OT: Multi-Level Marketing Schemes

[John Sabato]

Just curious, does any member of this forum participate in multi-level marketing of products or services?

Examples: Amway, Herb-a-life, Mary Kay Cosmetics, etc.

I recently was asked by a former professional colleague to watch a video that was part of his "practice" for a new business he intended to start...

I watched the online video as he requested and this was my rather blunt response:

Hi Steve,

It was great to see on the bus on Friday afternoon.

Thanks for asking… I did watch the video, BUT let me warn you, if you don’t already know, that this is a pyramid scheme, nothing more, and nothing less.

I knew it within 5 minutes of the start of the canned video. How did I know? To anyone who seen this type of presentation before it is absolutely transparent.

I have sat through this same, or similar presentations at the request of friends before, and I can tell you that I have never known one of them to ever be “successful” at this type of venture, where the payback turns out to be worth the time you invested, not to mention your money… the money is collected by the “coaches” or people in the pyramid that are higher than you… although at the outset, you may see some small return on anything you invest in… as a convincer that you can and will make money at this. Many of my friends have lost substantial money on a failed path to success… In my opinion, this is one of them.

Dead give-away’s on these ventures? Subtle Deception from the outset… nothing of any substance up front.

1. The product or company name is never mentioned up front, only after you have invested 15-30 minutes of your time listening to “facts” that are given without any verifiable references, and then an assurance that this company has the answer. Why not just ask if someone you know has a few minutes to listen to an Herbalife presentation? Because few people would voluntarily do so if you use the company name… keep them in the dark to get them to start watching the video, and you might be able to get them finish watching it as a favor. Ask yourself this Steve, If the products are so good, why aren’t they recommended by family doctors who are not associated with the company? Why don’t you see their products in stores? Because that would involve considerable overhead expenses… if they prey on people like you to find sales leads, the overhead is absolutely minimized. WalMart is in the business to make money… and it will carry any product that will make money, but they don’t carry anything from this company… You won’t find their products in “As Seen On TV” stores either, because you won’t see it on TV.

2. The only thing NEW about this video introduction methodology is the use of the internet, instead of getting 15-25 friends to come to your house for refreshments (a party) so you can tell them all about a business opportunity you think they might be interest in.

3. Do we have a health (or insert your pet named issue) problem in this country? Sure, but for every “testimony” presented, there is a disclaimer at the bottom of the page where the “results” are not typical. Or, that the claims have not been substantiated by the FDA, or that the product is not for cure or treatment of any illness or disease… These are just diet supplements.

4. You NEVER see advertising in print, billboards, on TV, or seldom even on Radio, …only directly from individuals who are somehow involved in the selling… why? Because some of the claims border on deceptive wording, fraudulent facts, or false advertising that could have legal implications when they don’t prove true. All you get are anecdotal stories by unknown people (or sometimes celebrities who are paid spokespersons) about the successful use of the product, or selling the products, that can’t be substantiated.

5. Practice Video? This isn’t practice, this is step one. This presentation is a standard marketing tool, that everybody practices with… How long will it be before you are “coaching” and having others ask 25 of their friends to watch it and then get you on the call. Classic pyramid business model format.

6. An “investment” from you in some small “sample kits” to provide to others… Now you have money invested and you won’t want to give up no matter how dismal the results are… “Don’t worry, It will get better syndrome” ----The deeper you get in, the harder it will be for you to extract yourself.

7. The poll at the end? This is not a poll… where is the choice for no interest at all? ALL the choices imply that the person has either interest in buying from you, or interest in selling the products too. (This company has obviously read the “Art of Negotiation,”… give only the choices you want them to choose from)

8. Talk to you WITH YOUR COACH? Why? Haven’t they provided you with real referenced and substantiated facts that should sell the product on its own?

This is CLASSIC pyramid marketing. If the person says they are not interested, have you been given a script of talking points to try and convince them from walking away from the presentation? I would bet you have, but the coach’s presence is to make sure they don’t lose the sale “opportunity” because of your inexperience. You are the “Sales Lead Finder” not a salesman.

Steve, I am sorry to be so blunt, but in the time you have known me, would you have expected anything less? I consider you to be my friend, and I want you to know that I think you are really bright, and I admire your work ethic, and you knowledge about our chosen career field.

I am about 20 years older than you… and perhaps 20 years wiser… not smarter, but wiser because of those years of experience.

I can only recommend that you RUN, not walk away from this “opportunity” as fast as you can.

Instead, invest the time in obtaining your CISSP, and perhaps another couple of certifications to enhance your value and marketability in Computer Security. These will guarantee you advancement and success in your profession. Don’t be fooled by Herbalife, Amway, or any company like them …


Truly Best wishes from me, and all your former colleagues here… I hope to see you again in the near future.

-John

So my friends, what has been your experience in this area? I would love to hear about it.

