More On Multilevel Marketing

A reader wrote to me regarding an online multilevel marketing article I wrote and felt I did not do justice to representing MLM properly.

Message sent:

I read your article on Multi-level Marketing where you state 'We tell it like it is.' You've really missed the mark with this one. There are hundreds of multi-level marketing companies from Avon to Watkins. Companies like Mary Kay, Shaklee, Tupperware, Pampered Chef, Discovery Toys and many, many more all pay on multiple levels. That's what multi-level marketing means. The 'companies' you described in your article are illegal pyramid schemes. True multi-level companies are responsible for millions of dollars in sales every year. Do a real service to your readers. Do some more research and get it right. Start at www.mydswa.org to learn about the real professionals in this industry.

Respectfully submitted,

"Reader"

Response to the message sent:
(note: Removed the name of the reader to protect their privacy online.)

Hello "Reader,"

I appreciate your comments here.

If you are referring to the article I wrote a while back titled:

Multi-level Marketing

The article was not written to be an in-depth piece on every single multi-level marketing company that has ever come along.

I state in the article, "There have been many multi level marketing companies over the years. Some of these companies have actually provided a quality service or product, many have not. In fact, many of the companies could be considered nothing more than pyramid schemes."

It was simply a warning to consumers to be careful.

For every good multi-level marketing company that has come along, there have been hundreds of others that are nothing more than pyramid schemes.

The problem with all multi-level marketing, is once a market is saturated, and everyone and their brother and sister become involved in it, it is difficult to earn any real dollars. Most multi-level product sales and selling procedures or MLM service providers tend to spiral downward to this point in time of market saturation.

Futhermore, because it is multi-level, everyone down the line (typically) pays a percentage of their costs to the people above them.

Keep in mind, I am not necessarily saying this is bad. However, if you look at history, that is the way it is with multi-level marketing. Sure, there have been other types of payment structures created for MLM, with some being better than others, but MLM by its very wording represents a mult-level format.

Also, it is wise to be aware that the Internet has really propelled MLM to a point of saturation with many of the MLM companies.

Here is some information related to multi-level marketing:

http://en.wikipedia.org/wiki/Multi-level_marketing
http://www.vandruff.com/mlm.html
http://www.mlmwatch.org

Note also, that it is typically the ground floor people that get involved with companies that make it very rich. Once again, I am simply saying that is the way it is. If you look at the historical data for every single MLM company, the people have indeed gotten rich, that got in early.

The FTC provides the following warnings about multilevel marketing;

The Bottom Line About Multilevel Marketing Plans
http://business.ftc.gov/documents/inv08-bottom-line-about-multi-level-marketing-plans

The Bottom Line About Multilevel Marketing Plans

Multilevel or "network" marketing plans are a way of selling goods or services through distributors. These plans typically promise that if you sign up as a distributor, you'll receive commissions - for your sales and those of the people you recruit to become distributors. These recruits sometimes are referred to as your "downline."

Some multilevel marketing plans are legitimate. However, others are illegal pyramid schemes. In pyramids, commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors - not to consumers in general. The underlying goods and services, which vary from vitamins to car leases, serve only to make the schemes look legitimate.

Joining a pyramid is risky because the vast majority of participants lose money to pay for the rewards of a lucky few. Most people end up with nothing to show for their money except the expensive products or marketing materials they're pressured to buy.

If you're thinking about joining what appears to be a legitimate multilevel marketing plan, take time to learn about the plan. What's the company's track record? What products does it sell? Does it sell products to the public-at-large? Does it have the evidence to back up the claims it makes about its product? Is the product competitively priced? Is it likely to appeal to a large customer base? How much is the investment to join the plan? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?

Be skeptical if a distributor tells you that for the price of a "start-up kit" of inventory and sales literature - and sometimes a commitment to sell a specific amount of the product or service each month - you'll be on the road to riches. Often consumers spend a lot of money to "build their business" by participating in training programs, buying sales leads or purchasing the products themselves. Too often, these purchases are all they ever see for their investments.

