MLM Systems – The Modern Day Pyramids

"You NO who ?"

There are a variety of misconceptions about Pyramid Schemes deploying the multi-level marketing (MLM) compensation plans which need addressing to ensure that all participants are fully cognizant of the facts and realities of venturing forth in the marketplace.

Starting at the very beginning; most people are drawn into these types of schemes based on different scenarios that are touted as commonplace; such as, large incomes for many individuals that are readily attainable. While such statements can be valid for a few individuals, the vast majority of participants will never see significant compensation levels; it's not justifiable. The few individuals at the top were most likely in the program for the beginning, and as participants came and went, the people at the top kept the best accounts for themselves, thereby building up their business through longevity, not necessarily through skill or hard work. Nearly 99% of all participants not at the top of the food chain lose money; those odds are not good at all unless you are the person at the top of the pyramid who benefits from all those people below.

Those same people at the top often tell recruits that "anyone can do this"; which on its face is not nearly as true as what it seems. After all, if "everyone can do this" and it is such a great opportunity, then why isn't everyone doing it, why isn't everyone achieving the same type of success as those at the top? Again, it's because 99% of all people who enroll in the opportunity lose their money.

Often, the organization will appear highly profitable and very viable based upon the average earning statements that are touted on official reports; these statements can be highly misleading. These comments are also beneficial if the company wishes to present itself as a legitimate business.

Although presented as legitimate, most product-based pyramid schemes are categorized as the companies with the highest loss rates at approximately 99%; comparatively speaking this loss rate is very unfavorable when judged against no-product schemes, or even most casino games of chance.

Legitimate "direct selling" business' often offer retail goods that can be purchased at wholesale prices and then resold at retail prices with a hefty markup for the retailer. The Pyramid schemes will try to play this card as well, but, the truth is most of the 'customers' for the product are the wholesalers themselves as they attempt to hit monthly quotas.

Many of the companies tout the "fact" that the direct sellers need only work 1-2 hours per day retailing the products or recruiting individuals into their organization, and that if the distributors are successful in their endeavors, they will establish an income stream that will allow them the time and financial wherewithal to enjoy their spare time. Considering the 99% attrition rate, most distributors will mightily struggle to recruit enough individuals to stay afloat, let alone rise to the top.

For a person looking for a steady income, or even just a regular job that allows them some free time, these opportunities may seem like a good thing. Recruits are told that it is a secure work and that a steady income stream can be easily be derived. This is far away from the truth in most cases; if 99% of the participants quit, that leaves only 1% to supply the necessary funding on a monthly basis; it becomes a vicious cycle, with low-level direct sellers struggling every month to enlist new people to take the place of those who quit. The beneficiaries are the people at the top.

Many times these very people at the top will tell recruits that the job market is terrible, or that the stock market is too risky, or that "standard" jobs are unfairly given out. Looking at it realistically, one could say there is nothing fair with only a few people at the top of a pyramid who benefit from the system. Of course, there is always the old fall back of "if you can't succeed at MLM, then it's because you failed to work the system"; this statement is like the pot calling the kettle black. The 'pyramid system' is skewed in favor of those already at the top of the pyramid, not those that are struggling to make it there.

A primary question asked by many recruits is if the program is legal. The reply is usually that if it were not legal, the authorities would have shut the company down a long time ago, the fact that the company is still operating is often touted as the proof needed to verify legal status. Statements such as these are not necessarily true; consumer protection officials react to complaints, and if the 99% of the participants are victims and they don't file claims, then the officials will not act. Victims often don't complain because they feel duped or self-incriminating, or they do not wish to face the consequences from their downlines or uplines.

The next three points all tie together and focus on the business aspect of the Pyramid scheme; first of all recruits are told that there are always expenses in starting a company, and those direct sellers should expect that they will have to pay those costs. Then recruiters will spout the fact that 16% or some higher percentage of direct sellers go on to earn large and steady incomes which compares favorably to other 'startups.' Finally, the prospects are told that MLM is the 'wave of the future' and that they should jump on board that very moment before the opportunity is gone forever.

In reality, the more money, time and effort put forth by newcomers, the more money, time and effort is gone forever. Unless the direct seller is willing to deceive even more recruits to rise to the very top, their money is gone; misleading people is a primary reason why 99% of recruits walk away, as most people do not wish to deceive others to achieve financial gains.

