MLM

Well, just read some debates of MLM in a forum whether would it helps in making a fortune for an employee. My opinion is that MLM could not bring them far enough but only up to sustainable level.Only with solid R&D and export could do that. (my opinion of course)

Below are the facts taken from Herald Press. (quoted from the forum as well)

The 10 Big Lies of Multi-Level Marketing

Lie #1: MLM is a business offering better opportunities for making large sums of money than all other conventional business and professional models.

Truth: For almost everyone who invests, MLM turns out to be a losing financial proposition. Less than one percent of all MLM distributors ever earn a profit and those earning a sustainable living at this business are a much smaller percentage still.

Extraordinary sales and marketing obstacles account for much of this failure, but even if the business were more feasible, sheer mathematics would severely limit the opportunity. The MLM type of business structure can support only a small number of financial winners. If a 1,000-person downline is needed to earn a sustainable income. Those 1,000 will need one million more to duplicate the success. How many people can realistically be enrolled? Much of what appears as growth is in fact only the continuous churning of new enrollees. The money for the rare winners comes from the constant enrollment of armies of losers. With no limits on numbers of distributors in an area and no evaluation of market potential, the system is also inherently unstable.

Lie #2: Network marketing is the most popular and effective new way to bring products to market. Consumers like to buy products on a one-to-one basis in the MLM model.

Truth: If you strip MLM of its hallmark activity of continuously reselling distributorships and examine its foundation, the one-to-one retailing of products to customers, you encounter an unproductive and impractical system of sales upon which the entire structure is supposed to rest. Personal retailing is a thing of the past, not the wave of the future. Retailing directly to friends on a one-to-one basis requires people to drastically change their buying habits. They must restrict their choices, often pay more for goods, buy inconveniently, and awkwardly engage in business transactions with close friends and relatives. The unfeasibility of door-to-door retailing is why MLM is, in reality, a business that just keeps reselling the opportunity to sign up more distributors.

Lie #3: Eventually all products will be sold by MLM. Retail stores, shopping malls, catalogues and most forms of advertising will soon be rendered obsolete by MLM.

Truth: Less than 1% of all retail sales are made through MLM and much of this sales volume is accounted for by the purchases of hopeful new distributors who are actually paying the price of admission to a business they will soon abandon. MLM is not replacing existing forms of marketing. It does not legitimately compete with other marketing approaches at all. Rather, MLM represents a new investment scheme that uses the language of marketing and products. Its real products are distributorships which are sold with misrepresentation and exaggerated promises of income. People are buying products in order to secure positions on the sales pyramid. The possibility is always held out that you may become rich if not from your own efforts then from some unknown person who might join your 'downline,' the 'big fish' as they are called.

MLM's growth is a manifestation not of its value to the economy, customers or distributors but of the recently high levels of economic fear and insecurity and rising expectations of quick and easy wealth. It is growing in the same way legalized gambling and lotteries are.

Lie #4: MLM is a new way of life that offers happiness and fulfillment. It is a means to attain all the good things in life.

Truth: The most prominent motivating appeal of the MLM industry as shown in industry literature and presented at recruitment meetings is the crassest form of materialism. Fortune 100 companies would blush as the excess of promises of wealth and luxury put forth by MLM solicitors. These promises are presented as the ticket to personal fulfillment. MLM's overreaching appeal to wealth and luxury conflicts with most people's true desire for meaningful and fulfilling work in something in which they have special talent or interest. In short, the culture of this business detours many people from their personal values and desires to express their unique talents and aspirations.

Lie #5: MLM is a spiritual movement.

Truth: The use of spiritual concepts like prosperity consciousness and creative visualization to promote MLM enrollment, the use of words like 'communion' to describe a sales organization, and claims that MLM is a fulfullment of Christian principles or Sciptural prophecies are great distortions of these spiritual practices. Those who focus their hopes and dreams upon wealth as the answer to their prayers lose sight of genuine spirituality as taught by all the great religions and faiths of humankind. The misuse of these spiritual principles should be a signal that the investment opportunity is deceptive. When a product is wrapped in the flag or in religion, buyer beware! The 'community' and 'support' offered by MLM organizations to new recruits is based entirely upon their purchases. If the purchases and enrollment decline, so does the 'communion.'

