MLM Math

[icerat]

Let me ask you a very general question, icerat, because I'm a newbie.

Like many people, IRL I've never heard anything other than that MLM schemes aren't much more than scams most people should steer well clear of, except from acquaintances and family members who are part of them and whom based on other experiences I wouldn't lend a dollar to and so have no credibility with me. This isn't just my own experience--I've spoken about this with others who pretty much share my experience and understanding of MLMs.

So why is this? Why this amazingly poor reputation of MLM schemes if as you say there really isn't anything wrong with many of them, and in fact they can make you money if you work at it? Is there some kind of conspiracy to discredit MLMs? I'm seriously curious as to what you think this is due to, if in fact what many (most?) people believe is wrong, as you claim.

Good question. There's a few reasons I think that contribute. This will be a long post!

1. Sampling bias.
You only notice the irritating, annoying, and unprofessional MLMers. In the US, 99% of direct sellers are part of MLM programs. And here's the kicker - almost 1 in 14 adults in the US are registered with a direct selling firm. How many MLMers did you meet last month and not even know it? How many may even have professionally sized you up as a prospect and decided against it?

You'll probably never know, but statistically speaking, you almost certainly have met several MLMers already just this week.

2. Guilt by Association.
It depends on your definition, but many actual pyramid schemes can be considered a subset of the MLM world. They then try to claim legitimacy by stating that they're MLMs "just like Amway" etc. In typical (il)logical human fashion, people then think the legitimate MLMs work the same way. It's amazing how many people state that particular MLMs operate in ways that they don't. I had one conversation with Brian Dunning after he did an anti-MLM podcast on Skeptoid where he (falsely) attributed the weaknesses of pyramids to MLMs. He stated direct sales companies should be like Avon and Mary Kay and avoid MLM. Both Avon and Mary Kay are MLMs. I pointed this out to him (with supporting links) and he deleted my comments. The irony of course is he's now facing a long jail sentence for fraud.

3.It's open to anyone to join an MLM.
This is simultaneously one of the greatest strengths and greatest weaknesses of the model. It means that it's truly an equal (and affordable) opportunity for people to start their own business. Direct sales (which mostly use MLM) is for example acknowledged as one of the earlier leaders in helping women start their own businesses. Today, the vast majority of active direct sellers are women.

But this it also means that at any given time probably the majority of people out promoting an MLM are fairly new, inexperienced, and untrained - and they do stupid things. The major MLMs like Amway have finally started trying address this with better training, but it's always going to have an influence.

4. It's open to anyone to start an MLM.
If you've got a dubious product (amega wand anyone?) MLM is a cheaper and easier way to get to market. The same applies even with a legitimate product, so it can be a method of choice for people without enough experience or capital to launch "traditionally". What you often find is they then don't have enough experience or capital to run an MLM either and they go out of business. Companies go out of business all the time, but by it's nature when an MLM goes out of business in seems to affect perceptions of the industry more than say when an IT company goes out of business.

5. The internet
The majority of the larger MLMs pretty much ban their agents from blatant prospecting and advertising on the internet. This has two effects - *
5(a) In the early days of the 'net Amway actively shutdown reps who were merely defending the company against misinformation, or giving experiences contrary to that of former distributors who had posted negative experiences. People do have bad experiences, but if only the people with negative experiences are posting on the 'net, you get a heavily biased sample for anyone using the net to research.
5(b) There are MLMs that don't ban their agents from blatant prospecting and advertising, and even encourage it. They tend to be the ones that are pyramid schemes (or verging on it), so again you have a biased sample. The MLMs you do see on the 'net are likely to be the relatively small, probably scammy ones.

So you had (and have) on the internet a bunch of people who either have no experience with the industry posting stuff that's just plan wrong, based on misunderstandings (eg Van Druff) or ex-distributors who may or may not have a legitimate axe to grind, and very little easily accessible to contradict it. This in turn influenced things like wikipedia. Much of the positive assessments of MLM are in books and other journals that aren't as easily accessible as some guys website. And then, for whatever reason, there's a small number of people that are truly dedicated anti-mlm zealots, guys like joecool with all his blogs, maximara and rhode island red on wikipedia, and those making money out of being anti-mlmers, like Taylor & FitzPatrick.

For an industry based on marketing, it's been remarkably poor at marketing itself!

