MLM Math

icerat said:
Maximara, are you aware that MLM itself is not a "distribution system" and that the vast majority of ordering is done online and fulfilled directly? It's been that way for more than a decade for many MLMs. You seem to be focused on a long dead ghost.

Are you going to answer my question about what you think should be banned?
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MLM is still outdated. It is still normally spread person to person.

And while the term MLM is used as a general term, it's easier than saying Amway, Herbalife, etal.

The MLM industry is full of unethical people whose main goal is to sponsor and sell stuff to downline, regardless of the downline's profitability. The more insidious ones sell their downline an endless supply of useless training.
 
CynicalSkeptic said:
MLM business opportunities. It's really just 98% of them that give the rest a bad name
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:D

Icerat, I'm curious, have you convinced anybody that MLM schemes make sense for them? And then they've actually been successful at it?

Just interested in your track record.
 
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AdMan said:
:D

Icerat, I'm curious, have you convinced anybody that MLM schemes make sense for them? And then they've actually been successful at it?

Just interested in your track record.
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If he was marketing Amway to just Randi Skeptics then I suspect his track record wouldn't be all that good.

Fortunately for icerat, the real world has more PT Barnum type targets in it.
 
Yes, I made money and helped others make money. You can understand therefore why I find it absurd when people say you can't make money.

I suppose nobody is going to actually answer my question and point out what is wrong with the MLM compensation aspect? Let's step through the development of MLM and see where the problem is.

Anyone care to help me understand the problem here?

1. Is it wrong to be able to purchase products in bulk and get a discount over the base price?
 
icerat said:
1. Is it wrong to be able to purchase products in bulk and get a discount over the base price?
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That depends. Is there a fixed cost to do so that isn't overcome? If I purchase a membership to a buying club but do not buy enough to make the discounted price pay off, I'm foolish. In a situation where I cannot predict, going in, what my level of purchases would be, then the membership price presents an unknown risk, a gamble.

The other aspect comes from competition and base price. If the discounted price is already too high (as compared to other purchase options) then "discount" is being used fraudulently and I should avoid the arrangement.

So yes, there are circumstances that make bulk purchases to get a discounted price a poor option or a risky option. Context matters.
 
marplots said:
That depends. Is there a fixed cost to do so that isn't overcome? If I purchase a membership to a buying club but do not buy enough to make the discounted price pay off, I'm foolish. In a situation where I cannot predict, going in, what my level of purchases would be, then the membership price presents an unknown risk, a gamble.

The other aspect comes from competition and base price. If the discounted price is already too high (as compared to other purchase options) then "discount" is being used fraudulently and I should avoid the arrangement.

So yes, there are circumstances that make bulk purchases to get a discounted price a poor option or a risky option. Context matters.
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Of course context matters, but you agree there's nothing inherently wrong with doing this, right? It's pretty much normal business, whether as a business person for resale or as a consumer ala Sam's Club or CostCo or whatever.

Agreed?
 
icerat said:
Of course context matters, but you agree there's nothing inherently wrong with doing this, right? It's pretty much normal business, whether as a business person for resale or as a consumer ala Sam's Club or CostCo or whatever.

Agreed?
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No, there's nothing wrong in the theoretical sense. There may be advantages or disadvantages depending on circumstances. But the idea of bulk buying to obtain a discount is neutral in the abstract.
 
marplots said:
No, there's nothing wrong in the theoretical sense. There may be advantages or disadvantages depending on circumstances. But the idea of bulk buying to obtain a discount is neutral in the abstract.
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2. Is there anything wrong with calculating a bulk discount monthly (or weekly) and paying it as a rebate rather than upfront?
 
icerat said:
2. Is there anything wrong with calculating a bulk discount monthly (or weekly) and paying it as a rebate rather than upfront?
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Again, there may be. For example, doing so implies a continuing relationship because the transaction isn't "clean" - that is, it isn't completed when the merchandise trades hands. If the relationship ends abruptly, the transaction may fail due to the time delay. But, in the abstract, there is nothing wrong with doing it that way.

It also adds a layer of accounting and trust that could raise issues, depending on with whom you are dealing.
 
icerat said:
Yes, I made money and helped others make money. You can understand therefore why I find it absurd when people say you can't make money.
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Anecdotal. No evidence of that happening.

icerat said:
I suppose nobody is going to actually answer my question and point out what is wrong with the MLM compensation aspect? Let's step through the development of MLM and see where the problem is.

Anyone care to help me understand the problem here?

1. Is it wrong to be able to purchase products in bulk and get a discount over the base price?
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There is nothing wrong with that. It is why Costco and Sam's club are wildly successful. Amway's sales are tiny compared to these buyer's clubs. I believe the public in general would support this claim.

But you don't get discounts with Amway. Icerat himself has said that Amway products are "premium" and therefore comes with as additional cost, not to mention the shipping charges. Ironically, there's no unbiased evidence that Amway's products are premium other than icerat saying they are.

