I know I am opening myself up to criticism for this post, but it's been on my mind and I really just want to put it out there.
I dislike the way multi-level marketing has been done by many companies.
I don't dislike multi-level marketers, mind you (well, most of them anyway). I just think that business model has proven destructive to many individuals and families.
Have I dabbled in MLM?
Yes. I had my first exposure to MLM in college when I saw a "Lose weight now, ask me how" button.
Then I tried drinking the aloe vera beverage that the company was selling and wanted to puke. I decided perhaps another line of work would be more appropriate.
As an adult, I got into an organization called Global Biblbe Network. Some dear friends told me about this wonderful many who was running the company whose primary goal was to send bibles to Russia. They choose MLM as the mechanism for recruiting people who would then multiply these efforts... all while earning a profit.
The man? Phil Piccollo.
Go ahead. Google him. It's quite entertaining.
Being young and naive, I signed up as a distributor. As in many MLM schemes, you are encouraged to purchase product in order to reach a certain level, thereby entitling you to increased commissions. Yes, I bought the product.
I then went about working with my upline to schedule meetings and recruit new distributors, so that they too could enjoy the benefits of the greatest thing since sliced bread.
And I was good. REAL good.
It was at that time that my wife noticed my natural gift for public speaking. I just knew I had the attention of the crowd and was able to sign up plenty of new recruits.
When Bibles didn't work, Phil turned to offering a shopping club as a new feature that distributors would be able to sell. This has been repeated so many times in MLM that it is a joke.
Needless to say, the company went up in flames and relationships were severely damaged. Interestingly enough, the one time my wife met Phil, she told me afterward that she didn't trust him.
I learned two very important things through this experience.
1) I should listen to my wife.
2) Even if the company is legitimate and the people behind it are filled with good intentions, MLM can be destructive and bring out the worst in people.
Here are some of the reasons I suggest people be careful before getting involved in MLM. Please note that I have participated in some internet-only MLM programs that do not require me to personally sell or solicit people. It's a completely hands-off participation, with the best ones not requiring any money. You can read more about my MLM experiences online here and here
First of all, MLM can be a breeding ground for scam artists and thieves. Since Multi-level marketing is often all about the lure of easy money, it's natural that unethical people would gravitate towards the opportunity to make a quick buck on the backs of those who can't necessarily afford it. It's just human nature.
This is bad for the unsuspecting individual who just wants to earn an extra $1000/month to get out of debt or who catches the vision of owning a fast car, a boat or a second home. There's nothing wrong with dreaming big and working to attain those goals. It's just that most people don't realize the sacrifices they will have to make in time, money and relationships to make it happen.
Next, many MLM companies require an up-front investment. They say that you should expect to invest in any business, and I agree with that. In fact, I preach that. But new distributors are often told to make an investment (eg: purchase the company's product) in order to qualify for a higher level in the food chain. How many garages are there still stocked with cleansers, vitamins, water filtration devices, makeup and other product that people purchased at high prices and were unable to sell at any price? Just check ebay. Look for companies that don't require big up-front investments!
In my business, and most traditional businesses, if you aren't happy with a product or service, you can appeal for a refund. I don't have many unhappy customers, but I guarantee you that when I do we bend over backwards to make sure all is made right.
That doesn't happen with MLM. You bought it? You own it.
Finally, the greatest reason that I am opposed to MLM in just about every form is that it destroys relationships. In many companies, new distributors are taught to first sell to their "warm market." That means the person who has been your mother, father, brother, sister, aunt, uncle, nephew, niece, employer, employee, friend or aquaintance has now become someone who sees you through the lense of dollar signs. The relationship that you have had can change dramatically as they seek to recruit you for the life-changing program they have gotten themselves into.
Of course, MLM depends on people using and manipulating their existing relationships in order to grow the pyramid. Why wouldn't you talk to the people you already know before you talk to strangers? Why wouldn't they want to experience the financial freedom that your program has to offer?
Unfortunately, MLM turns on greed in many people unlike anything I've ever seen. There is no greater way to destroy a relationship than to get in a bad business deal with someone. (ok, having an affair can also destroy a relationship quickly.)
