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Read This Before Joining MLM
In this article, MLM is the acronym of multi-level marketing. Other names are direct selling, network marketing and home-based franchising. The bad ones are called pyramid, get-rich-quick, Ponzi, rat club, affinity fraud or snowball scheme. There is just a thin line between MLM and pyramid scheme. Pyramid scheme is cultic (Confuse and Conquer) and puts active recruiters' reputation at stake. While the members lurk around for prey, they are victims themselves too, similar to vampire or zombie. If someone whose view you value tells you such 'business opportunity' you may want to explore, it is better that you understand MLM first.

The reality of MLM (that they do not tell you)

The system encourages
a) recruitment of friends and relatives to consume products or
b) sale of products to friends and relatives, usually without them asking for the products.

mlm

The encouragement is done via frequent motivational meeting and seminar. The meeting is paid by every member attending it even if the member has not earnt a cent from the system yet. Such pep talk plants the belief subconsciously. In layman term, you pay to be brainwashed / MLM-programmed. By the way, the top guns earn more money from the talk than the sale of products.

Vision of wealth and materialism is widely used in the propaganda. That is the only way they use to attract people although they tell you that it is not true. Instead they say people are attracted by their wonderful products. They show villas or yachts that belong to a few people on top of the system as if everybody can achieve that state. And there is a fleet of big expensive cars usually in same color maneuvering into the seminar location. Also people applaud and whistle (they want you to do the same thing too) when someone gives testimony. I personally feel a little sick to see all these materialistic behaviors. If it sounds too good to be true, most probably it is not true. There is always a catch. It is just a fad to get you jacked up. Note that nothing will happen when you go home right after the temporary ecstasy in the seminar. When your friend in MLM is getting too hyped up, you should mildly remind him that his MLM company is not the best thing on earth. Even before this I tried to believe it from time to time due to the charismatic propaganda. You cannot be wealthy by just seeing how wealthy people enjoy their life. They tell you about a few people who have succeeded and how they have succeeded. However, they do not tell you about thousands of people who have failed and why they have failed.

People with clear mind cannot do MLM. MLM can only be carried out with a certain degree of unconsciousness or even delusion, mainly due to the crowd psychological effect. Much common sense is pushed away by some buzzwords. Have your MLM friends told you that their system looks like an INVERTED pyramid instead of a pyramid? Or EVERY company in the world is actually a pyramid? And Mr. Gates' company is already linked to MLM and in future EVERY business will be running MLM? MLM helps you STOP working for other people? And Mr. TRUMP will join MLM after he is broke? For me, Donald actually implies: (1) MLM is for people who are broke and have nothing to do. (2) He will not join MLM (him being broke = sunrise in the west). (3) He will own an MLM company to let you and others work for him. By the way what makes him rich? I cannot remember it is MLM. MLM lunatics say working for others is bad but they forget they are also working for the MLM company to sell the product.

The income is from the lower levels of the system. From financial point of view I personally think that the company sees the payment to the people at high ranking as advertisement fee. Those hotshots are walking advertisement that attracts new downlines. A few members are extolled by other members to be renowned legendary VIPs (in business suit even on hot day) that non-members and new members will regretfully miss meeting with. In the meeting the upline wants you to wear smart, to be on time and to switch off the cellphone (he turns off his in front of you). The upline will make notes on what the 'VIP' say. Then the upline brings you to that 'VIP'. After the meeting on the way home, the upline still continues to praise him or her. All these are to build up your feeling of respect so that you will take whatever that 'VIP' says. I consider this idolatry. For me, most of those VIPs are snobs.

The reasons MLM is used to sell product:
a) Brainwashing. The product is often claimed to be unbelievably or mythically beneficial, for example cancer cure. Hyperbole. The business is done by believers instead of businessmen. True businessmen accept the fact that there is always a better product out there but believers do not think so. b) Overpricing. The product is probably good and sellable in open market but they can only sell it at market price in the open market. If they use MLM, their product can be sold at brainwashed price without price competition in open market. And they tell you their product is cheap because middleman is eliminated.
c) To save transport cost to distribute the products to the retail shops. In MLM, the members go pick up the products themselves.
d) To save cost of salary to hire manpower to do product service.

