[Dale King]

Multi-level marketing (MLM) or network marketing programs are a method of selling goods or services through distributors. These programs typically promise that if you sign up as a distributor, you'll receive commissions for your sales and those of the people you recruit to become distributors. These recruits are referred to as your "downline."

Some multi-level marketing programs are legitimate. However, others are illegal pyramid schemes. In pyramids, earned commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors--not to consumers in general. The underlying goods and services, which vary from car leases to cosmetics to vitamins, serve only to make the schemes look legitimate.

Joining a pyramid is a risky proposition because the vast majority of participants lose money to pay for the rewards of a lucky few. Most people end up with nothing to show for their money except the expensive products or marketing materials they're pressured into buying.

If you're thinking about joining what appears to be a legitimate multi-level marketing program, take time to check out everything about the program. For example:

What's the company's track record? What product does it sell? Does it sell products to the general public? Does it have the evidence to back up the claims it makes about its product? Is the product competitively priced? Is it likely to appeal to a large customer base? How much is the investment to join the program? Is there a minimum monthly sales commitment to earn a commission? Will you be required to recruit new distributors to earn your commission?

Be skeptical if a distributor tells you that for the price of a "start-up kit" of inventory and sales literature--and sometimes a commitment to sell a specific amount of the product or service each month--you'll be on the road to riches. Many times participants spend a lot of money to "build their business" by participating in training programs, buying sales leads or purchasing the products themselves. Far too often, their own purchases are all they will ever see for their investments.

Also, if you decide to become a distributor, you are legally responsible for the claims you make about the company, its products and the business opportunities it offers. That applies even if you're repeating claims you read in a company brochure or advertisement. The Federal Trade Commission advises you to verify the research behind any claims about a product's performance before repeating those claims to a potential customer.

In addition, if you solicit new distributors, you are responsible for the claims you make about a distributor's earning potential. Be sure to represent the opportunity honestly and avoid making unrealistic promises. If those promises fall through, remember that you could be held liable.

The Federal Trade Commission (FTC) suggests that you use common sense when evaluating a multi-level marketing opportunity and consider the following tips before you make your decision:

1. Avoid any program that pays commissions for recruiting additional distributors. It may be an illegal pyramid.

2. Beware of programs that ask new distributors to purchase expensive inventory. These programs can collapse quickly--and also may be thinly-disguised pyramids.

3. Be cautious of programs that claim you will make money through continued growth of your "downline"-the commissions on sales made by new distributors you recruit--rather than through products you sell.

4. Beware of program that claim to sell miracle products or promise enormous earnings. Just because a promoter of a program makes a claim doesn't mean it's true! Ask the promoter of the program to substantiate any and all claims with cold, hard evidence.

5. Beware of shills--"decoy" references paid by a programs promoter to describe their fictional success in earning money through the program.

6. Don't EVER pay or sign any contracts in an "opportunity meeting" or any other high-pressure situation. Insist on taking your time to carefully think over your decision to join. Talk it over with your spouse or partner, a knowledgeable friend, and an accountant or lawyer.

7. Do your due diligence! Check with the Better Business Bureau and state Attorney General's office about any program you're considering--especially when the claims about the product or your potential earnings seem too good to be true.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.


Dale King is the owner of the new Internet marketing website, GuruKnowledge.org

[Roxny79]

Hi Dale, that was very informative for people who are curious about MLM. Just wondering, are you involved in an MLM?

[Dale King]

No, I definitely DO NOT do MLM.

I'm quite happy and successful with the businesses I already have.

Dale King

[tekmoney]

I can't read the thread right now, but as a side note:

One of the best audio books I've ever listened to is Conversations with the Greatest Networker in the World. The guy is in MLM, but if you ignore that crap throughout the series, you can pick up some incredibly good fundamentals in sales.

I am not a fan of MLM but I recommend that audio series to anyone that has to talk to people throughout their day.

