multi-level marketing (a.k.a. network marketing & referral marketing) - The Skeptic's Dictionary

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class="it"> <h2 style="text-align: center"> <i><b><font face="Georgia" size="4"> <a href="http://www.mlm-thetruth.com/">Before joining an MLM check out this consumer site</a></font></b></i></h2> <h2>From Abracadabra to Zombies<span class="small"> | <a href="http://skepdic.com/contents.html">View All</a></span></h2> <ul class="alphabet"> <li><a href="http://skepdic.com/contents.html#A">a</a></li> <li><a href="http://skepdic.com/contents.html#B">b</a></li> <li><a href="http://skepdic.com/contents.html#C">c</a></li> <li><a href="http://skepdic.com/contents.html#D">d</a></li> <li><a href="http://skepdic.com/contents.html#E">e</a></li> <li><a href="http://skepdic.com/contents.html#F">f</a></li> <li><a href="http://skepdic.com/contents.html#G">g</a></li> <li><a href="http://skepdic.com/contents.html#H">h</a></li> <li><a href="http://skepdic.com/contents.html#I">i</a></li> <li><a href="http://skepdic.com/contents.html#J">j</a></li> <li><a href="http://skepdic.com/contents.html#K">k</a></li> <li><a href="http://skepdic.com/contents.html#L">l</a></li> <li><a href="http://skepdic.com/contents.html#M">m</a></li> <li><a href="http://skepdic.com/contents.html#N">n</a></li> <li><a href="http://skepdic.com/contents.html#O">o</a></li> <li><a href="http://skepdic.com/contents.html#P">p</a></li> <li><a href="http://skepdic.com/contents.html#Q">q</a></li> <li><a href="http://skepdic.com/contents.html#R">r</a></li> <li><a href="http://skepdic.com/contents.html#S">s</a></li> <li><a href="http://skepdic.com/contents.html#T">t</a></li> <li><a href="http://skepdic.com/contents.html#U">u</a></li> <li><a href="http://skepdic.com/contents.html#V">v</a></li> <li><a href="http://skepdic.com/contents.html#W">w</a></li> <li><a href="http://skepdic.com/contents.html#X">x</a></li> <li><a href="http://skepdic.com/contents.html#Y">y</a></li> <li><a href="http://skepdic.com/contents.html#Z">z</a></li> </ul> <webContent><h1>multi-level marketing (a.k.a. network marketing & referral marketing)</h1> <p align="left"><font face="Arial" size="3">The idea behind multi-level marketing (MLM) is simple. Imagine you have a product to sell. A common MLM product is some sort of panacea, such as a vitamin or mineral supplement. You could do what most businesses do: either sell it directly to consumers or find others who will buy your product from you and sell it to other people. MLM schemes require that you recruit people not only to buy and sell your product, but who will also recruit people who will not only buy and sell your product but also recruit people....<i>ad infinitum</i>. Only there never is an <i>infinitum</i> to move towards. This may seem unusual to traditional business people. Why, you might wonder would you recruit people to compete with you? For, isn't that what you are doing when you recruit people to sell the same products you are selling? MLM magic will convince you that it is reasonable to recruit competitors because they won't really be competitors since you will get a cut of their profits. This will take your mind off the fact that no matter how big your town or market, it is finite. The well will go dry soon enough. There will always be some distributors who will make money in an MLM scheme. The majority, however, must fail due to the intrinsic nature of all pyramid schemes. </font> </p> <p align="left"><font face="Arial" size="3">Multi-level marketing is system of marketing which puts more emphasis upon the recruiting of distributors than on the selling of products. As such, it is intrinsically flawed. MLM is very attractive, however, because it sells hope and appears to be outside the mainstream of business as usual. It promises wealth and independence to all. Unfortunately, no matter what