What Goes Wrong With MLM Companies?

Hi Enidi,

Your article was pretty refreshing, in the sense that you have taken a balanced stance on the issue.

None the less, there is much more to the story.

MLM is a form of network marketing, but not all network marketing operations are called MLM. If that being the case, the presence of ads you have from google on your website should also assume that you are in to MLM.

It is true that most of the issues that we see on the news with head lines such as 'MLM x company a Scam' and what not.
IF you had a Ferrari, would you be able to drive it? I guarantee, you won't be able to do so, without training. Does that mean that the car is no good?? Is it then the fault of the Ferrari, or the makers of Ferrari? Its Neither. Its nobodies fault. You just need to learn how to ride it.

Now what if somebody came to you and said that the car is the fastest car in the world, and 'anybody' can ride it? Now who is the faulty??

Its the same with Network Marketing Business. You need to learn the business. before you even start out.

Most of the unethical practices are a result of the people who joins the business but does not spend any time at all in training.

It kind of like opening up a shop and you don't know the first thing about accounting. And Inevitably, when you start to loose money in your shop, you resort to unethical practicing such as contamination, black marketing and the likes and end up blaming the business, rather than learn from your mistakes and try again.

Then, there is the question of saturation. I firmly believe that it is a myth. To prove my point, lets take the case of television. It is true that almost every home which is well off have at least 1 tv. Then, why have they not stopped making tv's? Why have they not stopped selling TVs?? Take the case of cars. bikes, anything you can think of. Why is it that they continue to be sold. IF everybody has it, does it not mean saturation?? If so, why is the sales of these commodities shotting up more than before???

something fishy huh???

And Cultism??? Whats that all about?? Isn't a person following a cult, when he is working for a MNC like Wipro or Infosys and TCS??

And when a company like TCS throws out 100s of employees with out a notice for no specified reason, why is no one going to the police?? Why is no one crying foul??? Probably they did. Probably they didn't. Either way, why is there no issue on that.

In closing I just need to say that no one throws stones on a tree that bears no fruit.

Thanks

Anwar Azad
Prosperity Consultant[EDITED-SELF PROMOTION]

"Insanity: doing the same thing over and over again and expecting different results."
Albert Einstein

Dear Anwar,

NM/MLM companies get a scam label due to practices listed in the article by some of its members.

ferrari: If someone sells you a ferrari for 3 times its price, by saying that "just buy this car and make 2 more people buy it-you can make a fortune in no time..." That certainly is not a right way to sell things, this is what goes wrong with MLM-while Company fine print states that buying the car may not take you anywhere, members use all unethical ways to close a sign up. But company seldom monitors practices of this kind and punish such members...

Saturation point: Traditional products are sold because there is a market demand. A storekeeper doesn't beg you to buy a TV or gives a detailed presentation explaining how buying TV would change your life. He just explains the features and price of tv to customers who walk in and happy customers buy on their own without any force. In MLM most of the cases products are pushed as wealth creation tools-"just buy this for yourself and make 2 more people buy it"...selling product when there's no natural demand for it is the reason things get tough...

coming back to respected IT companies, there is an inflow of cash from outside the country (by selling software abroad). In MLM, show us where is cash being generated outside the system...it is only taking from downline and giving a fraction of it to upline...

Let me know what you feel

Hello

YOU sat you are an analyst - you are also saying that some of the MLM erepresentataives do not give both aspects negetive and positive - Have you now give both aspects in your analysis - why not look at it like any other business as your self and the law makers what is missing or what is essentail to amke the buisness more legal and genuine why not make bylaws - like NBFC's chit funds and other financial instituions - most of the MLMs deduct Income tax and also service tax ? what not make the IT departments question at this stgae it self why allow the comapnies to operate Govt swallows the tax on one side and other side say the comapny is illegal - is it not ppossibel to tie up at tax deducion level - I am sure as an analyst you also ned to giev what inyour openion what is to be done to amke it more meaningful not just criticise

Hi Shrinidhi,

I wasn't expecting a reply, none the less, I am glad.

I agree with your point that the many network marketing companies falls prey to the unethical practices of its members.