6. Historical accident
The first majorly successful MLM was Amway, and some of the largest and most successful of their distributors through the 80s and 90s came from a very right wing, very evenglical, very "take no prisoners" kind of culture, "prosperity gospel" all that kind of thing. It works marvelously well for people who like that kind of thing, but it's terribly alienating for people who don't, not to mention does end up with people with the proverbial garage full of soap. Many of the "leaders" in other MLMs came out of those groups, so that kind of "talk to anyone and anything if they're not interested they're a broke loser" type of approach spread to other MLMs as well. My research indicates these groups never even made up a majority of Amway's business, let alone the industry as a whole, but their influence on the industry and particularly their influence on public perceptions has been enormous. It's waning, but it takes at least a generation.

There's other issues as well, but I think that's probably the major ones these days.

 

[icerat]

The reality is "MLM" is often used as a fig leaf to hide what is in reality a illegal pyramid scheme.

true.

Furthermore Fitzpatrick's and Taylor's studies which shoot the idea that MLM are better than traditional businesses down in flames

yes, straw men easily burst in to flames

have been quoted in numerous peer reviewed papers or well respected scholarly arms of publishing houses in the fields of business, law, physiology, and anthropology.

mostly untrue - Taylor & FitzPatrick have been cited in a very small number of "respected" publications, and when they are it's almost always been as an aside that has little to do with the subject of the publication itself, let alone the expertise of the authors.

The MLM community has had since 1997 (Fitzpatrick) and 2002 (Taylor) to do and publish a peer reviewed refutation of Fitzpatrick and Taylor on either data or methodology and yet none to my knowledge has done.

So let me get this straight. Taylor & FitzPatrick can self-publish any rubbish they want and you'll believe it, but any refutations needs to be in peer-reviewed publications - which you won't believe anyway.

Seriously though, what exactly is it you want refuted?

"MLM industry leaders have been challenged to refute key concepts for this report, but have so far responded with silence."

This is untrue. People like myself, Len Clements, Ted Sales, the DSA and others have been refuting his "key concepts" for years. Taylor submitted his claims to the FTC, the industry refuted them, the FTC rejected Taylor's position.

 

[xjx388]

I think the reason that MLMs have a bad rap IRL is simple: Experience. I had never read one negative website (indeed, there was no such thing) when I first experienced an MLM -my aunt got involved with a new one every week it seemed. She went to the weekly meetings, tried to sign up everyone she knew, etc. She still, 30+ years later, has boxes of Amway, Stanley, Avon, Mary Kay, Shaklee, Herbalife ... She was endlessly chasing the dream along with her little gaggle of friends. None of them ever made anything of it and they eventually gave up.

More recently, a lot of my running and fitness-oriented friends have gotten caught up in AdvoCare. I've never seen anyone be successful except for the one guy that brought it to our area and his two buddies. My friends end up buying the products themselves and attending weekly "sales meetings" where they are told they don't have to go out and sell, just get people to sign up for the distributor discount and they will make money on what they buy. Friends and family are fighting each other over who should be in who's downline...

And no one ever ends up making that money...just alienating their friends and family.

 

[icerat]

None of them ever made anything of it and they eventually gave up.

How do you know none of them ever "made anything" of it?

That aside, sounds like she was looking for a get rich quick scheme. It takes a lot of work over years to make the kind of money that people would notice.

I've never seen anyone be successful except for the one guy that brought it to our area and his two buddies.

How do you know?

As I pointed out, nearly 1 in 14 American adults is involved in MLM - do you ask everyone you meet if they've been "successful" out of it?

And no one ever ends up making that money...just alienating their friends and family.

You already said you know three people who did make money out of it.

How many people do you know who've tried losing weight and not reached their goal?

MLM is like dieting. It's really easy not to do.

Out of interest, how many people do you know who've "tried" homeopathy or acupuncture and swear it worked?

 

[Joecool]

Let me ask you a very general question, icerat, because I'm a newbie.

Like many people, IRL I've never heard anything other than that MLM schemes aren't much more than scams most people should steer well clear of, except from acquaintances and family members who are part of them and whom based on other experiences I wouldn't lend a dollar to and so have no credibility with me. This isn't just my own experience--I've spoken about this with others who pretty much share my experience and understanding of MLMs.

So why is this? Why this amazingly poor reputation of MLM schemes if as you say there really isn't anything wrong with many of them, and in fact they can make you money if you work at it? Is there some kind of conspiracy to discredit MLMs? I'm seriously curious as to what you think this is due to, if in fact what many (most?) people believe is wrong, as you claim.

