Secular Pinoy

Are MLMs really all that bad, or are they merely misunderstood? Are they feasible, or a losing investment? Is the math questionable, or accurate? I'm not thinking of a particular product being sold via MLM, but the concept of MLMs themselves. The MLM Watch website seems to be more interested in debunking MLM's quack products and not on MLM fundamentals. Quite simply, do MLMs work?

strubenuff

They can. Many people have become multimillionaires off them. A former friend of my family is doing quite well in one know to the best of my knowldege. As to your questions...
1.) If you're talking about profit distribution, levels of unnecessary stress, cult-like atmospheres, ect., then yes. They are that bad.
2.) They're also misunderstood.
3.) They are feasible, if you're a good salesman and incredibly dedicated. You also may want to blind yourself to the actual math, or, if you already know about it, to blind your customers.
4.) The math is questionable. There are things they're not going to tell you.
5.) They can work. But, the chances of finding any that offer anything worthwhile, with good people behind you, and customers who are willing you bring a high residual income is slim to none.

Corwin

MLM schemes can make you very rich.

IF you're the person that starts the whole thing up, and IF you have ready access to a crowd of gullible people.

The only people who make money in MLM are the people at the top. Sometimes an unusually charismatic individual will make money in mid level, but not often. Everybody else gets it in the shorts.

Baloo

I'd go a step further. Statistically, you will see a better return on investment if you
1) take all of the money you will spend on training, products, advertising, etc, to take part in an MLM,
2) add to this the hours spent to take part in an MLM, multiplied by minimum wage and
3) bet it all on a roulette wheel in Vegas.

As Strubenuff pointed out, MLM's can work, but the above three steps are more likely to make you money. In fact, even true pyramid schemes (now illegal) have a better return on investment than MLM's (although they, too, fall statisctically short of the roulette wheel at Vegas).

The biggest flaw? I'd say product control. A legitimate business with a good product will curb its production/distribution efforts to match market demand as closely as possible (thus taking fullest advantage of the supply/demand curve). An MLM with a good product (a rarity in its own right) will only succeed if there is an infinite demand (MLM INDOCTRINATION PRINCIPLE #1: THERE IS AN INFINITE DEMAND FOR THIS PRODUCT). Anyone with a head on their shoulders knows that there isn't an infinite or boundless demand for any product. The difference is most notable as a company approaches a marked saturation point. While legit companies will curb their expansion, work on improving the product, work on making a new product, etc, an MLM will reach it's fastest rate of expansion, literally bringing thousands, if not tens of thousands, of bright-eyed enthusiastic sales-people (most of whom have just forked over $200 or so to "join") to 1) sell the same old product for which there the demand is approaching zero and 2) recruit more sales people.

As they say, it doesn't take a rocket scientist...

ohwilleke

The definition that the SEC uses to distinguish an illegal ponzai scheme from a legal multi-level marketing scheme, is basically that in an illegal scheme, the profits to those at the top comes predominantly from lower level sales people's investments, while in a legal multi-level marketing scheme, the profits to thoses at the top come predominantly from end consumers.

There are lots of goods that pass through multiple middlemen before reaching an end consumer with each middleman taking a cut of the end purchase price. These thrive without the hype of a classic MLM.

But, most MLM's rely on new sales people to make it profit. The idea is that other people are brought into the system thereby making you money, not on maximizing your own sales.

Opera Nut

DO NOT MESS WITH THE PEOPLES NETWORK.

It is a satellite network based in Dallas consisting of self improvement programs by the self improvement gurus out there -- Les Brown, Michael Gerber, Tony Robbins, Patricia Fripp (yep she's Robert's sister), the Chicken Soup guys.

Good concept, I liked the programming but the $50 per month fee was too much. Besides I am a lousy liar and you have to lie to people to get them to come to the meetings. You really have to be an obnoxious pushy bastard or bitch to bother people with it. I lost all my friends after I asked them to come to meetings which made me almost as depressed as becoming a Christian and listening to that you-are-a-lowly pile o'shit-even-though- God-loves-you crap.

The only good thing I could say about it was that it was not Shtupperware, Dildo n lingerie parties, Avon, Mary Kay Spackle Inc., or that Sarah Coventry junk jewelry, home decorating shit.