the product, MLM is doomed to produce more failures than successes. For every MLM distributor who makes a decent living or even a decent supplemental income, there are at least ten who do little more than buy products and promotional materials, costing them much more than they will ever earn as an MLM agent. The most successful MLM scheme is <a href="amway.html">Amway</a>. It has millions of distributors worldwide with sales in the billions. At the turn of the century, the average Amway distributor earned about $700 a year in sales, but spent about $1,000 a year on Amway products. Distributors also have other expenses related to the business, e.g., telephone, gas, motivational meetings, and publicity material (<a href="http://www.amway.com/">Amway.com</a>; <a href="http://skepdic.com/klebniov.html">Klebniov</a> 1991).</font></p> <p align="left"><font face="Arial" size="3">The reason MLM schemes cannot succeed is because MLM marketing is, in essence, a legal <a HREF="pyramid.html">pyramid</a> scheme.  The basic idea is for a sales person to recruit more sales persons. This is very advantageous to those who own the company and supply the products, especially since the sales persons in MLMs are also customers. But it is puzzling why a sales person would think it is to his or her advantage to increase the number of competing sales persons. </font> </p> <p align="left"><font face="Arial" size="3">This is not to say there is no benefit to MLM membership. You get certain tax write-offs. You get to buy products, some of which you will be happy with. You get to go to inspirational meetings, some of which will make you feel good. You may meet new friends and you may even make a few bucks. But more than likely you will end up alienating some family and friends. You will probably end up buying more stuff than you sell. And you will learn a lot about deceiving yourself and others. You won't be allowed to tell anyone how you are really doing, for example. You will always have to think positive, even if that means lying. You will have to tell anyone who asks that you are doing great, that business is wonderful, that you've never seen anything go so fast and bring you income so quickly, even if it isn't true. </font> </p> <p align="left"><font face="Arial" size="3">The dangers of MLM schemes have been well articulated by others. If you are thinking of joining any MLM program, I advise you to first read Dean Van Druff's <a HREF="http://www.vandruff.com/mlm.html">What's Wrong With Multi-Level Marketing</a> or Robert Fitzpatrick's <a href="http://www.falseprofits.com/"><i>False Profits - Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes</i></a> (Herald Press, 1997).</font></p> <p align="left"><font face="Arial" size="3"><b>See also</b> <a HREF="amway.html">Amway</a>, <a HREF="mlmhar.html">multi-level marketing harassment</a>, and <a HREF="pyramid.html"> pyramid scheme</a></font></p> <hr align="left" noshade width="25%"> <p><font face="Arial" size="3"><b>further reading</b></font></p> <p align="left"><font face="Arial" size="3"><b><a HREF="comments/mlmcom.html">reader comments</a></b> </font> </p> <p align="left"><b><font size="3">books and article</font></b></p> <p align="left"><font face="Arial" size="3">Fitzpatrick, Robert L. and Joyce Reynolds. <a href="http://www.amazon.com/exec/obidos/ISBN=0964879514/roberttoddcarrolA/"><i>False Profits - Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes</i></a> (Charlotte, N.C.: Herald Press, 1997). See my <a HREF="refuge/fitzpat.html">review </a>of this book. </font> <p align="left"><font face="Arial" size="3">Klebniov, Paul. "<a href="http://skepdic.com/klebniov.html">The Power of Positive Inspiration,</a>" <i>Forbes</i>, December 9, 1991.