There is no other industry that has as many myths, fallacies and misconceptions about it as Multi-Level Marketing. The industry has numerous names – MLM, Network Marketing, Referral Marketing and People to People Marketing. Many companies refer to themselves as Direct Sales Companies – such as Avon, Tupperware and Shaklee. In fact, in recent years the growth of the highly respected industry association, Direct Sales Association (DSA), is attributed to new members from the MLM Industry.
In my articles, I will call this industry Network Marketing, MLM, or Multi-level Marketing. The purpose of this section is to help you understand the pros and cons of this huge – over 20 billion dollars – industry. EVERYTHING has pros and cons, and my intention is to give you enough information to decide if it makes sense for YOU to join the millions of people worldwide who participate in MLM, either part or full time. And if so, what would be the right company for YOU.
The information, based on research and my personal experience, will clear up many of the incorrect beliefs and opinions, both positive and negative, about the industry in which I earned over $35,000 a month.
Now, let me define a few words: distributor is someone who joins an MLM company to buy the products/services and sponsor others who do the same. A distributor is also called associate or dealer in some companies.
Sponsor is the person who brings you into the company. Your upline are the people above your sponsor in the same organization (organization is sometimes called “leg”). Your downline are the people you sponsor, the people sponsored by your distributors, and all the people below you in your organization. “Above” and “Below” does NOT mean “status” – it has to do with when you join the company, and which organization you are part of.
SOME OF THE MYTHS, FALLACIES AND MISCONCEPTIONS
Multi-Level Marketing is NOT a pyramid, Ponzi scheme or chain letter. It is a legitimate business that markets products and services, using a particular marketing structure that allows people to earn 3 types of income, instead of just one.
While an MLM article I wrote in 1980, which became the most popular MLM article ever written, claimed that most millionaires made their fortune in MLM, this is NOT true. It was a myth I heard over and over and over (along with other myths) while investigating the industry, before I became a distributor.
While most of the article is true — and it has been responsible for the success of many MLMers (I know because they told me so) – most millionaires own very profitable large businesses, are real estate investors, or are executives who earn huge salaries with profit sharing and bonuses in major corporations. Though some people become millionaires through MLM, most people are not able to successfully work the business.
Speaking of myths, here’s an oft-repeated one — Donald Trump appeared on a late night TV show in the late 1990s and said that he “would do MLM if he had it to do over!” Don’t believe it! However, I have been told that he and Robert Kiyosaki make a positive reference to Network Marketing in their new book, “Why We Want You to Be Rich,” claiming it is a way for people to be in business for themselves without a large financial investment. (This IS true, whether or not these two billionaires actually make the statement.)
A statement I know is attributed Robert Kiyosaki (author of Rich Dad, Poor Dad) is the following: “ I am often asked if network marketing is a pyramid scheme. My reply is that corporations are really pyramid schemes. A corporation has only one person at the top, generally the CEO, and everyone else below. A true network marketing business is the exact opposite of a traditional business model. The network marketing business is designed to bring you to the top, not keep you at the bottom. A network marketing business does not succeed unless it brings people to the top.”
PYRAMIDS, PONZI SCHEMES AND CHAIN LETTERS
MLM companies, pyramids, Ponzi schemes and chain letters all have “multi-level payment” structures, but that’s the only similarity. Jeffrey Babener, a well-known and respected attorney for the Direct Sales and MLM industries, has this to say: “Network marketing is a legal, ethical manner of doing business. Pyramids are illegal, fraudulent con games. In MLM, you are a legitimate seller of a product or service and business opportunity. In a pyramid, you are a crook. “
There is a simple way to tell the difference between the scams and MLM companies: The scams may use a multilevel payment structure, but there is NO product or service. You get paid for “bringing people in.” The same is true of “gifting programs.” They are illegal, in spite of the idealistic approach these programs use to convince people to participate. “Gifting programs” surface every few years, and have been exposed on major network television shows.