What's Wrong With Multi Level Marketing

Discussion in 'Network/Multi-level Marketing' started by forestmarie, Sep 21, 2008.

  1. forestmarie

    forestmarie New Member

    After a few years of networking, I've read a lot of interesting critics attacking MLM. Some said a lot, some said little, but I came across one today that was mostly pretty poor and disgusting. If you've been in the game long enough, you've heard all these arguments from a high level. Dean Vandruff "attempts" to give them substance ...

    and in the process comes out looking like an MLMer himself that failed.

    Clearly this article was written some time ago, so I'll let you guys sound off on it. I'm not going to quote all of the pieces I can reply to as just about every sentence he's written. You can see the article yourself at http://www.vandruff.com/mlm.html

    Here's his summary of "What's Wrong With Multi-Level Marketing"

    • MLMs are "doomed by design" to recruit too many salespeople, who in turn attempt to recruit even more salespeople, ad infinitum.
    • For many, the real attraction of involvement in multi-level marketing is the thinly vieled pyramid con-scheme made quasi-legal by the presence of a product or service.
    • The ethical concessions necessary to be "successful" in many MLM companies are stark and difficult to deal with for most people.
    • Friends and families should be treated as such, not as "marks" for exploitation.

    And some quotes...

    We will look at why MLMs can never equalize into profitability the way companies in the real world can, so that the result will be that the organization as a whole cannot, even in theory, be profitable

    This is an uneducated comment. Not all companies in the "real world" are profitable. Most of them go under and struggle. His argument is the market can become saturated. But even the PS2 is still selling well. Additionally, there is always new product lines and service lines to introduce.

    ...Other, larger MLMs have survived by hiring large batteries of attorneys to ward off federal prosecutors, even bragging about the funds they have in reserve for this purpose.

    In other words, MLMs are only surviving because of legal protection. Ignorant statement. All companies hire a legal team. Period. It's good business.

    The unfortunate "distributor" at the bottom is the loser, and once this becomes apparent beyond all the slick videotapes and motivational pep-talks, good people start to get a bad taste in their mouths about the whole situation.

    Where is the rule that states all distributors join via a slick videotape. And who is really at the bottom? If I bring in 10 people, am I not at the bottom anymore? This entire line just strikes me from someone who has the philisophy that he's entitled to something :roll:

    Seeing the disastrous end of market naivete' in Russia should help clarify the fundamental problem with the MLM approach. In the real world, the profit of a company is directly related to the skill and prescience of the "hand" on the "supply knob," so to speak. In the USSR, that "hand" could not react fast or accurately enough to market realities through the best efforts of the bureaucrats.

    With MLMs, the situation is much worse. Nobody is home. Even the Soviets had someone thinking about how much was enough! If the bureaucrat in Russia was having a hard time trying to play Adam Smith's "invisible hand" in setting the supply level in the Soviet Union, then an MLM "executive" is in a truly unfortunate position. Not only is there no one assigned to make the decision of how much is enough, the MLM is set up by design to blindly go past the saturation point and keep on going. It will grow till it collapses under its own weigh, without even a bureacrat noticing.

    Wow! It seems as if Van Druff has investigated the operations of all MLM companies and determined they have no operations manager or any supervision whatsoever. Saturation points in anything are rarely reached and to state boldy that no one is assigned to make the decision on production is just naive.

    MLM is like a train with no brakes and no engineer headed full-throttle towards a terminal.
    This is lumping all the operations of all MLMs as if there is a MLM standard operations methodology. It doesn't exist.

    Not everyone wishes to join a particular discount club, or buy gold, or drink filtered water, or wear a particular style of shoe, or use any product or service. No one in the real world of business would seriously consider the thin arguments of MLMers when they flippantly mention the infinite market need for their product of services.

    This is a good point worth noting, but out of touch. He's assuming ALL MLMs and ALL distributors will pitch the "everyone will want to buy this product" nonsense. Not the case.

    An MLM could never work, even in theory. Think about it.

    We have! And the numbers say many do work. And many people and doing well. It's hard to counter his point here because he doesn't really explain what he means when he says MLM can never "work". Can it not last 100 years? Can it not create 10000 six figure earners? Can it not reach 1 billion in sales a year? Clarify!

    For most MLMs, the product is really a mere diversion from the real profit-making dynamic.

    Wait a minute here. Your article title is "What's wrong with Multi Level Marketing." Not "What's Wrong With Most Companies That Use A Multi-Level Marketing Business Model." Irrelevant line and entire section to the article.

    In most MLMs you will have no choice. You are going to have to sit through after meeting and meeting. You are going to be "motivated" to coerce your friends and family to hear "the pitch." This is the way the "dream" is planted and fertilized. Get used to it.

    See above - the MOST MLMs does not suppose the title of the article. Additionally, he's attacking a culture here not a business model. I'm OK with attacking that culture as well.

