From Abracadabra to Zombies
reader comments: multi-level marketing
12 Jan 2006
Hi, Just ran across your site. I've been involved successfully in a couple of network marketing companies for about 20 years and have some feedback about your articles, which make some good points, but I feel do miss some other good points.
If a network marketing company tries to sell the business to a prospect on the basis of false claims of wild success, or easy money, or spiritual motivation, that is a sure indication it is not a good company to be involved with. That isn't the way I was introduced to the industry, and I know of many good companies that do not do this....although you will find people in any industry who use devious or faulty reasoning to get ahead, and this industry is no different. People are people.
My husband and I worked to make a decent living, which has given us a very nice residual return over the years, not rich, but better than average, giving us more lifestyle freedom than other options. And we are both active in other vocations (my husband is an Episcopal priest, and I'm a painter). Many of the friends we brought into the business are similar, and we know literally hundreds of folks in these companies, some of whom make very good money (and they worked hard to get there), some of whom make, as you say, pocket change. In my experience it is possible with a little effort to make a few hundred, or a thousand or two, dollars monthly. Even a couple hundred dollars a month, in residual income (repeat sales), is like creating a nest egg investment of many thousand, to get that kind of return - an option many people do not have.
The beauty of the business model, when it is done right, is that it is residual income. That is, once you have a happy customer (customer service is one of the things we get paid for, one reason it's not easy or to everyone's liking, and may be a reason so many don't succeed), you can rely on repeat sales and repeat commissions. But even more, once you have trained and mentored your sales network (we build the distributor force for the company, another thing we get paid for, again, not everyone's cup of tea), and helped them to succeed, you continue to receive overrides on their sales volume....not as much as they receive themselves, mind you, but a percentage.
I like this industry for several reasons. One is that I do not compete with my sales force. If I should have a potential customer in my town, there is no particular advantage to sponsoring the person directly, I might actually choose to have another local distributor do the sponsoring and we work together. But in reality, this situation rarely exists - people usually travel in different circles, and the people we sponsor are as often outside our geographical area as inside - and the world is a big place. I can make a very good income with only about 400 people in my total network, buying products on a regular basis. We don't need thousands or anything like the total population of the world! The company limits the "levels" any single person can get paid on anyway....and any given person has an equal opportunity to grow a network and get paid on it.
Here's another factor to consider. As you observe, the network never develops into an equally sided perfect pyramid, far from it. I always present that to a new potential distributor. Most people won't do what it takes to build a lasting network, for the same reasons most people wouldn't succeed at any other entrepreneurial business. Most people would rather work for someone else, at least at this time, in our society, even if they complain about it! However, many do continue as happy customers (assuming, as in my own case, that the products have high value). And many enjoy getting some commissions for sales to people they have referred, who became customers, so they can make back or reduce the cost of their products. As we often say in this business, what other company will pay you for referring new customers to them?
Now, the biggest reason I differ from your point of view is concerning the question "where does this money come from?" In fact, network marketing is a part of the direct sales industry, which includes many types of commission sales businesses in which products are sold directly to customers through distributors who earn commissions on those sales. This is a familiar form of marketing, not strange or suspect. Perhaps the best known direct sales company that is still around is Avon...lots of people love their products, and lots of people make money, big or little, and enjoy their small businesses. After 118 years! I say that's great. In fact, the only "twist" on this business model, in network marketing, is that you get paid overrides on additional "levels" of people you train - up to a limit that keeps the profit margin in balance so the company doesn't go out of business - the same as any other business!
I find it odd that you think companies are the big winners, at the expense of the distributors and/or customers. In fact, the amount of money actually used to pay commissions in network marketing is similar to the percentage allotted to getting a product to market in any other form of marketing, often around half the company-direct price. We usually buy toothpaste, food, and all other consumer goods, without thinking how many people had to take a cut of the retail price. Moving goods within customer networks, shipping directly from the company to the end user (no credible company requires you to buy garages full of products to resell any more) is efficient, and rewards the consumer who is interested enough to recommend the product to others (usually a small percentage, as few as 5 or 10% of the total number of customers). I can't see that this is less "legitimate" than sharing the money with wholesalers, distributors, ad agencies, truckers, retailers and so on, who may or may not care about the product, or the customer. It's all getting a product to the market that demands it...both systems have legitimacy.
