How do self respecting people in MLM actually think having a downline is fair leverage?

Question

You always hear people in MLM talk about how brilliant the system is because it uses leverage and that you get a little effort from a lot of people and everyone makes money.

Is this not the most idiotic thing you have heard? if everyone is doing only a little effort conceivably not selling enough on their own effort to at least provide an income, then it is physically impossible for everyone to be earning at the same time. The only way it works if is the pyramid continually grows. People in MLM say that the people at the bottom should leverage as well and get the same results as those at the top, but essentially that only means that at no point ever in the MLM model does EVERYONE benefit, there are always people at the bottom getting no value.

Are people in MLM that stupid, or is it that there are enough people with no concept of math that are constantly seeing MLM for the first time?

Answer 1

The bulk of people who profess this leverage do so because they do not understand. I don't think the majority of people in MLM are bad people, they are predominately non business people naive enough to overlook the fact that the need for constant exponential people is the only means possible to succeed using a downline...what supposedly makes MLM better than any normal sales position.

In terms of what some have said here, sure, if MLM was a sales operation only there would be no problem. One should hold the sale person who endeavors to make it rich selling any product with great respect since its a very hard and respectable means of making money. However, few if any MLM companies promote sales predominately, and in fact nearly all MLM companies are filled with people who never sell enough volume on their own to make a living. this is where the lack of respect in the MLM industry comes from because instead of actually promoting value through sales, they promote value through getting other people in your organization. They use one liners like "leverage is the key" to disguise the fact that the means of getting wealthy off of building a downline is a ponzi scheme.

Ideally, if you are selling lots of product and doing well, and you know of others who are good salespeople that could benefit, then signing them up and getting a small commission on their sales is good business. But that is not the intent of MLM. The intent of building an MLM downline is to build enough people in your network so you never have to sell a great deal of personal product. MLM companies will tell you that they are not a sales company when it is convenient and they need to get non sales people into their downline, and then will turn around and tell other people questioning their system that its all about sales. This promotes a great lack of respect for MLMers again.

In regards to mrsgillen's answer about the pyramid, this is a prime example of the MLMer using a one liner (saying "its not different than a pyramid structure in the company you may work for") as oppose to actually addressing the issue. The issue is not the shape of the network, its that the people at the bottom are not earning enough money to support themselves until they bring in people of their own. The whole system is set up on bringing in people who bring in people who bring in even more people, never on going out and selling enough volume to support yourself. In conventional business, although structured with people at the top earning the most, the fact and major difference is that the people at the bottom are able to earn a living without ever having to bring anyone else into the company (and in fact id they didn't add enough personal value, they would be fired), and the company is able to pay these people without ever having to hire new employees. In MLM, unless people are selling enough personal volume, the only way to make money is to bring in other people, which makes its a ponzi scheme. The fact that they CAN sell personal volume may keep MLM legal, but that doesn't mean its right. As I have said before, I can set up a lemonade stand on my front lawn and feasibly make millions, but the reality that it would be a terrible business decision in light of all the other options out there...thus is the same with MLM.

As far as the referral network, there is a huge difference between just recommending something to your friend and recommending an MLM product to your friend. The fact is, if I know you have an invested interest in what you are recommending, then I am going to take that bias into account. MLMers do not think that bias is an issue because their family and close friends happily buy their product initially because their family and friends wish to support them in their endeavor, that is human nature. But how long can you take advantage of human nature? The reason MLM is not taking over (what MLMers refuse to accept) is that in the long haul, people's good nature will only go so far and will they will not just continually buy your products just to support you. Those decisions eventually are made on value and cost. Most MLMers will jump right in and tell you that they have the most valuable product, etc etc etc...but the reality is most MLMers would never buy the products in MLM if there was not the dream of making millions in MLM attached to it (of course they will deny that, but common sense dictates the obvious).