The internet is littered with stories of people being tricked into attending MLM meetings and other horror stories. When you ask about someone who's actually made money in MLM, it will be someone who is statistically insignificant. The vast majority make nothing or lose money. The numbers that are released by MLM companies bear that out.

For example, .26, about 1/4 of 1 percent of Amway people reach the level where they earn about $40,000 a year. That's before business expenses and taxes. The net result is likely similar to minimum wage. And that's a top performer. A study in Wisconsin, while a bit dated, had the top 1% of IBO's tax returns examined and they averaged a net loss of about $900 a year.

The horror stories and the lack of people actually making money is why MLM has a bad name.

 

[maximara]

yes, straw men easily burst in to flames

So you say. WHERE is the peer reviewed proof?

mostly untrue - Taylor & FitzPatrick have been cited in a very small number of "respected" publications, and when they are it's almost always been as an aside that has little to do with the subject of the publication itself, let alone the expertise of the authors.

As proven by the talk pages on the wikipedia article on MLM you could not PROVE this to the satisfaction of the wikipedia community.

Peer review or scholarly sources that use Fitzpatrick or Taylor as references:

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"

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

Higgs, Philip and Jane Smith (2007) Rethinking Our World Juta Academic (for those who don't know "Juta is respected as South Africa's pre-eminent academic and law publisher".

Pareja, Sergio, (2008) "Sales Gone Wild: Will the FTC's Business Opportunity Rule Put an End to Pyramid Marketing Schemes?" McGeorge Law Review, Vol. 39, No. 83.

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


Walter J. Carl, Phd (2002) "Organizational Legitimacy As Discursive Accomplishment in Multilevel Marketing Discourse" Organizational Communication Division of the National Communications Association conference Nov 21-24, 2002.

Woker, TA (2003) "If It Sounds Too Good to Be True It Probably Is: Pyramid Schemes and Other Related Frauds" Western Journal of Communication, Vol. 68.

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

So let me get this straight. Taylor & FitzPatrick can self-publish any rubbish they want and you'll believe it, but any refutations needs to be in peer-reviewed publications - which you won't believe anyway.

Considering that Taylor & FitzPatrick themselves are cited repeatedly in peer-reviewed publications, yes that is exactly.

Seriously though, what exactly is it you want refuted?

Already stated that but then again you were too busy playing Don Quixote to pay attention:

The MLM community has had since 1997 (Fitzpatrick) and 2002 (Taylor) to do and publish a peer reviewed refutation of Fitzpatrick and Taylor on either data or methodology and yet none to my knowledge has done.

This is untrue. People like myself, Len Clements, Ted Sales, the DSA and others have been refuting his "key concepts" for years. Taylor submitted his claims to the FTC, the industry refuted them, the FTC rejected Taylor's position.

And the Supreme Court accepted Separate but Equal as just a proper form 1896 (Plessy v. Ferguson) to 1954 (Brown v. Board of Education) a period of nearly 60 years.

Continental drift - proposed by Abraham Ortelius in 1596; accepted in 1958. In fact Scheidigger (1953), "Examination of the physics of theories of orogenesis", GSA Bulletin 64: 127—150 was the last formal rejection of the theory. In Carey, S. W. (1958), "The tectonic approach to continental drift", in Carey, S. W., Continental Drift—A symposium, Univ. of Tasmania, pp. 177—355 the scientific community finally got with the program. Time of acceptance of incorrect theory: 362 years.

The existence of Troy - proved by Schliemann who was a total amateur in archaeology Later professionals have complained about the quality of his work equating it more to treasure hunting then true archaeology.

Heliocentrism - proposed by Philolaus (d. 390 BCE); accepted as a "mathematical convenience" by the Catholic Church during the Council of Trent (1545–1563) but when Galileo Galilei proved it in 1600 the Catholic Church couldn't suppress the information fast enough. The Catholic Church didn't accept heliocentrism as a reality until 1835. Only in 1992 did the Church finally admit it totally botched the handling of Galilei. Time of acceptance of incorrect theory: 1934 years if one is generous; 2224 is one is not.

The Norse colonization of the Americas - known nearly from the beginning through the "Eirik the Red's Saga" and the "Saga of the Greenlanders" both written about three centuries after the events happened. Dismissed largely because the experts saw it as harkening to the Imperial Synthesis Era of the 19th century. Finally accepted in the 1970s.

