Saturday, June 04, 2005

What is wrong with MLM

MLM, Multi Level Marketing has some inherent flaws. They are written very well here:
Here are my two Canadian cents:

Cent # 1: Growth

Population growth rate of US is 0.92%, according to CIA fact book. If a MLM plan projects bonuses based on expanding 'downline' or 'network' faster than this rate, it will be impossible for the majority and therefore, a scam. As they say in Quixtar, "Fight with me, but don't fight with a principle".

If the MLM
  • Does not place it's major bonuses by developing downline faster than 0.1% a year
  • put real emphasis on retail to non participants, thus ensuring the profitability of bottom level IBOs / associates
  • Explain to the prospect it is mathematically impossible for every one to make a big team fast, and work around this fact
then it's legit.

Cent # 2: Profitability

As LawDawg explained, more than 80% MLMers will be always at the bottom. Their profitability should not be dependent only on having a big team, as they won't have any at any given instance.

Remember: Pyramid = Majority losing money. Think about 80% IBOs. If they are losing money, MLM = Pyramid. Add product or not, bottom line is the determining factor here.

Conculusion

MLM has two characterisitcs. It grows without control and levels determines the profitability. These two are the problem as well.

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