[solomonsmine]

To address all this right now would be very time consuming, so I'll just caution with regards to how we define a pyramidale wrote:
"Some multi-level marketing programs are legitimate. However, others are illegal pyramid schemes. In pyramids, earned commissions are based on the number of distributors recruited. Most of the product sales are made to these distributors--not to consumers in general. The underlying goods and services, which vary from car leases to cosmetics to vitamins, serve only to make the schemes look legitimate. "

I believe a Pyramid is better defined as having no product or service that is tangible or marketable to the general public - Thereby creating a scenario where the money must always come from 'distributors' and more specifically must be provided by a steady supply of new recruits in which the money consistently flows to the top or upward and the new recruit can never out rank or out position the person above. My objection is to the idea that if the business is predominantly supported by distributors who are themselves customers thereby creating an environment which leads to rewards for recruiting - that the business is then illegal or pyramid in nature- that assumption would be misguided as proven by opportunities like Shaklee, Meleleuca, 4life, Fortune Hi Tec, or dare I mention Amway - these or opportunities where most purchasing is done by individuals are also distributors or at least can be without further obligation and they are certainly legitamate ventures with long and reputable track records.

MLM gets painted with a large brush because 95%+ of people who engage in it Fail to earn more then they spend - but this is simply an extension of the mathematics that are present in all avenues of our competion driven societies i.e 5% of the people control 95% of the wealth. It is individual choice that determines which group we end up in. Unfortunately many of those who stay with crowd like to blame and defame those who joined the 5% -which is the very negativity that led to their failure in the first place!

And Dale given your Business I would think that you have a huge volume of MLM/network marketers as clients? And as such would consider a more limited definition of Pyramid and whether or not recruiting should be rewarded - which in the corporate world has an entire sector known as head hunters but I could go on an on....

[Dale King]

Solomonsmine wrote:
Dale given your Business I would think that you have a huge volume of MLM/network marketers as clients?

Actually, Ken, you're absolutely right, I do have a lot network marketers as clients.

A few of them from this very forum.

And without exception, each and every one of them is trying to get out of network marketing.

Dale King

[SSM]

Dale you coulda summed up your post by writing:

Title: The Truth About MLM

Body: They are stupid!

now i know that seems primative and perhaps a little childish, but seriously, they're stupid. I can't believe how many of the MLM ppl get told they are "starting their own business for $50" (believe me, I've heard the pitch plenty of times). Then they go on google thinking hey they are a big entrepreneur now because they spent $50 and started a business and find YE...then we have to re-explain it all again.

[Envydia]

Very informative and useful knowledge. I personally don't or ever will use them for those very reasons.

[solomonsmine]

Originally Posted by Dale King

Actually, Ken, you're absolutely right, I do have a lot network marketers as clients.

A few of them from this very forum.

And without exception, each and every one of them is trying to get out of network marketing.

Dale King

Much the same as Truckers want to hang up their Keys, or real estate investors want to sell enough property to buy that beach house - it is called retirement or being done. You know between my business partner and I we are exceeding 5 figures per month from our primary MLM. And we have built that in a matter of months not years. So do I want out - well I want to accomplish a good many things that do not involve MLM, i.e houses for pastors in Honduras, orphanage in Guatemala, time on the beach with my 3yr old and 5 year old. So I also want out of MLM but only once I have moved enough capital from it to real property and other interest producing annuities. And that does not mean i will not maintain my MLM interests, because the interaction, recognition and seeing other people succeed are all worthy ideals. What I do understand though is that it is not for everyone, I also run a drywall company but you could not pay me enough to be a plumber, a cab driver or an assembly line worker. But I know some successful plumbers, some friendly cabbies and happy laborers. What you do with traffic generation and marketing education fills an important role and is a worthy pursuit. MLM as a broad and carefully regulated category(their or more traffic generation/exchange scams then MLM scams) should be given its fair consideration it has changed alot of lives for the better. And I do not know anyone who has lost the farm because they invested between $15 and $1500 dollars trying their hand at network marketing, but I do know some who have lost property because their retail location went under, or construction firm failed or NASDAQ deal didn't fly. I'm not upset - just trying to represent the other side of this BIAS, thats all.

[EntrePR]

My two cents:

I actually worked for a brief period as a programmer for an MLM a few years back. This was a 600 mil/year company and comparatively legitimate.

I can say from firsthand experience that these companies play by a different set of rules. They have absolutely no respect for their customers. They charge absurd amounts ($12-$25) for what is essentially 12 cents worth of product. They are also very cocky about the fact that their customers HAVE to buy a certain minimum amount every month to stay in the program.

While every company is about profit, this one reminded me of the Enron tapes when it came to their attitude towards their customers. I have also had an (unauthorized) in depth look at what their average client is actually making from their downline. 90% at least were making less than their personal monthly commitment. ($75/month). Less than 1% were making anything resembling a real income. Admittedly though, the top producers were raking it in. I think that had something to do with the Pyramid shape though.

That experience has put me off MLM's for life.