My view on Network Marketing / Mulit-level Marketing

First of all, i'll try to give a impartial view on this hugely successful topic. I have never been a member of this, nor heard any promotional talks on these. Next I'll quote some doucments/blogs that deal with this subject. So what makes me think and write on this topic? It's a simple answer : A logical mind will want to investigate into something that is, lets say "controversial". I'll not quote any company names directly, nor will I take this on a personal front. So you can expect an unemotional document here!

What is Mulit-level Marketing (hereafter referred to as MLM) ?

It is a business distribution model that allows a parent multi-level marketing company to market their products directly to consumers by means of relationship referral and direct selling. Business organisations have long relied on direct marketing to target customers without spending a lot of money on retail distribution. However the Network (Multilevel) Marketers have taken the direct model one step further, i.e. not only they do the sales, but recruit and train new distributors i.e., independent sales persons who are members in the network marketing company.

The big draw card in network marketing is the commission paid not only for direct sales made by
the salesperson , but also from the sales made by the recruits made by him.


Is this a legal business?

Network marketing is absolutely legal, and is governed by strict regulations in most countries. There are some countries where this is banned, due to heavy influx of money that these companies generate.

What is the difference between network marketing and pyramid selling?

It is sometimes difficult to distinguish legal and reputable MLMs from illegal pyramid or Ponzi schemes (Please go through these two business models before continuing). Both of which are highly illegal in almost all countries. It is considered as fraud and money laundering to have a business in pyramid scheme.

In a 2004 FTC Staff Advisory letter to the Direct Selling Association it was stated that - "The amount of personal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme. The critical question for the FTC is whether the revenues that primarily support the commissions paid to all participants are generated from the purchase of goods and services that are not simply incidental to the purchase of the right to participate in a money making venture."

Is network marketing ethical?

I have a firm opinion on this. According to me it is highly unethical. It is immoral to make money out of trust in relations viz friends, relatives, family, colleague. A lot of studies have been conducted on this regard, and many have come to a conclusion that, it exploits the basic nature of a relation for a gain. People join the network marketing mainly because of persuasion by friends and relatives.Marketers should be aware of the fact that network marketing foundation lies with relationships.
It is up to the channel members to decide at what cost relationship may be selected, maintained
and nourished. It should be a win–win situation with no exploitation of relationships whatsoever
for it to be enduring.

There is another way of looking at this :
Conventional business is very much a tiered system. The chairman or president at the head of a company makes a lot of money, and those beneath him (or her) make proportionately less depending on their level of expertise and responsibility. This seems superficially like MLM.
Some people have registered with NM opportunities and behaved in a non-ethical manner, but this is not at all a criticism of the industry - just on those particular individuals. Plenty of people abuse their privileges in jobs. We don't boycott the entire medical profession because of the occasional rare example where a doctor has abused their position for personal gain. We don't call for a ban on baseball bats because they are occasionally used by thugs! A business should be judged on its own merits, not on the qualities of some of its ambassadors.
But I dont tag along with this kind of reasoning, purely because, you are sure in this kind of scheme, the lower lying people never get anything. Where as in conventional business there is something that everyone gets for their work.

Do I believe in MLM ?

I have thought about this for sometime now. And I feel that there is no business which deals in material products (not human emotions and services like say the film industry/entertainment) result in a PROFIT for all. No business can be a win-win for all. This according to me is a basic economical concept. For someone to make a profit, someone else should bear the loss. Sometimes this 'someone else' can be non-human, like the earth, trees etc.
So the answer to the question is, Yes and No. Yes, I do believe that no business can be profit for all, but No, I do not believe in MLM because it is prejudiced and people directly and knowingly make profit of lower lying member's loss. This is unacceptable.

Is this brainwashing?

Yes, every time you watch a TV commercial, read the news paper or speak to any of your opinionated friends. Your opinions on pretty much everything are the result of brainwashing, some of which is accurate and some is not.
But this brainwashing is for the personal interest of the "brainwasher"! There is little concept of a organization, as "LIVE ALONE, DIE TOGETHER", cut-throat, back stabbing, is common here. In typical business, the organization makes the profit, and there is a perfect sharing scheme.

Is this a 'get rich quick' scheme?

Absolutely! MLM is no different from crime or gambling where you are in search of 'quick money'. And as in those cases, you have a good chance of getting caught/losing! But, the only difference is that, you are doing this legally! The thing is, although this involves hard work to get the quick money, it hardly takes a brilliant person to make this money. So there is no difference between a intelligent/educated person, and a thug! In this business, everyone starts from a equal playing field, regardless of his current financial status.

Will these businesses saturate/end?
I don't think so. People have come up with theories like : "What if all the people who really intend to buy, are already members?". This has not happened in past 50 years, and is not about to happen in the next 50 years is it? Because, there is always that one person, who craves for the extra quick money. And also, every day thousands of people are born!

Some Links to ponder over:
http://kishan-livinglifetothefullest.blogspot.com/2008/06/beware-of-pit-called-quest.html
http://en.wikipedia.org/wiki/Multi-level_marketing
http://en.wikipedia.org/wiki/List_of_multi-level_marketing_companies

I sincerely hope that I have presented an unbiased opinion here. If I have unknowingly hurt someone, my apologies.