The mindset in consuming the products is different from the ordinary one. There is a motive when consuming the products: so that you can influence others to consume the products too. With motive coming in, colleagues become prospects and the workplace becomes a market. Even friendliness has hidden agenda that can make a nerd become a social animal. Anyway they will not spend time on a friend who is not a prospect to the point that they may counter ask "Will you join me if I answer all your questions?". Community is degraded.

When you run out of the product you are using, you cannot pick it up anytime like buying things from the local shop. The product has to be purchased from the warehouse and a minimum amount of purchase is required. The warehouse is only open during office hours and you have to get the queue ticket. Even if your upline keeps some inventory, you still cannot walk into his house anytime to get the product like you can by walking into a shop.

If you have work experience in a corporate company, you can do MLM. But on the contrary if you have experience in MLM, you cannot work in a corporate company. If people that the society needs (for example farmers and paramedics) join MLM, the society will be in chaos.

MLM does not require you to have special skill, to be young, to be strong or to be highly educated, but just requires you to have
a) purchasing power
b) friends
c) perseverance (in other word, cheekiness for hard selling)
In fact, there is a secret system in place in MLM to push up a few doctors, disabled citizens and senior citizens for publicity purpose. If you are just a normal person, it is going to be harder for you.

To become a member there is a fee for the cost of the starter kit and monthly publication. You cannot join the system if you have no money at all. It is only suitable for people who already have income. The system suggests the possibility of wealth but there is nothing to make you survive your daily life in the beginning. This is different from being employed where no wealth is suggested but you have a steady pay check to live on.

They tell you that you do not have to spend money to do this business. But actually you are indirectly spending money because your time is money. Man-hour is valuable resource.

The company may call you a business owner. But are you setting the company policy? Are you handling the public relation? Are you facilitating the supply chain? Do you forecast market capacity and manufacture the product in an acceptable volume? Will ALL the profits go to you? When you consume a product, you are helping your upline's uplines whom you may not even know (even if you know them, they do not know you). I think you are more like a donator in MLM. Perhaps MLM is not for selfish people after all, hehe. For me if I want to do it, I will want to be attached directly to the company because I want to modify my own system. Of course they shall not allow this to happen although they call it a franchise. Is it not that franchise is supposed to connect directly to the company?

Your upline will want you to decline even the not-so-often invitation to other social activity if it clashes with the regular MLM meeting. This is because they are afraid that you are deprogrammed.

It is well-known that they are not time-conscious. Their 'one hour' is actually two hours. Time keeping is always compromised. It is quite amazing to me that EVERY MLM has this 'timeless' culture. They are only punctual when attending the talk show of their VIP.

If a member wants to distribute product catalogue, he or she has to bear the cost of the catalogue. Is it not absurd that you pay for their marketing material in order for you to market their product?

Almost all MLM companies sell health products. But you do not need those products anyway if you live a healthy lifestyle. Our personal medical knowledge today is so poor. Our ancestors knew what to do when they were sick. It is better to spread such wisdom instead.

I feel uncomfortable to be talked into buying or joining something because even when I do not like the conversation I feel it is impolite to just jam it. I think ad or brochure works on me because it does not give me pressure as I can read it anytime. Also I like to be surrounded with goods that I can take my time to check and pick my choice. Is anybody not like me? While they believe they are helping their friends, their friends feel being haunted instead.

MLM is usually a sensitive topic so you cannot talk about it in a formal occasion. Most of your friends will run away from you if you are an enthusiastic MLM member that talks about MLM all the time. They will not even pick up your call. It is even worse if you think that being straightforward does not work and you start masking what you say. Your friends will detect that manipulative behaviour. You are selling away your integrity. I always 'talk' about MLM too, but my friends do not avoid me.

