Are All MLMs Ripoffs?
First, let's get one thing straight: If someone you know becomes a "representative" for a line of products, and he is not a celebrity, he is almost certainly involved in multilevel marketing. This means the sales force is compensated not just for what they sell but for recruiting more salespeople. The Direct Selling Association says that 99.6 percent of people engaged in person-to-person sales are part of multilevel marketing programs.
Does MLM spell rip-off? The sales structure has critics who say MLM companies by definition exploit new recruits to profit off unsellable goods.
One of the most vocal critics is Utah's Jon Taylor, a former MLM sales rep who has pushed for stricter regulation. Taylor researched hundreds of companies and identified five "red flags." All the companies Taylor considers exploitative ? he lists 350 on his Web site, mlm-the
truth.com ? focus more on recruitment than on real sales, he says. In his view, they're more like pyramid schemes. According to his research, more than 99 percent of salespeople in these companies lose money.
Companies engaged in direct sales don't see it that way.
"No one should lose money in direct selling," said Amy Robinson, spokeswoman for the Direct Selling Association, whose membership includes companies on Taylor's list. The association's code of ethics requires companies to offer a buyback policy to prevent sellers from suffering financial losses, she said. The median income is $2,400 per year.
But are the goods overpriced? One of Taylor's red flags is if the company has more than five levels of associates all taking a cut of a single sale.
"They have to jack up the price to pay off all those people, especially those at the top," he said.
Value, of course, is in the eye of the beholder. Some see added value in buying from someone they know, in their own home or at a party. The fact that there is a party can be a good sign, Taylor said, that the company is trying to sell the product to the public and not just to new recruits.
Taylor recommends researching items and brands offered by home-party friends the same way you would anything else. Look at online reviews and comparable items on retail sites.
But do people really buy from their friends because they think the products are a good deal? Many of us are what Taylor calls "sympathy buyers."
In that case, ask your friend how much she gets to keep out of your purchase price.
If the company your friend joined seems exploitative, a token purchase may do more harm than good. If the offer looks like a bad deal for you or your friend, there's no need to lecture. Miss Manners and the Direct Selling Association agree that it's polite to simply decline.
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Comments (21)
Catherine White8
Entreprenuer
Agreed Cheryl, Agreed!
Cheryl Baumgartner12
Medical Billing/Coding/Insurance
@Catherine you touched on something that always strikes me as funny. In an MLM where you can attain financial freedom, residual income and achieve your dreams you point this out:
"Where people fail is wanting to achieve wealth without work."
No give that same person who won't work in MLM a job at Walmart and they will work themselves into the grave to make someone else wealthy. That is the conditioning of the Prussian educational system at work.
Catherine White8
Entreprenuer
You will get much debate over MLM or pyramid schemes. The two are very different. A MLM or multi-level marketing company is a way to position yourself to capitalize on, not only your sales, but the sales of many. This does not make it a scheme but a Wise Financial Investment.
Yes, there are scams out there. It is your responsibility to do your due diligence and investigate before joining any company. As they say, don't let one bad apple spoil the whole bunch. Do your homework before you
Paul Hines16
A New Path to Financial Empowerment
I'm learning a lot from these responses, thanks.
Patsy j Payne8
konnektions konsultant
Just a generic response. During the economic shake-ups of last year, several corporations changed top leadership and now are running more effectively. Shaking the top is sometimes beneficial to the entire corporation. Shaking the bottom can be beneficial. Let's use the example of Walmart. The person that greets you t the door sometimes shapes your entire shopping experience. In fact, that gives me an idea for an article on customer service. So no more here.
Philippe Moisan16
Tutorial videos, sci-fi writer
"If a team member drops out, your business will not fall"
For a MLM, that statement fits prefectly.
For a corporation, if one or worse, many of your top people leave, there will be consequences. If not, they were not your top people. It will depends on your flexibility and reaction speed to reduce the time the house shakes.