I've seen it happen time and again. I've even seen it happen in the church, where well-meaning people seize an opportunity to do business (in the name of God, of course), and end up worshipping the almighty dollar. This is not a criticism of the church. On the contrary, I believe it is the same spirit that caused Jesus to turn over the tables and chew out the merchants who were selling in the Temple.
MLM breeds a cult-like mentality. People who used to engage in other relationships and activities no longer pursue those relationships. Instead, they give 100% of their time and efforts to their distributorship, attending meetings and always on the lookout for new suckers, er, recruits, to sign up under them.
Bottom line? I believe MLM can bring out the worst people, and the worst in good people. Good people get hurt time and again.
Can you make money in a multi-level organization?
Absolutely.
Do many people succeed?
No. The system is not set up for the majority to succeed. Because it is pyramid in nature, those at the top will generate the most money while depending on those at the bottom to foot the bill.
Want to research MLM some more? Here's a site with great articles and links to resources.
Are there a handful of solid multi-level marketing companies with ethical people at the helm? Yes, I believe there may be a few. In fact, I am involved in some organizations that do not require me to put up money for inventory on product and that don't require I sign up my friends and family to be considered successful.
Are there well-intentioned MLMers who really believe in their business and the good that they are doing? Certainly.
I don't mean to paint any one person in a bad light (except Phil Piccollo, who manages to do his own painting...) There are always exceptions.
What are your thoughts? Flame on!
It's Del.icio.us!
Furl It!
September 12, 2007 12:45 PM
Many of the things you say are true. Many are also false and you used too broad of a brush to paint your picture.
Because of your influential position, I think you have caused undue damaged to the work of a lot of good people. I am unsubscribing from your list.
September 12, 2007 12:58 PM
That's nonsense, Tom. I shared my experience and my opinion of MLM. If you want to talk about undue damage, talk to the 95%+ who have lost money in a pyramid scheme.
September 12, 2007 01:50 PM
I guess I should have read the first comment and your reply.
Yes, perhaps 95%+ who join an MLM company have lost money. And perhaps 95%+ people who start their own business loose a lot of money. That's life. At least some people are willing to at least attempt to better their lives rather than sit home, in front of the boob tube sucking down beers and eating potato chips.
What is needed is a way to help those who want a better life to experience more success and MLM is a better business model than most other business models.
I have parted with thousands of dollars to scamming Internet Marketers as well as Internet marketers who weren't scammers necessarily, but just devious in how they conduct business. Yet you won't hear me bad mouthing Internet Marketing, especially if I had a lot of influence.
It is good that you have a place for comments, so that people reading your thoughts will at least have the option to read what others think.
Unfortunately most will not read the comments section and will accept your one-sided, poorly thought out opinion and take it as fact.
Joel, I am sure you mean well and I am saddened that you had such bad experiences with MLM. However, I do not think this was the vehicle to use to voice your opinions in such a manner.
September 12, 2007 02:11 PM
Well I have to disagree with you Gary. This is exactly the vehicle that Joel should use to voice his opinion, it's HIS Blog! We all have opinions and that is what blogs are for.
As for the subject at hand, I like Joel feel the same way he does in that a good many of these are dangerous, that doesn't mean there aren't good MLM programs out there and that they aren't doing phenomenal things.
I've been involved in several MLM programs over the years (I won't mention names here) and in each case I lost money and relationships suffered.
I think Joel is doing what he thinks is right and that is to warn people of their inherent danger, for that he should be applauded for stating what he believes.
Enough said...
September 12, 2007 06:25 PM
Michael, you are right in that it is Joel's Blog and he can say whatever he wants. I did not mean he shouldn't.
What I was attempting to communicate is because of his celebrity status on the Internet, he needs to be a little more careful in how he presents his views.
It is interesting that he is promoting MLM in ads at the top. (Hmmm, I wonder if he gets a commission on them?)
Also I gave an earlier comment that did not get placed on the comment board. This is what it said:
Joel, you presented some very interesting opinions. Unfortunately, your thoughts are mostly one-sided and not representing the full picture.
MLM is basically a pyramid as are almost all businesses. There are people at the top making the most money and then there are the masses who do most of the work. Name a business that isn’t like this.
MLM is destructive, to the extent that the people in it are destructive people. Not all MLM companies ask you to sell to your family and friends. Not all MLM companies require you to buy products monthly.
