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What's Wrong with MLM or Networking?

Are you willing to earn huge amount of money in as quick as you can? Well, think again.

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 do not like 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 has a slight difference from those statements, I doubt my instinct still tells me it is an MLM.



MLM or networking
MLM
The image was taken via https://gallery.foreverliving.com/gallery/FLP/image/Marketing/MLM3.jpg
My Honest Reply
For the conversational and engaging discussion, I will ask back with these follow-up questions:
  •  How much would be the registration fee?
  •  Or How much would it cost?
When they heard it, sometimes, they will change the topic, and they will not answer directly my inquiry. At such point, I know there is something fishy about it. Of course, I will not say it is illegal directly.

In this post, the wrongs of MLM (Networking ) are mainly cited.

The storyline...

Networker = people.

Some of the networkers will give valid reasons for their MLM business. One reason is to EDUCATE people. Well, it is no problem at all but.

At the back of my head, I reluctantly ask myself? What? How?

I understand that these people have gained knowledge about their business model and shared it to their prospects.

And then...

Some of them also proudly claimed that their business will help other people by joining. I am skeptical about that phrase.

Helping other people to achieve their dreams by joining their MLM? Or these people just helping them to their sucess? Which is which?

Interesting post: How I Earn Money Online

Anyway, a long time ago, at one point, I experienced and joined in a small seminar in one networking company. It was quick talks. At first, I thought and screamed — WOW! But at the end of those cheesy statements, I highly doubt if I could really get those promising huge amounts of money that they presented.

Honestly, I am a pessimist type of person (negative-type, always think something bad will happen but look always an alternate solution about the terrible event) so it is kinda difficult for me to believe. As skeptical in nature, my philosophy is to logically never believe without pieces of evidence.

Thankfully,  there are good benefits to being a negative one.

Did you know that being a negative thinker has a positive impact 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 and understand that it is a collection of other author's book, scientists and psychologists studies. Hence, found it useful.

In his book, I learn that being a Positive Thinker (optimist one) is better than being a Negative Thinker (pessimist one). But along the story, a pessimist often survives; and plans every next move to its unsolicited failure than optimist people who will face problems.

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

Let me add this disclaimer: I am not in any way part in MLM (Multi-level Marketing) company except with ClixSense and other Online Opportunity that features a referral system.

This post is not concerned about how good MLM is. There are a lot of better MLM companies out there too.

This post focuses on rather what's wrong with MLM. I am writing it for educational and research purposes. It aims to give light especially for those beginners in the business.

For starters, ClixSense is distinct in any way to other MLM companies. Clixsense is a FREE type of service which means no registration fee as compared to other MLM company.

MUST Read: How to earn money with ClixSense

Experience with ClixSense - PTC networking-type

Since joining the ClixSense – a PTC site which offers a similar business model like referring other people – I want to share with you the OPPORTUNITY to earn bigger revenues by doing Mini Jobs and answering surveys.

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 would talk about. As a matter of fact, more people have already been 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 from their employees(networker) to the people(Customer or potential prospect).

Multi-Level Marketing
Image: http://spotcard.co/wp-content/uploads/2015/05/5.jpg
Some legit MLM companies have been endorsed by known celebrities like Donald Trump, Robert Allen, Rober Kiyosaki, and much more.

So if it was endorsed by these popular people ( millionaires ) then what's wrong with it?

Before that, let me give you some facts and introductions:

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

With the idea of recruiting other members, it is mostly considered as Pyramiding. In a legitimate MLM company, commissions are earned ONLY on the sold products or rendered services.

But here, we often see other companies adding a creative marketing strategy ad to attract new prospect people to sign-up (registrations are expensive, why? Probably the workforce involved in creating those products) with reward commissions to the members (uplines) who recruited them (downlines).

If you are a customer (the buyer of a product or render service), then you are buying and paying to the royalties of the uninvolved distributor layers. But you will not care about these layers anyway.

That's merely the reasons why their products are way too expensive (well, others will not admit it) because its system is shared with other layers of the distributor levels.

Some MLM Compensation Plans

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

1. MLM: Law of its Supply and demand?

One good thing to consider is the MLM's supply and demand law.

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.

Fortunately, in MLM, there is no quite a big problem with the supply-and-demand because it sells products which people roughly need (health products) and people want like Beauty products.

In this case, the demand increases yet the supply remains unchanged, which ideally mean a shortage occurs. To anticipate it, MLM company has already done producing health product supplies.