Gilberto Cintron7
Viral, Local, Social & Mobile Marketing Expert
Any organizational structure that has one person on top, be it a Chairman of the Board or a President, followed by lower levels is for all intents and purposes a pyramid. The fact that a business model is organized in a hierarchical (up and down) structure rather than in a flat structure (where everyone is on the same level) does not make it bad.
The difference between a Corporation being a pyramid and the so-called pyramid scam is that corporations sell real products and/or services. Pyramid
Cheryl Baumgartner12
Medical Billing/Coding/Insurance
Laura Newton posted a good video today. MLM, Pyramid scheme corporate entity they all have the same structure a pyramid. The difference between them. A Pyramid scheme is set up so that the early comers profit and the late comers lose their shirts.
No I am not playing with words here, the western educational system is based on the Prussian education system. The educational system is set up to create 'employees to feed into the corporate machine. All corporations are pyramids. The educati
Paul Hines16
A New Path to Financial Empowerment
I'm getting back in the saddle tomorrow with my Primary business Jonny, this will probably be my last shot at it.
Jon Harte7
Internet Marketing Specialist
I don't mess with MLM anymore..It's either way to hard to market ar there are a lot of scams..Be Careful
Paul Hines16
A New Path to Financial Empowerment
That's what a lot of people think Philippe, I did too.
Philippe Moisan16
Tutorial videos, sci-fi writer
You're playing with words, Cheryl. you're saying the corporate world is the MLM business model.
Cheryl Baumgartner12
Medical Billing/Coding/Insurance
@ Philippe If you were to tell Sam Walton he created a Pyramid scheme in Walmart you would get the same reaction but it would not change the fact that it is a corporate pyramid Any more than not calling a franchise an MLM Changes the fact that the store owner must buy his way into the business and that there are 'levels' above him that override what he does, just like with Multi-Level-Marketing
Patsy j Payne8
konnektions konsultant
IMHO, thank you for the clarification. I've been in several affiliate programs and not understood how to market them I've also been in several, what I call hard product companies, e.g. Mary Kay, Tupperware, Cleaning Products, Cookware. I believe that a MLM that is selling hard products has more credibility, however, most of them require an initial monetary investment. I have since learned that an eProduct is just as valuable.
Philippe Moisan16
Tutorial videos, sci-fi writer
the article and the comments make it worth for a tweet :)
Paul Hines16
A New Path to Financial Empowerment
Thanks for the comments, I agree with you all.
Philippe Moisan16
Tutorial videos, sci-fi writer
Cheryl, I believe that if I ever said to a McDonalds Franchiser that he is a Multi-Level Marketer just like an Amway distributor, he would ask for your M-60 and I would become Swiss cheese.
Cheryl Baumgartner12
Medical Billing/Coding/Insurance
Avon, Mary Kaye, Tupperware? All MLM's-and all respected names in the business world.
7-11, McDonalds both franchises (form of MLM in themselves)-both respected names in the business world.
99% of those calling MLM a scam either never joined a legitimate MLM OR through their own efforts (or lack thereof) never made any money because they never learned how to run the business end of things.
Gilberto Cintron7
Viral, Local, Social & Mobile Marketing Expert
Avon.com and Marykay.com are two very successful MLM companies that have been around for decades.
Unfortunately, many confuse MLM companies with Pyramid scams. A successful Multi Level Marketing Company has bona fide products, is registered with the Association of Direct Marketers, and other trade associations, and if in the USA maybe with the Better business Bureau.
As with all business models you have to put in the work to reap the rewards. Many think they can join an MLM opportunity and
Philippe Moisan16
Tutorial videos, sci-fi writer
If MLMs were all ripoffs, Amway would have closed its doors years ago.
That said, it is possible to make money, but you have to bededicated and strongly motivated, IMHO. Also, the main principle of all or most of these companies is : "Don't think for yourself, follow your upline".
Those who think for themselves and study what makes sense for that business model are able to make enough money to make a living with their MLM business, and in some cases, become rich.
The product must have