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huggytree
11-11-2009, 07:42 PM
I joined a new networking group and have a Melaleuca sales guy in it...He asked to come over and go through his catalog and possibly get us signed up.

wow...what a goofy thing....you have to 'join' before they even give you a catalog...you must spend $60 per month min. once you join...they give you $ for signing up your friends...and more $ if your friends signup their friends

its a pyramid....I wanted to be a good networker and try some of his products, but cant unless i join...i can join and then cancel, but everytime i do that i end up having trouble canceling...i had one company say they would not accept the reason that i was canceling...i had to cancel my credit card to drop it..

I cant see bugging my friends to join a pyramid either...

its a shame because they have a few products my family could use...if i could just buy them when needed it would work out....the 'scam' thing is holding me back..

anyone had experience with this catalog company?

vangogh
11-11-2009, 08:06 PM
No experience with them, but based on your description it does sound like it leans toward the scammy side of things. Seems crazy that you can't even see the catalog until you've signed up. That says something to me. It says they don't think their products are valuable enough to sell themselves. They need you to spend before you get to look at the products.

huggytree
11-11-2009, 09:15 PM
they sell 'natural' products...or 'chemical free' products.

my kids have reactions to some soaps and sun screens...i could use their products a couple of times a year...you can purchase w/o joining, but at a greatly inflated price.

vangogh
11-11-2009, 09:26 PM
Oh, I misunderstood about the purchasing then. I'm not generally big on the pyramid things. They work well for those at the top if the pyramid, but at some point you always get to the bottom.

If you thought canceling wouldn't be a big deal then I'd say $60 is worth trying it. But if it means the aggravation and possible extra $60 charges while trying to cancel, maybe it's best to avoid.

cbscreative
11-12-2009, 01:14 AM
I will defend this company as NOT being a scam. Yes, you can buy their products at retail price, and I don't think it's greatly inflated. The $60 a month commitment (which is an approx dollar amount) is only to get the Preferred Customer (discounted) price.

Two of my kids are very sensitive to soaps too, and Melaleuca soaps are the first everyone could agree on. No reactions with anyone. I've been using their products for years and have no trouble ordering 35 points a month (their actual requirement for discount) in products. Some of their products are a little pricey, but not compared to others of the same quality; they're cheaper if you're comparing apples to apples. A lot of their products are less expensive than they appear because of the concentration.

I have no interest in their business plan. Yes, you can sign up other customers and get bonuses, even build a "business" that way. But you can do like I do and just sign up as a customer with no penalty. No one ever bugs me to do more. It sounds like the person who approached you is just gung ho for the business plan and not interested in just having you as a customer.

To view their products, just go to Melaleuca (http://www.melaleuca.com)

And yes, all their products are non-toxic. Imagine a bathroom cleaner that cuts through everything that you don't need gloves or a gas mask to use. I highly recommend their products. Well, most anyway. I didn't care for their automatic dish detergent and I hated the dental floss. Everything else I've tried, definitely. For most, I would not want to use anything else. You've got to try the tooth polish. Stay away from the whitening formula, but with the mint or cinnamon, you'll never be able to use store brands again.

vangogh
11-12-2009, 02:26 AM
Good that someone here is familiar with them. Sounds like a pretty good endorsement too.

Once I realized you can buy without having to pay to see the products I had a feeling it was legit. I'm still not big on the pyramid thing, but there are clearly companies that do it and do it well and fairly. Seems like this might be one of those companies.

Steve B
11-12-2009, 03:14 AM
"I cant see bugging my friends to join a pyramid either..."

I wouldn't call this guy your friend if he's wanting you to pay to see a catalog - so no worries about telling him what to do with the catalog. There are lots of pyramid schemes with great products, but they're still pyramid schemes . Hopefully, you can find someone else that sells these in a more normal way, or find similar products elsewhere. Maybe CBS's guy can hook you up.

huggytree
11-12-2009, 08:47 AM
I knew someone here would know about this company

w/o the $60 commitment discount their prices are out of line with the normal products we buy...im willing to pay more for the couple of items we use a year that i cant get anywhere else....

the whole $60 commitment per month is B.S....who runs a legit business this way?

yes my salesman put way too much effort into recruiting my wife to be a salesman for him....she has no time for it....ive had friends push pyramid stuff on me before and i thought they were idiots and i was always proven right in a year or 2 when they fell apart....anything with a pyramid structure is bad....one friend said it wasnt a pyramid, its a 'magic triangle'...i think that one was something to do with buying long distance minutes.

When in a networking group you want to use everyones products and not make enemies..you dont want anyone bad mouthing you behind your back....im going to have to give him back his catalogs/application and say no thanks and be vague...if he pushes me (like all salesman do) ill be truthful about it being a pyramid and goofy

cbscreative
11-12-2009, 11:23 AM
the whole $60 commitment per month is B.S....who runs a legit business this way?

While there is a "business opportunity" with this company, and some people get goofy about promoting it, the point value commitment is basically a loyalty incentive. If you like their products and switch from what you are currently buying, it's no problem to meet the requirement (they require 35 points, I usually do 40-60+).

As for the regular price vs the preferred customer price, the full price is not as high as it appears. For example, the multi purpose cleaner is fraction of what you would pay for Fantastic or 409 even at the full "retail" price. The laundry detergent is so highly concentrated you only use 1/2 oz per load (they have a special measure pump so you don't use too much). That makes any "ultra" product you buy in the store look like a joke.

On some of their products, like the shaving and other personal care items, I could save money, but I like the products. Even though they are higher priced than most store brands, they are less expensive than the high end products of the same quality.

Besides, have you ever read the labels on some of those store brands? If it goes ON your body, it's going IN your body. Most labels read like a laboratory experiment. Read the ingredients on natural products and you see extracts of this, extracts of that, and the fragrance is from oils instead of chemicals that are just listed as "fragrance."