Some MLM companies even offer guarantees. If you want out within 30 days you get your investment back. Some even guarantee that you will earn $6,000 your first year or they pay you the difference.
Are some MLM companies a scam? Absolutely. Are some Internet marketers scam artists? Absolutely.
In fact, we could compare MLM with Internet Marketing or any other business model and we could arrive at the same conclusions. It just depends on the slant of our writing.
Everybody was born to be wealthy and to enjoy a happy fulfilled life. However, somewhere along the way most of us lost that dream and chose to settle for mediocrity.
Fortunately it is never too late to change things around. The first thing you must do is to accept responsibility for where you are in life and not to blame anyone else for your current state.
The second thing you must do is to understand and believe that you will never truly be in charge of your life by working for someone else. In the USA everything is set up to reward the business owner. So in order to be in control of your life and to obtain the wealth you deserve you must become a business owner or at least realize and act like a self-employed person.
However, being in business by oneself is very hard and can be very expensive. That is where TAG comes in. We help you to be in business for yourself and not by yourself. And that is what will make the greatest difference in your success or failure.
Unlike most business models, we are set up to show and help you to make a smooth transition from being a W-2 wage earner to a 1099 business owner. This simply means you can start out part-time, using your current job to support you while your business builds up to replace your job’s income.
Yes, this does mean a lot more work on your part and some sacrifices for a short time. This is why most people choose to stay broke and controlled by others. However, if you are the type of person like me, you hate being told what to do, when to do it and how to do it. In the long run the freedom you will experience will be well worth the short time sacrifice you have made.
September 12, 2007 08:00 PM
you say you dont like MLM but you are offering HyperVRE Gold which works exactly in the system of MLM or network marketing, for me looks that like a piramid. I dont mean to offend you, thats just a notice. Thanks a lot for advices in your book.
September 13, 2007 09:11 AM
i still remember when my cousin come to my house to selling herb.. my father buy it with the high cost because of trust him and testimonial. Now we labelled him as a thief,ohh sad.
September 20, 2007 06:16 AM
Some women can do Avon or Mary Kay (or others)because the brand ID is more important to customers than the fact that it is MLM. BUt I believe that most non and ex MLMers hate mlm, so you ruin your credibility. Plus, some of the most boring and dumb people I've ever met were at mlm hotel meetings!
September 25, 2007 07:57 PM
MLM is the best business opportunity!!! I love this type of business! I made a decision to start a MLM called Nikken and it was the best decision I have ever made in my life. It truely was. I will preach this to the very end of my life!! Nikken is a very professional Japanese research and development company that was founded over 30 years ago. The integrity in this company is so amazing and the support is truely amazing! My life completely changed for the good. Last month I received a check from Nikken which totaled $3,200!!!!!!! I am working a full time job and doing Nikken on the side as part time. I am making much more with network marketing than my full time job!!! The people I have met have been so amazing!!! I am proof that a MLM can be very rewarding and very successful!!! Remember I just started a few months ago!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
February 14, 2008 06:58 PM
And there's something else, Joel, that you did not include in this well thought-out and written article.
When you're with an MLM, you're not yourself - you're merely a person wearing the company face. You're the fruity juice or the vitamins or whatever. You are the company brand, and you pay for the privilege not only by having your credit card banged every month for product, but also by having your credit card banged for sales tools and perhaps even leads.
Nice, isn't it? The company doesn't need to advertise because they do it off your hard earned money.
Those who do the best brand themselves as a trainer above and beyond the company.
That's my rant in reply to your rant.
By the way, I loved the Next Internet Millionaire panel at JV Alert Live, and it was great to meet everyone.
I'm ready for the arrows that will no doubt come my way.
Oh - and I love the new look of the blog.
The Story Lady
InnerSpace Author Interviews
February 23, 2008 04:56 AM
Hi Joel
You are absolutely right. there is just no winning for everybody in MLM. There are people making tons of money but always at the expense of someone trying to get the top.
Regards
Christo
April 11, 2008 12:43 AM
Joel,
What a way to bash my dreams. It is because of MLM I got into Internet Marketing. I started with a MLM selling websites. Then I became an Internet Marketer and let another group suck me dry. I actually made a lot of money in my MLM business. Lots more than my IM business. It's still growing. I am a virtual assistant and I use a MLM company to help my clients build their relationship marketing. Heard of Sendout Cards. One of the good guys. Their compliance is so strict we have to have approval for ads, presentations and websites. They want to be around a long time.