Finally, if you have borne with me up to this point, let me say that the industry as a whole is a pioneer industry. Amway was the first that moved from direct sales to "multilevel" - and I won't discuss that other than to say they have evolved quite a lot in 60 years. Most companies that have survived and thrived in the industry learned a lot from those who came before, and from their own early experience. Technology has changed the business, too. It's not the same today...but it will remain a minority business model in this country as long as people are suspicious and continue to label it as unsavory or deceptive...or use words like "scheme" which are polarizing emotional words that in fact have no descriptive meaning. If anything, they denote illegality, rendering a phrase like "legal scheme" meaningless.
I appreciate skepticism and honest questioning. I hope you find my response thought provoking, and if nothing else, I hope you will realize there are lots of us out there who are serious marketers and entrepreneurs, not just looking for "chump change" but a way to make an honest living and help others in the bargain. And a lot of happy customers just like in other businesses...commission sales is what this business is. It's as simple - and as complicated - as that.
Hannah Ineson
Damariscotta, Maine
14 Oct 2003
I MUST set the record straight; you have no idea what "MULTI-LEVEL
MARKETING" is, and probably never will. See if you can answer these, maybe
then you will have some IDEA !
reply: Sure. I love a challenge, especially from someone who gives me such compliments and also knows where the caps key is.
1- Which institutions and businesses, that you know of, aren't pyramids ?
reply: McDonalds, McClatchy Newspapers, Disneyland, to name just a few. (Is this a set-up question? This seems too easy to be a real test.)
2- Why was there a pyramid depicted on the last American dollar bill ? (Was that a mistake ?)
reply: No, it wasn't a mistake. I've already covered this in my entry on Paranoid Conspiracy Theorists. You can get more information here or here. But what does this have to do with multi-level marketing? You're not going to ask me questions about multi-level parking garages are you, because if you are we can stop right here. (When does the real test begin?)
3- How can anyone claim saturation, when that same person says NO to multi-levels ? (Does he understand his own theory ?)
reply: OK. I give up. How can anyone claim saturation (or dilation, for that matter) when that person says no to multi-levels (or yes, for that matter)? I must admit I am completely nonplussed by this question.
4- Why would Fortune 500 companies put their own products in "MULTI-LEVELS"? (Would they risk the slander of the "have nots" if they did profit immensely ?)
reply: My guess--and it is only a guess--is that they do this to make money.
If you are such a righteous individual, post my questions along with your answers on your web site for all to see.
reply: Even though I am not righteous, I will post your questions along with my answers. If I were righteous I would ignore you. I doubt whether your line of inquiry is going to gain you too many new recruits, unless you're all headed for the same clinic.
Every story has 2 sides, however most people get to hear from the
"have nots". Funny, "have nots" counseling "have nots" creates more "have
nots". How about successful people counseling others to be successful ?
Probably a novel idea to you - plain common sense to me. A MULTI-LEVEL
successful puts it like this; "Common Sense Is Not That Common!" If you
successfully answer the four BASIC COMMON SENSE questions above you will
discover how limited by "have nots" you have been in your life. The only
question left is, how long do you to continue on that path ?
Adamone (Philippe Alcindor)
reply: If that were the only question left, there wouldn't be much point in existing.
I suppose I am a "have not." But I once put it this way: The reason common sense is so common is because it usually doesn't make any sense.
Say, are you part of our new governor's transition team?
24 Mar 1999
Thank you for allowing me to comment on your MLM section. I am a student
and advocate of professional MLM. I have a few factual corrections to add.
Your first paragraph: Network marketing (NM), which includes both MLM and Direct Selling, is a distribution and sales method that adds the power of networking (the sharing of information and resources, or leverage and delegation) to the marketing process. It often emphasizes recruiting because that is how more product (merchandise) is sold. The greater the sales force, the more merchandise marketed. As such, it is intrinsically unblemished.
reply: There is a big difference in recruiting sellers of a product and recruiting recruiters to recruit more recruits of recruiters ad infinitum. All markets are finite. MLMs might work in an ever-expanding market of unlimited dimension.