I'm guessing that even if you do "sign up" you might not want to do that with Goofy because he might bug you about "the business." I'd recommend you try the products. As you can see, I'm completely sold on most of them. If you decide to cancel your membership, I believe they require 10 days to process it, so you'd want to do it early enough in the month, but I doubt you'll want to cancel as long as no one is leaning on you to sign up other customers.

Spider
11-12-2009, 12:30 PM
I've heard of Melaleuca and heard good things about them. Have never used their products, though.

It is a multi-level marketing company (MLM - or NM, network marketing) but it is incorrect to calll it a pyramind scheme. Pyramind schemes are something different and are illegal. There is nothing illegal about MLM or NM. As a system of doing business, MLM/NM is legitimate and is, I am told, taught at Harvard as an genuine and accepted business system.

Steve B
11-12-2009, 01:49 PM
HT - just say "NO" if he offers you any Kool-Aid!!

Spider is right - most of these companies have now made adjustments to prevent being labeled as an illegal pyramid scheme. Whatever they are labled these days it's amazing how they come at you with a certain gleam in their eye.

Spider
11-12-2009, 02:45 PM
No matter how much effort the recruiters try to get you into their downline, at the end of the day, someone has to be selling product or the whole thing falls down. You can't have everyone in the company recruiting and nobody selling. I think where MLM works well is if you can find a product that compliments your business. For David, he might add supply and installation of water filters, available as a network marketing program. A fitness trainer might join a health supplements program, like Maleleuca or other program. I know a buseinss coach who reps SendOut Cards. (There is another thread here on diversifying - this is one easy way to do that.)

As for the pushy rep that David encountered - who wouldn't let him see the catalog - I'd go directly to the company website and buy there. If one is interested in joining to create a business, then find someone else to join under or ask the company for a referral.

MLMers don't make much money because they focus on recruiting and have no enthusiasm for the product.

billbenson
11-12-2009, 04:51 PM
I've heard of Melaleuca and heard good things about them. Have never used their products, though.

It is a multi-level marketing company (MLM - or NM, network marketing) but it is incorrect to calll it a pyramind scheme. Pyramind schemes are something different and are illegal. There is nothing illegal about MLM or NM. As a system of doing business, MLM/NM is legitimate and is, I am told, taught at Harvard as an genuine and accepted business system.

The problem is, many mlm's are scams. There are plenty of legit ones including Amway who is still around and marketed under various names.

Spider
11-13-2009, 09:54 AM
The problem is, many mlm's are scams. ..That is not true. Because of all the problems in the past, multi-level and network marketing must be one of the most highly regulated and closely watched industry in the country. There are so many rules and regulations, I'm surprised anyone would want to start a MLM or NM company, these days.

Now, there might be quite a few people in MLM/NM that any one person might not like, but I would venture to suggest that there are more scams in the non-MLM/NM world than the other way round.

orion_joel
11-15-2009, 04:33 AM
It does not surprise me that people are willing to start more and more NM/MLM programs. As by the largest margin, people that participate in these programs, seem to be very willing to jump ship as soon as some new fantastic program is released, with some different product or spin on the marketing.

My opinion on MLM/NM in relation to pyramid scheme, is that there is a very fine line, almost any MLM if you took away the product they are selling you are left with a Pyramid scheme. Just my opinion, do feel free to disagree though.

Spider
11-15-2009, 08:52 AM
Duh! Take away the product from any business and it is a pyramid scheme!

Patrysha
11-15-2009, 09:13 AM
Duh! Take away the product from any business and it is a pyramid scheme!

Phooey! Ya beat me on that one.

Spider
11-15-2009, 02:58 PM
........ :D

billbenson
11-15-2009, 04:39 PM
That is not true. Because of all the problems in the past, multi-level and network marketing must be one of the most highly regulated and closely watched industry in the country. There are so many rules and regulations, I'm surprised anyone would want to start a MLM or NM company, these days.

Now, there might be quite a few people in MLM/NM that any one person might not like, but I would venture to suggest that there are more scams in the non-MLM/NM world than the other way round.

My most recent experience with a MLM was a friend of a friend trying to pitch me on it because I'm a "web" guy. It was for .ws domains. Here is how it worked:

$10 to sign up. You get your own domain and email. The reality is it is a subdomain on the mlm's site, not your own domain. A common trick.

Usual strategy. You get all your friends to sign up and spend 10 hours a day talking to people on the phone. The person pitching me kept trying for 3 years.

The strategy included buying opt in email lists for $100. This was their main source of revenue.

It was set up so you couldn't make much money unless you were very cleaver. They gave you a plan to success, but it would never make you much money and required buying email lists.

Most people quit after a while. Since the domain was the mlm's, any emails that that person collected belonged to the mlm, at least after the person quit. This is what they resold to people when the bought the mailing list for $100.

The person pitching me eventually quit, having worked it hard and making less than McDonalds wages for her effort.

The mlm's buisiness plan counted on people dropping out so they could resell the email list. Most dropped out because there was very little money to be made.

I've seen emails for this same mlm recently. My name is being used by other members who bought the email list.

Is there a product here? Kind of. The business model of the mlm, however, relies on a high drop out rate. Could you make money at it? Yes, but not using the plan they give you. It also required that you sucker other people into buying into the plan.

In my book that is a scam, and it's not the only mlm scam out there. As I said, there are legitimate ones as well, but the industry is still cluttered with scams such as I described.

Spider
11-15-2009, 07:10 PM
Yeah, it's terrible, isn't it?!

I know a company that charged a lot more than $10 to get in. It required real world premises and you couldn't just set up where you wanted, you had to set up where the company told you to.

You had to buy all your products from the company, you couldn't sell anything they didn't sell to you. You were trapped! That's how they made their money!

And they fixed your prices, no matter what your costs were!