I guess it is becoming a requirement on part of the company to monitor the practices of its members, if it is required to protect its integrity. Network marketing if you really understand it, is a personal franchise business. I guess it would be wise to borrow the activities involved in a normal franchise to monitor its members.

About the and saturation:

Most network marketing companies start out with products that would be of less relevance than is usual. None the less the products are good on their own. The initial stages of these companies basically aim at building the customer database.

I know for a fact that after the first 3 years of operation, the company moves in to main line products which you might be able to buy from any retail store. The products equal or exceeds in terms of their quality, compared to what is available.

At this point, If its not just about pushing non - sense products out to the market, what is saturation???

Most people crib that the price is more than what it really should be. Now according to them should be the price??

If you buy a Cadbury Bar, why is it priced at Rs 20, when its actual manufacturing price would be no more than 3-4 rupees?? Tax, Profit, Retail, Distribution, and the Big B ( Advertising ). A single Ad for cadbury before the worms found have fetched Mr ABC somewhere around Rs 1-3 Crs. After the worms, the same fetch him Rs 3-5Crs. Paisa kaun dega??? (We) Papu dega.

In Network Marketing, the 70 - 80% of the price of the product goes to pay its members, administrative cost and if it carefully planned, towards their profit. Now is it better to pay ABC for the product, or to pay ourselfs?? you decide.

IT ( LOL ):

I agree that in Network marketing, a fraction of the money from the down line goes to the upline, and let me also note, that this is not necessary in all cases.

Now you say, that in IT, the money comes from outside the system?? Think again.


Step 1. We make those softwares for the market, we get payed X amount of money.

Step 2. We also provide support to the product, and earn X amount of money.

Step 3. We ( Our Country Men and Women ) buy the self same products we developed, and provided support for, from the people who supposedly gave us the job which gives us money.

Step 4. They pay us our salary from the profit they make out of getting us ( Our Country Men and Women ) to buy their product.

In summary, we get payed to buy the self same products we made. Now, isn't that a vicious cycle.

Lets leave IT aside and take another industry to nudge at.

Whats say the Insurance industry. Or should I call it the sadistic lottery industry.

Now is there a bigger pyramid scheme than this??

The majority of the youth population takes up insurance, ( Basically betting the company against their health ). The law of average would say that it highly unlikely that a kid of age 23 is gonna die for the next 10 years. None the less they go ahead and get the insurance, just in case they might get lucky or unlucky.

Now where does all the money given by the youth go to?? It goes towards the current oldies who has been paying insurance for the past 10, 20, 30 years who get lucky ( or should I say their family ).

Now isn't that cycling the cash within the system. Wouldn't you call that a chit fund kind of scheme???

Just because a network marketing organisation, comes out and tells you its working, and everyone claims to know it, doesn't make all other industry any better.

And finally about legality.

How efficient is any judicial system?? Will something become wrong when it is stated illegal by the government for what ever reason?? How would you like it, if computers, cell phones, and the internet were banned in this country. Unthinkable????? What kind of a mad government would do something like that???

Well... Until the beginning of this month ( May 2008 ), Computers and cell phones were BANNED in Cuba. And Btw, internet is still illegal there. Search @ google news. You should find it.

Well Shrinidhi, thats all for now. It was wonderful to meet someone with a bit more common sense than the average population.

Until next time... Stay Cool..


Thanks

Anwar Azad
Prosperity Consultant

@Sudhakar
Dear Sudhakar,

You need to first work on your english spelling and grammer.

In the post I didn't say the company is illegal-I listed a set of possibilities as to what all can (and usually will) go wrong with most of the NM/MLM companies. Please put your comment in a sensible format.

@Anwar:
FYI: Most of the software developed by Indians sells abroad.

About pricing: When we go out to buy a toothpaste, we dont really hesitate to pay Rs 15 for a toothpaste, though we know it might have costed only Rs 2 to manufacture it. But when an Amway IBO tries to sell a toothpaste for Rs 115 I certainly dont see a value in that at that price, though he would give detailed talk on the quality and wealth creation involved.

Same with Questnet Gold coin and watches-No one feels like buying them at 30k-members have to struggle hard to convince a prospect. In rare cases when companies can give me a product I would need everyday at better quality and lower price, I would agree with you.

