Similar Videos
|
|
|
For some time, there has been an ever present
phobia associated with the term "Multi-level
Marketing" or often called by it's acronym "MLM".
This fear could often be compared to the same
repulsive sensation one feels when in close
proximity to a skunk. Like most fears in our
society today, is this fear of "MLM's" based on
reality, or is the true source of this phobia
simply lost in a dark cloud of ignorance?
MLM's have existed for many years, and going
back decades will often be associated with
organizations such as Amway, Herbalife, and
Watkins, etc. Each person, no matter where they
are on the organizational chain builds their
business through two key functions, marketing
products, and recruiting new distributors (also
referred to as Sales Consultants, Independent
Business Owners, etc.) . These people all do the
same basic functions, sell products, and recruit
new distributors, living off commissions based on
their own as well as the sales of people
recruited in their downline. On close
examination of the business structure, there is a
markedly close comparison to the business
structure of many non-MLM business and franchise
agreements, where royalties are paid based on the
sales of the individual franchise organization to
the franchise owner, as well as the area or
regional manager. In MLMs, there can be a vast
number of levels of distributors receiving
royalties or commissions from one person's sale.
Why then do most people get their back up at the
sound of the term "MLM" or the words "multi-level
marketing"? Truthfully, MLMs have an image
problem that goes back many years. The business
structure of MLM's has been duplicated many times
over. Some have used the business model as a
means to fraudulently make money. Many people
see an MLM and immediately assume they are one in
the same as a Pyramid Scheme, or a lesser known
evil, the Ponzi scheme. MLM's while struggling
with image issues have in recent years made vast
strides in changing "their window dressings".
Today you will see the products of public
relations departments as you hear new businesses
refer to themselves as "home-based business
franchises" or the latest fever to hit the world,
especially on the internet, is the wave of "
affiliate marketing" groups. No matter the name,
MLM's are identified by their business plan and
structure.
So how does one quickly determine if they are
faced with a legitimate MLM or in fact they have
been duped into an illegal Pyramid or Ponzi
Scheme?
In legitimate Multi-level marketing businesses,
people earn commissions from the sale of products
as well as from the enlistment of new
distributors. If the only commissions offered by
the program are for the recruitment of new
distributors, then it's an illegal pyramid scheme.
Products must be a part of the program for the
business to be legitimate. If Distributors are
required to buy more products than they are
likely to sell, then it is considered a Pyramid
or Ponzi Scheme which is illegal in many
countries. It's important to say, that while in
structure MLM's and illegal Pyramids look the
same, and while both can receive monies for
bringing in new recruits, the primary difference
lays in one area. MLM's have a product line
associated with the business which can be
marketed in a variety of ways giving the
individual business consultant the opportunity to
stock the product or simply act as a salesperson
working for a drop shipper. In MLM's the clear
expectation is that the majority of the
commissions earned will be from the marketing of
products, not from the recruitment of or sale of
memberships to new distributors.
When questions of legitimacy have arisen, the
courts, upon examination have applied a simple
determination to separate Pyramids from MLMs.
The determining factor lays in the area of
products sold. Precedent has been set
recognizing what's known as the 70 of
those products first. While some argue, this
means selling to none distributors, some also
allow this to include products Distributors use
themselves as "Demonstrator Products". Both
arguments have been successful in the Courts, and
while one might wonder why the variance, intent
must be considered, or at least somewhat added to
the pot, to determine the final mix of the ruling.
The Federal Trade Commission uses further
determinations to define as to whether or not a
business is in fact a Pyramid Scheme. In the
Commissions determination, Pyramid Schemes are a
non-sustainable business model that involves the
exchange of money primarily for enrolling other
people into the scheme usually without any
product or service being delivered. Pyramid
schemes have existed for well over 100 years.
Closely related to Pyramid Schemes is another
term often heard of, "The Matrix". The Matrix
Scheme uses the same non-sustainable business
model as Pyramids do, but here a person pays to
join a large waiting list of people for a product
which only a few of them can receive.
It's important to note, the Federal Trade
Commission recognizes there to be a difference
between MLM's, Pyramids, and Matrix plans with
MLM's for the most part being legal. While MLM's
are legal, the line between them and their
illegal counterpart is not black and white, but
covered in an array of contrasting shades of grey.
Ponzie Schemes are illegal "private -
unregistered" investment programs which offer
incredibly high returns for short term
investments. These require an incredibly fast
continuing influx of cash flow in order to
survive, therefore using the MLM business model
to accomplish such, and often collapse only to
disappear before they are discovered by the
authorities.
The success and potential for sustainability of
Pyramid, Ponzi and Matrix Schemes all depends on
their ability to disguise their program and
confuse the investor long enough to get them to
hand over their money.
So is the fear of MLM's reality based?
Certainly, the general public has been burned by
many illegal businesses, and while similarities
do exist in the business models, it's important
to realize MLM's are legitimate businesses, and
people do earn real incomes from them. MLM's may
not be for everyone, but they are certainly no
less a serious business than the franchised
coffee shop in your own neighborhood.
Next Paragraph..
EditorialToday Internet has 4 sub sections. Such as Blogging, Affiliate Marketing, Work from Home and Online Marketing. With over 20,000 authors and writers, we are a well known online resource and editorial services site in United Kingdom, Canada & America . Here, we cover all the major topics from self help guide to A Guide to Business, Guide to Finance, Ideas for Marketing, Legal Guide, Lettre De Motivation, Guide to Insurance, Guide to Health, Guide to Medical, Military Service, Guide to Women, Pet Guide, Politics and Policy , Guide to Technology, The Travel Guide, Information on Cars, Entertainment Guide, Family Guide to, Hobbies and Interests, Quality Home Improvement, Arts & Humanities and many more.