You always hear people in MLM talk about how brilliant the system is because it uses leverage and that you get a little effort from a lot of people and everyone makes money.
Is this not the most idiotic thing you have heard? if everyone is doing only a little effort conceivably not selling enough on their own effort to at least provide an income, then it is physically impossible for everyone to be earning at the same time. The only way it works if is the pyramid continually grows. People in MLM say that the people at the bottom should leverage as well and get the same results as those at the top, but essentially that only means that at no point ever in the MLM model does EVERYONE benefit, there are always people at the bottom getting no value.
Are people in MLM that stupid, or is it that there are enough people with no concept of math that are constantly seeing MLM for the first time?
The bulk of people who profess this leverage do so because they do not understand. I don't think the majority of people in MLM are bad people, they are predominately non business people naive enough to overlook the fact that the need for constant exponential people is the only means possible to succeed using a downline…what supposedly makes MLM better than any normal sales position.
In terms of what some have said here, sure, if MLM was a sales operation only there would be no problem. One should hold the sale person who endeavors to make it rich selling any product with great respect since its a very hard and respectable means of making money. However, few if any MLM companies promote sales predominately, and in fact nearly all MLM companies are filled with people who never sell enough volume on their own to make a living. this is where the lack of respect in the MLM industry comes from because instead of actually promoting value through sales, they promote value through getting other people in your organization. They use one liners like "leverage is the key" to disguise the fact that the means of getting wealthy off of building a downline is a ponzi scheme.
Ideally, if you are selling lots of product and doing well, and you know of others who are good salespeople that could benefit, then signing them up and getting a small commission on their sales is good business. But that is not the intent of MLM. The intent of building an MLM downline is to build enough people in your network so you never have to sell a great deal of personal product. MLM companies will tell you that they are not a sales company when it is convenient and they need to get non sales people into their downline, and then will turn around and tell other people questioning their system that its all about sales. This promotes a great lack of respect for MLMers again.
In regards to mrsgillen's answer about the pyramid, this is a prime example of the MLMer using a one liner (saying "its not different than a pyramid structure in the company you may work for") as oppose to actually addressing the issue. The issue is not the shape of the network, its that the people at the bottom are not earning enough money to support themselves until they bring in people of their own. The whole system is set up on bringing in people who bring in people who bring in even more people, never on going out and selling enough volume to support yourself. In conventional business, although structured with people at the top earning the most, the fact and major difference is that the people at the bottom are able to earn a living without ever having to bring anyone else into the company (and in fact id they didn't add enough personal value, they would be fired), and the company is able to pay these people without ever having to hire new employees. In MLM, unless people are selling enough personal volume, the only way to make money is to bring in other people, which makes its a ponzi scheme. The fact that they CAN sell personal volume may keep MLM legal, but that doesn't mean its right. As I have said before, I can set up a lemonade stand on my front lawn and feasibly make millions, but the reality that it would be a terrible business decision in light of all the other options out there…thus is the same with MLM.
As far as the referral network, there is a huge difference between just recommending something to your friend and recommending an MLM product to your friend. The fact is, if I know you have an invested interest in what you are recommending, then I am going to take that bias into account. MLMers do not think that bias is an issue because their family and close friends happily buy their product initially because their family and friends wish to support them in their endeavor, that is human nature. But how long can you take advantage of human nature? The reason MLM is not taking over (what MLMers refuse to accept) is that in the long haul, people's good nature will only go so far and will they will not just continually buy your products just to support you. Those decisions eventually are made on value and cost. Most MLMers will jump right in and tell you that they have the most valuable product, etc etc etc…but the reality is most MLMers would never buy the products in MLM if there was not the dream of making millions in MLM attached to it (of course they will deny that, but common sense dictates the obvious).
Word of mouth advertising is the least expensive method of sales, but MLM twists that fact into their model to convince their reps that their system is best. This always flies right over the head of the MLMer in light of the fact that the product they are selling is nearly always substantially higher priced than any competing product. MLMers are taught to confront that issue saying that their product is unique and there is no other product to compare it to. This of course is merely a convenient justification. Any good product will have quick competition from the market, but MLMers are led to believe that patents and early entry into the market has kept them ahead. The fact that conventional systems such as Wal-Mart or other large retailers can offer prices at a fraction of anything MLM has ever sold gives evidence to the fact that MLM as a sales model is far more expensive.
If the MLM system was the dream that MLMers profess, wouldn't it make sense for companies to exist in MLM to compete with large retailers? Yet they do not, the only physical products sold in MLM are products that are not found in the market permitting MLMers to be duped into the concept of not having comparative products in order to justify their extremely high prices.
Then there is the fact that MLM doesn't reap the low cost of word of mouth because of the fact that MLM is forced to pay several layers, sometimes even 10 levels deep, of reps for every transition. Suddenly the costs of marketing these products has sky rocketed since so many people are being paid on a single sale. Consider, the MLM view is to suggest that in conventional sales there are middle men along the way that jack up the prices and advertising costs that send the prices even higher…yet in MLM they overlook the fact that each sale pays several layers of people who added absolutely no value to that single sale. At least in convention sales you have direct value being added at every step, such as advertising, wholesalers, warehousers. MLMers suggest that these entities take a slice of the pie at the expense of the consumer, which is perhaps the best example of their lack of economic understanding. Competitive advantage through cost efficiency in an open market enforces the fact that value must be created through these entities or competing entities will be able to offer similar products at lower costs. Mention that to the average MLMer and it goes right over their head, which is likely the result of people jumping into MLM in droves with no business backgrounds.
I do not believe people in MLM are stupid. It is, however, a common trait in MLM to accept what the leaders and owners of the MLM companies tell them as the way things work. As I mentioned above, if an MLM leader tells them word of mouth is cheaper and MLM will win out, and this MLM leader is a successful person, most MLMers prefer to take that as fact. There is generally not any thought given to the fact that perhaps these things are being said to keep the MLMer excited about the business in lieu of reality. Many MLMers choose not to think about it and just accept that they too can have riches from the system without ever considering what it really would take to achieve it, or if the leaders actually achieved their success in MLM at all.
MLM is an emotionally charged business where they require massive amounts of hype at every meeting, convention, and gettogether to keep everyone emotionally involved. MLM programs are geared at merely looking over the face of the numbers and never digging much deeper. The initial numbers always look great and most people, who are now on an emotional high thinking about what it would be like to be rich, never choose to look further than what is being presented. That is likely the very definition of naive.
So these people are not stupid, they are merely emotionally driven and naive. In all likelihood, they are quite capable of doing the math, but never do so because they have already convinced themselves that MLM is the wave of the future (and their upline and other leaders constantly reinforce it for them). I would not say these people deserve any lack of respect for making this mistake, the lack of respect is constantly bothering those of us who identify the flaw of MLM with their spam, arrogance, and and in some cases derogatory comments.
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