Skepticism about MLM

[therealbt]

I had a conversation with John Jackson today about MLM , which in his view was/is a scam and propaganda. yet i must admit I found his response srather lame and not very Skeptical just very opinionated. after a few exchanges of email he found the conversation quite boring and suggested I come to the forum to have an open discussion.
So here I am. A bit doubtful and skeptical I have to say about Johns ability to engage in the search for knowledge.
But i'm very willing to be curious.
So folks where is the evidence that MLM and I mean all MLM is a scam and propaganda??

Bryan

[Admin]

Welcome Bryan.

Firstly, can we ascertain what it is you're claiming so that it can be discussed.

Do you think MLM is a great business opportunity in general or is it a great business opportunity per se?

Or is it a poor idea in general but you have discovered a real MLM opportunity that's different to all the rest?

We don't have a huge section devoted to MLM but here's our articles: http://www.ukskeptics.com/multi_level_marketing.php

Your emails today were just ranting and raving (and no I didn't put much effort into the replies) so please state your case here for discussion.

Let's discuss the arguments for/against MLM and not your subjective opinion of my, or anyone else's, ability to understand your stance on the subject.

Fire away.

[therealbt]

I have read your articles on mlm and would agree with you that some of the points that you make are valid. but a lot of the points that you make are also out of date and certainly not applicable in todays market, communication methods and distribution systems.
Your articles appear to refer to the old model of MLM. I buy stock from the company and sell it to the customer for a profit. Is in my experience and research, this method is now pretty much old hat.
I know of companies where the requirement for one to hold stock in nihil.
The order is taken the company delivers, the customer pays the commission, the distributor paid by the customer, no investment in stock by the distributor, other than time and effort.
You also refer to the local market reaching saturation. This would not affect the latest models of MLM as the market is international.
I have a question as to how many business owners there are in the UK distributing goods?
Also every standard business model that I know of in the UK has a pyramid model (only in disguise) the chief exec at the top his team of execs underneath, another team under that etc. etc. a pyramid by any other name. wheres the wealth? at the top! whats your chances of getting wealthy as the boss in terms of earnings? zilch. Whats the possibility in MLM. Very possible, difficult? absolutely but still possible. in standard marketing distribution, totally impossible unless you become the boss.

I'll take up some other points over the next while.
In the meantime I am curious as to your personal experience of MLM is and has been and what was it that brought about the disillusionment?

cheers

Bryan

[therealbt]

John, you asked me to state what it is that I am claiming.
I am claiming that the statements that are being made are not true about MLM and most certainly not in all cases. and that if a claim is being made about MLM period then it has to be true in all cases. Otherwise the other truths should ber included.
cheers
Bryan

[Cuddles]

Perhaps you should elaborate on what you think multi-level marketing actually means. Your above post does not appear appear to have anything to do with MLM, just some stuff about stock and how higher people in companies get paid more.

[Admin]

Your articles appear to refer to the old model of MLM. I buy stock from the company and sell it to the customer for a profit. Is in my experience and research, this method is now pretty much old hat.
I know of companies where the requirement for one to hold stock in nihil.
The order is taken the company delivers, the customer pays the commission, the distributor paid by the customer, no investment in stock by the distributor, other than time and effort.

Not all MLMs involve the shifting of stock. Selling of intangibles, like telephone services (e.g. euphony telecomms), have also been around for a good while.

The point you're missing is that MLMs have a business model whereby the earning potential of a person joining the scheme is not determined by how much product they sell but by how many (active) members they can recruit into the scheme below them (their downline).

It's the business model that's the defining feature of an MLM, not the type of product/service sold (!)

You also refer to the local market reaching saturation. This would not affect the latest models of MLM as the market is international.

You may want to rethink the logic of that statement.

Also every standard business model that I know of in the UK has a pyramid model (only in disguise) the chief exec at the top his team of execs underneath, another team under that etc. etc.

