Multi Level Marketing Warnings

Once upon a time, multi-level marketing was a legitimate business which provided a way for small companies to get their unique products to consumers in small towns and rural areas which had no access to these products. At this time, the products sold themselves, and the multi-level aspect was a way of giving a small reward to those who had worked hard to build the organization. Multilevel marketing also called network marketing is a form of direct sales in which independent distributors sell products, usually in their customers’ home or by telephone. Today, products are even distributed via the Internet.
In this article, MLM, multilevel marketing and network marketing are all synonymous.

There is simply no real need for distribution systems as there once was and indeed the focus of many of the programs is not on the products they sell – which are usually either bogus or are available somewhere else to the public at the same or lesser prices. These may not be the exact same product, but are comparable and often much less expensive. You may be selling the best multivitamin in the world (according to the company that produces it, anyway), but there are thousands of manufacturers and distributors of quality and inexpensive multivitamins. Why should I buy your product at $25.00 a bottle when I can get a product with the same ingredients for $10.00 a bottle at the drug store and not pay shipping costs?

This is one of the things that a potential MLM distributor needs to consider before joining an organization. Is the product available elsewhere for less–meaning that you’re going to have to be a super salesperson in order to hawk your wares? Most of us are not sales people, but can be successful in network marketing if we find the right product and if that product is unique.

Today too many of the multi-level marketing programs are scams. In today’s Internet economy, there is simply no need for multi-level marketing or the overpriced products that they sell – meaning that the only thing they are selling are memberships in anticipation that future memberships will be sold, which is the classic definition of a pyramid scheme, and thus fraud. Because products are available over the Internet to everybody at lower costs than ever before, claims that “Multi-Level Marketing will take over the World!” are completely false. So are you being hired to sell products, and you have to buy into the program? This is a sure sign that it is a scam.

The Thirteen Step Program for Avoiding MLM Failure
Or When to Run Screaming!

Warning #1: If there’s a cost involved to become a distributor, is that cost of value to you? If you’re simply paying a nominal fee for some basic training materials, it might be worth checking into. If you are paying an outrageous fee and a portion of that fee is paid to the person signing you up as a bonus, there’s already a problem. For example, a now defunct MLM company required $300 just to “get in on the program.” $100 of that went to the person that signed me up. Hmmm…why couldn’t I just pay him the money directly and save myself $200? Because everyone else up the line had to get a piece of the pie. The company training programs talked about getting rich and paraded a couple of millionaires (the people who started the company or who got in on it in the very beginning) around as if everyone could do this.

Another company, for which I am still a distributor, required a nominal fee (less than $30) to get your initial training materials. There were a lot of materials and most of the additional sales brochures and forms are available free to distributors online. I am not required to purchase a set amount of product each month, but in order to get a commission my customers all in total need to purchase a minimum of $50 a month in products. That’s a deal and it means that the company is selling products, not memberships in the company and a chance to “strike it rich.” At no time has this company ever talked about getting rich. They’re realistic and talk about additional income which equals the amount of time you put into it.

Warning #2: If a company requires you to pay for advertising or marketing materials well above the cost of these materials it is a sure sign that it is a scam. We have often seen people encouraged to take out thousands of dollars in credit card debt to go to these seminars with the promise that they will make so much selling the MLM program that they will quickly pay back the credit card debt. This is almost never true. If you’re immediately going into debt to get into a network marketing program it is probably not legitimate.

Warning #3: Does the distributor and the products seem genuine? Does he/she seem like a pushy salesperson? If the distributor who wants to sign you up is selling you a dream then take a nap and dream for free. If its hard sell and you feel like you can’t get out of the room without buying something then take a deep breath, be brave and walk. Your checkbook will thank you. Active distributors will defend to great lengths their program and their products, to the point of slandering naysayers and often buying the products themselves in substantial quantity in order to “prove” their worth.

Warning #4: Does the distributor have products in stock ready to sell you? If the distributor has products, ask him/her if these purchases are required. If they are required to buy a certain amount of product every month, this could be a sign of a scam. There are legitimate companies out there who have minimum purchase requirements or who give “preferred pricing” to those who buy minimum quantities. If these are not products that are of a value to you or that you will not use up before the next purchase is required, walk away. This means you’re stuck with product you probably can’t sell. Unless you’re already a door to door salesman and you know you’ll have no trouble selling the product you buy, walk away! It is an interesting phenomena of MLM that the hardcore and brainwashed distributors who defend the products the hardest almost always quit using those great products completely when they move on to the next program! Many network marketing distributors go through several programs before either settling on one legitimate program or getting out of MLM entirely. For example, if you’re selling household cleaning products that you feel really are better than anything out there, will you use those products you’re required to buy? If the products you’re required to buy are replacing something you’re already buying, there may be merit to this if the products are not outrageously priced. Using our multivitamin example, if the vitamin you’re buying really is a great formula (based on what you know already or research you have done) and is comparable in price to what you’ve been buying at the drug store, there may be merit in this since you’ll stop buying the vitamin you’ve always used and use the one you’re selling. You’re not being asked to spend more money than you’re already spending-you’re just switching brands.

