Multilevel Marketing: Doomed by Design (I)

Pyramid

“It’s not about the money any more. It is about the people I am able to help,” she said. But that was a lie and she knew it. But she was on air, on radio promoting the “supermarket business” in which you shop once and earn daily. That drew my attention. I get to shop once and I get paid daily? How? So I made up my mind to attend the “expo” for which I paid. The income I was having then from the small business I had ventured into was negligible. I thought extra cash or daily cash would make some sense. At the “expo,” they talked about the system in which selling is not compulsory and there was no target. What one had to do was to bring in people into the system. It started with a challenge of bringing in two people in the next one month. I bring them in and I get referral bonus for each and matching bonus for both. They projected the potential income for twelve months – over ten million naira. Eyes of the attendees at the “expo” popped but not mine. Ok, my eyes kinda popped too. But that income was the least potential income. It was the potential income of those coming in with one spot. Those coming in with three spots or seven spots would have a potential income of twenty-one million or seventy-four million naira respectively. The higher the number of spots you come in with, the higher the amount you pay to become a “partner” in the “business”. In this “business,” you are not mandated to sell even though you would be given pack(s) depending on the number of spots you come in with. In the “business” you do not render a service. The “business” is that of recruiting people into the organization.

At the “expo” they were careful to avoid mentioning the word “pyramid.”  Neither did they display the diagram of a pyramid with the PowerPoint presentation. But if it looks like a pyramid then it probably is a pyramid. At the “expo” I was not logical. Reason escaped me and greed took over. I wished I had the money for three slots because I saw the “business” as my financial breakthrough. But I paid for only one slot and left determined to get the money to enable me upgrade to three.

It is multilevel marketing (MLM) when you are paid for recruiting people with or without selling a product. It is sometimes called Network Marketing. MLM is a system that enriches few at the expense of most. It is a system that is designed to fail. Its’ scheme is closer to being a con.

They claimed it was a “supermarket system” which sells products and hence have the capacity to pay partners in the “business” – the “business” of recruiting people, not selling. But this system is a clever design which uses both the “supermarket” and the products as a cover to legitimate the real money-making system which is the recruitment.

When you recruit ten people who go on to recruit ten people each, and so on, there is bound to be saturation at some point. Ten people three levels deep is 1000. Ten levels deep is 10,000,000,000. I have neither come across nor heard about any MLM company that stops recruiting at some point. On the contrary, the population of the world is not enough for any MLM company. They keep recruiting and recruiting and recruiting without control. Mathematics and common sense show that the system will fail. For every additional level, competition increases because there are many more “marketers.” Some MLM companies try to address this problem of over recruitment by limiting the number you can sponsor to say four (although most have no limit). Even with this limit, the same geometric expansion problem exists. The only difference is that the failure mechanism has been slowed down a bit. And since four people recruit four people each who go on to recruit four people each on and on, an additional problem of unnecessary layers have been created in the organization.

The real profit of MLM companies comes from the fee that is charged up-front whether it is called “distributorship” fee or “partnership” fee. In a real business which is not MLM, money serves as a store of value and with it there is an exchange. You therefore give money in exchange for a product or service. In MLM, you pay money without getting a corresponding value in products or service. What you pay is for you to join the “business.” How do you make money from the business? By recruiting other people who will pay without you giving a corresponding value in products or service.

A real business does not over hire sales representatives. For MLM, “over hire” means nothing. Keep recruiting without stop. This is a recipe for collective disaster. Many people do make money from MLM. Few really become millionaires. But these are the very few people who got in early. The money they make come from “partners” lower down the pyramid. As the number of those recruited keeps increasing, the base of the pyramid keeps expanding wider and wider. It is those at the base, the greatest majority that the few people at the top will make the most money from. Again the product or the “supermarket” is a cover for this scheme doomed to fail.

The MLM company is exploitative. The money made is from the losses of people lower down in the organization. So, yes, some people make money with MLM but is the money legitimate or from a scheme that looks and smells like a con? When the organization’s agenda from the start is to recruit sales people up to the point of saturating the market and past it, one should perceive danger.

After paying the registration fee to become a “partner” in the MLM company, I was added to the WhatsApp group. Daily we were given an overdose of motivational quotes. More than that was the appeal to greed and materialism. You see someone showing her bank account to be over N900,000. Another posts her picture in which she is standing in front of her new car. “Partners” are addressed as millionaires and sometimes billionaires even though the overwhelming majority are not. “Happy birthday to you. More matching bonuses” was a common message for birthday celebrants. These should not necessarily be part of an MLM system but it usually is. The question is, “Why the appeal to materialism or greed?” Is it a trap to keep my brain turned off? Why not focus on the product or service like other companies with real businesses do? But MLM organizations have recruitment as the goal not product or service. Common sense and good judgment take back seat in the presence of greed. This is how “partners” get stuck with the organization even when they do not see the money coming in. They are stuck with videos and presentation scripts called tools.

In a real business, net profit is more important than gross profit. New members in the group were told it was better they left the money they made without transferring it from the MLM organization to their bank accounts for some time so that it can grow. Who says the same money will not grow in my bank account? The reason they told us that was simple. It was so that one day we could appeal to the greed of our downlines just as an upline appealed to ours.

You pay to join, that is your capital. You recoup your capital by recruiting. To recruit you spend money – your own money even when you have not made a dime after “investment.” As a “partner” you are expected to send videos to prospects (who were sometimes called suspects), make three-way phone calls (you, your prospect, and your “coach”), invite prospects to your house so you can make a presentation. The problem is that after paying a sum to join and not having made a dime, you spend your data to send videos, spend your credit to make three-way phone calls, spend your money on entertaining those you invite to your house. More often than not, you will not be successful in converting your prospect. And when your enthusiasm begins to wane and you almost begin to question the whole design, boom-boom-boom! They hit you with another seminar with motivation overdose. Even when you do convert prospects and are paid, the money that reflects in your account with the MLM organization has no information about what you have spent to get it. To get more you have to spend more. They hit the million target they had when they started but they hardly tell you about the amount spent on adverts and halls for seminars. After all these and you make converts, you are paid a token and those above you who have done little or nothing also get paid. When your ethics have been compromised, you will have no problem with this simply because you hope to get paid someday through the effort of your downlines for doing virtually nothing.

“Shop once and get paid daily,” is what this particular MLM “partners” tell prospects with very little information about the true nature of the “business” but with emphasis on it being the “opportunity of a life time” to make millions. You join only to find out that you are a long, long, long way from getting paid daily. The very person that told you, “Shop once and get paid daily,” is not being paid daily. You pay and you join. How do you get back your money? By promoting the lies. And you do it. You begin the promotion of values contrary to your belief system. You begin to coerce your family and friends. Your materialism takes over and your values take flight.

The MLM organization is loose. The workforce is not made up of professional marketers or sales representatives. So, when these people have the product of the MLM organization in their hands, they often times make bogus claims with it which could be dangerous. When I paid to join the MLM company, one of the products I was given was a dietary supplement. I wanted to know what the health benefit of the product was so I took out the paper inside to read. The manufacturer claimed it contained the greatest diversity of daily essentials, whole food concentrates, phytonutrients, and antioxidants. According to the manufacturer, it helps support bone health, eye health, immune system, colon health among other health benefits. On the package of the product as well as on the very paper was the disclaimer: “These claims have not been evaluated by NAFDAC.” This disclaimer means little to those who sell the product to make an income. These sellers exaggerate the health benefit. This is the result of inexperienced sales people selling a product without accountability or supervision.

This write-up continues in the next post.

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