Not only that, you had to follow their plan exactly - they even told you how you had to store the product.

It was set up so it was very difficult to make money because the upfront fees were so high.

You were responsible for getting your own customers but you weren't allowed to advertise. And if you couldn't make a go of it, the company kept your money and passed any clientelle you had created on the the next sucker they sold your building to.

And it wasn't even a MLM scheme. It was one of the largest companies in America -- McDonald's!

orion_joel
11-16-2009, 04:50 AM
There is a difference between a MLM and any other business when you take away the product.

With the MLM because of the minimum committment and the way people are members of the program, that is what make the pyramid scheme.

Where as any other business you take away the product and you have a company losing plenty of money, and laying off staff.

Spider
11-16-2009, 09:09 AM
There is a difference between a MLM and any other business when you take away the product.
.. With the MLM because of the minimum committment and the way people are members of the program, that is what make the pyramid scheme.
.. Where as any other business you take away the product and you have a company losing plenty of money, and laying off staff.Bad comparison, Joel. If you are going to play such hyperthetical games, you must keep the rules the same for both sides of the argument.

You are allowing that the MLM continues its operation without the product. That would result in an illegal pyramid scheme, as you correctly point out.

If you are going to assume that a MLM will continue without product, then you must assume other businesses will continue without product. In which case you have fraud - accepting money from sales and not deliverying any product or service for that money.

Both are illegal, both are fraud, one no more than the other. The jail term is likely the same for both.

Spider
11-16-2009, 09:36 AM
I realise there is a general concensus against multilevel and network marketing in this community. I think this arises with many folk because they have been pestered in the past by various people, friends and family, trying desperately to get them involved. It is not so much the business model that is disliked (who cares how someone else structures their business?!), it is the persistence with which their friends hound them only to find they give up after a while. It is easier to blame the company than their friend.

I have no axe to grind over MLM/NM - I don't promote them, although I have participated in the past, and was quite successful. I just don't like to see inaccuracies and distortions being tossed about as truth in a business community, such as we have here.

In fact, this community - a small business community of entrepreneurs, self-employed and micro-business owners - is the sort of community that should be encouraging people to start their own busineses. MLM/NM is the most available learning ground for anyone wishing to achieve what we have all achieved - independence of income. There are not many ways for someone with no more than $100 to spend to get into business for themselves. There are not many ways for someone to start their own business with all the materials, products, handouts, business plan/model/structure and processes in place on Day #1. There are not many ways for someone to hire helpers, associates or partners before they are even familair with the business itself. There is no other way I know of that can put a unknowledgeable person in business immediately and let them rely on on-the-job training or after-the-fact self-education.

There are dangers in this approach, but there are dangers of a different sort in any other approach. We should, I suggest, be encouraging people to start their own businesses and be warning them of and educating them on how to overcome the potential dangers. Not trying to discourage them from becoming independent business people in their own right.

We have the opportunity here, good people, to promote entrepreneurialism and I encourage you all to do that.

vangogh
11-16-2009, 11:36 AM
The idea behind a pyramid scheme (http://en.wikipedia.org/wiki/Pyramid_scheme) is that you make money by enrolling people in the program without any product or service being offered. Think of a chain letter asking you to send $1 to the person or persons at the top of the list and then your name gets added to the bottom of the list so that people behind you start sending you money. The mathematical formula sounds great and sounds like it can't lose.

The person at the very top and perhaps the next few levels down can make money. The further down the side of the pyramid you are the less likely you'll ever make any money.

Pyramid schemes are illegal in many countries.

MLM (multi-level marketing) (http://en.wikipedia.org/wiki/Multi-level_marketing) has one major difference with a pyramid. There is a real product involved. That alone is enough to make them legal and in some cases a solid business. The idea is to compensate people for becoming part of your marketing or sales force. An affiliate program is an example of MLM.

Where MLMs can get into trouble is when they incentivize recruitment more than product sales.


The FTC advises that multi-level marketing organizations with greater incentives for recruitment than product sales are to be viewed skeptically.

When the incentive to recruit is more than the incentive to sell the product an MLM moves in the direction of a pyramid scheme. Most of the MLMs you see that are scams are making money on the recruitment more than on the product.

If you're wondering whether or not to join an MLM look at the company and see whether or not they're pushing the idea of selling products or recruitment. If the focus is on the recruitment then you should be wary. If the focus is on selling the product then it's more likely there's a real business model behind the company.

@Frederick - if we're going to point out the negatives of buying a franchise we have to point out the positives too. When you buy a franchise like McDonald's you are buying into the brand. You can't advertise, but you don't have to since the company is advertising for you. The brand and national advertising gets you a lot of customers early on, certainly more than you could get on your own going into business as a competitor of the franchise. The plan you have to follow is one that has been developed and tested over time and proven to work again and again.

I'm not endorsing franchises. You do lose a lot of freedom in how you want to run your business. You give up that freedom in exchange for a proven business model and an instant brand. Given that most new businesses struggle with developing a working plan and most small businesses will never brand themselves at that national level it's not necessarily a bad deal.

Ultimately you have to determine if what you gain in brand is worth what you give up in freedom. I prefer the freedom, but a franchise does offer a lot and can be a great fit for some people.

Spider
11-16-2009, 12:21 PM
...An affiliate program is an example of MLM...An affiliate program is not an example of multi-level marketing because, usually, there is no "multi" level. Some affiliate programs (but not many) pay commissions on two, maybe three, levels, but that's all. Usually it's only on one level. MLM can go to any level and if restricted by the company (possible but rare) is restricted at possibly 8 or 10 levels deep.


...Where MLMs can get into trouble is when they incentivize recruitment more than product sales...Interestingly, the first network marketing company - the inventor of the idea - is still in business today - Watkins Spices and Herbs - which began in the mid-1800s. Not only did they create network marketing, they also offered the first money-back guarantee. As I understand it, Watkins made every customer an associate. To be an associate and be able to sell their products you had to be a customer - a user of the product. That was the "network." They didn't have a salesforce as such, they had this network of customers. You got a rebate on your purchases bases on the volume of sales to other people you had brought into your network of customers.