So the idea of whether demand decreases, the supply still remains unchanged.

Though some MLM will make more products, which will result only to a surplus (which is not good) and the increase of members recruiting other prospects will occur (certainly at that point, no one will be recruited yet the product's PRICE is always too expensive).

If you have noticed, registrations are quite expensive, because it is shared with its upline at different levels. Yes, it is well-distributed in some concentrations in a pyramid model.

I was once told by a manager of an MLM company that even if our economy sucks and that some people are poor, still, these people will expend money for their beauty and health maintenance even if they will pay for it for the rest of their lives.

Another similar modern idea, "Everybody needs to eat." Just analyze and imagine this, a  popular food chain ( like Mang Inasal) will open 24/7 to cater the customers.

You see, you will ask these yourselves:

At day time where there is a little number of customers, how will Mang Inasal afford to pay employees salaries and its electricity and water bills? Is it feasible then to make it 24/7?

This must be considered too.

In short, demand is the problem here. If you apply it to the food chain business, it is slow-death bankruptcy. A  better company has already been considering supply and demand.

More MLM companies do not care about these factors.

Please consider also that MLM has a tough competition of products. Yes, there are a lot of MLM out there. How will a new MLM compete for its expensive products to the company that is already established a name?

MLM said No worries. To overcome this scenario, some MLM companies used a Special Marketing Strategy like Networking techniques to give a promising reward for those recruited members.

Thus,
More recruited members equal more sales equal advertised products;

2. MLM: the so-called Innovation?

Members will say MLM  or Networking is innovative. Well, certainly not!

MLM is not new, not for me though, 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 they are dealing with. But I noticed the earnings per month. In one MLM company, it has claimed to be whopping to earn roughly 50k/month. Seriously? Well, not possible though and I don't blame my family members will get attracted to the amount earned(Now they are inactive about it).

I am not even excited with the huge amount of money earned by a single networker. Don't know why. Probably, I just hate to sell products, and I am terrible at persuading people. (sigh).

Fact is:
MLM is no longer claim as a new and innovative business model. This type of activity has existed for past a few years ago –  and most of the MLM those timelines had failed yet still now, there are more MLM created again with some various new systems and names and creative marketing strategies.

With the slight tweak of its failed business system,  no way it can be called innovation because, in the first instance, its model is the same idea – to sell products and recruit members.

3. MLM: Produce Perfect Product?

I heard some Networkers proudly claimed that their products were excellent and 100% effective to improve well-being results.

However, one quick question:  if their products are entirely the ULTIMATE PERFECT one, then why it needs to use a "Special Marketing Scheme like MLM?

People just buy without registration or being a member.

Are the promising results merely a sugar-coated to hide its real intention that is to exploit others to engage in the pyramid scheme?

4. MLM: Recruit Limitation and Saturation

MLM offers a significant expansion of its own matrix. There are so many ways, one technique is to invite and sponsor new prospects, meaning the member will pay for those new recruits.

Now, the problem will arise, what if other people in the city have already been a member with another MLM company or if not, they already been a member since then? So a member upline will venture to other places to just to attract new prospects using its PITCH motivational statements. Some places have less population, and it is a problem.

So to fix it,

To solve the problem with the recruit limitation issue, the MLMs will restrict the number of people to sponsor. If you notice, some members will just invite two recruits only (called a Binary system.)

The new problem will surface, it is called a geometric expansion problem until there are no available prospects in a specific area.

5. MLM Presentation

The most common method to attract potential recruits is by showing a slideshow with cheesy presentations of personal testimonial, educational videos, and other promising data 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."

If you are like joining in a seminar, it more convincing phrase "Most of it fail, " and I will say,  you do not state most of the failures about it: "But not with you Mr. Speaker, a.k.a Mr. recruiter".

6. MLM: Products VS Recruits

If you are a networker and just focused on recruiting only, then you will suffer difficulties. Since MLM promotes and sells its products, it should be work that way — selling goods, not merely focusing on recruitment.

The problem here is when a member mostly focuses on building his/her networks, he/she will be at #4 situation.

7. MLM: Moral and Ethics

Most of the networkers will say that their MLMs help and educate other people. Yes, it may be true, but their videos and testimonials are way too cheesy to comprehend, and it is naturally appealing to greed and materialism (some show cars to show off their earnings).