Word of mouth advertising is the least expensive method of sales, but MLM twists that fact into their model to convince their reps that their system is best. This always flies right over the head of the MLMer in light of the fact that the product they are selling is nearly always substantially higher priced than any competing product. MLMers are taught to confront that issue saying that their product is unique and there is no other product to compare it to. This of course is merely a convenient justification. Any good product will have quick competition from the market, but MLMers are led to believe that patents and early entry into the market has kept them ahead. The fact that conventional systems such as Wal-Mart or other large retailers can offer prices at a fraction of anything MLM has ever sold gives evidence to the fact that MLM as a sales model is far more expensive.

If the MLM system was the dream that MLMers profess, wouldn't it make sense for companies to exist in MLM to compete with large retailers? Yet they do not, the only physical products sold in MLM are products that are not found in the market permitting MLMers to be duped into the concept of not having comparative products in order to justify their extremely high prices.

Then there is the fact that MLM doesn't reap the low cost of word of mouth because of the fact that MLM is forced to pay several layers, sometimes even 10 levels deep, of reps for every transition. Suddenly the costs of marketing these products has sky rocketed since so many people are being paid on a single sale. Consider, the MLM view is to suggest that in conventional sales there are middle men along the way that jack up the prices and advertising costs that send the prices even higher...yet in MLM they overlook the fact that each sale pays several layers of people who added absolutely no value to that single sale. At least in convention sales you have direct value being added at every step, such as advertising, wholesalers, warehousers. MLMers suggest that these entities take a slice of the pie at the expense of the consumer, which is perhaps the best example of their lack of economic understanding. Competitive advantage through cost efficiency in an open market enforces the fact that value must be created through these entities or competing entities will be able to offer similar products at lower costs. Mention that to the average MLMer and it goes right over their head, which is likely the result of people jumping into MLM in droves with no business backgrounds.

I do not believe people in MLM are stupid. It is, however, a common trait in MLM to accept what the leaders and owners of the MLM companies tell them as the way things work. As I mentioned above, if an MLM leader tells them word of mouth is cheaper and MLM will win out, and this MLM leader is a successful person, most MLMers prefer to take that as fact. There is generally not any thought given to the fact that perhaps these things are being said to keep the MLMer excited about the business in lieu of reality. Many MLMers choose not to think about it and just accept that they too can have riches from the system without ever considering what it really would take to achieve it, or if the leaders actually achieved their success in MLM at all.

MLM is an emotionally charged business where they require massive amounts of hype at every meeting, convention, and gettogether to keep everyone emotionally involved. MLM programs are geared at merely looking over the face of the numbers and never digging much deeper. The initial numbers always look great and most people, who are now on an emotional high thinking about what it would be like to be rich, never choose to look further than what is being presented. That is likely the very definition of naive.

So these people are not stupid, they are merely emotionally driven and naive. In all likelihood, they are quite capable of doing the math, but never do so because they have already convinced themselves that MLM is the wave of the future (and their upline and other leaders constantly reinforce it for them). I would not say these people deserve any lack of respect for making this mistake, the lack of respect is constantly bothering those of us who identify the flaw of MLM with their spam, arrogance, and and in some cases derogatory comments.

Answer 2

I work with a MLM company, if that is what you want to call it. We have a great compensation plan that everyone benefits. There will always be someone at the bottom and people at the top may decide to quit, I have seen it. But in life, aren't there always people at the bottom of every job. The MLM system is not a pyramid, at least the one I am in. Pyramids are not legal. But think about the companies you all may work for. Aren't they a pyramid. You will never pass your owner's rank. With my company, I can certainly pass the top people in my team and some people in my downline can advance pass me. So, no it is not a pyramid. I have never heard anyone in my business say that if everyone does a little. They just start you off slow, if you chose,as a comfort thing. People who build teams are the people who make the money. However, I do have people in my company that work in what we call group and make just as much money if not more. Anyone looks at MLM really needs to look at a good company, not these cheesy ones that fail within a year!

Answer 3

Yet one more reason on the LONG LONG list of reasons why people in MLM do not get any respect.