Yes, most traditional businesses' organization charts will have a pyramid shape. Don't be fooled by the propaganda though. MLMers use the tricks of equivocation and false analogy by comparing a pyramid-shaped structure with a pyramid scheme. It's a trick to fool people into thinking that MLM, which is a product-based pyramid scheme, is no different to any other business.

In the meantime I am curious as to your personal experience of MLM is and has been and what was it that brought about the disillusionment?

Is this leading to an Ad Hominem point based on a loaded question?

My 'personal experience' has absolutely nothing to do with whether MLM is a good idea or not. I suspect a 'how can you criticise it if you haven't tried it?' argument coming up. Well, I haven't tried crack cocaine - but I could give damn good reasons for others not doing it.

I have looked into MLM twice (where other people have been suckered into it) but as the point is a fallacious one, I'm not going to expand on it.

Why do you use the word 'disillusionment'?

I suspect the point of you introducing that term is to make out that I think that MLMs are nothing but a scam because I tried it myself and failed. Then you can simply dismiss what I say as I'm a bitter and twisted failure.

Well you're wrong.

[Admin]

I am claiming that the statements that are being made are not true about MLM and most certainly not in all cases.

OK, I look forward to seeing your arguments supporting your claim.

[therealbt]

Hi John,
You said:

The point you're missing is that MLMs have a business model whereby the earning potential of a person joining the scheme is not determined by how much product they sell but by how many (active) members they can recruit into the scheme below them (their downline).

This statement is not as true as it would appear.
It is quite possible to earn a very substantial income in an MLM company (I personally know of at least one) without having a downline.
It is true, however, that to earn the long term residual income which means you could possibly retire from the business or pass it on to someone in your family, and it would continue without you, the multi-level model is the most efficient model for doing that.

By the way the only way you can fail in an genuine bona fide MLM business ( and thats where the due diligence comes in) is by quitting.

Multilevel marketing is also taught now as a legitimate method of marketing.
It is a valid methodology. why not pay all the revenues that would go to Advertising an distribution and wholesale commissions etc. etc. and pay that directly to the people who use and recommend the products but nevertheless doesnt guarantee quality of product etc. ( again a reason to do the due diligence).

Quote:
Originally Posted by therealbt
You also refer to the local market reaching saturation. This would not affect the latest models of MLM as the market is international.

You may want to rethink the logic of that statement.

Although mathematically it may be correct. it forgets the number of people who want to have their own businesses (which as you know is not everyone)and the fact that every day many many children are born into the world so the population is not static the world bithrate is 20.59 children per 1000 of population so around 2%. In numbers thats a lot of MLMers

So if you take the equation of numbers of people wanting to participate in the business building aspects of MLM and the growing population . Saturation is highly unlikely. Also in the MLM environments that I am familiar the models that are used are usually of the order of six (when you are talking of substantial income with the ability to replace the J.O.B. Just over broke. incomes.

Interestingly I would ask the question if MLM is so bad what is the alternative? A JOB I dont think so. but perhaps you can point me to the ones that are not a time/for money swap. and one where you can stop doing and it will still keep paying you.

Is your endeavour not a time for money exchange? and what happens if you stop?

The fact that you have taken a look at MLM would suggest that you are someone who is willing to investigate possibilites. Unfortunately you were unlucky in looking at a couple of companies that didnt quite have all the elements in place to enable you to satisfy your skeptical mind and you made a good choice not to pursue them. But i have to say thats "them " but its not all of "them".
PS I'm enjoying the skepticism.
its intriguing my curiosity

cheers

Bryan

I'm looking forward to your response

[Admin]

It is quite possible to earn a very substantial income in an MLM company (I personally know of at least one) without having a downline.

I would say that it's possible to make pin-money selling MLM products but there's no way that you'll make a very substantial income. The schemes are designed so that you can't make a good living at them so that their 'consultants' are encouraged to sign up new members - this ensures a constant influx of money into the company.

It is true, however, that to earn the long term residual income which means you could possibly retire from the business or pass it on to someone in your family, and it would continue without you, the multi-level model is the most efficient model for doing that.

It's the dream of making big money they're selling you; the reality is quite different. And make no mistake, even if you do make good money, it can all be taken away from you at a moment's notice. They are in control not you. That's even less secure than normal self-employment.