I actually was going to ask you to become a card sender. Gosh, you blew that out of the water. I actually sent you 2 cards and you didn't even email me a thank you.
I am very familiar with Phil Piccollo. I was in a business and as soon as Phil decided to join, I left. He leaves destruction every where he goes.
The average corporation is build on the MLM principal. If you're not on top than you will get paid for being on the bottom, just enough for you to keep going.
One thing, I find that IM and MLM have in common, they never sell the whole story. Just pieces at a time until it is obsolete, then they give it to you.
My problem in all this is my beliefs won't let me deceive people. When I start to feel uncomfortable, IM or MLM, I quit. My salvation is more important to me.
That's my rant for today.
P.S. Jesus was an MLMer. He had a frontline of 12. He just set out to bless every one who believed.
April 11, 2008 01:42 AM
Hey Saundra,
I wasn't trying to "bash your dreams". Honestly, I don't believe that is possible. If you have a dream, no one should be able to bash it. You should just pursue it with all your heart.
Thanks for the Sendout cards. I get them every week and I just don't have time to respond to everyone that sends them to me. I haven't looked into the model much, but it appears to be pretty decent.
SOME Internet marketers don't give you the whole story. I do. I've nothing to hide and when I offer products or services, I put it all out there. Are there scam artists? Absolutely. Anywhere there is money involved you will find snake oil for sale.
Are all MLM companies bad? Nope. Like I said in the blog, I am involved in a couple. But the model in general rewards those at the top and not those who get into the program later in the game.
Anyhow, glad you are engaged in the discussion and wish you the very best with your efforts.
May 26, 2008 02:29 AM
Personally i hate all and anything to do with MLM, only the people at the top ever win or gain any benefit and often when marketed the details are misleading and often inaccurate, personally i will never invlove myself in MLM
July 12, 2008 04:35 PM
This is kind of an old post, so maybe nobody'll read this. Anyway....
I've been involved with several MLMs. A couple of them I *really* should have known better - but I was really having financial difficulties and that can sometimes blind you a bit.
The thing you mention about MLMs ruining a lot of relationships is definitely one of the main problems with MLM programs. A very large percentage of people involved with MLMs have their "sales person" hat on way more often than they realize, and their family/friends get tired of it pretty quickly.
Another huge problem with the business model is the lie that it's a way to cut costs by cutting out the middle-man, thereby benefiting the consumers. The way most MLMs are structured, with either unlimited levels or a very large number of levels, it's simply impossible for them to even come close to competing with similar products from companies using traditional advertising. And to any of you who would challenge that statement I challenge you to do the math...
Many MLMs focus mostly on recruiting new members, which makes them pyramid schemes, and thus illegal. The definition of a pyramid scheme is an MLM structure where 50% or more of the revenues come from members instead of from customers. So when considering joining an MLM make sure the majority of the revenue comes from external customers! Otherwise it's doomed to fail - and that's simply a mathematical fact.
After many years of experience with MLMs - for the most part bad - I am definitely DONE with that business model.
A two-level affiliate program is as far as I'm willing to go. Getting paid for each referred sale is completely fair. Getting paid a percentage of sales made by affiliates you yourself recruited is also, to a certain extend fair. But from there on it *really* gets into the grey area and very quickly turns into something that costs the company money instead of making it money.
People selling MLMs compare them to normal companies (boss at the top, middle management etc.) and sometimes comparing them to franchises. However, if you look a little closer at these different business models you'll quickly realize there are quite a few key differences which make these "normal" business models far more likely to succeed in the long run and most of the time also more fair for everyone involved.
And those of you who think being part of an MLM isn't virtually the same as being an employee of a company are kidding yourselves. Seriously. Think long and hard about it - and try to be objective...
Hmmm... I intended to throw in my 2 cents, but it seems I threw several dollars in here. Sorry about that - but I hope my comments have been of some help to people considering MLMs. Probably offended someone in the process though - and I'm sorry, but I'm just not going to appologize for that ;o)