Adapt to ExperienceMulti Level Marketing

MLM is both a scam and a legitimate idea. Be Careful.

MLM companies are too keen the recruit new distributors and give too little emphasis to retail sales.

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Generally, I'm against Multi-level Marketing. I've seen many friends get involved in multi-level marketing, and ALL of them except one, have failed. In my thinking something's very wrong in the industry.

I accept that some types of products, are best sold by people who personally recommend their use. Personal care products and health products for instance. So there is a legitimate reason for using MLM as a means of distribution.

However, the way the pricing is structured, in most companies, people can't earn even a minimum wage on the income from retail sales. The products tend to be over-priced, and the retail margin is small, maybe only 10%. (In retail shops the margin is often 50% and much more.) This is a price manipulation by the sponsoring company. Price pressure forces people into extending the network of distributors. The rewards for that a very good in comparison.

In most MLM companies there is every incentive to enlarge the pool of distributors and very little incentive to sell the product in a retail manner. This leads to many people being encouraged into "the business" where they are almost certain to fail. The failure rate is caused by the lack of mentoring and support, but also because most companies have built the reward structure to encouraging recruitment, rather than retail sales.

Having a good product is only part of the battle. CEO of StemTech Ray Carter was introduced to MLM as a child. His parents were Amway distributors. As well as doing a business degree and working in the corporate world, Ray Carter tried his hand in three different MLM companies. Each time he was successful, only to have the management change the rules on their distributors, effectively trying to cash out the business for themselves at the distributors expense. MLM distributors are dependent on the ethical standards, the knowledge and the ability of your up-line, particularly the senior management.

Having said that; I am now a distributor, and a recruiter, for a MLM company called Stemtech. So why have I done that? Three reasons:
I tried the product and I'm highly impressed.
I trust the present management of StemTech not to betray their distributors.

However, Stemtech is not immune to the structural problems of the MLM industry. I control what I can. Stemtech policy is not in my control. They do have a 100% money back return policy. It's possible to be a distributor and not to be a customer.

MLM Examples that are not scams

There are several MLM companies selling health products. You can search for them on Google. I can only tell you what I know. This field is new to me. I'm involved with StemTech Health Sciences.

Stemtech : Stemtech has one unique health product, and two or three other related products that are distributed by MLM. Stemtech has a set of principles for distributors, which includes a target of 70% of income from retail sales. That's a laudable objective, but unlikely given the price of the product and the small retail margin.

I talk about StemTech and some other MLM companies here.

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MLM Examples that are Scams

Let me talk now about some MLM schemes which are definitely in the scam class.

Ultimate Power Profits : This is set up as a Multi-Level Marketing Programme. Many of the product claims are not credible.

7. Upon acceptance of this application by the Company, I will be an independent contractor responsible for my own business and not an employee of the Company. 

10. The company's program is built upon retail sales to the ultimate consumer. 

11. The Affiliate acknowledges that Affiliate is a wholly independent marketing representative who establishes and services retail customers for Company products as an independent contractor.

12. No purchase or investment is necessary to become a Company Affiliate other than the purchase of an Affiliate sales kit which is sold "at Company cost."

World Pre-Launch

This is a strange mixture of a matrix, (pyramid scheme) and what they claim to be Multi-level Marketing.

This is typical. Pyramid schemes are often disguised as something else.

My Australian friend was excited by this one. He wrote:

Try this John. The Number of People Enrolled After I joined is 6334. Should they all join at launch (at $9.95 a month.) that is worth in excess of $100,000 to me.

They want a 100,000 people to join by launch date, on 18/03/2013. No cost at present in pre-launch mode

So that's the pyramid scheme, they are tying to disguise as a MLM programme. The rewards promised are fantastic and the effort required is minimal. However if they get 100,000 people involved, a tiny number, will get pay outs, and all the rest will lose out.

I deal with this in more detail on the Pyramid Schemes page.


Here is a printable version of this page.