I suppose that you may be correct in that the reason MLM is still even around is because there are always new people not smart enough to think deeper than face value that see MLM for the first time and think because of all the hype and because of all the people at a meeting going crazy over it, that it must be the real deal. This is why only 3% of people become successful, because too many people think this way and make money decisions becuase people around them think its a good idea, not becuase they actually researched it themselves.

Answer 4

Let's talk about why companies start MLM, network marketing, or referral marketing structures. Word of mouth advertising sells and is a whole lot cheaper than conventional advertising.

There are people who fit the MLM mode of sales. There are those who aren't. Here is where the rubber meets the road. If you had a friend recommend a product or a service to you because your friend used the product or service and enjoyed it, would you be upset. Probably not. If your same friend recommended the same product or service and the company who he purchased the product or service from chose to pay him a commission for the referral, would you be upset? You shouldn't.

Based on that referral, you decided to purchase that product or service. As a purchaser, you don't have to be a seller. You are now your friend's customer.

As a good salesperson in a MLM structure, you will have a good balance of customers and salespeople. Those who decide to go further and those who are content to purchase the product.

If you have somebody who decides to be a salesperson in a MLM, network marketing, or referral marketing opportunity, these are the criteria it should meet:

1. NO Fees to Participate - Why should you pay a distributor fee to sell for any company? Never pay a distributor fee to join a company ever again!

2. Powerful Products - UNIQUE cutting edge exclusive products that work fast! Everything designed in-house by world renowned scientists and doctors!

3. Results Sell - Day one you'll feel it, day two you'll love it and day three you'll be telling your friends.

4. Manufacturer Direct - Unlike 99% of most so-called "opportunities" who have their products made by someone else and pass high costs on to distributors, this company is the manufacturer direct, and there are no middle sales or multi-level companies.

5. Solid Company - A 12 year old manufacturer that has the capability of shipping over $10 million dollars worth of product a day.

6. Free Samples to Dealers - They will continually be giving out Free Samples for Dealers to Hand Out. Most companies simply can't afford to do this, but they make the products and understand the importance of getting people to try the product.

7. Low Cost - A two months supply for as little as $59. No more trying to sell your friends on buying $200 or $300 of product that they don't need.

8. Pays Out Checks Daily - They understand the importance of getting dealers money quick.

This is what my company uses as its criteria. This way, if a person decides to participate and attempt to sell the product, the risk is very minimal. Financially, the risk is next to nothing. If you enjoyed the products of the company and they worked for you, then there is no risk. The only thing lost would be a person's time.

If I can be of further assistance, let me know.

[e-mail]
http://www.geocities.com/pktull

Answer 5

I've never understood why people have a problem with MLM. If you don't want to recruit, don't. Just make your money selling and be happy. That is no different than someone who is happy on the sales floor and has no desire for management.

The problem is that most people want all the benefits that come with recruiting (higher and more stable income) without having the ability/dedication/desire to do what it takes to get there.

Now if you don't like sales and don't want to recruit then MLM is not for you but just because you don't have what it takes to succeed in that environment does not make the environment bad.

As for the people at the bottom getting nothing, they only get nothing if they do nothing. They will always, at a minimum, get the commission for the sales they made.

Answer 6

MLM ruined my father's life.

The people at the bottom lose- they buy the product, they sell the product, but they make practically nothing- only those at the very top make anything and that isn't much- the real money is in selling tapes on how to sell and running sales seminars that charge money to the downline.

Answer 7

Having an mlm downline and considering that an asset, is just SLIGHTLY more secure then owning an apartment building that had been built on quick sand, in an earthquake zone, with a severe termite problem and subject to constant tornadoes and hurricanes. Come to think of it.... I think they are about even.

Answer 8

There are legitimate MLM operations, those that are based on real and valid products.

But yea, I agree: the vast majority right now are basically crooked pyramid schemes seeking to lure the stupid, naive, or greedy.