Your Responsibilities

If you decide to become a distributor, you are legally responsible for the claims you make about the company, its product and the business opportunities it offers. That applies even if you're repeating claims you read in a company brochure or advertising flyer. The Federal Trade Commission advises you to verify the research behind any claims about a product's performance before repeating those claims to a potential customer.

In addition, if you solicit new distributors, you are responsible for the claims you make about a distributor's earnings potential. Be sure to represent the opportunity honestly and avoid making unrealistic promises. If those promises fall through, remember that you could be held liable.

Evaluating a Plan

The FTC suggests that you use common sense when evaluating a multilevel marketing opportunity and consider these tips as you make your decision:

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive products and marketing materials. These plans may be pyramids in disguise.
3. Be cautious of plans that claim you will make money through continued growth of your downline, that is, the number of distributors you recruit.
4. Beware of plans that claim to sell miracle products or promise enormous earnings. Ask the promoter to substantiate claims.
5. Beware of shills - "decoy" references paid by a plan's promoter to lie about their earnings through the plan.
6. Don't pay or sign any contracts in an "opportunity meeting" or any other pressure-filled situation. Insist on taking your time to think over your decision. Talk it over with a family member, friend, accountant or lawyer.
7. Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering - especially when the claims about the product or your potential earnings seem too good to be true.
8. Remember that no matter how good a product and how solid a multilevel marketing plan may be, you'll need to invest sweat equity as well as dollars for your investment to pay off.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

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So, once again, my article was simply a warning to consumers to beware. It was not an article telling which MLM plans were not PYRAMID schemes. If you are involved in a company that is legit, more power to you. I truly wish you luck and great success.

I hope you are not offended by anything I wrote here. Please don't take it as a hammer on your business. I have not done any research on Watkins. I would however take a close look to see how many representatives there are for Watkins as a way of judging how far along the company is.

An easy way to do that is with the following search:
http://www.google.com/search?q=site%3Awww.watkinsonline.com

If you look at those search results you will see the following on the right side of the Google Search page on the search date of 09-28-2008:
"Results 1 - 10 of about 41,100 from www.watkinsonline.com"

Keep in mind, that most of these pages are separate distributors.

If most of your selling is online, it is going to be extremely hard to compete with 41,000 distributors. The reason for this is that every single distributor has the same exact pages for the most part. Search engines will not display each distributors' pages because it is considered spam from the search engine standpoint.

Also, keep in mind, if you are going to use Pay Per Click advertising; look to see how competitive this area is.

There are over a hundred advertisers for just the keyword "Watkins" at the time this article was first published. The cost on the PPC for each click is extremely high.

I hope you find this information helpful.

Best regards,

Jim
Get Your Business Found Online Today
MARKETING ONLINE

PS — Watkins Online is only used as an example provided by our reader. This "More On Multilevel Marketing" article is not an endorsement of Watkins, nor is it in opposition to the Watkins business plan.

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The Reader wrote back:

Thank you for your in depth response. Yes, that is the article. What bothered me is that, IMHO the article is not "balanced". There is too much emphasis on the schemes and scams and not enough information about what makes a legitimate company.

As to this comment:
"Furthermore, because it is multi-level, everyone down the line (typically) pays a percentage of their costs to the people above them."

My downline does not pay a percentage of their costs to me. They are paid by the company in accordance with the company pay plan. The pay plan is designed to reward those who do the work. So I may sponsor someone who builds a bigger business than mine and they would get paid more. The "top of my line" has been in business since my company went MLM but my income is more than hers because she does very little. So I find your statement misleading.

The article just struck a nerve with me. I have many, many friends who run an MLM business from home. They sell, sponsor, take legitimate tax deductions for their home & car. They are ordinary people, not scammers or Ponzi schemers. (Actually the government is the biggest Ponzi schemer with their Social Security. LOL)

I'm just looking for balance.

"Reader"