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Viti

I am an outside vendor for several of the largest MLM's...less than 1% even make a living at it and even the ones at the very top are constantly trying to find outside sources of income (investments, tool sales, etc.). Think critically, if there is not a constant flow of money coming from OUTSIDE the system it falls apart....you will reach saturation of those willing to join eventually.

Here is a good skeptic's site <a href="http://www.mlmwatch.org/" target="_blank">http://www.mlmwatch.org/</a>

Arrowman

I know someone who makes pocket money selling Avon - she has a regular group of customers who buy most of their cosmetics from her. But she has no illusions about taking it any further.

And my mother swears by Amway cleaning products. But no-one is ever going to get a holiday house in the Bahamas out of her custom!

Bottom line of retail business:
1. Buy from wholesaler
2. Add profit margin
3. Sell, and keep profit
4. All assuming there is actually a market for the product, and all assuming that the profit margin which the market will bear, will cover your overheads (phone calls, petrol etc) and still return more than 50 cents an hour for the effort you put in.

MLM ignores all of this; it relies on a sort of "magic pudding" view of business - they weave a complicated picture of the buying/selling process to obscure the fact that all they are doing is inserting several extra layers in the wholesale-retail chain, each of which takes its cut. It's a bit like people who sell lottery systems - they weave a complicated, scientific-looking picture which obscures the underlying laws of probability.

Ever ask an MLMer how much they make per hour? Or how much their petrol, telephone etc overheads cost them? Odds are
(a) If they are at the bottom of the food chain, they will have no idea. And they won't want to know.
(b) If they are towards the top of the chain, they won't answer. Or they'll lie.

Also, ask a middle-to-upper MLMer how much of their income is derived directly from personal sales, and how much is derived from taking a cut on their agents' sales, for which they made no productive contribution.

I once met with a guy who tried to sign me up for Amway. I thought he had a genuine business proposal, but within about 5 minutes it became apparent what was going on, so I relaxed and let him go, out of curiosity. Key points:

1. He knew I worked in IT, so he spun the pitch to make it sound very high-tech and retail of the future. He over-emphasised the use of technology.
- Instead of explaining the proposition in a staightforward manner, he spun it to "sell" to me. Bad start in the credibility stakes.
2. He didn't mention "Amway" until I challenged him; he was clearly uncomfortable with having his storyline disrupted. (as he was whenever I asked a question of any sort)
3. When I told him (more politely than he deserved) that I would discuss it with my wife, he asked me not to discuss it with my wife at all; to wait until he could come to the meeting That was the point at which I was tempted to laugh in his face and ask if he really expected me to take him seriously....
4. I asked to borrow the product catalogue; he was reluctant "because it's my only one" but grudgingly let me have it for a couple of days.

I don't think you need to be a rocket scientist to judge the credibility of a person offering an alleged business proposition, who behaves as I describe here.

I checked out the catalogue just out of curiosity. There were all the well-known Amway cleaning products etc - bread and butter, but never going to make you rich. The rest? Stuff like shirts and other standard mail-order stuff. I mean, who buys shirts from Amway, sight unseen?

Let me see - maybe 5 shirts per year per customer, at maybe $5 per shirt profit. Ok that's $25 per customer per year. So I either find several thousand customers, or I sell a lot of other stuff.

No wonder he didn't want to lend me the catalogue; a quick perusal and a bit of thought showed that it was going to be very difficult to make any serious money selling that stuff. Not without a lot of hard work (and consequent low return per hour) and a willingness to exploit your personal relationships that I'm afraid I just couldn't do.

I'd love to have my time with him over again. It'd be like playing with an evangelist.

PS: Let's just do the "shirt maths" again. Suppose you need/want to make about $35,000 per year, before overheads. And let's assume a 20% margin (I doubt the Amway margin for direct sellers is that high, but I'll never know because that sort of fact is the last thing they'll disclose).

So, I need to sell about $175,000 of product per year, just to live. So I need to find 175 customers, each of whom is willing to spend an average of $1,000 per year on Amway product. Yeah.

[ August 15, 2002: Message edited by: Arrowman ]</p>