Big Bang theory; suggested or implied by John Philoponus (6th century), Abu Yūsuf Yaʻqūb ibn ʼIsḥāq aṣ-Ṣabbāḥ al-Kindī (9th century); Saʻadiah ben Yosef Gaon (9th to 10th century) Abū Ḥāmed Muḥammad ibn Muḥammad al-Ghazālī (11th to 12th century) and Immanuel Kant (19th century); dismissed as crackpot as late as 1963!

The acceptance of Homeopathy which even by the standards of 1796 made no scientific sense is still practiced despite study after study showing it does not work. One of the FTC mandates (Bureau of Consumer Protection) is to protect consumers against unfair or deceptive acts or practices in commerce. Since Homeopathy products make promises that cannot be proved (ie effectively deceptive) why hasn't the FTC stepped in and dealt with it, hmmmm? Note I said FTC not FDA.

"While earning potential varies by company and sales ability, DSA says the median annual income for those in direct sales is $2,400." (Peterecca, Laura (September 14, 2009). "What kind of business do you want to start?". USAToday)

"The figures used in the analysis are from public documents of the companies themselves. The percentages and actual dollar figures have been extrapolated to a "per 10,000 sales representatives" in order to provide a more understandable picture and to match data of the companies analyzed. A larger sample is applied to the Amway/Quixtar data" (FitzPatrick (2008) The Myth of MLM Income Opportunity)

Taylor used much the same data concluding that on average that going the MLM route would NOT result in a living income.

Tell us Oh Wise One how the DSA has refuted ALL of what FitzPatrick and Taylor said? Cite the paper or stop wasting our time with your David Copperfield nonsense.

 

[maximara]

The internet is littered with stories of people being tricked into attending MLM meetings and other horror stories. When you ask about someone who's actually made money in MLM, it will be someone who is statistically insignificant. The vast majority make nothing or lose money. The numbers that are released by MLM companies bear that out.

For example, .26, about 1/4 of 1 percent of Amway people reach the level where they earn about $40,000 a year. That's before business expenses and taxes. The net result is likely similar to minimum wage. And that's a top performer. A study in Wisconsin, while a bit dated, had the top 1% of IBO's tax returns examined and they averaged a net loss of about $900 a year.

The horror stories and the lack of people actually making money is why MLM has a bad name.

This is EXACTLY what Taylor told the FTC. More over from Fitzpatrick:

"If you strip MLM of its hallmark activity of continuously reselling distributorships, . . you encounter an unproductive and impractical system of sales upon which the entire structure is supposed to rest. Personal retailing is a thing of the past, not the wave of the future. Retailing directly to friends on a one to one basis requires people to drastically change their buying habits. They must restrict their choices, often pay more for goods, buy inconveniently, and awkwardly engage in business transactions with close friends and relatives. The unfeasibility of door-to-door retailing is why MLM is, in reality, a business that just keeps reselling the opportunity to sign up more distributors."

 

[maximara]

The internet is littered with stories of people being tricked into attending MLM meetings and other horror stories. When you ask about someone who's actually made money in MLM, it will be someone who is statistically insignificant. The vast majority make nothing or lose money. The numbers that are released by MLM companies bear that out.

For example, .26, about 1/4 of 1 percent of Amway people reach the level where they earn about $40,000 a year. That's before business expenses and taxes. The net result is likely similar to minimum wage. And that's a top performer. A study in Wisconsin, while a bit dated, had the top 1% of IBO's tax returns examined and they averaged a net loss of about $900 a year.

The horror stories and the lack of people actually making money is why MLM has a bad name.

This is EXACTLY what Taylor told the FTC. More over from Fitzpatrick:

"If you strip MLM of its hallmark activity of continuously reselling distributorships, . . you encounter an unproductive and impractical system of sales upon which the entire structure is supposed to rest. Personal retailing is a thing of the past, not the wave of the future. Retailing directly to friends on a one to one basis requires people to drastically change their buying habits. They must restrict their choices, often pay more for goods, buy inconveniently, and awkwardly engage in business transactions with close friends and relatives. The unfeasibility of door-to-door retailing is why MLM is, in reality, a business that just keeps reselling the opportunity to sign up more distributors."

I would like to point out Icerat's previously sloppy use of Google and the rebuttal showing the limitation of Google. Yes, Google is a very useful tool but it is important to know its limitations.