What value is there is $10 shampoo from Amway that you can't get in a $3.99 bottle from Walmart? Keep in mind that icerat made the argument that the Amway toothpaste was competitive with much cheaper brands simply because the Amway toothpaste has a smaller hole. (There's a link in this thread).
 
icerat said:
Just an opinion or got anything remotely like evidence?

Here's a starting point, the world's top 100 largest direct sellers, nearly all of whom use MLM compensation incentives.
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Again you try to shift the point away from the individual distributors to the companies as a whole. That is like to pointing to the profits the mobs of the 1920s did with their fixed lotteries and gambling rackets and saying they were a good deal. :boggled:

"It is considered that 99% of NMOs’ distributors lose profits because the costs associated with building the business exceed the returns." (Cruz, Joan Paola; Camilo Olaya (2008) "A System Dynamics Model for Studying the Structure of Network Marketing Organizations")
 
CynicalSkeptic said:
You've admitted yourself several times in this thread, that not all MLM companies are legit.
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Not all lawyers are legit. Doesn't mean there's a problem with the legal profession. Not all swim schools are legit. etc etc etc

Heck, a certain well known skeptic (and anti-mlmer (for his definition of mlm)) is facing serious jail time for fraud - does that mean skepticism should be considered tainted?

I think you may have even acknowledged that over half of the opportunities are illegal pyramid scams masquerading as legitimate MLMs.
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No, I said I don't know, I've never tried to count. I don't know anyone who has. If you do, please share. But heck, if you took every retailer from Walmart down to the multitude of guys trying to sell me fake egyptian antiquities in Luxor, I wouldn't be surprised if a majority of "retailers" in the world were scammers masquerading as legitimate sellers. Certainly there's an awful lot.

On the other hand I bought a beautiful onyx cat from a seller in Hurghada. Good thing for him, and me, that I didn't just dismiss all sales people as scammers.
 
icerat said:
maximara said:
The reality is MLM is more often then not a pyramid scheme using promises of great wealth to entice people.
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That's arguably true. Under one definition pyramid schemes might be a considered a subset of MLM, and there are an awful lot of scams out there claiming to be legitimate MLMs that are not.
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emphasis mine. Also, since the jref forums strip out nested quotes, I had to manually recreate this, but I believe this is the proper context. Please correct me if I'm wrong.
 
maximara said:
Again you try to shift the point away from the individual distributors to the companies as a whole.
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You're the one who was talking about the industry being legal because of lobbying, not me. Or are you suggesting individual distributors should be made illegal?

We might be in agreement there :D

"It is considered that 99% of NMOs’ distributors lose profits because the costs associated with building the business exceed the returns." (Cruz, Joan Paola; Camilo Olaya (2008) "A System Dynamics Model for Studying the Structure of Network Marketing Organizations")
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The fact you continue to quote a fake study by Taylor says everything about you and little about the industry. Just because a couple of mathematicians in a non-peer reviewed conference presentation cite his fake study in their paper doesn't make it any less fake.
 
icerat said:
Not all lawyers are legit. Doesn't mean there's a problem with the legal profession. Not all swim schools are legit. etc etc etc
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Hence my comment:
CynicalSkeptic said:
MLM business opportunities. It's really just 98% of them that give the rest a bad name
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Yes, same thing could be said about lawyers and cops.

No, I don't have a source for the 98%. I made it up. Call it hyperbole.
 
Joecool said:
Anecdotal. No evidence of that happening.



There is nothing wrong with that. It is why Costco and Sam's club are wildly successful. Amway's sales are tiny compared to these buyer's clubs. I believe the public in general would support this claim.

But you don't get discounts with Amway. Icerat himself has said that Amway products are "premium" and therefore comes with as additional cost, not to mention the shipping charges. Ironically, there's no unbiased evidence that Amway's products are premium other than icerat saying they are.

What value is there is $10 shampoo from Amway that you can't get in a $3.99 bottle from Walmart? Keep in mind that icerat made the argument that the Amway toothpaste was competitive with much cheaper brands simply because the Amway toothpaste has a smaller hole. (There's a link in this thread).
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The MLM model doesn't make sense from a logical standpoint if you think about the standard selling model (MU is mark up)

A -> (A + MU) -> B -> (B + MU) -> C and so on.

But in an MLM that chain keeps going until the MU gets insane.
 
CynicalSkeptic said:
emphasis mine. Also, since the jref forums strip out nested quotes, I had to manually recreate this, but I believe this is the proper context. Please correct me if I'm wrong.
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I would hope you would understand that

"there are an awful lot of scams out there claiming to be legitimate MLMs that are not"

does not lead to -

"over half of the opportunities are illegal pyramid scams masquerading as legitimate MLMs."

10%, 50%, 90% - I've no idea. On the other hand, the FTC spent more than year looking in to business opportunities for their new bizopp rule and in the end decided to exclude MLMs from it's coverage. The EU spent several years studying the industry for their direct selling directive and also had no particular issue with the industry as a whole, despite submissions trying to convince them otherwise.

So, I haven't looked, but the FTC and EU have and didn't find a particular problem. If you have evidence to the contrary, I'd appreciate seeing it.
 
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