Why Does MLM Have Such A Bad Rep?
I’ve recently tried to publish some of my MLM articles on well-known Web2.0 sites however I’ve been advised that the subject is not welcome & is indeed on the banned list together with, among others, gambling & pornography!
Has the reputation of MLM sunk so low that it has become a taboo subject? Why has this happened? Do you agree with the banning or is it narrow mindedness on the behalf of the web 2.0 site moderators?
“MLM Scams”
Whilst there is no doubt that in the past there has been problems with some companies purporting to be MLM companies when in fact they were nothing of the sort & just scams out to part people with their hard-earned cash on the promise that they could become millionaires, there are lots of genuine legitimate companies out there with whom it is possible to build great businesses.
The problem lies with the fact that if you do a search for MLM scam or similar you will find hundreds of websites telling you how bad MLM companies are & why you should not get involved with them. These sites however are totally one-sided & give no information about legitimate MLM opportunities. They tell you all the horror stories about how people have lost thousands after joining these companies in the hope of making a million. However what they fail to tell you is that these so-called MLM companies were nothing of the sort, they were simply scams & had nothing whatsoever to do with MLM.
Pyramid Schemes
You may have heard of “Pyramid Schemes” which incidentally were made illegal more than 20 years ago, it is these schemes or variations that all the websites knocking MLM are talking about. To be totally truthful & to give readers the full picture the MLM bashers should distinguish between these scams and genuine MLM Businesses instead of just using the term “MLM” to mean something completely different. OK so how do you make the distinction between the scams & the legitimate opportunities.
One simple way is to look at a company and see what product is being offered, many scams will not even have a product but will ask you to invest your money with the promise that you will earn it back 10 times over. However if there is no product, what are you investing in? These schemes simply move money around & the people at the top of the company or pyramid are the only ones making money & the only way they do so is to encourage people below them to go out & recruit more people to join & pay joining fees.
Another variation on this type of scheme is one where there is a product involved, but in order to join you are required to buy lots of the product from the person who introduced you, & then you are encouraged to do the same ie go out & find somebody to join the “company” & buy product from you at a higher price than you paid for it. This is the typical pyramid scheme that was made illegal a long time ago. In order for it to be a true MLM company there must be a product or service & there must be customers, after all this is how all businesses run. Any company that makes its money by simply introducing more distributors or reps is not a MLM opportunity & is more than likely a scam.
MLM Structure
On the subject of pyramids, many people when shown a MLM business structure, ie multi layers of distributors at various levels in the companies compensation plan immediately think ” ah but its a pyramid, I’ve heard about those types of business”. They are put off straight away & assume that they are being asked to join some sort of illegal scheme. The truth is all businesses are “pyramids”. Let me show you a simple diagram to illustrate this point.
Director
Manager Manager
Supervisor Supervisor Supervisor
Worker Worker Worker Worker Worker
Worker Worker Worker Worker Worker Worker Worker
Whilst this is very simplistic I hope you can see where I am coming from. A MLM company will have a similar structure but instead of Workers it will have distributors or reps, instead of Supervisors it will have Team or Group Leaders, instead of Managers it will have Senior Team or Group Leaders & instead of Directors it will have National Team or Group Leaders. Different MLM companies will have slightly different names for the various levels in their business. The big difference between traditional businesses & MLM businesses is that in MLM there is room for many National Leaders ( Directors ) where as in traditional business there is only 1 top position.
MLM Summary
So, back to the original question, why does MLM have such a bad rep? Well in short because there is a lot of misinformation out there & not enough balanced discussion on the subject. ( Web 2.0 moderators take note! ) You see, MLM companies run on the basis that they do not advertise, the money they save on advertising allows them to supply their product or service cheaper to the customer.
This means that the general public will not have heard about the genuine MLM businesses, but will have heard about all the “MLM Scams”. Maybe if MLM companies spent millions advertising on TV & in the press then they wouldn’t have such as bad rep as they would be household names, but then if they did that, they wouldn’t be MLM Companies!
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