 

[icerat]

This is EXACTLY what Taylor told the FTC.

Yeahhhh .... that would be the stuff the FTC rejected?

 

[maximara]

Yeahhhh .... that would be the stuff the FTC rejected?

Just like the FTC have rejected cracking down on homeopathy in general. Lobbying does wonders especially when you have a regulation is bad for business mentality in the Congress and the Presidency. Look at how long it took to stop the Bernard Madoff investment scam to break (1999 is when there were the first reports)

The fact that the FTC ignored NBC Dateline's May 7, 2004 evidence that Amway was out of control shows something was wonked. That Timothy Muris (head of the FTC 2001-2004) was part of a law firm that defended Amway has retrospectively raised a few eyebrows.

Then there is Amway's connection to Blackwater; Blackwater as public relations goes is right up (or rather down there) with Tuskegee syphilis experiment and Reinhard Gehlen as a US supported skymater against the Soviets...the same job he had done for his old boss Adolf Hitler (and the US wonders why a good hunk of the world hates our guts when we have such nice friends. )

 

[icerat]

Just like the FTC have rejected cracking down on homeopathy in general.

You can't ban water. But they do go after the claims.

Look at how long it took to stop the Bernard Madoff investment scam to break (1999 is when there were the first reports)

Yes, look at it. In less than a decade he was investigated, arrested, charged, and in prison.

MLM has been around since the 1930s. In the 1970s it was investigated and cleared.

The fact that the FTC ignored NBC Dateline's May 7, 2004 evidence that Amway was out of control shows something was wonked.

Ahhh ... evidence of what exactly?

Then there is Amway's connection to Blackwater;

I know a whole bunch of russians. Clearly I'm a member of the russian mafia ....

Blackwater as public relations goes is right up (or rather down there) with Tuskegee syphilis experiment and Reinhard Gehlen as a US supported skymater against the Soviets...the same job he had done for his old boss Adolf Hitler (and the US wonders why a good hunk of the world hates our guts when we have such nice friends. )

Godwin!

How about Amway's links to the illuminati? You haven't mentioned that yet ...

pppssssttt .... I've also heard rumours Rich DeVos is actually an 8 foot tall alien reptile. Someone toook a photo of him transforming at Bohemian Grove!

 

[Joecool]

MLM has been around since the 1930s. In the 1970s it was investigated and cleared.

This is a big straw man. In many MLM companies, such as Amway, there are legally separate but integral parts of the business called training companies. In Amway, they are called WWDB or Network 21.

These separate entities often sell tools such as cds, books, seminars. They also recruit and teach the new prospects. Amway for example, does little to control or regulate what is taught. While Amway did start an accreditation program, there is still evidence that it has been ineffective. (You can still see evidence that not much has changed at all)

One of the things that these separate entities might teach their prospects is to self consume exclusively with little thought given to moving products to customers outside of the sales force. This results in massive recruiting campaigns, which are unsustainable. Yet that is the primary way to profit, because the organization lacks sales.

So while Amway and MLM may have been cleared at one time, the tool companies have not been investigated and the way tool companies teach their disciples to operate have not been investigated. I wonder what an investigation would uncover?

 

[xjx388]

The FTC did not "clear" Amway. In fact, they found wrong doing and forced them to change. They were fined in 1986 for violating the 1979 ruling. They then had to settle a class action lawsuit in 2010.

They may not fall under the FTCs definition of an illegal pyramid scheme but that doesn't mean Amway has always operated 100% legally.

 

[Mycroft]

Agreed ... but ... to a large extent I believe the issue does come down to products. In my experience most critics come from a perspective of simply refusing to believe there is a legitimate market for any product promoted through MLM, thus their must be nefarious reasons for their success.

Well, the success of may products are due to having a built in market in the people who are told they're there to sell the product.

Yet mlm critics continually tell me that people are "forced" to buy products (how is never quite explained), that it's impossible to sell them and that no customers exist - in other words, they're vehemently insisting that I and people I know don't exist.

I can explain it.

These people are told over and over again that in order to succeed they need to believe in the program and the products. How can you believe in the program and the products if you don't buy them?

There is no "force", per se, but there is pressure.

 

[AdMan]

Good question. There's a few reasons I think that contribute. This will be a long post!

1. Sampling bias.
You only notice the irritating, annoying, and unprofessional MLMers. In the US, 99% of direct sellers are part of MLM programs. And here's the kicker - almost 1 in 14 adults in the US are registered with a direct selling firm. How many MLMers did you meet last month and not even know it? How many may even have professionally sized you up as a prospect and decided against it?

