21 June 2015

What's Wrong with MLM or Networking?

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Probably you have heard these statements:
  • As someone/friend said to me, "Hey, Richard, how are you?..blah blah... I have a unique, incredible, and great business opportunity to share with you" 
  • and sometimes, "Did you know that in a day or week you could earn thousands of pesos?";
  • at most times, "Do you know some-name-blah-blah? He/she is now a millionaire, that he/she owns Ferrari/Mercedes? That, he/she has earned $2000/week. POWER!" ;
  • finally,"I will invite you to a FREE seminar about this business venture. Just attend and oh you can invite your friends. No commitment." Sounds familiar isn't it?
As a first thought, I know it is MLM or networking — judging from its style and deliverables — also these sentences couldn't stop my instincts from thinking that it is a get-quick-rich-SCHEME which I hate the most. (Well, everybody wants to be rich, but with proper investment and workforce....I will surely  venture to work for it. But I am not attracted to the idea of this quick-rich-scheme.)

If something quite slight different with those statements, I pretty sure my instinct tells me it is MLM



MLM or networking
MLM
Image was taken via https://gallery.foreverliving.com/gallery/FLP/image/Marketing/MLM3.jpg
My Honest Reply
For the conversational and engaging talk, I answered back with this follow-up questions, How much would be the registration fee? Or How much would it cost?

Upon hearing it, sometimes, they will change the topic, and they will not state the correct amount of fee. At that point, I am pretty sure, there is something fishy about it. Yes, I didn't say it is not legal, in this post, I will cite what is wrong with MLM a.k.a Networking.

Some of them will reason out that their MLM business is to EDUCATE people. At the back of my head, it questions, how? Oh yes, I am not challenging the educational system they have shared to their clients or prospects. Some of them also claimed that they help other people by doing their business job. Again, yes, this time, I would be skeptical about that phrase.

Help people to achieve their dreams by joining the MLM? Or they just helping you to their own dreams?

See post: How I Earn Money Online

Anyway, long time ago, I also experienced in a quite-fast-little seminar in one networking company. At first, I thought and screamed — WOW! But at the end of those cheesy statements, I doubt if I could really get that huge amount of money that they have told me. Honestly, I am pessimist type of person (negative-type, always think something bad will happen) so it's kinda difficult for me to believe. As skeptical in nature, you won't blame me about my philosophies on life.

Thankfully, being a negative one is quite has a great benefit too. Did you know that being a negative thinker has a positive result too? Read more here: NYTIMES: Positive Power Of Negative Thinking

Author: Oliver Burkeman is the author of the forthcoming book “The Antidote: Happiness for People Who Can’t Stand Positive Thinking.”

I read his book too, and it is a collection of other author's book, scientists, and psychologists studies. And I found it useful too.

In his book, I learned that being a Positive Thinker (optimist) is good than being a Negative Thinker (pessimist). But Accordingly, at a certain point, a pessimist often survive and plan the next move to its unsolicited failure than of those of optimist people.

I recommend  reading his book: “The Antidote: Happiness for People Who Can’t Stand Positive Thinking.”

Let me add this disclaimer: I am not in anyway involved in MLM (Multi-level Marketing) except with ClixSense that I might tag as a real Online Opportunity. 

This post  is not concerned about how good MLM is, but rather what's wrong with it. I am writing it for educational purposes. I earned in different ways but not with MLM.

ClixSense is distinct in any way to other MLM companies. Clixsense is a FREEMIUM type of service which has a Free registration compared to MLM. But it is a Freemium because at one point if you want to increase more revenues than you need to expend money to upgrade your account.

MUST Read: How to earn money with ClixSense

Experience with ClixSense - PTC networking-type

Since I am joining ClixSense – a PTC site  which offer similar business model like referring other people – I want to explore its OPPORTUNITY to earn bigger revenues. At most, I have seen advertisements on how they receive $1000/week plus with motivational videos and true-to-life testimonials. Anyway, enough with ClixSense and back with the main topic.

MLM Introduction

MLM or Multi-Level Marketing has gone long source of constant debate in years. Whether it is correct or wrong, legal or fake, good or bad, it is something ordinary people to talk about it. But most of the people already been a negative about it (including me).

What is MLM or Multi-Level Marketing?

MLM or only "Networking" is a marketing method used by companies to promote their products to the people.
Multi-Level Marketing
Image: http://spotcard.co/wp-content/uploads/2015/05/5.jpg
Also, don't try to underestimate MLM because it has been endorsed by known celebrities like Donald Trump, Robert Allen, Rober Kiyosaki, and much more.

So if it was endorsed by a millionaire then what's wrong with it anyway?

Before that let us give some introductions:

How do MLM works?
MLM Pyramid Scheme
MLM Pyramid Scheme. Image: MLM
In a business model, MLM sells goods and services through distributors (or so-called downlines). The method or system promises that person(upline) to earn a high huge amount of money with the commissions for both selling products and recruiting those people(downlines) to join on their(upline) league.