By the way the only way you can fail in an genuine bona fide MLM business ( and thats where the due diligence comes in) is by quitting.

Again, this is just MLM propaganda. I don't know if you can see the ruse but it's one that's used in all faith-based beliefs: those it didn't work for just didn't have enough faith - they are to blame for their failure, not the system.

Multilevel marketing is also taught now as a legitimate method of marketing.

I've done business studies and I've never come across MLM being taught as a legitimate business model. Having said that, it certainly is an attractive model those who run the business. When you have a workforce that you don't actually employ who pay money to you to sell your products and it doesn't really matter too much how many products you sell because your money is made by the 90% of people who pay to join and leave, well you can't go too far wrong.

What MLM is not, is a good proposition to those people who are looking to earn an extra income.

Although mathematically it may be correct. it forgets the number of people who want to have their own businesses

It is mathematically correct.

What you're failing to see is that demand creates supply - it's explained in one of the articles. It doesn't matter how many people want to have their own businesses (and MLM is not owning your own business) they can't sell their products to a market that isn't there (!)

Interestingly I would ask the question if MLM is so bad what is the alternative? A JOB I dont think so. but perhaps you can point me to the ones that are not a time/for money swap. and one where you can stop doing and it will still keep paying you.

A decent job will pay £25,000 to £30,000 a year - MLM will earn you peanuts. The reality is not the same as the propaganda will have you believe.

If you work out the hourly rate of MLM (assuming you're not making a loss) then it will be on par with doing a paper round. I'd like to see someone give up a good job (or even a minimum wage job) and swap it for MLM.

Bryan,

You keep alluding to this 'new' MLM etc. but you're not giving any information. In fact you're not presenting an argument at all!

Why not state which company you're involved with, and why you think it's a viable MLM?

i.e. give us a reason to rethink our stance.

[Cuddles]

Interestingly I would ask the question if MLM is so bad what is the alternative? A JOB I dont think so. but perhaps you can point me to the ones that are not a time/for money swap. and one where you can stop doing and it will still keep paying you.

Music, film, writing.

That said, how exactly do you consider MLM not a job? Surely someone has to do some work, or where does all the money come from? The only way your views can be true is if you are at the top of the pyramid. If you are not the person in charge and are just someone who has been suckered in, you will be the one doing the work that gives money to the people at the top that aren't. Or do you really believe that it is possible to have an infinite number of people all making tons of money without doing any work?

[therealbt]

John, your information is very dated, I challenge you to relook at some of your assertions.

For example:
I've done business studies and I've never come across MLM being taught as a legitimate business model. Having said that, it certainly is an attractive model those who run the business. When you have a workforce that you don't actually employ who pay money to you to sell your products and it doesn't really matter too much how many products you sell because your money is made by the 90% of people who pay to join and leave, well you can't go too far wrong.

------------
Network marketing / mlm is taught at the University of Illinois, by Dr. Charles King, who has a doctorate in Business from Harvard Business School.

Donald Trumps friend, Entrepreneur and respected Businessman Robert Kiyosaki, best-selling author of Rich Dad, Poor Dad and nine other books, said this about networking: "If I had to do it over again, rather than build an old style type of business, I would have built a network marketing business." One of Kiyosaki's books, "The Business School for People Who Like Helping People," is about the power of mlm and the significant opportunity that it provides the average person."

85% of all traditonal businesses fail in the first five years in the UK.
Does that mean that traditional business works and is the best model to follow? I have my doubts.

A point worth noting is that most people do not join an MLM organisation in order to do the business but in order to be able to buy the products at wholesale prices. The Joining fee £12.50. and this is waived for those who chose automatic delivery for example.
Not many execs going to get rich on those joining fees huh.

Same company: 43% of Turnover is paid out in commissions

Show me a traditonal business that pays out 43% to its sales force.
-------------------------------------------------------------
You say

A decent job will pay £25,000 to £30,000 a year - MLM will earn you peanuts. The reality is not the same as the propaganda will have you believe.
If you work out the hourly rate of MLM (assuming you're not making a loss) then it will be on par with doing a paper round. I'd like to see someone give up a good job (or even a minimum wage job) and swap it for MLM.