You'll probably never know, but statistically speaking, you almost certainly have met several MLMers already just this week.

2. Guilt by Association.
It depends on your definition, but many actual pyramid schemes can be considered a subset of the MLM world. They then try to claim legitimacy by stating that they're MLMs "just like Amway" etc. In typical (il)logical human fashion, people then think the legitimate MLMs work the same way. It's amazing how many people state that particular MLMs operate in ways that they don't. I had one conversation with Brian Dunning after he did an anti-MLM podcast on Skeptoid where he (falsely) attributed the weaknesses of pyramids to MLMs. He stated direct sales companies should be like Avon and Mary Kay and avoid MLM. Both Avon and Mary Kay are MLMs. I pointed this out to him (with supporting links) and he deleted my comments. The irony of course is he's now facing a long jail sentence for fraud.

3.It's open to anyone to join an MLM.
This is simultaneously one of the greatest strengths and greatest weaknesses of the model. It means that it's truly an equal (and affordable) opportunity for people to start their own business. Direct sales (which mostly use MLM) is for example acknowledged as one of the earlier leaders in helping women start their own businesses. Today, the vast majority of active direct sellers are women.

But this it also means that at any given time probably the majority of people out promoting an MLM are fairly new, inexperienced, and untrained - and they do stupid things. The major MLMs like Amway have finally started trying address this with better training, but it's always going to have an influence.

4. It's open to anyone to start an MLM.
If you've got a dubious product (amega wand anyone?) MLM is a cheaper and easier way to get to market. The same applies even with a legitimate product, so it can be a method of choice for people without enough experience or capital to launch "traditionally". What you often find is they then don't have enough experience or capital to run an MLM either and they go out of business. Companies go out of business all the time, but by it's nature when an MLM goes out of business in seems to affect perceptions of the industry more than say when an IT company goes out of business.

5. The internet
The majority of the larger MLMs pretty much ban their agents from blatant prospecting and advertising on the internet. This has two effects - *
5(a) In the early days of the 'net Amway actively shutdown reps who were merely defending the company against misinformation, or giving experiences contrary to that of former distributors who had posted negative experiences. People do have bad experiences, but if only the people with negative experiences are posting on the 'net, you get a heavily biased sample for anyone using the net to research.
5(b) There are MLMs that don't ban their agents from blatant prospecting and advertising, and even encourage it. They tend to be the ones that are pyramid schemes (or verging on it), so again you have a biased sample. The MLMs you do see on the 'net are likely to be the relatively small, probably scammy ones.

So you had (and have) on the internet a bunch of people who either have no experience with the industry posting stuff that's just plan wrong, based on misunderstandings (eg Van Druff) or ex-distributors who may or may not have a legitimate axe to grind, and very little easily accessible to contradict it. This in turn influenced things like wikipedia. Much of the positive assessments of MLM are in books and other journals that aren't as easily accessible as some guys website. And then, for whatever reason, there's a small number of people that are truly dedicated anti-mlm zealots, guys like joecool with all his blogs, maximara and rhode island red on wikipedia, and those making money out of being anti-mlmers, like Taylor & FitzPatrick.

For an industry based on marketing, it's been remarkably poor at marketing itself!

6. Historical accident
The first majorly successful MLM was Amway, and some of the largest and most successful of their distributors through the 80s and 90s came from a very right wing, very evenglical, very "take no prisoners" kind of culture, "prosperity gospel" all that kind of thing. It works marvelously well for people who like that kind of thing, but it's terribly alienating for people who don't, not to mention does end up with people with the proverbial garage full of soap. Many of the "leaders" in other MLMs came out of those groups, so that kind of "talk to anyone and anything if they're not interested they're a broke loser" type of approach spread to other MLMs as well. My research indicates these groups never even made up a majority of Amway's business, let alone the industry as a whole, but their influence on the industry and particularly their influence on public perceptions has been enormous. It's waning, but it takes at least a generation.

There's other issues as well, but I think that's probably the major ones these days.

Thanks to you and everyone else for taking the time to answer.

Haven't responded because as mentioned I'm an MLM newbie and don't know MLM things in detail, just what I've observed, so I'm still learning. But, holy crap! "almost 1 in 14 adults in the US are registered with a direct selling firm."