With the idea of recruiting other members, it is mostly considered Pyramiding. In a legitimate MLM companies, commissions are earned ONLY on the sold products or rendered services. But often, we see other companies includes a plan to attract new members to sign-up (usually expensive registration – why? because the package of products probably) with the reward commissions to the persons (uplines) who recruited them (downlines).


If you are a buyer of a product, then certainly you are buying and paying with royalties of uninvolved distributor layers. But you didn't care anyway. That's merely why their product is so expensive(well, others will not admit it) because it is shared with other layers of the distributor levels.

 MLM Compensation Plans

 Some public plans:
  • Unilevel or Stairstep Breakaway Plans
  • Matrix Plans
  • Binary Plans
  • Matrix Schemes
What is Wrong with MLM Business Model?

MLM: Supply and demand?

One good thing to consider is the supply and demand.

The following four basic laws of supply and demand are:
  • If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
  • If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
  • If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.
  • If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price.

But in MLM, there is no quite big problem with it because it sells beauty or health products which people needs it anyway. Thus, if in this case, the demand increases yet the supply remains, which ideally mean a shortage occurs. To anticipate it, MLM company has already done producing health product supplies. So the idea whether demand decreases, the supply remains unchanged, but probably makes more surplus (which is not good) – and people recruiting increases(certainly at some point that no one will ever hire other people yet the product's PRICE is always have been too expensive).

If you have noticed, registration are quite expensive, just because it is shared with its upline in my levels. Yes, it is distributed in some concentrations in a pyramid model.

A particular manager told me that even if the economy is that small and people has the difficulty to earn money, still, they will expend more money for their beauty and health maintenance.

Quite being similar to the modern idea, "Everybody needs to eat." Just Imagine, a particularly popular food chain (Mang Inasal) opens 24/7. How can they afford to pay employees salary and its electricity and water bills in the daytime where it has lesser customers?

This must be considered too.

In short, the demand is the problem here. And it could be a slow-death of that food chain business. This is the real world. A company should consider supply and demand, yet MLM does not care at all.

Try to think also that MLM has many competitive products out there too. How could MLM compete for its expensive products to the one that is already established name? No worries. To overcome this scenario, MLM companies used a Special Marketing Strategy like Networking techniques and give promising reward for those recruited members.

Thus,
More members = more sales = Advertised products & company name!

MLM: Innovation?

They say MLM a.k.a Networking is innovative. Well, certainly not!

MLM is not new to me, in fact, even my mother and aunties already tried it. They even networked each other in which at the time I have no idea what it is. But what I did notice is the alleged earnings per month. That MLM company claimed to be whopping to earn roughly 50k/month. Seriously? Well, not possible though.  I don't blame my family will get attracted to it (Now they are inactive about it) And at that same time also, I am not even excited with the amount to be earned by a single networker. Don't know why. Probably, I hate to sell and recruit and persuade someone. Sigh.

MLM is no longer claims as new and innovative business model. This type of activity was existed for the past a few years ago –  and most of it failed yet stands again with new system and name. With the slight tweak of its failed business system,  it can be called slightly-innovation, but its core model is the same – to sell and recruit.

MLM: Perfect Product?

I heard some Networkers claimed that their product is so-great and 100% effective. One quick question:  if their product is entirely a perfect one, then why it needs to use "Special Marketing Scheme like MLM? Even inexperienced could sell and market the product. Is the result merely a sugar coated to hide its real reason to exploit others to engage in the pyramid scheme?

 MLM: Recruit Limitation

MLM offers a significant expansion of its own matrix (no, just don't say it pyramid) — to invite/sponsor new recruits. The problem now here arises, what if other people in the city has already been a member with another MLM or if not, they already been a member since then? So an individual who is an upline will venture to other places to share its dream and to attract new prospects with its PITCH motivational statements which can be limited due to its population.

MLM Recruit Limitation Solution

To solve the problem with the recruit limitation said reports mentioned above, MLMs restrict the number of people to sponsor. Say Binary system, which you can ONLY invite two prospects. How about just to invite those downlines? No problem, but geometric expansion problems will exist.

MLM Presentation

Most common method to attract potential members is usually shown with a cheesy presentation of personal testimonials, educational videos, and other information that adds delightful pitches.

The speaker will say "Anyone can make it work!", "If they can, so like you," "it is a once-in-a-lifetime opportunity," "you do the math, you will be a millionaire." And if you are like me in the case joined in a pitching seminar, you will certainly think as "Most of it fail, " and I say "But not with you Mr. Speaker, a.k.a Mr. recruiter".

MLM: Products VS Recruits

If you are a networker and focused on recruits only, then you have hard and wrong time for that. Since MLM promotes its products, it should be work that way — selling of goods, not focusing on recruitment.

MLM: Moral and Ethics

They said they help and educate people. Yes, it's certainly true, but their videos are too cheesy to comprehend, and naturally appealing to greed and materialism.

These motivational speakers likely showed how this particular person gets Mercedes, Ferrari, and other 4-wheeled cars just to attract and bait new members. It's a dream! It's once-a-lifetime opportunity! As they always say.

