Friends and MLM recruitment. HELP!

[icerat]

Sure, as long as there is sufficient "churn" at the lower levels then the business continues to be viable.

If it's possible for the lower levels to "churn" then it's possible for those same lower levels to instead grow.

I note you ignored the example I gave of the business I built years ago, which has ZERO churn and yet continues to be viable. Similarly, several years ago Amway UK put a halt to all sponsoring for almost 2 years while they were involved in a court case. They continued to sell millions of pounds of products and those earning incomes continued to do so.

It is again the case of theory simply not stacking up against reality.

MLM seems to rely on people paying over the odds for the product though. Comparing Amway product pricing to those in Walmart (which IIRC we did in a thread some months ago) or whatever shows that Amway is more expensive.

It only shows that if you don't bother with product differentiation. There is a huge market of people who not interested in simply purchasing the cheapest possible product in a particular category but are interested in other aspects to assess "value". Whitening toothpastes vs normal toothpaste. Environmentally friendly vs not environmentally friendly. Longer lasting mascara vs cheaper mascara etc etc etc. Very few (if any) of Amway's products are targeted towards the same market as Walmart.

Those people who have enough family, friends or cow-orkers to flog their wares to are likely to turn a profit (at least until they have to start buying the instructional materials).

As already noted, but you also have chosen to ignore, the data shows that purchasers of products from direct sellers are overwhelmingly happy with their purchases, would purchase again, and would recommend to others.

 

[Mike!]

Meh, I checked them out and they look interesting as long as you have a steady supply of rich people who want you to act as their own personal travel agent. Most of the rovio packages were hidden behind a register first wall so the only price I could get was their 12 day South American tour which goes for +500/day/person.

I've seen lots of people get involved in MLM schemes however I've never seen anyone make a go of it. Most people don't want to talk about it after they've left the organization.

It's funny how fast it can go from, "Let me tell you about my new 'business'..." to "I really don't want to talk about it."

 

[Biscuit]

Not to me. Anyway, flawed either way.

Well it's a simple function of critical reading and no it is not flawed as no flaw has been demonstrated. Just repeating the same thing does not make it true.

So the decision that you won't open a store is the "control"? How is that different to MLM? If I show you a business selling water filters, and you think there's too many people selling water filters in the area already, can't you just decide not to start the business? I fail to see a difference?

You are missing the point. All business models except MLM pay careful attention to their market saturation and territories. Like the example in the article, wendy's would not open 4 stores on the same intersection. The people in charge of the MLM company could care less if four neighbors all start selling the same product, in fact they encourage you to recruit neighbors! Anyone can join at anytime and no one, not the people in charge or the independent contractors, is aware of how saturated the market is.

Market saturation is a goal for all businesses. It rarely occurs. If a business approaches saturation for it's product, then it looks for new products or new markets. Again, I fail to see the difference?

The difference is no one in an MLM knows where market saturation is! The pitch is always, "get in now!" When an MLM over saturates a market they are A) unaware and B) unconcerned. When rayban orders 10 million sunglasses and can only sell 2 million they loose their capital investment and may not survive.

As for your other questions I will take a look but I have yet to see any real criticism of the Van Druff article that stands up.

 

[The Don]

If it's possible for the lower levels to "churn" then it's possible for those same lower levels to instead grow.

I note you ignored the example I gave of the business I built years ago, which has ZERO churn and yet continues to be viable. Similarly, several years ago Amway UK put a halt to all sponsoring for almost 2 years while they were involved in a court case. They continued to sell millions of pounds of products and those earning incomes continued to do so.

It is again the case of theory simply not stacking up against reality.

Of course they continued to sell product, predominantly the purchasers are either in the MLM organisation or friends, relatives, cow-orkers who will continue to buy.

The same people will make money - the upstreams who benefit from the vast majority of MLM members who don't make profit.

It only shows that if you don't bother with product differentiation. There is a huge market of people who not interested in simply purchasing the cheapest possible product in a particular category but are interested in other aspects to assess "value". Whitening toothpastes vs normal toothpaste. Environmentally friendly vs not environmentally friendly. Longer lasting mascara vs cheaper mascara etc etc etc. Very few (if any) of Amway's products are targeted towards the same market as Walmart.

Of course they will claim that in order to avoid proper price comparison.

As already noted, but you also have chosen to ignore, the data shows that purchasers of products from direct sellers are overwhelmingly happy with their purchases, would purchase again, and would recommend to others.

Direct sellers are not always MLM.

Most people are happy with their purchases regardless of source. A score of just above 3 on a 1-5 assessment doesn't represent overwhelming happiness in my book.

 

[Stomatopoda]

It only shows that if you don't bother with product differentiation. There is a huge market of people who not interested in simply purchasing the cheapest possible product in a particular category but are interested in other aspects to assess "value". Whitening toothpastes vs normal toothpaste. Environmentally friendly vs not environmentally friendly. Longer lasting mascara vs cheaper mascara etc etc etc. Very few (if any) of Amway's products are targeted towards the same market as Walmart.