Lie #6: Success in MLM is easy. Friends and relatives are the natural prospects. Those who love and support you will become your life-time customers.

Truth: The commercialization of family and friendship relations or the use of 'warm leads' which is required in the MLM marketing program is a destructive element in the community and very unhealthy for individuals involved. Capitalizing upon family ties and loyalties of friendships in order to build a business can destroy ones social foundation. It places stress on relationships which may never return to their original bases of love, loyalty and support. Beyond its destructive social aspects, experience shows that few people enjoy or appreciate being solicited by friends and relatives to buy products.

Lie #7: You can do MLM in your spare time. As a business, it offers the greatest flexibility and personal freedom of time. A few hours a week can earn a significant supplemental income and may grow to a very large income making other work unnecessary.

Truth: decades of experience involving millions of people have proven that making money in MLM requires extraordinary time commitment as well as considerable personal skill and persistence. Beyond the sheer hard work and talent required, the business model inherently consumes more areas of ones life and greater segments of time. In MLM, everyone is a prospect. Every waking moment is a potential time for marketing. There are no off-limit places, people or times for selling. Consequently, there is no free space or free time once a person enrolls in MLM system. Under the guise of creating money independently and in your free time, the system gains control and dominance over people's entire lives and requires rigid conformity to the program. This accounts for why so many people who become deeply involved end up needing and relying upon MLM desperately. They alienate or abandon other sustaining relationships.

Lie #8. MLM is a positive, supportive new business that affirms the human spirit and personal freedom.

Truth: MLM is largely fear-driven. Solicitations inevitably include dire predictions about the impending collapse of other forms of distribution, the disintegration or insensitivity of corporate America, and the lack of opportunity in other professions or services. Conventional professions, trades and business are routinely demeaned and ridiculed for not offering 'unlimited income.' Employment is cast as enslavement for 'losers.' MLM is presented as the last best hope for many people. This approach, in addition to being deceptive, frequently has a discouraging effect on people who otherwise would pursue their own unique visions of success and happiness. A sound business opportunity does not have to base its worth on negative predictions and warnings.

Lie #9. MLM is the best option for owning your own business and attaining real economic independence.

Truth: MLM is not true self-employment. 'Owning' an MLM distributorship is an illusion. Some MLM companies forbid distributors from carrying additional lines. Most MLM contracts make termination of the distributorship easy and immediate for the company. Short of termination, downlines can be taken away with a variety of means. Participation requires rigid adherence to the 'duplication' model, not independence and individuality. MLM distributors are not entrepreneurs but joiners in a complex hierarchical system over which they have little control.

Lie #10: MLM is not a pyramid scheme because products are sold.

Truth: The sale of products is in no way a protection from anti-pyramid scheme laws or unfair trade practices set forth in federal and state law. MLM is a legal form of business only under certain rigid conditions set forth by the FTC and state Attorneys General. Many MLMs are in gross violation of these guidelines and operate only because they have not been prosecuted. Recent court rulings are using a 70% rule to determine an MLM's legality. At least 70% of all goods sold by the MLM company must be purchased by non-distributors. This standard would place most MLM companies outside the law. The largest of all MLMs acknowledges that only 18% of its sales are made to non-distributors.

Taken from False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes, published by Herald Press in Charlotte,


And below is one of the great reply by one of the forummers.

Whatever said and discussed, the point is that none of the top US and Malaysian billionaires in Forbes list and Malaysian Business are in MLM, except for Jay Van Andel and Rich DeVos, who are the owners of Amway in US.

My conclusion is that owners of MLM companies have created a great business model for themselves -- employing sales persons free of charge -- no need pay salary, no benefits, just give them hope and a little bit commissions, and they're die for you selling and pushing the products at whatever costs. What a business model! And in the end, who make money and who suffer? It's quite obvious from what I see in Forbes and Malaysian Business magazines...



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