Multi-level marketers look to prey on desperate consumers
Filed under: Entrepreneurship, Ripoffs and Scams
Writing on AllBusiness.com, home-based business guru Frank Ross talks about that special group of people that embraces the idea of a recession:
Everyone's talking the "R" word - Recession in the U.S. There is one headed our way, or depending on who you talk to, there's one already here. Most people fear recession, but one group that doesn't fear it is a handful of successful network marketers. In fact, some of them embrace recession.
It's widely-known that tough economic times are a boon to the recruitment numbers for multi-level marketing companies. But as I discussed last month, this doesn't make sense, assuming that network marketing is a bona fide means of distributing goods.
Here's why: With few exceptions, the products sold by multi-level marketing companies are very expensive compared with similar products distributed through traditional retailers. Network marketing and pyramid scheme expert Jon Taylor compared MLM-distributed products with other comparable products and found that products distributed through MLM are about 5 times more expensive, on average.
Here's my question for Mr. Ross: Why on earth would a recession lead to a new found appetite for premium-priced nutritional supplements and other products commonly distributed through MLMs? As I wrote before, the counter-cyclical nature of the industry would seem to indicate that network marketing success is not about selling products on their merits; it's about getting desperate people to buy products they can't afford in the hope of recruiting others to do the same so they can earn commissions. That's why it follows a completely different economic cycle than conventional product sales.
Everyone's talking the "R" word - Recession in the U.S. There is one headed our way, or depending on who you talk to, there's one already here. Most people fear recession, but one group that doesn't fear it is a handful of successful network marketers. In fact, some of them embrace recession.
It's widely-known that tough economic times are a boon to the recruitment numbers for multi-level marketing companies. But as I discussed last month, this doesn't make sense, assuming that network marketing is a bona fide means of distributing goods.
Here's why: With few exceptions, the products sold by multi-level marketing companies are very expensive compared with similar products distributed through traditional retailers. Network marketing and pyramid scheme expert Jon Taylor compared MLM-distributed products with other comparable products and found that products distributed through MLM are about 5 times more expensive, on average.
Here's my question for Mr. Ross: Why on earth would a recession lead to a new found appetite for premium-priced nutritional supplements and other products commonly distributed through MLMs? As I wrote before, the counter-cyclical nature of the industry would seem to indicate that network marketing success is not about selling products on their merits; it's about getting desperate people to buy products they can't afford in the hope of recruiting others to do the same so they can earn commissions. That's why it follows a completely different economic cycle than conventional product sales.
Recent Posts
- Where the jobs will be: Obama's green energy economy and you (12/01/2008)
- New York busts shady tax preparers (12/01/2008)
- Why I'm holding on to my CostCo card (12/01/2008)
- Hold your noses: Economy slashes plastic surgeons' business (12/01/2008)
- Tax Tips: Potential break for retirees (12/01/2008)
Reader Comments (Page 1 of 1)
2-09-2008 @ 2:01PM
hopflcd said...
Multi-level marketing depends on talented people, similar to people running conventional retailing businesses. Many capable people lose jobs, lose their businesses, etc. during recessionary times. They lack the capital to go into another business or cannot find an acceptable job, given their backgrounds and training. Many multi-level marketing businesses have a low level need for capital and allow these people to go into a new business. The failure comes when people think that it is not necessary to put in the many hours, the time and effort, and the perserverence, required to succeed. This is the same requirement for other so-called conventional businesses or jobs. Nothing comes easy but many have benefitted from the multi-leveled business. It usually has not come from selling people things they cannot afford. Maybe it is just getting people motivated to do something with their lives. Charles Hopf
Reply
2-09-2008 @ 4:34PM
Tracy Coenen said...
MLM doesn't depend upon talented people. It depends upon being able to recruit people to recruit people to recruit people..... And once those marks are recruited (to recruit others) you have to throw in a nice inventory packaged of high priced (and almost always average or low quality) products.
Recruit and frontload is all that MLM is about. Ask the millions of people who joined last year, worked their butts off, and only had financial losses to show for it.
2-09-2008 @ 2:52PM
Gary Mayer said...
My entire portfolio consists of penney stocks (not under $5.00 but under $1.00).
They were all on-line tips presented on the front page of MSN's or AOL's Money Page.
I am a CPA who investigated as much as I could but many did not reveal financial statements on the Web.
Only one stock (FRTW) Franklin Towers Silk, out of China, is selling for more than I paid for it. I bought at the 2007 low ($.11) and it's at $.28 now as of Friday, February 8th. I expect it to rise greatly over the next twelve months. I only own 4,000 shares so, even if it goes to $1.00 I make only $3,600 on an investment of $440.00 + $14.00 commission. That's about an 800% gain but in terms of dollars, what's $3,600 going to get me - a used car? But, if all my stocks went up 800% I'd have well over $100,000 in long-term capital gains. Fat chance? Yes. Even FRTW may not hit $1.00.
I also own 3,020 shares of a motion picture stock (BSEG) who produced 'Forget About It' with Burt Reynolds and Raquel Welch. It bombed in the east and Arizona only places it played. It's on video now but the company can't afford to promote it. They have two new films coming out: 'Babysitter Wanted' and 'The Mirror.' If they play nationwide the stock will zoom as long as they are well- promoted. 'Forget about It' was a good film with a great cast. Please rent it so the stock goes up.
As for the others, forget about it.
Reply
2-10-2008 @ 11:07AM
Janet said...
Interesting article. I don't feel the need to defend mlm or convince anyone it's a viable way to earn income. The one thing I will say is just like in traditional business, the business model drives the behavior in the field. So if all mlm companies are the same does that mean all traditional brick and mortar businesses and companies are the same?
Janet Napora
Reply
2-11-2008 @ 10:39AM
Catherine said...
I disagree with you. I'm a stay at home mom, and don't consider myself to be a talented sales person at all. I just like saving friends and family money on their home electric bill. People see that energy and gas is deregulating all over America and they jump on board.
It's just that simple.
Reply
2-16-2008 @ 2:32PM
hardulakl said...
I would have to agree with the author inasmuch as when there is a recession, many people find themselves without a job and having difficulty obtaining one. So they end up going for an MLM, which often isn't something that person would've done ordinarily.
Reply
2-17-2008 @ 4:00PM
J.R. Jackson said...
I totally disagree with this article.
I have earned more then $8-million in the last 15-years working the MLM and Network Marketing industry.
My blog at http://www.jrjackson.com teaches people the 101+ techniques and tools that I have used to recruit tens of thousands of people and market millions of dollars with of products and services.
MLM is like any other business. It takes hardwork and time to build a successful business.
J.R. Jackson
http://jrjackson.com
Reply
3-27-2008 @ 2:55PM
JR Watch said...
Of course J.R. Jackson, the guy who wrote (spammed) the comment above, "totally disagrees with this article".
He is a scammer himself, having been sued by the U.S. Government several years ago for running his own fraudulent MLM scheme known as Streamline International. Google it if you don't believe me. And then go to his website (he was kind enough to provide a link) and tell him what you think of people like him.
Reply