Why the **** doesn't the MLM industry do a better job of disseminating that to the public, assuming it is true? Is it because bringing that number up makes you ask how many are making any money?

As my nick suggests, I work in (traditional) marketing and advertising. If one in 14 adults in the country were purchasing my product or service, you would bet your ass I would be using that to market to everyone else.

Unless my product or service were crap...

 

[icerat]

The FTC did not "clear" Amway. In fact, they found wrong doing and forced them to change. They were fined in 1986 for violating the 1979 ruling. They then had to settle a class action lawsuit in 2010.

I said MLM was investigated and cleared. The MLM was absolutely cleared in the FTC vs Amway case.

Amway's fine was for price fixing for pressuring ostensibly independent agents to sell at the same price.

They may not fall under the FTCs definition of an illegal pyramid scheme but that doesn't mean Amway has always operated 100% legally.

Never said they did. Large companies getting fined for something or another isn't exactly unusual.

These people are told over and over again that in order to succeed they need to believe in the program and the products. How can you believe in the program and the products if you don't buy them?

There is no "force", per se, but there is pressure.

How exactly is this "pressure" happening? Telepathy?

According to Amway statistics, the majority of people who renew their memberships don't attend business meetings, subscribe to CD programs etc etc. The training programs that suggest IBOs should set certain volume goals (through personal use and retailing) also typically suggest something like 100 points or 200 points a month - yet Amway statistics show the average monthly order is less than 40 points.

 

[icerat]

Why the **** doesn't the MLM industry do a better job of disseminating that to the public, assuming it is true? Is it because bringing that number up makes you ask how many are making any money?

I can't say I've the "traditional retailing" industry out their marketing the idea of opening a store, or the ecommerce industry out their marketing the idea of ecommerce as a way to make money.

As my nick suggests, I work in (traditional) marketing and advertising. If one in 14 adults in the country were purchasing my product or service, you would bet your ass I would be using that to market to everyone else.

We're talking hundreds of different products and services, Adman - from companies that are competitors for field reps, and in many cases, products.

So it's not that simple. But yes, I agree - as I said earlier, for an industry based on marketing, it's been remarkably bad at marketing itself.

Years ago I suggested a series of adverts Amway should do to blow out of the water the image of who an Amway distributor is by featuring some successful distributors. They're not who you people seem to think.

Thinking of some top Amway distributors there's award winning NASA scientists, NFL champions, world reknowned medical researchers, media personalities, athletes, traditional entrepreneurs etc etc etc. There's also Gen Yers and housewives.

I'd love them to do some brief vignettes featuring some of these people and what they do in their "traditional" careers, finishing with "and I'm also an Amway business owner", perhaps with a bit of background of why. It could really change perceptions

The problem is that Amway's "culture" is that individual business owners can't be marketed as it will give them an unfair advantage over other IBOs - people may want to join with the guys on TV rather than their neighbour who just started.

 

[maximara]

The problem is that Amway's "culture" is that individual business owners can't be marketed as it will give them an unfair advantage over other IBOs - people may want to join with the guys on TV rather than their neighbour who just started.

You also get into the issue of the whole point of MLM is so you don't have to do massive ad campaigns. Never mind the massive ad campaign won't address the herding cats problems MLMs have.

 

[icerat]

You also get into the issue of the whole point of MLM is so you don't have to do massive ad campaigns. Never mind the massive ad campaign won't address the herding cats problems MLMs have.

"No ads" is a myth (promulgated not least by some reps).

Amway has done various forms of advertising regularly since they began. One paper on the industry even suggests traditional ad spend as a way of distinguishing legitimate MLMs from scams. Most legitimate MLMs *do* spend money on "traditional" marketing, including TV ads, sponsorships etc etc.

Obviously it's a lot less than traditional retailers, but it's always been there, and I think is increasing, primarily for "branding" rather than product sales per se..

 

[Dr. Keith]

You can't ban water. But they do go after the claims.

You really don't understand the FDA and their relationship with homeopathic products. The FDA and FTC would have had no basis for action if the products had been homeopathic, ie just water. The problem wasn't claiming pure water as a homeopathic weight loss product. The problem was claiming a non-homeopathic product was homeopathic. The fact that it was in the weight loss category just means the FDA actually paid attention.

The FDA's priorities for cracking down on claims are disease (cancer), weight loss, hair growth, and anti-aging. If you stay away from those you can say just about anything.