...@Frederick - if we're going to point out the negatives of buying a franchise we have to point out the positives too....I agree. My post about McDonalds was to demonstrate that we can paint a bad picture about any business model, if we have a mind to.

So, if you want to insist that we point out the positives when discussing the negatives of franchising, are you going to insist we point out the positives when discussing the negatives of network and multi-level marketing? I would welcome that.

cbscreative
11-16-2009, 04:51 PM
I got Frederick's point right away when he used the McDonald's illustration. There is a lot of negativity toward MLM as if it's not a respectable buisiness model. It probably stems from the people who chase others to recruit because there is nothing wrong with the MLM model itself.

The phrase pyramid scheme gets used so much that many people assume MLM amd pyamid are synonomous. As stated above, every business is a pyamid once the product or service is removed.

I actually respect anyone who can be successful in MLM because it's probably one of the hardest things to succeed at. On the plus side, it offers a low startup cost and a built in system. But the work is grueling and it takes a long time to bear fruit.

One thing that is a distinguishing feature in a valid MLM is the opportunity is equal on all levels. IOW, you will have the ability to earn more than the person who signs you up. The reward is in direct proportion to the effort.

The company this thread was opened up to ask about is like that. I am a customer only, so if you signed up under me and built a business with it, you would make the money. I'd only make a few dollars a month for the referral. You would be getting the rewards for your work, not me. If I did want to build a business, that opportunity is just as equally available to me, but I'm happy just being a customer.

vangogh
11-16-2009, 05:04 PM
I thought I was being unbiased in my post above. I wasn't trying to make any judgement about an MLM business model. Just trying to point out where the line might be between the honest ones and the not so honest ones.

I think affiliate programs fall under MLM, though it's fair to say not all. Maybe I'm wrong, but I don't think there's a specific amount of levels needed to consider something MLM and many affiliate programs do go several levels deep. I guess we'd have to distinguish between the single level affiliate program and those that go beyond the single level.

From the Wikipedia page I linked to above on MLM


The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid.

I'm not suggesting Wikipedia is the expert, but that definition seems fair and I don't know that there needs to be a specific amount of levels to the marketing.


Interestingly, the first network marketing company - the inventor of the idea - is still in business today

Nothing in your example suggests the recruitment is incentivized more than the product. Also nothing in what I said suggests it's automatically bad. Simply that's where companies begin to cross a line. Being wary doesn't mean that what you're wary of is by default a bad thing. Just that you should be more cautious and do more investigation.


So, if you want to insist that we point out the positives when discussing the negatives of franchising, are you going to insist we point out the positives when discussing the negatives of network and multi-level marketing? I would welcome that.

Isn't that what you're doing? Is anyone stopping you from doing it? I don't think everyone here needs to write equally balanced posts showing the positives and negatives. I think you're carrying the positive side in this thread. Most people commenting here seem to lean toward the MLM is spammy side of the equation. I'm not saying that means MLMs are automatically spammy, but clearly they have a less than stellar perception with a lot people.

I think MLM is a marketing model and like anything can be done well and be done poorly. Unfortunately too often they seem to offer more promise than substance and I'd guestimate that most MLM offers you see aren't worth getting involved in. However there are certainly MLMs that are on the up and up and offer potential to people. I don't think this is an either/or question where MLMs are either the greatest thing since (fire, the wheel, sliced bread, substitute your favorite greatest thing) or pure evil. Like everything else they fall somewhere between.

You have to investigate the specific MLM if you're thinking of getting involved and make a decision. I think one good place to look when making that decision is to see if the business model of the company revolves around a product or service or is the business model the MLM itself.

MLM is a marketing model. It's not a business model. When signing up new members under you is the major incentive the MLM moves toward being a business model and when that happens I think it crosses a line. That doesn't mean you can't add incentive to signing up new associates, but that shouldn't be the primary incentive.

Patrysha
11-16-2009, 07:00 PM
See I kind of differentiate between MLM and Direct Sales Co's. I think of Watkins as DS. I know the structure is MLM, but the differentiation (in my mind anyway) is that the DS companies are more product oriented and tend to be way less pushy on the recruitment aspect.

I don't have a negative attitude towards them, but I do know they aren't for me. I tried with two different companies but never really found my groove with either. I picked them both up as side-hobbies and really just wanted the good deals on the kits :D

Spider
11-16-2009, 07:16 PM
...MLM is a marketing model. It's not a business model... I think this is an important distinction.

There are two things I notice present day MLM companies adopting that makes their business more legitimate--

1. Calling the payment one gets for recruiting a new associate "training payment" or some such. It may just be a change of name to some people but I think it goes some way to impressing each associate that they are responsible for training their downline, and

2. Requiring a certain level of actual sales of product for an associate to earn override commissions - if they don't sell a certain minimum amount of product directly to a customer, they lose that month's override commissions from their downline's sales (they still get their own earned commission.) This might sound like a way for the company to "steal" those overrides, but it forces associates to sell product as well as recruit.

These are good developments, in my view.

Dan Furman
11-16-2009, 07:21 PM
The thing I don't like about most MLM's is they push into your social life.

I'm an entrepreneur, and I'm an entrepreneur 24/7. But I'm not "Clear-Writing" 24/7. There's a difference.

You kinda need to be "Amway" 24/7.

Dan Furman
11-16-2009, 07:25 PM
Oooh - here's another thing I do not like. Many encourage stretching the truth and putting on a false "face". I knew someone who joined one of those MLM health companies, and a week later had the standard company bumper sticker that read "I work at home, and I'm healthy, wealthy and happy. To join me, call..."