More like regular $5 HDMI cables sitting on the shelf vs $300 HDMI cables + extended warranty that the salesman shoves in your face. Lots of people respond to sales pitches for "premium" products that aren't any better than the competition.

 

[Stomatopoda]

Then again, you could say those folks aren't just buying a product... they're buying unwarranted self-importance and feeding their ego. Hmm. It's pretty hard to hate these types of schemes, as the victims so often bring it upon themselves.

 

[Stomatopoda]

Ugh. Now I sound like a libertarian. I feel dirty.

 

[Joecool]

The MLM Reality

While "some" people can make money in MLM, the sad reality is that the vast majority do not.

In general, MLM does more harm than good for society. Most people, even those who work hard and apply MLM skills taught by their mentors/sponsors are doomed to fail because for most MLMs, the model dictates it.

In evaluating the "plans" shown, people will note their is usually a "direct" or something similar where they have maybe 100 or more downline (typical in Amway). Basically nearly everyone downline of that direct distributor will make nothing or lose money.

The losses become worse if the participants have been duped into purchasing "valuable training" from their upline.

 

[icerat]

Of course they continued to sell product, predominantly the purchasers are either in the MLM organisation or friends, relatives, cow-orkers who will continue to buy.

Assuming this assertion is true (have you any data to support it?), where's the problem? It shows there is demand for the product.

The same people will make money - the upstreams who benefit from the vast majority of MLM members who don't make profit.

Nobody who purchases products for personal use is "profiting", in MLM or anywhere else. You seem to think they should be?

Or are you disciple of the thesis, contrary to all evidence (not to mention common sense), that insists that everyone in an MLM is trying to make money?

Or are you one of those who apparently is disappointed that MLM businesses require hardwork, dedication, and persistence over months and years to develop a profit, it should be "get rich quick"?

Of course they will claim that in order to avoid proper price comparison.

And of course you would say that in order to avoid a proper price comparison.

But help me out. I'm working on a paper tentatively titled "A methodology for comparing price competitiveness of consumer products"

How do you think it should be done?

Direct sellers are not always MLM.

In the United States 96% of direct selling companies and 99% of direct sellers use a multilevel compensation plan.

Most people are happy with their purchases regardless of source. A score of just above 3 on a 1-5 assessment doesn't represent overwhelming happiness in my book.

My "overwhelming" was in reference to the numbers that were happy, not their degree of happiness.

So you accept they're happy with the purchase. Indeed happier enough to repurchase.

Have you any evidence to suggest consumers purchasing from fixed retail locations are more happy with their purchases?

 

[Alt+F4]

Their unique approach would be to use contacts at the local colleges to market to students.

Their "unique approach" is not unique at all. MLMs also pitch to high school students, that is something your friends should know.

I agree with another poster who basically said, "No thanks, it's not for me".

 

[Joecool]

Their "unique approach" is not unique at all. MLMs also pitch to high school students, that is something your friends should know.

I agree with another poster who basically said, "No thanks, it's not for me".

Some MLMer's are so desperate, they will recruit anyone with a pulse. Not surprisingly, they all fail.

 

[halleyscomet]

I would prefer a less aggressive approach.

Ask him to sit down and run the numbers to see how much he'd have to move in order to actually turn a profit. Then ask him to think long and hard about the amount of work needed to achieve it and what his hourly pay would end up being.

I also recommend the following Skeptoid episodes:

Network Marketing

Bend Over and Own Your Own Business - Skeptoid

MonaVie and Other "Superfruit" Juices

As far as the Nutrilite and Amway defenses go, the fact that the company at the top can thrive does not mean the bottom level suckers are doing the same. Once an MLM scheme is old enough, it has enough name recognition to keep suckering in the next generation.

 

[Mike!]

Some MLMer's are so desperate, they will recruit anyone with a pulse. Not surprisingly, they all fail.

AKA, "The three foot rule". Anyone who gets within three feet of the desperate MLMer will receive a completely unprovoked and unwarranted presentation and invitation until possibly forced into capitulation. Join an MLM and lose friends and distance family in no time flat all while blowing a college fund on a garage full of overpriced yet totally worthless products you couldn't give away at a yard sale.

 

[halleyscomet]

AKA, "The three foot rule". Anyone who gets within three feet of the desperate MLMer will receive a completely unprovoked and unwarranted presentation and invitation until forced into capitulation. Join an MLM and lose friends and distance family in no time flat all while blowing a college fund on a garage full of overpriced yet worthless products you couldn't give away at a yard sale.

When I was in my 20's a woman tried to pitch me on Amway when I was at a dance club. She was very attractive and wore a skimpy, tight "pending wardrobe malfunction" outfit. The friend I was with pretended to be interested and then said "So, what's it like hooking for Amway?"

The poor girl slunk off, deflated and humiliated.

 

[icerat]

Of course they continued to sell product, predominantly the purchasers are either in the MLM organisation or friends, relatives, cow-orkers who will continue to buy.

The same people will make money - the upstreams who benefit from the vast majority of MLM members who don't make profit.