That many Pyramids display success percentages in the % range is also very misleading and deceitful; most of the time, the companies do not count the 99% of people who have dropped out. Instead, they only tout the 1% who have been willing to stick around and deceive others, thereby making the numbers look very viable.

Finally, the 'wave of the future' has been boasted about for nearly 20 years, and yet purchases from this industry still only amount to ½ to 1% of consumer purchases; if this is the wave of the future, the tide will arrive on the beach like a whisper in the night.

A realistic question could be asked concerning the demand for the product as well as any saturation levels that might be reached. The quick MLM answer is that there is no saturation point for the individual or product, but that the product virtually sells itself. This is comical, in a town of 10,000 people, will there indeed by 10,000 direct sellers, of course not. Additionally, if the product is being sold to the direct sellers 99% of the time to hit their quotas, then what happens if that 99 % pull out of the program?

A couple of the tricks used or inducements made to recruits include the opportunity to build a business by taking advantage of momentum and windows of opportunity that is available to help 'jump-start' a business. At the same time, recruits are told that this is not a 'get rich quick business' but that they should expect success using a slow, but steady methodology. It's true that it takes time to build a successful business (for the most part) but how that jives with a window of opportunity is worrisome.

It can't be both ways, and in this case, it is neither way. The people at the top are looking to recruit as many individuals as they can recruit, for the most prolonged period; in that way, they can drain 99% of the recruits from their funds and energies until the recruits give up.

Recruits are told they can be the master of their destiny, but the only people destined to win are the people already at the top (or nearly there) not the 99% of recruits that will give up on their destiny in exasperation and disgust.

Other tactics used by recruiters include statements that entice prospects by suggesting that they will be operating their very own business' with little capital expenditures and the support of an entire network of people who not only wish to see the recruit succeed but will be the recruit's friend as well. Based upon the little or zero capital that it takes to sign up as a direct sellers, the tiny capital foray could be right, except for one small fact; there is monthly product to purchase, success seminars to attend, marketing material to buy, and all the time and effort needed to recruit other unwary individuals into the downline.

There is also the product factor that should be considered when contemplating an MLM endeavor. Products can be touted as healthy, improved, and better than other products, but the truth can be starkly different.

The company can and does state that products are organic, or were developed primarily for the company using improved methodologies, but in truth, the majority of the time product is overpriced and can be purchased elsewhere for much less. When there are some direct sellers (or upline individuals) who all have to receive a 'cut' in the pie, it makes sense that the product will have to be priced at a higher rate than the average wholesale/retail scenario.

When recruits are told to provide the products to their family members, friends and colleagues, the rookies are being told that the products would not sell on their merit, so sell them to people in the recruit's social circle. This is the ultimate in hypocrisy, telling individuals to take advantage of their loved ones to push a mediocre product.

Recruits selling to a friend or family member is one way that the people at the top of the pyramid become very rich; they convince recruits to purchase a 'bundle' of product. The bundle can contain enough product to sell to five customers, but the vast majority of the time, direct sellers are unsuccessful in selling even one or two of the bundles or kits. They are stuck with an inferior product at inflated prices, while the people at the top laugh all the way to the bank.

Many prospects are told that there are some very reputable people in the MLM community, and that many of them (as well as the MLM companies) invest their time and money in very worthy and visible causes, and that by doing so, direct sellers benefit from their visibility. Al Capone, a very wealthy criminal, often touted the fact that he donated to charities; his donations did not overcome the fact that he was a criminal; he still ended up in jail.

While it is true that there are some reputable people involved in MLM, quite often it is because they are personally benefiting in one way or the other.

Individuals who are considering participation in the marketplace or community should seriously consider the facts contained in this article. Approaching and investing in any business endeavor is something that should be thought through, with both the pros and cons taken into consideration. Even though Direct selling- MLM companies and recruiters are great manipulators of fact and fiction, real opportunities often make more than just getting friends and neighbors to buy a product that they may not want or need.

Being pushed to attain a specific status by recruiting other individuals also to achieve that rank is not the best business model ever produced. The System may work for the people at the top, but it surely does not work for 99% of people at the bottom.