In addition to marketing merchandise (product category one), NM also markets hope to people (product category two). I call this the "idea behind the business." Here we are looking for people to do something more important than merchandise marketing or business building. Here we are looking for people who want a feeling of control in their lives along with a feeling of self-esteem, self-fulfillment and accomplishment. Here we are offering people an opportunity to practice being the best they can be. The idea behind the business has great attraction for many people because of the frustrations and stress they feel in their lives and work. People often feel hopeless. Some find hope in NM. They believe-a feeling of certainty--certain of the possibilities.
reply: Yes, you are selling hope to the hopeless but any relief you give is only temporary.
It is true most people quit their NM business. I think this is do more to unrealistic expectations than any serious flaw with NM.
reply: Obviously, I think otherwise.
Your second paragraph: The reason MLM plans cannot succeed has nothing to do with pyramids. Pyramid selling is a system of selling goods and services to consumers by settings up a structure consisting of layers and layers (multilevel) of sales agents whose ultimate objective is to sell goods and services to consumers. At the heart of every successful sales force is the recruitment and selection of effective sales representatives. This is very advantageous to the company owner(s), suppliers, distributors and consumers. Its a win-win situation. It's what relationship marketing is all about. The ultimate outcome of relationship marketing is the building of a unique company asset called a "marketing network." This network consists of the NM company and all supporting stakeholders: customers, employees, suppliers, distributors, retailers and others with whom it has built mutually profitable business relationships.
reply: Again, any market is finite. Eventually, the recruited become the only buyers. Do the math. In any town, of any size, you eventually run out of people to recruit. The only thing you never run out of are people who might buy your products, and most of those people will be involved in the program because they think they're saving money by buying the products direct.
Your third paragraph: Direct sellers (face-to-face selling away from a fixed retail location) market merchandise to consumers. NM plans do not 'require' direct sellers to recruit people. It's optional. Many do recruit a sales force because more merchandise is marketed and more profits are made.
reply: I'm glad you are here to set the record straight. Every MLM I've read about is based on the notion that it is different from direct selling because you recruit recruiters. Of course, no one is "required" to do this, but that is the main selling point of MLMs, so this seems to be little more than quibbling over a word.
The people you recruit are not in direct competition with you. I believe you're referring to the concept of "market saturation." This theory just does not hold up in the real world. After at least three decades of recruiting, NM companies have barely scratched the distributor and consumer markets (less and 1%). The MLM "saturation theory" has been tested in many court cases (Go-Re- Mar, Amway & Avon) and is unfounded. Walk onto the first floor of any department store and note it is almost entirely filled with cosmetic counters. Likewise note the health and nutritional section of every major supermarket chain. As long as you see these departments, you will know there is plenty of markets for network marketers.
reply: The distributors are the ones buying most of the products. The only one who will get rich in this scheme is the one who started the thing, like the founders of AMWAY.
Illegal pyramid schemes are doomed to fail due to the intrinsic nature of their operation--there is no consumer market to purchase any item of value. Many people confuse the two. They are kissing cousins in design but not in operation. The difference is a difference that makes a difference.
reply: Really?
Your fourth paragraph: There is no need to alienate anyone least of all family or friends. Practicing Professional Integrity Selling will keep you out of trouble. This type of selling is fulfilling needs and wants. There is no trickery involved. People, in general, practice deception all the time whether in traditional or nontraditional business. NM does not have a corner on deceit. How often I would go into stores and ask, "How you doing?" They would reply, "Fine!" The following week the store is closed. Positive thinking? Lying? Doing great? Business wonderful? You call it. It happens all the time. People are strange.
reply: Finally, we agree on something!
Your final paragraph: You still don't seem to understand the overall concept. The idea of selling goods to people and encouraging them to sell the goods to others is merely Direct Selling on multiple levels. The distributor is selling the goods themselves. They are merely offering a value-added business opportunity to others who want to take advantage of it. The ultimate goal is to market more merchandise. It's managing, selecting, training, supervising, motivating and evaluating sales representatives. It's entrepreneurship. There is nothing inherently evil with the concept. What people do with the concept is another question.
reply: If MLMing is "direct selling on multiple levels" then Mickey Rooney is a serial polygamist. It is what it is, whatever you call it.
I hope these factual comments help you understand this misunderstood industry.
All the best.
Steven Brownstein
reply: I'll let the readers decide if this help understand the misunderstood.