Motivational speakers likely show how a member gets a Mercedes, Ferrari, and other expensive cars, just to attract and bait new recruits. And always state some phrases: It's a dream! It's a once-a-lifetime opportunity! As they always say.

Of course, if you need money badly, then chances are, you'll fall for it. Ironically, before you earn money from their MLM company,  you need money to pay for registration first.

Sad, the new members will loan money just to pay for the registration fee. My schoolmates had already mortgaged their smartphones because they cannot cope up the problem.

The morality issue can be tricky to discuss. Sometimes, members will exploit their family, relatives, and friends for their MLMs. I  know someone already invited a member of the family to join.

Will discuss in the Relationship issues.

8. MLM: You have NO choice

Yes, once you are already joined and invested, you have no choice but to interact and engage every meeting. It is quite challenging and yet expending money and time. You have no choice, you are going to be "MOTIVATED" to PITCH your family because you cannot deal with your friends. 

Are this pitch member do for materialism? "Do you wish to be a salesperson for materialism?"

9. MLM: Be your OWN boss

This part is appealing, Be the BOSS! But in reality, you have your own BOSS – your UPLINE.  You are a BOSS if you have downlines too. Checkmate!

10. MLM: Relationship Issues

One good and logical reason why I don't really like MLM is that it exploits the relationship. There is nothing wrong with building your business with families and friends. But if one networker benefitted from the efforts with its upline(family and friend) then, that is the big issue.

You are just successful because of someone's effort, you exert effort but your downlines do dirty works, more efforts in the process.

Questions like Friends a target to be a prospect? Or Mother is a new recruit? 

In my own perspective view, some prospects are just SHY to yes No to their member friend. Also, some recruiters are aggressive where they feel annoying and irritating.

Better point to ponder: Friends, Relatives, and families should not subject to exploitation.

FREQUENTLY NOT-SO-ASKED QUESTIONS

1. Why are you so BITTER with it comes to Networking?
Answer: Sometimes being bitter about it is good. I will use my analytical, logical, and skeptical mind to promote quality information and defeat loss of income and morality. Some of my friends already a failure as a member of his/her MLM, and just wish they were at the establishments instead.

2. There are real and legitimate MLMs too. What are your assessments?
Answer:  I only stated what's wrong with the MLMs. I see better MLMs too, and in fact, I love their products. But here, I am more concerned about its mistakes rather than on its shadow earnings.

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 that Doctor is not even a smoke user?

Don't wait for mistakes to happen in your life to learn something, it's not a smart way of living.

4. Did you buy Products of MLMs?
Answer: Some are admittedly effective. But there are always cheaper ones, and need not become a member just to buy the product.

5. So you are suggesting us not to join any MLM?
Answer: I am giving information that might affect your decision-making, but the final call still with you.  Maybe you love to take risks then, you can join any of it. 

6. Since you put the relationship morality issue here, did your friend invite you or sell you something?
Answer:  A lot. But I have my principles and they respect it. Case-closed. Yeah, friends still.

7. Why you are posting the negative side of MLM?
Answer: To appreciate total happiness, you need to feel its wrong side of it. Most problems with MLM are not discussed. I call it a "healthy discussion."

8. Your post is short of facts and sources
Answer: I have ultimately great sources about my topic being talked here. You can check below.

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

10. MLM is a great opportunity. True?
Answer: Well, it is true, when a product is being sold or purchased, not merely on recruiting other prospects. Some will fall for it, those unemployed and students.

11. Did you see many people are now the millionaire?
Answer: Well, I did see. Some of them are the top-tiers, founders, and pioneers.

12. You are just bitter because you are a failure with MLM?
Answer: I do have so-called networking with Clixsense, a free PTC site. But referring will just earn a cent.

13. You are not EXPERT, you are just one heck BLOGGER.
Answer: Well, while it is entirely true that I am not expert of it. However, I have researched this topic with great sources. It is like making a thesis type of post.

14. You just have NO money to join on MLM 
Answer: I carefully manage my expenditures. Most of the MLMs target students and unemployed too.

15. Your post is generally wrong. 
Answer: All my claims are supported by references. Check below are the references for further study.

Thank you.

References and inspirations:
Edited: July 29, 2019
Name

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Mabzicle: What's Wrong with MLM or Networking?
What's Wrong with MLM or Networking?
Are you willing to earn huge amount of money in as quick as you can? Well, think again.
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Mabzicle
http://www.mabzicle.com/2015/06/bad-side-of-mlm-aka-networking.html
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