MLM motivates members to aim for ideal duplication. Let's say a company recruits 5 members in a month, then the 5 recruit 25 in the next month, 25 recruit 125 in the month after and so on. Then after one year 244,140,625, equivalent to the population of a country, will be in the MLM and there will be no further market for the members in the lower level in that country. When you tell them this figure, they will say that the real duplication will not be ideal. This is in conflict with what they aim for. So they already know that it is not going to be ideal and even it is ideal it is not economically good but they still aim for the ideal? This makes me bewildered just to reason it. No matter they can duplicate (or clone) ideally or not, only a few members will succeed. "Many Lose Money".

The sidelines are basically your competitors and will not help you in anything because they have their own downline to take care of. The lower the layer you are in, the more competitors you have. Let's say the first layer has five people. If you are at the first layer, you need to compete with other four to get new members. If you are at the 12th layer, you will have 244,140,624 competitors! Of course they will not tell you which level you are in. Sidelines do indirectly help each other:
a) when attending a huge rally: the scene of big crowd of people will be a powerful brainwasher for newcomers.
b) by letting newcomers know them. The more members that the newcomers know, the stronger the sense of belonging to the group.

As you can see above, MLM does not even consider about market saturation. Genuine franchise companies will do market analysis for a town that already has their franchise outlet when they receive a new franchise application. If they know that the market in the town is already saturated, then will reject the application. Only one of the two McDonald restaurants in a small town can survive, but by sustaining loss in competition.

I personally see there are three groups in the system:
a) members who pay for the product they consume
b) members who need not pay for the product they consume (income enough to cover product's price)
c) members whom the company has to pay handsomely
If members succeed so easily, the company will die. The system is closely observed and delicately tweaked so that the ratio of b and c is minimum (but of course greater than zero, haha). Although if more people join and stay in the system, then more people will be eligible to be in higher position. However that also means that one needs to compete with more members and to be extra hardworking to stand out. It is worse if the number of people in the system does not increase because that means nobody can go up at all due to the stagnant number of available positions.

When someone joins MLM, I can say that his or her whole family joins MLM because that family will no longer be open to deal with outsiders in MLM. So if every family joins MLM, the last family that joins in will not have the opportunity to earn money because there is no MLM-free family outside anymore. Everyone on the street (including kids who will grow up one day) will rather want to deal with his or her own family member in MLM.

There are new MLM companies coming out every year. Despite of the uncertain future of a new company, they assert that they have big space for growth compared to existing MLM companies and they invite you to grow with them as pioneers. And everyone of them will say that their MLM is different. Yeah, right.

How pyramid schemes usually exploit loophole in the law to be stamped as a legitimate MLM:
a) Create a phantom company that acts as a simple and unsuspicious middleman to deal with the local authority. This phantom company can be closed down anytime by the pyramid scheme.
b) Sell goods only to uplines and let uplines deal with downlines. From legal point of view it is just a simple trading with uplines and there seems to be nothing wrong. In other words, the company is not liable with the deal (so called franchise) between uplines and downlines.

...

Despite of the undesirability even in legitimate MLM, if you do succeed in the system, you may earn a decent living as long as the company survives. But do not think about the villa or sports car. The work pressure becomes lesser with ranking raise (with solid foundation), which is different from corporate world where work pressure becomes greater with career advancement. And doing MLM is at least better than loitering around. But it is not going to be quick and easy in the beginning. And it is pretty hard for an individual to determine whether an MLM company is legal or not. Even the authority can make a mistake in stamping the legality or the company knows to utilize the loophole in law. And even the company is legal, it does not mean it operates ethically. Wealth should come from value. If reading until this point you still really want to join an MLM company, I have criteria that you can scrutinize against for both existing and new MLM companies. See if there is something fishy about them.

Company criteria

1) They will fully refund the fee for the starter kit quickly if you want to pull out anytime. And the price of the starter kit is not expensive.

2) The product
a) is of the the type that you are using. It just has different brand. Nobody likes to be persuaded into using product that he or she is currently not using.
b) is researched and produced by the company itself. It is not selling other other company's product. The product is unique and cannot be bought somewhere else.
c) has full and QUICK money-back guarantee. Some can refund but you have to wait for a very long time.
d) must pass your own verification with the mentioned accreditation body if the product is claimed to have certain award or certification. For example by checking in the official website of the body.
e) is not claimed to appreciate overtime or to be able to be speculated. You will discover that they do not want to buy it if you remise it.