21 Sep 1998
Thank you for your write up and links on multi-level marketing. While I was
doing my laundry at a public laundry mat, several individuals tried to get me to sign up
with Excel -- long distance carriers. They never once stressed why I should have Excel as
my carrier, and they never asked whether I used long distance. (I don't.) I was told how
much money I would make by 'helping people'. Unfortunately, they kept coming back to the
laundry mat. I finally informed the local authorities who put a stop to their activities
since door-to-door sales are prohibited in our county. Your article helped me greatly. I
was able to say "NO". Thank you.
Virginia Carper
23 Nov 1997
I would like to obtain your permission to use, adapt and/or to translate the content of
your web pages in a publication to make South Africans aware of the issues not told by the
Multi-Level marketing companies. This publication will be published for profit with or
without endorsments from The Minister of Trade and Industry, the Business Practice
Committee and the Consumer Council.
Recently I was one of many South Africans who lost a great deal of money to a West Indies based company. I believe the total loss was $29,000,000. The industry is booming in South Africa and there is no way to educate South Africans quick enough to protect them. If only I saw these pages before my meeting, I would have spotted the warnings before I have joined.
South African Minister of Trade and Industry are looking for input from the public to
put legislation in place to stop the Multi-level marketing Industry. I would like to send
him a copy of your pages with your permission.
Lourens Human
You have my sympathies and my permission to use my materials.
29 Mar 1997
Yes. I'm in MLM. But, then, so are you with your WebPage on Critical(?) thinking.
You're a hoot!
Look, friend, no matter how it's done, no matter the format, every business enterprise is MLM. You simply have to set up your own criteria, ascertain your goals, recognize that it's not going to be easy, and get to work.
reply: If every business enterprise is MLM, then MLM is not unique, not special, and not worth our interest.
There have always been those that are looking for the easy dollar from some gullible soul.
This can be said of any enterprise on the market
reply: First we learn that all business enterprises are MLM, and then we learn that all enterprises are looking for the easy dollar from gullible souls. You really do understand economics better than anyone I've met so far.
-most especially your offer to instruct people on how to be as skeptical as you purport to be by shelling out $2-.95 for your coffers.
reply: I assume you are referring to my book Becoming a Critical Thinker ($15 plus postage & handling). If I wanted to make easy money by writing a book, I think I would have chosen another topic, such as Six Easy Steps to Finding the True You and Your Path to Success.
Do yourself a favor? Take a good look at the way that big business is downsizing.
This is affecting everyone. and if people adopt your "skepticism", they'll be so
paralyzed with "skepticism" (proper definition: fear) that they'll be even more
susceptible to the "blame-everyone-for-my-joblessness" bunkum that the lazy
promote when they find that self-pity has landed them without the income to insure against
homelessness.
reply: You're not only an expert on economics, but on social problems as well. I must admit that you make connections I have trouble following. I understand downsizing, but don't see how I'm doing myself a favor by taking a good look at it. I don't think those who are downsized or outsourced will be paralyzed by skepticism, though I can understand why they would fear the future, especially if they are older. Being skeptical about occult, paranormal, supernatural or pseudoscientific matters isn't likely to play a role in the decisions of those unfortunate enough to be vicitims of downsizing. But if it does play a role, I think it will be a positive one, helping people avoid making bad decisions out of desperation.
No need to reply, for I know this message will be too hard for you to accept in your fearful little world of "skepticism".
P.S.: Were you one of those people - like me - who thought that the chance to buy into a little-known company (named Xerox) in the mid-seventies was too risky because it seemed "too good to be true"? I'll bet you were.
Sheila Middlebrook
reply: Unfortunately, when Xerox stock came on the market I was too young and too poor to have known or cared about it. It is frightening, though, to find that you and I have so much in common.
30 Nov 1996
Harassment of this kind need not restrict itself to the sale of MLM
"opportunities". Recently, several of our middle-managers were forced to submit
to Meyers-Briggs typing, which can be seen as a
pseudoscience. Other managers might become enamored of various "motivational"
gurus and try to impose their cult techniques on unwilling subordinates. What this boils
down to is an equal-opportunity employment issue, where the forced belief is analogous to
a religion. Anyone in a supervisory stance therefore runs considerable risk when
attempting to impose unproven or fringe methodologies within their organization. Some
enterprises, of course, permit much more latitude than others in this regard. Your example
from the U.S. Navy is one where rogue supervisors will have much less success than in
small businesses with only a handful of employees.
Raymond Bayerl
multi-level marketing