Problem is, this person wasn't any of those three things. Pure BS.

vangogh
11-16-2009, 08:20 PM
Dan those are both specific to companies and not to MLM in general. We could say the same things professions like used car salesmen. They have a negative reputation, but by definition selling a used car doesn't make you a bad person.

However I do know exactly where you're coming from.


...MLM is a marketing model. It's not a business model...

Frederick to me that is the central thing here. And I don't want to to imply that there's a very clear line here either. There's nothing wrong with offering incentive to sign up people a level below you. Somewhere though when the incentive is more about signing up a new person, especially requiring that person to pay to become a member, the MLM becomes the business model. And when that happens you have a system funneling money to the top that isn't returning something of value back toward the bottom.

I'm not sure changing the name to training is enough for me. Maybe it is trying to get across something more professional, which is good, but for me it still comes down to how the MLM is generating the majority of its revenue. If it's from selling a product or service then it's all legit to me. If it's selling membership in program where money is made by signing someone up for the same program it crosses into pyramid scheme territory.

Again I'm not at all saying MLMs are bad by default. MLM is simply a model for marketing. The key is what's being marketing. If there's a real business being marketed then great. If the only think being marketed is the system there are problems.

Spider
11-16-2009, 08:28 PM
...Again I'm not at all saying MLMs are bad by default. MLM is simply a model for marketing. The key is what's being marketing. If there's a real business being marketed then great. If the only think being marketed is the system there are problems.But isn't that the case with franchises. Don't franchises focus on "the system"? When you buy a franchise isn't what you actually buy, "The System"?

And pay a whole lot more for it than a MLM system. Why is that okay?

Spider
11-16-2009, 08:42 PM
...And when that happens you have a system funneling money to the top that isn't returning something of value back toward the bottom... Didn't someone in this thread comment on how hard one had to work to be successful? If you saw how hard the people at the top work at this, you wouldn't think nothing of value was being returned to the bottom. A good upline person who builds and develops his downline ("downline" = the people who make up that downline) provides an immense amount of value to those people. Changing peoples' lives is of great value, in my opinion.

Seems most people here have only spoken to people who have just joined or dropped out after a few weeks. Try talking to one or two successful network marketers - people who have been in it for years and who have developed a large following. Attend one or two of the large seminars and network meetings they throw for their downlines - largely at their own expense. Then talk to some of their longterm downline and ask them if they feel they didn't received any value?

vangogh
11-16-2009, 11:23 PM
But isn't that the case with franchises. Don't franchises focus on "the system"?

System might not have been the best choice of words on my part. With a franchise I think the emphasis is still on selling a product or service. You pay in exchange for the brand and the national marketing and advertising.

With a pyramid scheme you're paying someone for a promise and hope that others below you in the pyramid will also buy that same hope or promise only this time from you.

I think what unfortunately happens with an MLM that places too much focus on signing up new people as opposed to placing the focus on the product people are buying in more for the promise of those further down the pyramid. If you start making more money from signing up someone down a level that's what you spend more of your time doing. But ultimately the money flows into the business by selling a product. If people stop thinking about selling the product money stops flowing into the whole system.

If I can make more money by signing you up that's what I do. Then you make more money by signing someone else up and so on. The money that's transferred is then moving from the bottom of a pyramid structure to the top. But of the product gets lost then nothing is flowing back down.

Again I don't know where the line is. There's nothing wrong with offering incentive to sign up someone new. Somewhere though it can tip the scales to where the company isn't making money by delivering something useful, but from getting more people to join. There's always an end to the bottom of the pyramid and when you reach it the whole system collapses.


A good upline person who builds and develops his downline ("downline" = the people who make up that downline) provides an immense amount of value to those people

What specifically is the value that's being added. Remember until things fell apart Bernie Madoff was delivering a lot of value to a lot of people. He was working a Ponzi scheme (http://en.wikipedia.org/wiki/Ponzi_scheme). It makes money for awhile until it inevitably collapses. It's designed to collapse because ultimately the earnings are less than the payments being made.


The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.

I'm not at all saying that the MLMs we're talking about are Ponzi schemes, but there's something there that applies.

It's the idea that the money can't simply come from the flow of money of new investors. That's similar to what happens when the flow of money in an MLM comes solely from new people paying to become part of the MLM. It's how a pyramid works. What's different in an MLM is there is a real product in the mix generating revenue. That's the main flow or money or should be. When the incentive moves in favor of signing up someone new the flow of money moves away from the product and more toward the new investor.

Spider
11-17-2009, 12:11 AM
I agree that product must dominate. In all NM and MLM programs it does.


...What specifically is the value that's being added....1. Encouragement to think about becoming an independent business person;
2. Living proof that it is possible;
3. Training to make it happen;
4. Motivation to keep doing it;
5. Providing an opportunity to take the step;
6. Introduction to other successful people;
7. Involvement in a successful organization;
8. Continued contact to keep up the enthusiam;
9. Direct help to build the business;

Can I stop there? The most time consuming would be #3 and #9, of course. When you have 200, 300, 500, 5,000 people in your downline, you can imagine how time consuming and how demanding it would be.

And, if your downline is spread out across the country and around the world, there would be a considerable amount of travel required, too.

Being a successful network/ML marketer is a pretty harrowing job. Very lucrative, of course, and I think such a person earns every penny of they make.

If you only have 500 people in your downline, that means you have several people with over 100 in their downline and many more with 40, 50 people in their downline. Most of these people will have started from nothing. They all started at the bottom, even the guy at the top! Changing people's lives like that is, in my book, of considerable value.

Wouldn't you consider that your efforts have been of value if you could claim to have helped 500 people shake off the shackles of a J.O.B. and helped them, trained them, encouraged them to be independent business people, who are helping all their team members to a new life? And so on, down the line.

vangogh
11-17-2009, 11:12 PM
I agree that product must dominate. In all NM and MLM programs it does.

