why has scamway started running commercials? I thought the whole point of MLM was to avoid spending money on advertising and giving that money to the "reps'. What's up with that rabbit?

 

[Wowbagger]

If your cousin is at the top of the pyramid, he could end up raising a lot of capital. Those at the top will more often do a lot better, in these schemes, than those at the bottom.

But, that's the key point: You could be screwing lots of people at the bottom. Even if the business happens to be legal (for some reason), it's not the best way to gain a good, solid reputation.

 

[pipelineaudio]

There is no such thing as a product that "sells itself". There is only a limited demand for any product. If the product "sold itself" he could get a loan to start a company to sell the product, if nothing else.

That's pretty much what happened in the end. He didn't want to give up too much control, but knew the product was fast enough to demand not paying interest either. People just bought in, we got our guys now and our quantity price break.

I said "just about sells itself" I don't know why people take so much issue with that. Were offering the same or higher quality at less than half the price that people buy this product for every single day. I'll have more to say about it once we feel we are more protected from our fascist government and their anti-first amendment rulings in this issue of late. AFAIK I'm not even allowed to make the website order form public without incurring the wrath of the nannies. Taking that part slow

 

[pipelineaudio]

But, that's the key point: You could be screwing lots of people at the bottom. Even if the business happens to be legal (for some reason), it's not the best way to gain a good, solid reputation.

That about sums up my feelings on this as well. Luckily it was avoided

 

[icerat]

Why has scamway started running commercials? I thought the whole point of MLM was to avoid spending money on advertising and giving that money to the "reps'. What's up with that rabbit?

What's up is that you're not entirely correct. It's quite common amongst legitimate network marketing companies to supplement the field word-of-mouth marketing with traditional advertising. Amway has been doing advertising ever since it was founded in 1959. Here's one from the 1960s -



But yes, it is usually significantly less money spent than non-mlm companies, freeing up dollars for field commissions. I can't find it now, but I have a paper talking about advertising spend levels and MLM. The major MLMs (Avon, Amway, Verwork, Herbalife, Mary Kay, Primerica etc) all have a significant advertising budget, and the paper suggested this is one way to differentiate scams from legitimate companies.

The scammers almost never spend money on traditional advertising, and if they do it is very small and never for the products they're ostensibly marketing.

 

[ServiceSoon]

Why has scamway started running commercials? I thought the whole point of MLM was to avoid spending money on advertising and giving that money to the "reps'. What's up with that rabbit?

My best guess is that Quixtar growth is stagnant or declining. AFAIK, this was Amway's most recent marketing gimmick (1999). So they swallowed the advertising pill. It's called desperation.

 

[NewtonTrino]

Make any money yet Icerat?

Keep in mind we've never got a single one of these scamsters to tell us how much money they make for how much effort.

 

[Wrathernaut]

You know you've been using MS Word for far too long when you wonder why "can" is marked as being misspelled.

 

[icerat]

My best guess is that Quixtar growth is stagnant or declining. AFAIK, this was Amway's most recent marketing gimmick (1999). So they swallowed the advertising pill. It's called desperation.

Quixtar doesn't exist anymore, they merged back into the Amway corp a couple of years ago when market research made it clear they were better off using Amway's brand recognition and working on improving reputation and clearing out the troublemakers.

North American sales are indeed down. Apart from changing market conditions, something which all businesses have to deal with, a large contributor to his was they have (finally) kicked out dozens of top "leaders" over the last few years for rule breaking and other unethical behaviour. According to various lawsuits Amway North America lost more than 60,000 active distributors due to this action and North American sales almost certainly dropped below $1billion for the first time in a decade. The right thing to do long term though, imo.

Interesting you completely ignored the fact Amway has been advertising for more than 50 years (since it was founded) in your hypothesis that Amway is advertising now because of "desperation". The North American TV advertising campaign began 3 years ago by the way, so not exactly "now" anyway.