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The principle, while economically sound, must
have core strength at its base and not fall into
a well documented type of business known as
pyramid selling, which became popular in the late
1960's and early 1970's.
When I say core strength, I mean that at its
foundation any business must have a product that
sells!
This may sound ridiculously obvious however a
major problem occurring with many of the products
marketed through this method, in their experience,
has been that the products simply did not
penetrate into the market successfully.
When joining one of the companies that
participate in MLM, one is generally pressed upon
to purchase materials for personal use and to buy
stock for distribution to further people.
Additionally, whilst the figures shown in the
literature are very impressive, to attain these
figures it is imperative to introduce other
people to the business thereby gaining a
percentage of their material sold.
As that person introduces further people to the
business, one then gains a percentage of sales
from that person also.
Depending on the company, the revenue continues
for a certain amount of levels, hence the name
multi level marketing.
The major drawback that they discovered was that
to attain the desired figures, one had to
concentrate on recruiting more and more people to
the business with the result being that nobody
was really concentrating on selling product.
This is why pyramid selling was made illegal -
quite simply no product was moving at the bottom
end and the only people making good money were on
the top level and able to benefit from many
peoples 'efforts, whether or not product was
moving.
Unfortunately for the people on the lower levels
they often parted with considerable sums of money
unaware that the end product was either non-
marketable or in some cases did not even exist!
After this, the only way out for these people was
to rope more people into the business on levels
beneath them and thus recuperate some of their
money.
Multi level marketing, while not crooked in this
way or illegal, still carries with it the problem
of having to recruit other people into the
business to attain the dizzy financial heights
projected by the companies.
I know several of the companies that we looked at
in the early nineties, including the one they
became involved with, have disappeared without
trace and one never hears nor sees the products
anywhere- is this coincidence? Since the
companies were extremely well capitalised, did
the owners realise that their products had a very
short shelf-life and this was the best way to
juice any profitability possible in a very short
time?
Without sounding too sceptical, it does seem to
me that this was the case since, as they
mentioned earlier, the products are never seen
and the company is never heard of.
You be the judge.
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