The problem is it doesn't always dominate. The reason you see a lot of people in this thread holding a negative view of MLMs is because there are many where the product is insignificant or practically nonexistent or something there because it needs to be there legally. I've seen some where you don't even get to see the product until after you've signed up. I've seen plenty of people who go around never mentioning any kind of product whatsoever and only try to recruit people.

There are good MLMs and there are bad MLMs.

The things you mentioned are certainly valuable, yet where is the mention of the product? Is all this value being passed to the downline in the sense that they can also build a downline and succeed too? That's artificial. That's the MLM being the product. At some point there is no downline, because everyone who wants to join has joined.

The value I'm talking about has to be something independent of the MLM. I'm not suggesting there isn't one there, but most of what you listed sounds like the value is dependent on the MLM. You've stated them in general terms, but they are all tied to success in the MLM and meeting other successful people in the MLM.

The second M in MLM stands for marketing. If you take the marketing out of the business is there still value being created? I'll use my business as an example. If I completely stopped marketing I still offer a service of value. Granted I wouldn't have much of a business without marketing, but my business is creating something of value.

If you take the marketing out of an MLM does it still create something of value? I think there are certainly cases where the answer is definitely yes. There are also cases where the answer is no. That's the line I've been talking about in some of my posts. A successful company that chooses MLM for its marketing should also be able to be successful using other forms of marketing. If the only way the company can earn revenue is by being an MLM then I question whether it creates real value.

Steve B
11-18-2009, 04:59 AM
Oooh - here's another thing I do not like. Many encourage stretching the truth and putting on a false "face". I knew someone who joined one of those MLM health companies, and a week later had the standard company bumper sticker that read "I work at home, and I'm healthy, wealthy and happy. To join me, call..."

Problem is, this person wasn't any of those three things. Pure BS.

This kind of sums it up for me. This person drank the Kool-Aid and is giving the MLM model a bad name. He's also doing what got Amway into trouble - although they did it with more than bumper stickers. They were not honest in their descriptions of earnings and potential earnings.

It may not be a fair assessment of the business model (or marketing model), but if I see someone that I know is part of an MLM program I RUN the other way. I also can't help myself and tend to use the word "scheme" when describing what they do. I know I know, it's not fair and other systems share a lot of similarities blah, blah, blah. But, the reality is many of us have been cornered at parties by these people with dollar signs in their eyes who go to great lengths to describe why it's different than a "pyramid" scheme because everyone can get just as rich as anyone else. I've never felt "cornered" by an owner of a franchise or other more traditional business.

The focus always seems to be on getting rich and how rich their "sponsor" got. They feel some need to describe the size of the house and the type of cars that have been bought by others who stuck with the scheme (er, I mean program). This is just distasteful to me on many levels.

I think the model is actually smart and there is no reason it can't be successful. It just happens to attract too many people that want to get rich by recruiting others and they give the MLM world a bad name - justified or not.

A new MLM'er reminds me of a Stepford Wife - giving the party line with a weird smile on their face. I've never met an MLM'er that wasn't new - so that's the only impression I have. Everyone I ever knew that tried it wasn't doing it anymore after a couple weeks or months.

Spider
11-18-2009, 11:05 AM
The problem is it doesn't always dominate. The reason you see a lot of people in this thread holding a negative view of MLMs is because there are many where the product is insignificant or practically nonexistent or something there because it needs to be there legally...I beg to differ. The reason, as I see it, that a lot of people in this thread hold a negative view of MLMs is because they have been approached poorly by novices to the business. I know someone in a local networking group that keeps pestering everyone for him to build a website for them, even when he is told, No. I don't hold that against all website builders nor against the industry at large.

This is caused by novices teaching novices, in my view. People are recruited who know nothing about business in general and they try to recruit how they were recruited. It is a problem the industry does not address well, in my opinion, but that doesn't mean there is no product and that product does not dominate as far as the company is concerned.

Yes, as far as the company is concerned - because most of, indeed all in many cases, of the enrollment fees goes to the recruiters, not to the company. I disagree that MLM companies make money out of receruiting people - they make money out of the sale of product. Only the lower levels make money out of recruiting. That is something I think the companies need to address, but none of them has consulted me on the subject, I'm sorry to say.



...The things you mentioned are certainly valuable, yet where is the mention of the product? ...There is no mention of the product because I understood you were asking about value the people at the top pass down to the people at the bottom, not to the customer. The product does not feature in value to recruits, it features in value to the customer - which is not what I thought you were asking about.

It's like you hiring an assistant, VG - the value you bring to that employee is very different from the value you bring to the customer...

Spider
11-18-2009, 11:21 AM
...A new MLM'er reminds me of a Stepford Wife - giving the party line with a weird smile on their face. I've never met an MLM'er that wasn't new - so that's the only impression I have. Everyone I ever knew that tried it wasn't doing it anymore after a couple weeks or months.This is the whole point as far as this discussion is concerned. I'm sure you have met one or two upper level MLMers, Steve, but they identified early on that you were not a likely candidate so they never even broached the subject. Just like you don't tell everyone you meet that you install invisible dog fences. New recruits have not learned that level of constraint. And they are the ones that give NM/MLM a bad name.

Steve B
11-18-2009, 06:13 PM
That could be - perhaps I met an upper level person without knowing it. I'm glad they can tell I wouldn't be a good candidate - they must have keen senses at those upper levels.

I must correct something regarding what I do. I don't install "invisible dog fences", I install "Derby's Pet Fences". It's an important distinction I must make since just today I got a cease and desist letter from the Invisible Fence company because I use the term "invisible protection for your dog" on my website. Kind of a stretch that they would own the right to the word "invisible", but I don't have the money to fight them so I'll make sure to correct anyone just so it doesn't appear that I'm infringing on the trademark. While I won't knowingly infringe on their trademark, I will go out of my way to point out I install a far better product, provide far better customer service, and back it up with a far better guaranty than the Invisible Fence Company. Get ready for yet another website change VanGogh.