</font> <p align="left"><span class="highlight"><a name="new" id="new"></a><a href="http://www.mlm-thetruth.com/index.php/download_file/view/77/149/">new</a></span><a href="http://www.mlm-thetruth.com/index.php/download_file/view/77/149/"> Taylor J. M. 2011<em>. The Case for and against Multilevel Marketing: The Complete Guide to Understanding and Countering the Effects of Endless Chain Selling and Product-based Pyramid Schemes.</em> Consumer Awareness Institute. <span class="highlight">[/new</span>]</a></p> <p align="left"> <font size="3"><b><a name="web">websites</a></b></font></p> <p style="text-align: left"><font face="Arial" size="3"><a href="http://pyramidschemealert.org/">Pyramid Scheme Alert</a> "The international spread of pyramid schemes, often perpetrated by individuals or companies based in the USA, will be a special focus of Pyramid Scheme Alert."</font></p> <p style="text-align: left"><font face="Arial" size="3"> <a href="http://www.mlm-thetruth.com/mlm_evaluations.htm">EVALUATIONS of MLM or Network Marketing Companies, Based on the "5 Red Flags" of a Recruiting MLM</a></font></p> <font face="Arial" size="3"> <a href="http://www.mlmsurvivor.com/">MLM Survivors Home Page</a> </font> <p style="text-align: left"><font face="Arial" size="3"><a HREF="http://www.vandruff.com/mlm.html">What's Wrong With Multi-Level Marketing?</a> By Dean Van Druff</font></p> <p style="text-align: left"><font face="Arial" size="3"> <a href="http://www.ftc.gov/speeches/other/dvimf16.shtm">FTC - On Pyramid Schemes</a></font></p> <p style="text-align: left"><font face="Arial" size="3"><a href="http://www.lawpublish.com/mlm.html">FTC's Online Booklet: "Net Based Business Opportunities: Are Some Flop-portunities?"</a></font></p> <font face="Arial" size="3"><a HREF="http://www.quackwatch.com/01QuackeryRelatedTopics/mlm.html">The Mirage of Multilevel Marketing</a> by Stephen Barrett, M.D.</font><p style="text-align: left"> <font face="Arial" size="3"><a href="http://www.ncahf.org/articles/j-n/mlm.html">Buyers and Sellers Alike Need to Beware of Multilevel-Marketed Health Products</a> by William T. Jarvis, Ph.D.</font></p> <font face="Arial" size="3"><a href="http://www.freedomofmind.com/resourcecenter/groups/a/amway/">Steve Hassan on Amway</a></font><p><font face="Arial" size="3"> <a href="http://finance.groups.yahoo.com/group/MKSurvivors/">Mary Kay Survivors Club</a></font></p> <p><font face="Arial" size="3"> <a href="http://www.thepinkingshears.org/">Mary Kay Support Group</a></font></p> <p> <font size="3" face="Arial"> <a href="http://www.merchantsofdeception.com/">Merchants of Deception</a></font></p></a> <p><font size="3" face="Arial"><a href="http://www.advocacy-net.com/mlmalertmks.htm">MLM Alerts! on the Net</a></font><font size="3"> </font><p></webContent> Last updated 20-Nov-2011 </p> </div> </div> <div class="right"> <div class="right_it"> <div class="search"> <form method="get" action="http://www.google.com/custom" target="_top"> <input type="hidden" name="domains" value="skepdic.com" /> <input type="text" name="q" maxlength="255" value="" size="20" /> <input type="submit" name="sa" value="Search" /> <br /> <div class="search_2"> <input type="radio" name="sitesearch" value="" /> Web     <input type="radio" name="sitesearch" value="skepdic.com" checked="checked" /> Skepdic.com <br /> <img src="_images/logo_google.gif" alt="Google" width="48" height="19" /> </div> <input type="hidden" name="client" value="pub-3542920166946725" /> <input type="hidden" name="forid" value="1" /> <input type="hidden" name="ie" value="ISO-8859-1" /> <input type="hidden" name="oe" value="ISO-8859-1" /> <input type="hidden" name="cof" value="GALT:#008000;GL:1;DIV:#336699;VLC:663399;AH:center;BGC:FFFFFF;LBGC:336699;ALC:0000FF;LC:0000FF;T:000000;GFNT:0000FF;GIMP:0000FF;FORID:1;" /> <input type="hidden" name="hl" value="en" /> </form> </div> <div class="center"> <p align="right"><a href="http://skepdic.com/authorpage.html"><strong>Books by R. 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