Multi-level marketing: still a scam
Our old friend Dear Prudence (a.k.a. Emily Yoffe) has some wise words this week for someone looking for marketing advice. (It’s the last letter on that linked page.)
Dear Prudie,
I have a marketing problem. It seems that since the economy has taken a downward slide, many of my friends and customers have turned to enthusiastically selling multilevel marketing products. I find that I am getting pitched every time we meet for lunch, go shopping, or have a cocktail. I have been presented with energy drinks, vitamins, phone services, and travel companies, to name a few. I have also been told by some of my customers that if I don’t support them in their new business venture, I can plan on not getting any future business from them. I believe these people are being taken advantage of and their excitement is only temporary, as they are riding the high of what was promised to them for potential earnings. How can I tell my friends and customers that I do not support multilevel marketing schemes and I don’t want to hear about their newest business opportunity?—Please Stop the MLM Madness
Multi-level marketing schemes are ones where you get recruited to sell a product — it could be something specific, like Herbalife which sells vitamins and herbal “supplements,” or a virtual smorgasbord of different things, like Amway/Quixtar. This is presented as a great opportunity because you can “be your own boss,” and the like. Not only are you a salesperson for this business, earning commissions on your sales, but the person who recruited you gets commissions on your sales. And the person who recruited that person gets commissions on the sales of the people they personally recruited, and all of those people’s recruits (including you). And so on. If you recruit people, they’re sure to recruit others, who will recruit still more, and you too can make a fortune! So goes the claim.
Of course, it’s nonsense. Not only is it impractical — because the products are typically overpriced and are easily beaten in value by something your potential customers would find at the mall before they call you up about it — it’s also nonsensical. It’s different in a tiny technicality from a pyramid scheme (no commissions on recruitment, only on sale of products) but it’s doomed to fail for the same reason. There just aren’t enough people on the planet to sustain it in a way that’ll be profitable. Profitable for you, I mean. This whole thing is plenty profitable for the people that start these outfits, because they’re churning out these cheap silly products for you to buy for your inventory at marked-up rates (and then fail at selling to your friends and family at even more marked-up rates).
Bottom line: this is not a good idea. It may look good on paper, but it is ultimately a false promise. A tiny fraction of people participating in multi-level marketing turn a profit from sales, and an even tinier fraction of them quit their day job and make a fortune off it. The economy has been hard enough on everyone as it is. Don’t take it as an opportunity to throw even more of your money away. And remember that it’s not just yourself you’d be putting at risk, it’s the people you’ll be pressured to rope in with you, and in particular — as this letter reminds us — the friends and family you’ll be putting in a really difficult situation.
Anyhow, Prudie answers:
Dear Madness,
With your friends, you need to say you wish them the best, but like everyone else, you’re on a tight budget and simply can’t purchase these items from them. If they press you, say you’re being approached all the time, and you’ve just had to make a blanket decision in order to keep yourself from going broke. As for your clients, I’m assuming you actually provide a useful and necessary service to them. How nice that they want to exploit that to coerce you into buying useless and unnecessary products. It’s up to you to decide if a firm refusal is the best way to go, or if being more flexible would be better for you. If it’s the former, explain to them you understand how tough it is out there, but you hope to keep them as customers because they value what you offer, and that one way you keep your prices competitive is not going off your budget. If it’s the latter, you can consider buying their junk a cost of doing business. But before you sign up, explain that you are able to spend only a specific amount of money and will not go beyond that.—Prudie
I’m sorry that anyone might have to set aside a budget for playing along with a scam, but I agree with Prudence here that it might be the best thing for business if you can keep your involvement limited. Limits are really the key with this kind of stuff! Don’t let yourself get sucked in. For a lot more information about MLM, including hard numbers such as income statistics, and a bunch of citations, please take a look at Brian Dunning’s Skeptoid episode from last October. It’s great! You might also be interested in Russell Glasser’s site, The Perils of Amway, which has two epic personal accounts of individuals who were involved with Amway but found their ways out.
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