By the way, I probably do tell everyone I meet that I install Derby's Pet Fences. I only own three shirts that don't have my company name on it - so I'm pretty much advertsing it 365 days a week. I'm a bit obsessed with promoting my business.

Spider
11-18-2009, 08:13 PM
Okay, Steve, but I'll bet you don't wear your advertising shirts to go to private parties or the theater or church, do you? Even if you did, I'm sure you are discrete enough not to ask everyone you meet if they are interested in having an "unseen fence" installed. You probably don't ask everyone you meet straight off if they have a dog.

(Unless you are an absolute bore, and no better than the new MLM recruits that are being critisised in this thread. I don't think that would be the case, judging from your posts here.)

No, the successful network marketers that I have met have no special powers of observation. They are conscious of their position, though, and considerate of other peoples' time. Just like any successful, wealthy business man or woman. Those I met were not inclined to be in "recruit-mode" 24/7, and, in fact, referred to their product when pressed, rather than any "business opportunity" they represented.

billbenson
11-18-2009, 10:36 PM
There are also some people in the "make a few extra bucks" category in mlm. My wife knows a woman who works in a laundry. She meets a lot of people at work. She works alone. She sells cosmetics at work. She doesn't make much money so the money selling Avon or whatever one it is, I forget, helps her a lot. She doesn't make a ton from the mlm, but the product is good and it helps here out. She never pitches people to join.

vangogh
11-19-2009, 02:45 AM
Frederick fair points about the value being passed. We were talking about two different things.

I'm going to disagree though about the focus always being on the product. I suspect with the MLMs you've been around that it has been true that the product dominates. Most of the ones I've come across the recruitment has dominated. Now to be fair most of the ones I've been around have been the online variety. My only experience with an MLM offline was when a friend of mine in high school tried to recruit me for Amway. He handed me some products and I told him I had no money. He let me keep the products anyway and that was the end of it.

I'll repeat again what I've been saying. The second M in MLM stands for marketing. The big question with MLMs is could they be successful using another form of marketing. If they could then I see them as legit companies who have chosen MLM as their marketing strategy. If they couldn't then they're using the MLM as the business model, which to me cross over into scam territory.

One thing that turns me off to an MLM is when it charges for joining. That to me starts the chain of placing more emphasis on recruitment. Now I know you can argue that the MLM is providing training in return, but I think it gets into a gray area very quickly. The revenue should come from the product.

Another thing that seems fuzzy to me is the idea of selling inventory to your downline. It's easy for me to see how it can cross a line where the only people buying are the downline so it's not so much about selling a product to people who truly want it (though of course people downline can also be customers if they have interest in the product), but it becomes selling things over and over again for the promise of being able to resell them and make money. Perhaps it's the only realistic way to get the merchandise from the company to the customer, which would be a fair point. Something about it though, rubs me the wrong way.

Frederick, again I think you've likely encountered the better MLMs out there. I don't want to put out there that I think there's something wrong with MLMs by default. One bad apple doesn't make me think all apples are bad.

Spider
11-19-2009, 10:01 AM
Regarding whether MLMs focus on recruitment or product.

I searched online for "business opportunity" (the term commonly used to advertise for recruits.) The top results were for Biz Op sites, blogs, magazines and articles on the subject, WSJ, Wikipedia, etc. I scrolled down to find the first one or two companies actually offering a business opportunity to see if their websites focused primarily on product or recruiting. I felt that might be a guide as to the companies' main focus.

The first company was Primerica. The link was, obviously, to their business opportunity page because that was what I had searched for. But their home page, Primerica.com, is all about product and the only reference to their business opportunity is a small link in the menu that carries you to their opportinity pages. Otherwise, the entire text and visuals on the first page relates to product.

The second one, SiteCubePlus.com, did not appear to be a MLM opportunity, and this was followed by a automotive business for sale, and some single level affiliate marketing sites.

The next was Amway, under the name of Quixtar.com. Even this King of NM had their front page devoted to product apart from a small graphic and small text asking, "Interested in your own business?"

Down the pages I found Mary Kay Cosmetics. Their front page, MaryKay.com, is entirely devoted to product. There was not even a mention of "business opportunity" - their opportunity link itself also focussed on product by having the anchor text read, "Sell Mary Kay."

These were the first I found. I came across no MLM company that showed the opportunity over the product, even digging several pages into the serps.

I think this indicates THE COMPANIES are product-focussed. Unfortunately, most peoples' contact with MLM is by way of novice recruits trying to recruit rather than trying to sell product. As I said before, this is something I feel the companies should address, but one cannot, I feel, blame the companies for what independent contractors do in attempting to promote the independent contractors' own businesses.

That would be like you, VG, pestering people about building a website for them and your victims blaming Wordpress for the annoyance you cause. Let's put the blame where it belongs.

cbscreative
11-19-2009, 12:54 PM
One thing that turns me off to an MLM is when it charges for joining.

I don't see a problem with that. Although I have no interest in any MLM, it is a biz opp and all businesses have startup costs. In fact, the low rates most MLM's have for startup could actually be their biggest problem. With little invested, many people don't put the required effort in because there is little to lose. If they charged more, their success would probably be higher. Franchises use this model, so their failure rate is much lower than MLM.

I just had a meeting a couple days ago with a new client who is getting ready to launch a new product. Although he's not using MLM, it did need to be considered. With all the discussion here about MLM being a valid business model, I thought I would mention that. For his product to use "traditional marketing" would require millions in advertising to drive consumers to the store to choose his product. That expense is built into the price. To use MLM. he came to the conclusion that several "levels" of commission would also drive up the price.