About insurance: We knowingly buy it and I dont see any harm in that. Logic is, I dont mind losing Rs 1000 as a premium, if that can assure that my family will get Rs 1000000 if something happens to me. It is fine since no one is forcing you to buy it and you cant expect insurance cos to cover risk for free. Infact many policies are linked with investment and give higher returns and tax advantage.

About legality: There is a difference between being legal and being ethical. Business may be legal but if it is promoted unethically, then it is certainly not good for overall well being of the society.

Thanks

@ Shrinidhi

FYI : Most of the software developed by Indians sells abroad. 70% of Software used in India is pirated which is highest in the world. ( BTW Piracy is ILLEGAL ). Is the software on your machine licensed???

Also.. our mentality towards building these softwares is akin to a constuction worker being proud of building the buildings s/he makes. Either way, the condition under which both work is still the same. Both slave workers. Just that one variety works in A/C halls, other one toil under the sun.

Errrm.... have ever heard of watch manufacturers such as DKNY, Omega, Rolex??? Have you heard of car manufacturers such as Ferrari and Rolls Royce??? You would get T-shirts worth Rs 50 on the street, but why do people buy Nike and Adidas T-shirts that costs over Rs 1000???? Same goes for any product?? Probably you might not opt to buy any of these for your life time. But there are people who do. The same with the products made by the N/W marketing products.

Vijay Malaya bought the Tipu Sultan sword for Rs. 18 Crs over an auction. For the same, a scrap dealer would give you Rs. 1000 max.

Value of anything, is in the eye of the beholder.


Insurance: You know what... I like to bet towards my life, you like to bet against it. Its alright, we are different people. Probably your family will earn 10 Lakhs when something happens to you. If your family were to be really unlucky, you would live till the a good 70 - 80 year old. At that point, the 10 Lakhs would look like today's Rs 1000 or maybe even less. If I were to leave something for my family, it would be assets that would survive any economic condition. This would include a Business, R/E Investments, Education and a legacy.

Legality: True, most companies are legal, and the problem is usually caused by the members/customers due to their unethical practices. None the less, the media which is supposedly the watch tower for the community, projects an negative image to the media regarding the company. Now tell me, how ethical is the media?

Shrinidhi, we can go on for eons debating the pros and cons of the world. While that could be a facinating activity on its own, forgive me, but I really don't have any time to spend, for I have a higher calling.

Thanks you for your participation, you have a wonderful life. Cheers.

i fully agree with mr.Anwar and Mr.Sudhakar's stand on MLM or network marketing business or companies. With due respect, i would earnestly request Shrinidhi to read a book by name BUSINESS SCHOOL written by Dr. Robert Kiosaki. By reading this book you would know what is the power network marking business in the WORLD. You probably may not know that China allowed only 1 - 2 companies to operate in their country after THOROUGH verifications of these companies.

With best wishes,

p.ramakrishna

Dear Anwar,
Softwares in My machines are licensed.
Btb you're simply diverting from the topic-I said if someone sees a value in the product and voluntarily buys it, it is perfectly fine...but in most of the cases NM companies sell a product under the disguise that buying it (and say making 2 more people buy it) would make them rich. That is the cause of all problems...

Tipu Sultan's sword has proven historical significance and people like Vijay Mallya can afford to buy it. Are you telling me all those QN gold coins also can be sold for lakhs this way?

About the insurance: FYI most of the policies have a maturity value because of investment component in it. Pls understand that. You can't compare insurance and MLM. MLM is only taking from your downline and distributing a part to upline. This is no foolproof wealth creation.

Why do you always deviate from the topic under discussion here- the reasons why MLM companies face trouble, by quoting media and other examples? If you can explain how MLM companies have fool proof mechanisms to protect themselves and their members against the possibilities mentioned above, please explain. Else I am ending this discussion here. I am sure readers are smart enough to take a decision by reading the post, comment and their own common sense.

Thanks.

@Ramakrishna

I've already replied to your comment at my blog.

Thanks

Hande said :
You need to first work on your english English spelling and grammer grammar.