Multi-level Myths
Anybody who has lived in Utah knows that when a casual acquaintance wants to share a “business opportunity” with you that you better stay home. Utah County, in particular, has more pyramids than ancient Egypt. The fact that people want to participate in these ridiculous schemes does not bother me at all. What does bother me is the lies propagated by selfish people taking advantage of our innate desire to create wealth with a minimal amount of effort. Here is a brief list of four popular myths that I have heard and an explanation of why they simply are not true.
Multi-level marketing is more efficient than traditional marketing
First let me give a brief explanation of multi-level marketing: I find a product that changes my life that I can’t live without. I tell my friends about the product and when they buy it I get a percentage of the sale as a commission. Also, when they go out and tell their friends about the product, they will get a commission and I will continue to get a percentage of sales made by friends that they recruit.
This model is not efficient - it is incredibly inefficient. Everybody who shops on the internet knows that you can typically find better prices online than in the offline world. Most people assume that this is because of the low overhead associated with operating a virtual store. Obviously this is a factor, but even more significant is the fact that several layers of inefficient middlemen are cut out when a manufacturer or an importer can sell directly to consumers.
Multi-level marketing adds layers and layers of inefficient middlemen. As a result the prices are much higher than they would be otherwise.
Amway has created more millionaires than Microsoft
This is one of my favorite multi-level myths. I have actually never attended an Amway product meeting, but for some reason other MLM’s use this statistic as well. I guess it makes them feel like they are in a legitimate industry, but unfortunately it is simply not true.
For more information on why this isn’t true, check this out.
Those who know you are the best fit to recommend products to you
To some degree I would agree that this is true. I value recommendations that my friends and family give me. This gets clouded, however, when the person making the recommendation has a vested interest in me buying the product. How can I be sure that the person making the recommendation is being sincere and doesn’t have their own agenda? Unfortunately these complications render recommendations worthless.
Multi-level marketing is a scalable business model
Let’s assume that I recruit two people to be in my “downline” and I instruct them to recruit two people each. Let’s assume also that we are the world’s best salesmen and we can recruit everybody we meet to join our pyramid. After 34 cycles, we would have a downline of over 8 billion people (which, incidentally, is greater than the number of people living on the earth right now). Even with this optimistic approach, the last 4 billion recruits are out of luck because there is nobody left for them to market products to. Why would you start or join a business whose model is doomed to fail?
I believe that it is inevitable that multi-level marketing will continue to thrive in Utah. Thousands of people will invest their time and money and statistically virtually all of them will lose their initial investment. I think it is important to educate friends and family who are considering joining a multi-level marketing company about the realities of the risk involved.
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