Warning #5: “You’ll get rich” or “You’re building a lifetime of residual income” or “This is the road to a quick retirement” or other such phrases. The promise of MLM is that if you are successful in selling others that you will create this big “down line”, i.e. multiple layers of sellers under you which will quickly lead you to riches and allow you to retire forever with a never-ending stream of seven- or eight-figure revenue. The idea behind multi-level marketing (MLM) is simple. Multi-level marketing is system of marketing which puts emphasis upon the recruiting of distributors and on the selling of products. 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. Don’t be surprised if a friend or acquaintance tries to sell you vitamins, herbs, miracle remedies, weight-loss supplements, work out equipment, or other health-related products. Millions of Americans have signed up as distributors for multilevel companies that market such products from person to person. Often they have tried the products, concluded that they work, and become suppliers to support their habit. Many times, however, due to lack of support within the organization they fail and get out of the business.

Warning #6: Beware of pyramid schemes. A pyramid scheme looks like multi-level marketing, but there is no tangible product being distributed. These are illegal. If you’re selling memberships in a down line and no product is being sold, walk away. Better yet, report it to the Federal Trade Commission. Pyramid schemes are systems of marketing which puts more emphasis upon the recruiting of distributors than on the selling of products. Usually, there are no real products at all. Pyramid schemes give all network marketing programs a bad name and many online advertising pages and online auctions like eBay do not even allow legitimate MLM advertisements. You can sell an MLM product on eBay, but you cannot sell a distributorship.

Warning #7: This isn’t really selling. Bologna! You’re selling a product and you’re selling a business model. While MLM does help non-sales people (I personally couldn’t sell ice water to someone in hell) make a living at sales by providing a more comfortable framework in which to operate, it’s still selling. Multi-level marketing is a system of selling in which you sign up other people to assist you, and they, in turn, recruit others to help them. It’s a way of having your own sales force without hiring people. You share a little bit of commission for everything people you recruit (and people they recruit) sell. This is one reason that MLM is attractive. You can take a week off and you still have an income because your down line (your “sales force”) is still working. Just make sure the program is legitimate. Most people who sell products via MLM are good and honest people who genuinely believe in their products.

Warning #8: These products sell themselves. If that were true, there wouldn’t be millions of dollars being spent on a 30-second commercial during the Super Bowl. Most products are not unique. There are similar and sometimes better products out there. The sales portion of MLM comes in making sure that the product you’re selling is a quality product that people will actually use. You can’t successfully sell an electric razor to a group of men who all wear beards! Look at the product and do some research before you actually commit. Go on the Internet and find out if the product is all over the place. There was a pet nail trimmer that was all over the TV and in every drug store, pet store, and discount store. If you’re trying to sell the next generation pet nail trimmer, you can probably bet that there are hundreds of them out there for a song at every garage sale in the country and you’ll have a difficult time selling another one.

Warning #9: Sell to friends and family. Wrong! I don’t want my friends or family running every time I visit or screening my calls because they’re afraid that I’m going to try to sell them something or “sign them up.” If a friend or family is genuinely interested, make sure they understand that you’re giving them the information on the business or selling them the product because they wanted in on it and not because they’re doing you a favor. I have personally lost two or three friends who were distributors for network marketing companies because they insisted on bringing in the products to our relationship so that every phone call became a masked sales pitch.

Warning #10: Products are not returnable. This is a major red flag. This means the company is interested in selling products and they’re making millions. By not offering returns, especially if you’re required to buy a certain amount of product, you’re immediately in jeopardy of losing a lot of money and getting stuck with a lot of product.

Warning #11: You have to become a distributor to buy the products. Walk away. Every company needs customers to buy a product. They don’t need every customer to also sell the product. Some people are genuinely interested in a product, but have no interest in a home business or what they perceive as a sales job. Many people who buy products become word of mouth advertisers for the product. At this point, one could become a distributor. It’s not always right for some people-or at least not right now.

Warning #12: You just didn’t have enough belief in yourself or the company. Guilt does not sell products! Your faith in the product means nothing. You do have to actually have some interest in the product and to be honest you should also be using it. Do you really think that the movie stars who advertise hemorrhoid cream really have hemorrhoids and use the product frequently? Doubtful. If it’s in their medicine chest, it’s because they get in free by the case for being the company spokesperson.