Here are some figures that are publicly available

The Range of Average commissions paid out in 2005 by one MLM company listed on the New York Stock exchange was:
between an average of $4,332 p.a at the entry level and $490,872 at the upper level.These figures do not include any profits made on retail sales.

Some paper round!!!!
------------------------------------------
You say
What you're failing to see is that demand creates supply - it's explained in one of the articles. It doesn't matter how many people want to have their own businesses (and MLM is not owning your own business) they can't sell their products to a market that isn't there (!)

Of course demand creates supply, its the bog standard market economy model. and your argument does not hold water for consumables.

Distributors and executives in an MLM business are independent contractors and as such own their own business and are responsible for their own accounting etc. they can claim business expenses etc. just like a conventional company.

They are not employed by the company

----------------------------------
You say
it is mathematically correct.

only in theory not in reality

You say
I would say that it's possible to make pin-money selling MLM products but there's no way that you'll make a very substantial income. The schemes are designed so that you can't make a good living at them so that their 'consultants' are encouraged to sign up new members - this ensures a constant influx of money into the company.

This statement is so out of date it questions your credibility as someone in the pursuit and search for knowledge.

I must say I havent seen ( that I can recall) a single argument that you have put forward to support your claim that mlm is a scam as being credible and based on real facts.

you asked me to name an MLM company.
heres one. (and I'm not involved in it, althought that might change)
If you want a good example
take a look at Pharmanex owned by Nuskin

their address is Pharmanex.com

They have been in existence for a long time, are listed on the NYSE and were a 2005 American Business Award at the annual American Business Awards ceremony in New York City on June 6, 2005. Nu Skin Enterprises won the award in the Most Innovative Company category for the Pharmanex® BioPhotonic Scanner.

The above responses I believe debunk some(probably all) of your responses.
It would be interesting to see if you are able to take a truly Skeptical approach to your own assertions,


Cheers

Bryan

[Admin]

If you want to see how MLMers argue their case and make claims of huge financial success see this thread: http://forums.moneysavingexpert.com/...d.html?t=53537

The John Jackson in there is me. Look particularly how I use the company's own published figures to take apart their claims and also look at the turnover of 'consultants' - the failure rate is enormous. That's a lot of people losing money - the company doesn't care as it profits from each and every one of them.

Bryan,

You're arguing like a conspiracy theorist. All you're trying to do is state that my argument is flawed/wrong/outdated etc., and implying that therefore yours is right but you don't state what your argument is.

I also notice that you've evaded the question as to which company you're a 'consultant' (or whatever fancy but phony title they give you) for.

Don't just state that my points and articles are wrong - prove it.

If you can't provide a good counter-argument to mine then all I can assume is that you're simply spouting off the MLM company's propaganda that you've fallen for hook, line and sinker.

This is probably an exercise in convincing yourself that you haven't been taken for a fool as it is in convincing others that you haven't.

I've heard it all before. I've seen it all before. What I have never seen, despite people getting totally consumed by the MLM dream, is anyone making money from being involved with MLM.

It's an appeal to greed, an appeal to hope, and appeal to wishful thinking - but it's nothing but a pipe dream.

[therealbt]

Perhaps you should elaborate on what you think multi-level marketing actually means. Your above post does not appear appear to have anything to do with MLM, just some stuff about stock and how higher people in companies get paid more.

Hi Cuddles, I'm just getting to grips with how things work in this forum and my apologies for not reponding to you earlier but I missed your post.

To answer you question in my own words and my understanding:
Network marketing and MLM are synonomous.
They are methods of marketing
usually in consumbles but not necessarily.
Traditional Commercial marketing often has the company manufacturing a product, marketing it using Advertising, PR, Press releases etc.and distributing using the wholesale chain where the product goes to national distribution then regional then local and then finally to the consumer.
the pricing structure is usually worked out by manufacturing costs + advertising + wholesale markup + retail markup + Profits = final selling price.
this is not in all cases all of the time. each company will have a slightly different methodology and emphasis but it serves the purpose of giving and sense of what happens generally.