3) The sales points will not accumulate. This is to ensure that you have a network that has solid foundation before you move up a ranking. It is meaningless to move up the ranking from the accumulated points of just using the product yourself alone. Such ranking is just a name.

4) The company is listed in stock exchange. That minimizes the chance that it is an illegal company.

5) Free and fast home delivery.

Network criteria

The reason I write these criteria in addition to the company criteria is individual network under the same company may work differently. Some networks operate like a pyramid scheme although the company is not.

1) You are not duped into their meeting. Something like they do not tell you beforehand what company organizing the meeting. False pretexts or a strange lack of information.

2) They do not tell that you do not have to sell anything. For me even getting people to self-use the product is a type of selling too. They should not twist this around.

3) They do not put you under under a person that you do not know instead of your friend who introduces you into the network. Remember this is people's business that is based on relationship. It should not be bound by mechanical policy. New recruits are not pawns on the chessboard. Plus it is not that fair for people who have got in more recruits.

4) Before you sign up, they do not ask you to keep it a secret. Pyramid scheme definitely does not want a potential prospect to consult friends and family on the matter of signing up.

5) It does not suggest to you to give them big money. Something is just not right if someone claims that you will earn more money by giving big money to his company. They may say that it is an investment but it is not. Of course starting a business needs fund and time. However, unlike MLM, nobody persuades you to start it and you yourself scout around to pay the suppliers and authorities to facilitate the business that you own 100%.

6) It does not suggest any option of stocking up products (for the purpose of moving up a rank etc). You buy only when you need it. From economy point of view, if everyone stocks up product, the market will saturate and the price of the product will decrease. Decent system will focus on natural repetitive sale.

7) They do not have college students. College students are young people whose judgment is still not strong. They can be easily influenced even the system is not right. If they have many college students you can say that there is something wrong with the system and they cannot pull older people with better judgment along. Plus it is an ethical issue to get students into MLM as it distracts their study.

8) It does not have so-called time-limited offer which urges you to sign up quickly, say on that day itself. Take note that signing up does not mean you can get big money in return straightaway.

9) It does not ask you to make risky change of lifestyle. Examples are stopping monthly loan payment, quitting job, buying luxurious stuff (to dupe prospects you are doing well with MLM) or borrowing money (even from loan shark) to 'invest' in it. And it does not make you so occupied that you lose your job. For example they may purposely have meeting until midnight, literally (Marketing Late at Midnight. In Malay language, the equivalent is "Meniaga Larut Malam"). So you do not have enough sleep and your work performance the next day goes down. Or they want you to talk about them to your colleagues during work time.

10) They do not suggest you to stay away from Internet. Pyramid scheme is extensively exposed and discussed in the Internet.

11) The system for the lowest level should be in such a way that even if you do not move up a level, you will not lose anything. The most is just to consume the product that you need anyway accordingly. They must not suggest to you on buying books, audio/video material and seminar seat from them. I personally see that new members are asset to the system so they should be well taken care of, not be sucked dry.

12) They do not suggest you to ask friends and relatives whom you have not contacted for a long time to join you in MLM.

So, basically the difference between pyramid scheme and MLM is how fast you give them the big money. Pyramid scheme urges you to pay big money at one time (to buy in big inventory etc). MLM wants you to use their products as needed (of course the more the merrier) and in the long run the accumulated amount of money spent is big. And the basic similarity between them is you are required to pitch the people you know to do the same thing you do.

My advice is do not suddenly call the people whom you do not contact for a long time to talk about your MLM or to sell products. Many friends will be mad at you. After all, MLM is more suitable for people who constantly hang out with all friends.

...

If you are already an active member who has recruited many friends, even though after reading this article you feel you are in the wrong boat (in terms of company, system or MLM itself), MLM is designed so that you cannot just jump out due to self-esteem since you have proclaimed to many friends that it is good.
Posted: 2007-09-04; updated: 2013-08-15 by Ong Seng Aun.
I categorize this article under Consumer. Other articles are accessible from home page.
External pages that link to this article:
  1. Quatloos!
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