Of course they will claim that in order to avoid proper price comparison.



Direct sellers are not always MLM.

Most people are happy with their purchases regardless of source. A score of just above 3 on a 1-5 assessment doesn't represent overwhelming happiness in my book.

Ask him to sit down and run the numbers to see how much he'd have to move in order to actually turn a profit. Then ask him to think long and hard about the amount of work needed to achieve it and what his hourly pay would end up being.

I also recommend the following Skeptoid episodes:

Remember what I said about the first rule of evaluating MLM criticism? If they quote Taylor or FitzPatrick, then you know they don't know what they're talking about.

I challenged Dunning over some of his claims in one of those podcasts. He asked me to provide evidence to support what I was saying. I responded with links to the supporting evidence, he did not post it. He does things like reporting on accusations of plaintiffs in a lawsuit - but ignores actual findingsin judgements.

In the comments he says patently absurd things like this -

"Holly - You are right, there are substantial differences between Mary Kay & Avon and MLM programs. That's why I did not discuss them in the podcast. In short, they are based upon product sales commissions, and not dependent upon recruiting networks."

Both Avon and Mary Kay are MLM programs!

He has his definitions ass-backwards. The definition of MLM is that they are "based upon product sales commissions and not dependent upon recruiting networks"

He has clearly begun with the assumption that MLM=pyramid and then attacked MLM as having the well known flaws of pyramid schemes.

Precisely as many are doing on this thread.

As far as the Nutrilite and Amway defenses go, the fact that the company at the top can thrive does not mean the bottom level suckers are doing the same.

This is almost as absurd as Dunnings comments. If you're at "the bottom" then by definition your not making much, if any money. If I'm at "the bottom" of a coca-cola distributon chain I'm either a customer or someone who hasn't yet on-sold the product.

Nobody at "the bottom" of a coca-cola distribution chain is making money either!

This is one of the more bizarre criticism I see. You seem to think the problem with MLM is that it's the people who work hard and build businesses that make money!

Once an MLM scheme is old enough, it has enough name recognition to keep suckering in the next generation.

There's a girl I've known since she was about 10. She started an Amway business 4-5 years ago when she was 18. A "bottom level sucker" as you put it. Guess what, just like every other business in the world, she wasn't making money the day she started. She has now built a significant business with sales turnover of $2 to 3 million a year and is making a very significant 6 figure income.

 

[Alt+F4]

There's a girl I've known since she was about 10. She started an Amway business 4-5 years ago when she was 18. A "bottom level sucker" as you put it. Guess what, just like every other business in the world, she wasn't making money the day she started. She has now built a significant business with sales turnover of $2 to 3 million a year and is making a very significant 6 figure income.

What's her name?

 

[icerat]

AKA, "The three foot rule". Anyone who gets within three feet of the desperate MLMer will receive a completely unprovoked and unwarranted presentation and invitation until possibly forced into capitulation.

A quick survey -

There are around 16 million registered direct sellers in the United States, more than 99% of whom are with MLM companies.

There are 207 million people aged over 15 in the United States.

This means around 1 in 12 adults in the United States is a representative of an MLM company.

How many people did you get within 3 feet of today? How many accosted you with a presentation?

 

[icerat]

What's her name?

Why, looking to hook up with a young rich chick?

 

[Alt+F4]

Why, looking to hook up with a young rich chick?

He,he,he.

No, I'm doing fine as middle-aged chick, making a nice living...honestly. I just asked because it seems to me that if this woman is the epitome of the wealth that can come from being an MLMer (especially at a young age) she would be their spokesperson.

 

[halleyscomet]

I challenged Dunning over some of his claims in one of those podcasts. He asked me to provide evidence to support what I was saying. I responded with links to the supporting evidence, he did not post it. He does things like reporting on accusations of plaintiffs in a lawsuit - but ignores actual findingsin judgements.

Well then, post the links here. Let's have a look at them.

He has his definitions ass-backwards. The definition of MLM is that they are "based upon product sales commissions and not dependent upon recruiting networks"

Ah, now I see the core issue. You are using a broader interpretation of MLM, while Dunning was only addressing the ones that are actually scams. It sounds like the two of you don't really disagree on what constitutes a scam, but have gotten mired in a pointless argument about semantics and definitions. While he attempts to make the distinction clear in at least one of the episodes, I haven't listened to any of them recently enough to know how good a job he does. I will defer to the FTC:

http://business.ftc.gov/documents/inv08-bottom-line-about-multi-level-marketing-plans

In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.

Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.

Note the portion I have highlighted.

Another major red flag are minimum purchase levels and frequencies. The Superfruit episode I linked to covers this nicely by discussing the minimum monthly juice purchases distributors need to make.

I would also like to direct you to the Wikipedia entry on MLM. Whoever taught you what MLM consists of appears to have has something a a bias.

http://en.wikipedia.org/wiki/Multi-level_marketing

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant's "downline", and can provide multiple levels of compensation.[1] Other terms for MLM include pyramid selling,[2][3][4][5][6] network marketing,[7][8][9] and referral marketing.[10]