In MLM or Network marketing which are forms of Direct selling.
In MLM you will have the company the distributor and the consumer.The distributor and consumer are often one and the same

Using the multilevel model all (or most)of the traditional middle elements are cut out. This means that there are no advertising costs( usually the biggest cost) massively reduced distribution costs as the product can be sent directly to the consumer. This saves money in stocking and distribution, usually incurred by the distributor in the process.
A distributor can hold stock and retail if they so wish but it is not a requirement.

Which means that all the savings in Marketing and distribution costs can then be passed on to distributors.( i think average commission payouts are somewhere in the region of between 20 - 43% depending on which company you work with.
The multilevel element kicks in when someone who is a product user for example says "I can see an opportunity to sell these products myself" and that person would then be taught the ropes by the people who are already in the business and had introduced the product to them, maybe.
In fact the person who wanted to take the opportunity would potentially be able to choose which team they would work with.
and so the process continues.
In the old Style MLM businesses you could never earn more than your upline believe. This is not true in todays MLM enviroment. Your earnings are not limited by the people above you, so you can ean more than the people above you if you put in more effort and work more effectively.

hope this helps

but I would say do due diligence. and check out the proponents as well as the skeptics.

cheers Bryan

[Araneus]

but I would say do due diligence. and check out the proponents as well as the skeptics.

So in the interests of due diligence, how much profit have you made from participation in MLM, and over what time period?

[Legaleagle]

In MLM you will have the company the distributor and the consumer.The distributor and consumer are often one and the same

This is one of the scam elements of MLM. Lots of the orders for goods are by the salespeople themselves or from family members who may or may not be ordering the stuff not because of "demand" for the product but through a desire to help the poor chump of an MLM salesman out.

This whole thread reminds of when a friend a mine invited me to an Amway meeting many years ago. I was only 19 or 20 at the time and not very worldly wise.

I remember that the first major problem I had with the scheme was that we were told that we would have to sell these cleaning products at the rate of about £100 of orders per week (or was it a month?). I honestly didn't want to become a part time door to door salesman and told the guy that I just couldn't see myself walking the streets trying to sell things door to door as that just wasn't my scene. On no, it's OK..came the reply.. you just order the stuff for yourself and get family members to order it and that takes care of most of your quota.

This put me off even more as I had no desire to buy anything from the catalogue personally and I had even less desire to open myself up to ridicule and loathing from family members by trying to pressurise them into buying stuff just to earn myself a few pounds commission.

(when you are talking of substantial income with the ability to replace J.O.B just over broke incomes

Ugghh, that trite little phrase just brought back repressed memories of the cringemaking motivational speaker bull***t which was the "highlight" of my Amway day.

Not a day I had wanted to remember.

Anyway since then I have done quite well out of my traditional J.O.B. and now own my own business. And guess what, I actually pay my sales staff decent wages with full holiday entitlements and employment rights and proper working hours. I do this because it is ethical, right and fair to all concerned. The same cannot be said of people who use the Multi Level Marketing business model.

The multilevel element kicks in when someone who is a product user for example says "I can see an opportunity to sell these products myself" and that person would then be taught the ropes by the people who are already in the business and had introduced the product to them, maybe.
In fact the person who wanted to take the opportunity would potentially be able to choose which team they would work with.
and so the process continues.

Rubbish, it's a hard sell by the upline guys and they certainly don't take on and teach new salesmen the ropes out of the goodness of their heart, it's the cut of the downline commissions they're after.

In the old Style MLM businesses you could never earn more than your upline believe. This is not true in todays MLM enviroment. Your earnings are not limited by the people above you, so you can ean more than the people above you if you put in more effort and work more effectively.

So exacly how has the MLM model changed in the last 15-20 years? Please enlighten me.

I don't remember that the earnings were ever limited by the people above you so your above seems to be a red herring.