    Pyramid schemes are illegal. They are illegal because they are exploitative and dishonest. They exploit the most vulnerable of people: the desperate, the out-of-work, the ignorant. Those who start and practice such fraud, should, and increasingly are, being punshied for their crimes.

    Agree 100%. What's this have to do with multi-level marketing? Nothing.

    People can make money in an MLM, undeniably. The moral issue is: Where is the money coming from? Selling product? Thenw hy not sell the same product in the "real world"?

    Hard to counter this as well since he does not define what the 'real world' is. I assume he means why not sell it and a brick and mortar fashion Perhaps he does not understand e-commerce. I wonder how he feels about walmart.com or ebay?

    Do I want to sell a product that perhaps couldn't be sold any other way?

    Perhaps it can. That's why you wrote this line with with "perhaps."

    Do I want to be part of a company that may employ criminals as marketing experts?

    And there is assurance that 'real world' companies don't hire 'criminals' as marketing experts and mislead people? LOL.

    I'll stop here. There's many, many more quotes in this article that are very off base and naive.

    From a philisophical standpoint, it seems as if this guy is all about control. Big companies selling all the products and services while everyone else works a job. :roll:

    I look forward to your comments about this article and quotes you found idiotic.

    See you at the top,



    Forest
     
  2. vicjoy

    vicjoy New Member

    MLM is an ideal system that cannot be applied in a real life world. Why? because I join and learn and earn some money but never enough for the time I have invested in. Saw the fault in the system or every system. Simple to understand. Why there are many level of payout. it means the company is trying to delay payment so that their payout system will out burst.

    The theory is good on paper. However one thing does give an advantage, and that is your social skill is widen. Sales become easy for you if you decided to venture out and sell other stuff.

    my 2 cent comments.
     
  3. alexa

    alexa New Member

    Some of the little bits you've quoted a bit out of context do apparently leave a little to be desired.

    But overall, I think it's a pretty intelligent, articulate, well-reasoned article. I think the problems he's describing there are pretty much the ones responsible for the enormously high failure-rate in MLM and the huge turnover of companies and distributorships.

    I'd just urge people commenting to read the whole article first and have a good think about a number of the apparently irrefutible points he makes and how very true they are. Many of his points are just indisputable.
     
  4. HomeBizMama

    HomeBizMama New Member

    Yes... the writer, Dean Vandruff, was a failure in MLM therefore he decided to attack MLM companies by writing that article.

    "This aspect of the MLM experience should not be underestimated, and the reflective reader would do well to think twice about the value of friends, family, community, and church fellowship before joining or continuing in an MLM."

    WHAT????? Not sure what he meant by that, but if it means what I think it means....MLM today is not all about getting family and friends to join. With the technology of the internet, the potential of network marketing is much higher than it was back in the old days where you only have your friends and family to convince to join the biz.
     
  5. earnandsave

    earnandsave New Member

    The MLM concept is definitely a good one on paper. In fact several 'mainstream' businesses work in the same way - insurance and financial services to name a couple. You start off as a junior associate, with a small salary, and then move toward mostly commission income. Then you can earn additional income by training other new associates.

    The problems I have seen with MLM companies are high prices and lack of adequate training. I was once involved with a nutrition company who claimed their vitamins were 'revolutionary', yet looking at the ingredients they were not much different than vitamins you could buy at a health food store for half the price.
    Another issue is 'old school' sales methods - it's just really hard to do for most people, so even with training the MLM systems could not be duplicated on a large scale with lots of people. And MLM companies will never fire you - they tell everyone to keep buying products, do more training etc., regardless of whether or not the person has the skills and drive to be successful.

    Check out Michael Oliver's 'Natural Selling' techniques http://www.naturalselling.com - reading one of his books really changed my view of selling. Most people don't want to be 'closed' by a pushy salesperson; he emphasizes this and how to do it differently - by learning about the 4 main personality types and focusing on other people's needs or wants.
    There are several other marketing experts who teach similar methods - the old ways just don't work anymore.

    Most people starting a business these days are more likely to look for a low-cost opportunity. These are great for getting started; then once you are making a decent profit, you can add another business that does cost a bit more to get started yet greatly increases your income potential.

    To your success!
     
  6. alexa

    alexa New Member

    Thanks very much for the link to Michael Oliver's website, Ross. Looks very interesting!
     
  7. westfam11

    westfam11 Member

    That is why I am happy to have found a company that uses "Cooperative Marketing". I haven't found anyone dropping out of this one. So the attrition isn't there. That is why I was so happy to find a business model such as this.

    The company gets the customers, we purchase them, they follow up, we get paid. There is an MLM side also with finding new people that want to do the same but since they have customers also and are getting paid, they don't quit!


    Becky
     

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