Really, both models have pros and cons and create a marketing expense that must be covered through the price of the product. Neither is more or less valid, better or worse, etc. Out of the two, MLM often has more attractive options, but as this thread makes obvious, there are drawbacks, and you have to overcome credibility issues.

For everyone here who has slammed MLM by principle, when you do look at the product of the valid ones, it is far superior to those using traditional distribution in the same price range. Amway products are unquestionable in quality, and it's a myth that they are expensive. They were concentrating before concentration was cool. It resulted in less packaging and more use per container, and you got a better product for usually less than store brands of considerably less quality. I buy Melaleuca. Same thing, and I happen to think their products are better than Amway's (both brands are hands down winners over anything you can find in the store).

As for my client, we'll be working on a lot of decisions that have to be made. It won't be MLM, but not because there is something inherently wrong with the marketing model.

vangogh
11-20-2009, 12:20 AM
Frederick just because a company sells a product doesn't mean the focus is on the product. Your typical pyramid scheme will technically offer something that's considered a product too. Also you can't really look at a company's marketing material (in this case a website) as source since by definition that marketing material is trying to get you to believe what the company wants you to believe. I'm not saying it's dishonest, just that it's not the best source.

Pretend for a moment these companies were trying to deceive us. (I'm not suggesting they are, just pretending for the sake of discussion). In that case could you believe what they tell you.

I've mentioned this I don't know how many times already, but I'm not saying all MLMs are bad or that I would blame a company for one or two individuals abusing things. Now if it's a lot more than one or two people then you could say the company is creating a culture where those kind of things can happen more often. But a few people doing something wrong is not the fault of the company at large.

@Steve - the issue with having to pay for joining only becomes an issue when the incentive for members is more to recruit someone new because they make more money for signing someone up than selling the product.

Say you joined an MLM and you made more money by signing people up then by selling products. You're probably going to put your efforts into signing up people and not worry so much about selling products. If the incentive for recruitment is high enough that would also be the case with most other members. So where does that leave you?

It leaves you with a pyramid scheme where the money flowing into the system is from recruiting more people into the system and little if anything else. The marketing becomes the business model.

This is the same point I've trying to make over and over again in this thread. MLM is a marketing strategy. There's nothing wrong with that as long as it's a choice to use that as a strategy. You should be able to work a different marketing strategy and still have a successful company. Once the MLM is the business as opposed to a marketing strategy for the business it moves into pyramid scheme territory. That doesn't mean you can't charge for membership. It's just that it should make someone more aware about further checking out the company to make sure that membership doesn't account for too high a percentage of revenue for the company.

One more time let me make clear that there's nothing wrong with an MLM by definition. There are completely legit companies that are MLMs which you can join and if you work hard enough make a good living at. There are others that aren't legit for the reasons I've been offering throughout this thread. If you're thinking of joining one take the time to investigate the company just as you would investigate a business you're thinking of buying.

Spider
11-20-2009, 09:17 AM
Another "rule" I have noticed (and I don't know if this applies to all MLM/NM companies by law but it does seem to be common) is that one cannot earn commission unless one sells a certain amount of product. It's referred to as Personal Production. No matter how much product is sold by your downline or how many recruits you, or they, bring on board, if you don't personally sell a stated amount of product you lose those commissions.

That is one way the conpanies are making sure (or trying to make sure) that no-one focuses on recruiting alone.

I restate that I have no experience of any MLM company making any money out of recruiting activities - all the fees charged for joining, in my experience, have been paid out to the reps. The companies make their money from the sale of product.

cbscreative
11-20-2009, 11:20 AM
Another "rule" I have noticed (and I don't know if this applies to all MLM/NM companies by law but it does seem to be common) is that one cannot earn commission unless one sells a certain amount of product. It's referred to as Personal Production. No matter how much product is sold by your downline or how many recruits you, or they, bring on board, if you don't personally sell a stated amount of product you lose those commissions.

That's been my observation too, but I am only familiar with a few of the leaders in MLM. Since I have zero interest in joining, I know almost nothing about the rest (other than spam in my mailbox which I don't read either).

Usually, the "start up kits" that I have seen come with products because the companies want people using those products. When we joined Melaleuca, they were an exception in the sense that it was separate, but the "kit" was low cost (something like $20 but I don't remember the actual amount). I'm sure the reason was to let customers select their own products rather than force a pre-selected sample kit.

I also recall they offered a lot of special deals (deep discounts) for the first several months after joining to promote switching over to their products. Even now, years later, I get loyalty incentives which I use to get free products every few months as the incentives build. On this month's order, I got baited to increase my order size because 2 of the things I had on my order offered a 2 for 1 special during checkout if I increased my order. The deal was good enough that I went for it.

Patrysha
11-20-2009, 11:05 PM
I've stayed quiet for most of this thread, but I just don't see the MLM's in quite the same light as most of you seem to. I know tons of MLM Work at home moms both online and offline. While nearly every one of them has made their you should consider this biz pitch, but that is usually the end of it.

I've known a few of them who have earned trips, cars and other perks...I've known a few who have done nothing but lose money buying stock and then jumping ship to the next shiny object company of the week.

The ones I know who are successful have generally been with their respective companies for a long time. It's not a get rich quick business despite the hype. They work hard - the same as any online business owner I have met and any the same as traditional business owner and any franchise owner come to think of it.

And I don't see what everyone is saying about there not being a product, I do not see that at all in the circles I meet these women (and of the ones I know they are mostly women) sell product. Lots of different products...books, lingerie, kitchenware, make-up, cleaning supplies, diet aids, food, toys...just about everything under the sun...and they're generally having fun and making a bit of money for their families.

I couldn't do it. Honestly, it's just way too labour intensive for me...all that driving to parties, setting up and taking down...gah!

As for Mela, the reps I know (two locally and dozens online) are all very nice people - not pushy at all. Sure they occassionally talk about their products and business, but so do I...