[alanint]

I have attended a total of one of these scams. As with you, John, as a favor to a friend who had just gotten involved.
The "coach" is invariably a tall, good looking type "A" person with natty clothes and perfect hair. Another warning sign is the "coach" showing off a powerpoint of their luxury cars or manicured McMansion, yatch, etc. with a subtle message that "this can all be yours".
The simple fact is that only the top 3-4 layers of these schemes make money. It is a private club, which is prearranged and you are not invited to join.

After the show, there is pressure to sign up, which I actually enjoyed, since I am somewhat confrontational..I told them exactly what you have said, John, that this was a pyramid, pure and simple. My friend was upset at my rudeness and said so afterwards.

Long story short, he ended up owing these people thousands, as they kept shipping products to him, based on the "hidden sales quota" he had blindly agreed to. They would not take the goods back and intimidated him for months with collection agencies. I finally helped him with the support of a goverment friend or two.

Make no mistake, these people are slick. The better scams are perfectly legal if you sign all the information provided to you. Most people are all too eager to sign their cash away in a blind attempt to get rich quick. Complaints will usually not be followed up, since the scammers will invariably produce your agreement to all the conditions.
Run away from anything that offers nothing up front and results which seem too good to be true!!!!
My younger Brother is a habitual victim of these types of schemes....

[lugerholsterrepair]

Guys..I see you have given this subject some thought..After our luckless saleman sells to Family & Friends he soon runs out of leads...Then he is just irritating to these same people.
In the old days I think there were succesful sales schemes..Fuller Brushes etc. Most of the modern deals are bogus but I know succesful people selling Mary Kay?

[Ron Wood]

I remember fondly the old Fuller Brush salesman and the Grand Union Tea man. That is an era long gone.
I think the biggest pyramid scheme/scam was Amway. We had several of our "friends" try to get us into it...we didn't and they flopped.

[alanint]

I suppose the difference is that there was a basic honesty back then, as well as garranties in place like an assigned territory. If you joined Fuller, etc, you WERE the Fuller Brush man for your area. There were not three dozen guys trying to beat you to the punch. People were also much more amenable to door to door sales as well. You were welcomed in and allowed to demonstrate your wares. Today's "parties" will naturally limit your potential audience, as most people want no part of them. There was also an actrual corporate structure, manufacturing, etc. This goes for Mary Kay as well. The scammers produce nothing. They buy cheap Asian crap and hope to turn it over quickly by constantly enlarging the pool of suckers who will at least try to sell a case or two.

[Russ]

My STUPID Ex wife got involved in one of these scams. It cost us 10,000.00 before she was convinced it was a scam. Good thing she is an ex.

[lfid]

John S - best summary Ive seen of the case

It will likely be that the annual company sales volume divided by the number of agents (members ) will be about what a typical family would use of the product per year

so the sales are the products used by the members themselves / extended sympathetic friends / family

avon and mary kay seem to be exceptions - maybe they are not as pyramided

Bill

[Vlim]

Well, my voting option isn't present, but I have warned some employees in the past.

If they would try to sell these schemes to co-workers, they would have had their contracts terminated.

[John Sabato]

Avon & Mary Kay may in fact be exceptions. Their methods seem to be just hand out their catalogs and hope for sales and word of mouth advertising by pleased customers. Let me caveat that statement by including that I work with someone who apprently has over $4K in non moving inventory in their basement.

I have NEVER had anyone I know come to me and tell me they have discovered this "great" product that was produced by Amway (or other ML marketing company) that wasn't directly involved in selling the stuff. That speaks volumes to me about the satisfaction level by customers.

[alanint]

Avon and Mary Kay work because they are classic examples of corporations with "Horizontal" sales forces but "Vertical" logistics structures.
I once worked for a prestige brand company that was owned by Avon. I piggy-backed on Avon's sales force in several places in the Caribbean and South America to sell luxury goods. I was astonished by the number of women out there doing this. Puerto Rico; 400,000 sales women! Venezuela: 600,000, Brazil: 800,000!
The formula is simple: They don't really push you for results. You work at your own pace and get the results you put in. They recruit thousands of women who are just expected to service mostly their friends. They capitalize on women's ego to be their friends "secret source" for quality, discounted cosmetics and fragrances. They are further enticed with special offers on other types of goods as Avon or Mary Kay representatives. They become the neighborhoods "go to" girls for a number of things at special prices. Only seriously ambitious types stand out. The women are mostly bored housewives who do not depend on the job as their primary source of income.
The company has incredible logistic resources. They are able to deliver single packages to thousands of saleswomen very cheaply and efficiently. These companies are built on tens of thousands of individual sales. Representatives are not expected to front load, keep or own stock, other than samples. They don't own the goods but place orders against payment. They can quit any time and walk away or go on hiatus and return.
This is the difference between these companies and the scammers. Only people pushing worthless junk would make you buy it in advance. The pressure is then on you to move it and make a profit.