Of course, if you seriously need money, the chances are, you'll fall for it. Ironically, before you earn money,  you need the money first to pay for registration.

Sad but true, a new members loan amount of money just to pay the registration fee. My schoolmates already mortgaged their cell phones because their upline cannot help them cope up the problem.

That is the issue, the morality issue could be tricky to discuss. I  knew someone that already invited family and about join him as their upline. Wow. Will discuss in the Relationship issues.

MLM: You have NO choice

Yes, once you are already joined and invested, you have no choice but to interact and engage every meeting. You have no choice, but you are going to be "MOTIVATED" to PITCH your friends and family. Well, they get used to it.

Real quick question to them: "Do you wish to be a salesperson for materialism?"

MLM: Be your OWN boss

This part is appealing, Be the BOSS! Or should I choose to be a LEADER instead? But in reality, you have your own BOSS – your UPLINE.  You are a BOSS if you have downlines too. Checkmate!

MLM: Relationship Issues

One good and logical reason why I don't really like MLM is that it exploits relationship. There is nothing wrong with building your business with families and friends. But if one networker benefited from the efforts and hard working with its upline(family and friend) then, that is the big issue. Seriously, you are successful because of someone's effort. Anyway, it's a networking infrastructure though.   Friends be a prospects? Mother is a new recruit? 

The problem here in the prospect perspective view is that he/she is too shy to say no to the friend who hired him/her.  Sometimes, these recruiters are too aggressive, to the point, it makes one feel annoying and irritating.

A good point to ponder: Friends, Relatives, and families should not subject for exploitation.

If one of the main ideas of MLM is to earn money to someone's effort then can you accept that idea? Me? I just couldn't!

FREQUENTLY NOT-SO-ASKED QUESTIONS

1. Why are you so BITTER with it comes to Networking?
Answer: Sometimes being bitter becomes better. I used my analytical, logical and skeptical mind to promote quality information and be helpful as possible here. I have seen friends failed their duties as a networker and they just wanted to be hired by any company. That's one problem.

In my Clixsense, as of June 21, 2015, I already have exactly 2,644 downlines, but yet it does not much give me high revenue.

2. There are real and legitimate MLMs too. What are your assessments?
Answer: as my post suggests, I only stated what's wrong with the MLM, I am sure there is goodness with it. I have seen good MLMs, and I love their products too. But here, I am more concerned its wrong side rather than on its icy-coating side.

3. Should we trust you? You don't even try to join one MLM.
Answer:  Do patients doubt about the doctor who made a statement not to take cigarettes when He/She is not a smoke user? I am just logically and practically equipped with knowledge rather than experience and its practice.

4. Did you buy Products of MLMs?
Answer: I tried and admittedly, it is effective. The way I see it, it is the kind of goods I should have used. However, I still looking for alternatives and cheaper ones. :)

5. So you are suggesting us not to join any MLM?
Answer: I'm not suggesting, but it is your own personal decision that matters. If you have read above information and you want to join MLM. Yes. You can and take risks.

6. Since you put relationship morality issue here, did your friend invite you or sell you something?
Answer:  a lot. But I have my principle. They have too. They understand me. I understand them. Case-closed. Yeah, friends still.

7. Why you are posting the negative side of MLM?
Answer: To appreciate joy and happiness, you need to feel its problem. The problem with MLM is not seen. I would better call it as a "healthy discussion." Lastly, my titled posts say it all.

8. Your post is short of facts and sources
Answer: Just read my references below.

9. If you have given a chance, would you like to join part of the MLM?
Answer: Why not? As long as it does not exploit my friends and families. Anyway, I have my online extra money work – Blogging. At least one source of earning: Mabzicle blog.

10. MLM is a great opportunity. True?
Answer: Maybe, and those unemployed and students most likely fall for it. And in the long run, they all failed. The founders are laughing now.

11. Did you see many people are now the millionaire?
Answer: Well, I did see. In fact, they obviously have many connections. Congratulations! Can I get some spare money? Oh wait, I also see, bloggers and affiliate worker earn at least $1,000-$300,00k/month. Hence,  Online > MLM.

12. You are just bitter because you are a failure with MLM?
Answer: As the disclaimer says, I don't engage MLM except one — Clixsense, a free PTC site.

13. You are not EXPERT, you are just one heck blogger.
Answer: I honestly admitted it, but for that networker who does not admit what's wrong with their MLM. Then, this is a good indication. Research. One tip, don't underestimate a blogger for it is more knowledgeable than you even if you have experienced.

14. You just have NO money to join on MLM 
Answer: Good news! I have money to invest. Bad news: Not on MLMs. Why networker targets unemployed and Students, by the way?

15. Your post is generally wrong. Come, and we'll talk.
Answer: The only wrong here is its bad side of MLM, as the title says. Again, I have backup references to my claims. If you are enjoying good revenues and commissions, well, that's not bad!

References and inspirations:
Edited: February 03, 2017
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