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Q:
Is MLM a scam? Is it legal? Is it moral, ethical, etc?
The short answer is: maybe.
Multilevel marketing is misunderstood 90% of the time. Ignorance about MLM is
the cause of undue arguments, remarks about pyramids, and general disagreements
in general about MLM. Many people contend MLM is immoral or unethical. Many
Attorney Generals (who ought to know what they're talking about) say a properly
managed and operated MLM is perfectly legitimate and ethical. Who's right?
The truth is, MLM is not inherently good or evil any more than capitalism is
good or evil. Both can be done ethically, and both can be done unethically. It
depends on how a particular company is designed and managed.
Since the MLM industry is very young (less than 50 years old), the law is still
in flux. There are admittedly many MLM companies that are nothing more than
scams, get-rich deals for the owners and their cronies, glorified chain
letters, ponzy schemes etc. Some of them even manage to skirt around the legal
issues and avoid prosecution.
There are other companies that have legitimate products, and may have been in
business for many years, but which are run in such a way that many people get
burned -- old ladies investing their retirement funds to buy a garage full of
products, and so on.
Most people would agree these companies, or at least the Members that condone
and prepetuate questionable practices, are not very ethical.
On the other hand, there are many companies that are run legitimately, legally,
and ethically. They produce good products that are valued by customers, and
give many people the opportunity to purchase great products and improve their
financial situation.
In a properly designed MLM, a new person has the same opportunity to build a
downline group on the same basis as the person who got in the program months
earlier. He invested maybe a hundred bucks and a few hours. It's only fair that
everyone starts out in the same place -- AT THE BOTTOM -- and every person has
the same chance to build a downline of their own.
The anti-MLM argument often runs calculations of exponential growth, and
demonstrates that the entire population of the planet will be enrolled within a
short period. This is an intellectual exercise rather like the example of "one
pregnant mosquito could carpet the earth in mosquitoes by the end of the
summer." In other words, in actual reality, it doesn't happen that way. The
growth rate is normally much slower than people realize, especially once a
company gets larger. No company in the history of MLM has ever grown fast
enough to exhaust its potential marketplace. More people turn 18 every year in
the United States than are enrolled in all MLM companies combined. So far, at
least, the growth of MLMs hasn't kept up with the growth of population.
So, in the opinion of those people who know, MLM can be done legally, morally,
and ethically. It can also be done unethically and illegally. Choose your
company carefully.
Q:But
isn't it wrong to keep bringing in new participants, rather than concentrating
on selling a product like "regular" businesses?
Many anti-MLM folks think that the only purpose of an MLM is to enroll new
people, instead of selling a product. What they don't understand is that
enrolling new people is how you sell product in MLM. Besides, all businesses
whether retail or MLM continually lose customers so sponsoring must be
continuous.
If you focus only on selling, it isn't MLM; it's plain old sales. There is
nothing wrong with that; it's just not MLM.
MLM works with a different process than typical sales. Rather than finding a
few people who sell a ton, you find a bunch of people who sell a little. Since
each person sells so little, self-consumption can account for a significant
portion of those sales. Enrolling new people, and building downlines, is how
you find the people who consume and bring others who consume! That's multilevel
marketing and consumer-to-consumer sales.
In any legitimately run MLM, all people, from top to bottom, contribute to the
sales effort, that's how bonuses get paid. It's just done in a different manner
than in traditional sales or retail.
MLM works differently than traditional methods, but just because it's different
doesn't make it bad. It's just different. Just like franchising was different
from traditional retailing and was considered to be a scam for many years. But
when properly implemented, franchising is not a scam; it's a very effective way
to do business. Similarly, when properly implemented, MLM is different from
traditional retailing and franchising, and it can be a very effective way to do
business as demonstrated by many major companies who now have multilevel
divisions.
Q:
What's the difference between MLM and Network Marketing?
Most people would say the terms are synonymous. MLM is an older term, and has
taken on negative connotations in some people's minds. Some who are trying to
avoid this stigma prefers network Marketing. Regardless how you dress up
network marketing it's still multilevel.
Some companies, such as Amway, consider "Network Marketing" to be a specific
form of MLM: namely, combining a "network" of outside suppliers (AT&T,
Coke, Reebok, etc.) with a network of "marketing" folks (the Members).
Q:
How can you succeed in MLM?
The short answer is, work diligently, work consistently, and don't give up.
All companies and products are different, and what works in one company might
not work in another. You should learn from your upline. Ask them what works and
what you should do to succeed.
Draw on them for help. They've found out from experience what works and what
don't, and they're interested in your success. The fundamental ideas, though,
are the same in any company.
Do what a Member/distributor/associate/whatever is supposed to do in your
company. That is, retail products, sponsor, consume products, whatever -- and
find others to do the same. Convince them to do what you do.
Duplication is the key to success in MLM. You're not supposed to go out and
enroll the world, or sell something to everybody on the planet. You're supposed
to find a few people who want to consume or use the product, build a business,
and help them get started. More importantly, teach them to do what a Member
does, and go out and find a few people to work with and teach those new people.
Until you have "convinced your people to convince their people to convince
others," you have not really duplicated yourself.
Keep plugging away. Unless you're incredibly good at this, it will take time to
build a group. It takes time to find good people. Sometimes it can be very
discouraging. Sometimes you may be tempted to give up and if others are
succeeding in your company and you are not, you need to take a look at what
you're doing that isn't working. It may be that you wouldn't do any better in
another company, even if the grass looks greener, because you're doing the
wrong things.
It is a sad fact that a very small percentage of people who enroll in any
particular MLM will succeed big. This is not, however, a fatal flaw of MLM;
it's a reflection of real life. 90% of small businesses fail within 1-5 years
and the owners lose a whole lot more than the few hundred dollars an MLM person
typically invests. 98% of corporate employees will never achieve executive
levels. 95% of 65-year-old retirees in the US (according to insurance &
Social Security statistics) are dead or broke. The true fact is, very few
people succeed big in any endeavor. Most people simply will not do what it
takes to succeed. MLM is no different in this regard.
However, many people get into an MLM with the idea that it's some kind of "easy
road to riches". It's not. It takes work. It takes time and dedication. But
most people don't see that, either because their sponsor misled them with rosy
predictions of instant wealth, or because they chose to hear the easy story.
People like this enroll and don't do anything, or give it a try but give up
after a few months. This is where the vast majority of "MLM failures" comes
from.
The biggest problem with MLM is that it's too easy to get into it (usually no
more than a few hundred dollars), so it's too easy to get out. With only a few
hundred bucks committed, it's easy for someone to say, "Ah, heck, I talked to 4
people and none of them were interested. This doesn't work! Guess I wasted
$200."
You should approach your business as if it was a real business, one that you
had invested your life savings into. If you had sunk $200,000 into your MLM
business, would you let 4 "no"s stop you? No you would not! You'd get back out
there and keep working until you made it work, because you had too much money
in it to give up! Well, guess what? That's what makes MLM work too -- that
dedication to keep working until you make it work.
If you work consistently, and effectively, and build your downline fast and
solid your income will build more quickly than you had anticipated. If you've
taught your people the correct ideas of "work consistently, work effectively,
and teach your people how to duplicate your efforts", you should see a
consistent rate of growth from the very beginning.
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