I don't know why I find this funny, but I do. Deal with it.
A lot of people on the web are talking about multilevel marketing, also known as MLM. Some swear by it as a great income generator, while others dismiss it as a legalized version of a pyramid scam. A representative of a local MLM company recently tried to recruit me, so I thought I'd share some of the facts of multilevel marketing, as well as my personal experience.
In case you don't already know, multilevel marketing is a business model where a company distributes a product by getting third party representatives to sell it for them. These representatives also recruit more people to become potential sellers, taking a cut of their sales in exchange for training, and so on.
You can see why many people would equate this business model to a pyramid scam. They work in almost exactly the same way, the main difference being that with a pyramid scam, there's no product; the only thing that changes hands is money.
So are MLM's a scam? Well, it depends. Here's what happened to me:
I work in retail, selling electronics. One day, a customer told me her computer had no anti-virus software, and consequently contracted a virus. After helping her pick out a program, she complimented me on my knowledge and customer service, and offered an interview with her husband's company. So we exchanged information, and a week later I got a call. The rep and I set up a meeting at a local coffee shop.
The representative (let's call him Pete) took out a brochure and told me about a company that sells products online. After explaining some basic business concepts, he said that the company he works for was doing too much business to handle with current staffing, and it needed temporary employees to work on a project that was to last twelve to eighteen months. I got the feeling something was wrong when he told me I couldn't keep the brochure for "tax purposes." I got another bad feeling when I actually had to ask what the company's name was. I was told that it was called Leadership Team Development, or LTD for short, and that I would get some information to take home at a larger meeting the following day, where he'd introduce me to some of his business associates. I figured it couldn't hurt, so the next day I went to this talk.
I show up the event the next night to find that there's a five dollar charge for all associates attending, which also didn't seem right. Fortunately, as a guest I was admitted for free.
One of the things I noticed first was that everyone I met asked me the same exact questions: where I was from, where I went to school, and what I do for a living. And they asked everyone else those questions, too. I even got to talk to the speaker, and he didn't have anything remotely creative to say. They were all following a script.
So after we all get settled in, the speaker (we'll call him, "Ted"), started his spiel. He began by scaring all of us about the economy, stating job loss records and so on. He then went on to mention my employment situation as an example of how lousy the economy has gotten. He didn't do it anonymously, either. He specifically mentioned my name and used my personal shortcomings in his sales pitch. Seriously, who does something like that?
Ted gets into the whole business structure, and then mentions that LTD's supplier is Amway Global, one of the biggest MLM companies in the world. He went on for a solid two minutes to explain how it was absolutely NOT a pyramid scam, and then use Bernie Madoff as an example of one. Except Madoff ran a Ponzi scheme, which is entirely different!
LTD’s business model is set up so that a rep’s main source of income comes from gathering recruits, rather than selling products. While Tom technically didn’t say anything that was untrue, he downplayed the fact that the extremely high promised returns would take a lot more work than simply gathering recruits in one’s free time, “on the way to work,” or, “instead of spending time on the Internet.” Believe me, to earn the kind of cash Ted was talking about, you’d pretty much have to quit your day job and spend all of your time gathering recruits.
At the end, I firmly but politely told Pete that I wasn't interested in LTD. In fact, the whole experience left me with a bad taste in my mouth. First of all, Pete initially told me that the company was looking for someone to work for twelve to eighteen months, but the returns Ted was promising would have taken at least two years to attain. Secondly, you can't expect me to believe that you're running an online business and own no anti-virus software. Third, LTD has no public website, just a login page. How can you run an online business like that? Finally, Pete's assertion that LTD was doing "too much business" was just an outright lie. The only reason he interviewed me in the first place was because he needed another sucker to pad his income.
So in my case, the MLM was a scam. Ted’s talk was disingenuous, and Pete’s interview was unethical, if not downright illegal. This isn’t to say that all MLM companies are frauds; Amway is actually a very successful company. And I’m actually a member of a search engine called Swagbucks, whose referral program is similar to an MLM (except users don’t have to pay any money - and yes, that is my referral link)
In my opinion, MLM isn’t a great business model. I believe if you’re going to put most of your time and a lot of money into selling products, you’re better off starting your own business. If your income depends on getting a constant stream of recruits, you’ve got to remember that they’re eventually going to run out. Once that happens, the whole thing collapses. It’s much better to stand behind a quality product and distribute it yourself.
Stumble It!