Warning #13: You’ve only got one product to sell. Run away! If the business model you’re interested in does not have multiple products, you’ve got a long row to hoe. I may not be interested in your multivitamin but I may be interested in your weight loss drink mix. Saturday Night Live used to do a skit about an adhesive tape store. That was the only product in the store. You could find any kind of tape you wanted, but they didn’t sell glue. Retailers don’t sell one product. And they try to give you choices of products in the same line (ten different types of tape, for instance) and in different package sizes. No one will be successful opening a tape store and you won’t be any more successful trying to sell that one item via network marketing.

MLM is a fantastic way of getting products out to the public without relying on the goodwill and acceptance of the retail distribution system which strongly favors big, established companies over small, newer ones. I worked retail for over a decade and retailers are paid billions of dollars each year for product positioning. Manufacturers will pay a lot of money to have their product at eye level in the supermarket or drug store. This is the spot where most of the high profit items in a store are shelved. We’re taught that the bargains are usually on the bottom shelf, but we’re in hurry and that glitzy eye-level ad and product display is what catches our attention.

Most successful MLM distributors tend to focus on selling the business rather than the products; the products are incidental to the business. It should be exactly the opposite or business emphasis should be equal in importance to the product. The sales pitch you get to get into a particular business should focus on the products and how that product will affect you. The business discussion should be last. If you’re selling the next $19.95 widget, then the focus should be on the quality of the widget, how well the widget sells, how well the widget will work for you and why you need this widget. Making money by also selling widgets should come at the conclusion of the presentation. I focus on customers. The MLM company I work with does too. I’m only required to have $50 in sales monthly (me plus all of my customers). When one of my customers regularly begins purchasing $50 a month on their own, I approach them about becoming a distributor. I never do it the other way around. I want them convinced that it’s a good product and to use the product. I can’t convince anyone that a line of women’s make up is the best thing out there since I don’t use make up!

Some MLM companies can successfully trade in second-rate products because they have such a great payment plan for the distributors, and so the company can still do well, but usually only during the initial growth spurt stage, after which the company soon implodes. Again, the product should be the focus.

MLM also tries to appeal to our innate herd mentality by giving the impression, invariably false, that everyone is involved in MLM, that it is the marketing method of the future, and that all the top business schools and business newspapers are endorsing it. “Everyone can do this,” “This is so easy it practically does it by itself,” “These products really just sell themselves-you just have to share them” are all MLM hooks and they’re all just words. If this were true, the entire country would be involved and everyone you know would have a down line.

No program that requires you to buy into the program is real, meaning that all are scams. If you have to buy into the program, forget it! It is not a real program. If what you’re paying isn’t simply a fee for the initial training materials, walk away! Someone very high up in the company and the owners of the company are the only ones making any money.

Why shouldn’t the training materials be free? In reality, 99% of people who enter an MLM business give up for various reasons after a short time. Legitimate companies would go bankrupt or suffer severe losses if they did not recoup the cost of those training materials. One company that I am still involved with charged about $30 for the initial packet of materials (which included a couple of DVDs and an audio CD) and an additional $10 or so monthly for a website. The materials were valuable and contained a lot for the $30 investment. The website was brilliant, in my opinion, because it allowed you to steer people toward the Internet where they could read about the products, watch some videos or listen to audio recordings. They could do their own research, make up their minds, then sign up or buy the products without someone hassling them. I often do not give a sales pitch to anyone who wants to “get in on this.” I give them a business card with a URL on it and tell them to check out the website tonight and then tell them to ask me about it tomorrow if they’re still interested. It also allows me to get listed with search engines and make “passive” sales where someone that I never met simply orders the products from the Internet.

The odds of anybody in your down line making any money are incredibly small–smaller than yours. This means that they will probably drop out and be mad at you for getting them into a program where they lost money -this is why I do not recruit friends and family members. It is also why I concentrate on helping my down line as much as they’ll allow. I don’t want them to feel like I got them into it for the quick buck and am moving on to my next “mark.” If your down line is not successful, it is doubtful that you’ll be successful and it may earn you a bad reputation to boot!

MLM can be a way to earn additional legitimate income and can be enjoyable. It is also work, no matter what anyone tells you and the amount of money you make is directly proportional to the amount of work you put into it. You can work MLM a couple of hours a week or full time. You’ll make money either way if you pay attention to what you’re doing, tell the truth, and find a legitimate opportunity. Remember also that just because you’ve never heard of a company does not mean that it’s a scam. MLM relies on “door to door” type selling and there is no advertising of the products other than through the company’s distributors or agents.

Do your homework and remember that if it sounds too good to be true-it is!

Randy Walden