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Are you finding it hard to pay your ever-increasing bills with your meagre salary?
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The Multi-Level Marketing (MLM) strategy offers a dream prospective recruits cannot afford to miss. Network marketing is simply a way of distributing products through an organisation of independent business owners to an expanding customer base. MLM companies recruit people to do two things: sell their products and recruit more people to sell their products.
When an individual becomes an associate for one of these organisations, they make money --in theory--by selling the company's products, as they earn commissions on those sales. However, what draws most people to MLMs is the chance to make money without having to sell -- because you also earn a commission on sales made by members you have recruited.
That is how it is supposed to work and that is why they are controversial. Critics say MLM companies peddle pyramid schemes: Those who join early sit at the top of the pyramid and earn commissions on sales made by their recruits, and by their recruits' recruits, and so on down the line. The later a person joins, however, the lower they sit on the pyramid (or the "downline"), and the less likely they are to make money.
Many MLM styled "businesses" have started to 'mushroom' rapidly in the region that --usually aimed at people in the lower earning brackets -- claim to offer potential recruits the opportunity "to make it big". However, the legitimacy of their declarations remains to be seen over the course of time. Companies currently functioning in this capacity include: HerbaLife, Biznas, and Serious Income Now, among others. Their websites are adorned with success stories, motivational quotes, and advertisements from reputable companies in an effort to prove their authenticity to potential recruits.
A cleverly calculated sales pitch says, "If you concentrate on selling, you'll be sitting on the beach in the Bahamas having a cold drink while watching your computer screen as your downline continually expands, with money going into your bank account non-stop."
Nevertheless, "pyramid" is not a term those in the MLM industry like to use because the word pyramid has become synonymous with fraud, and there is a legal fine line between a pyramid scheme and a legitimate MLM programme.
A pyramid scheme is called a 'pyramid scheme' because the network takes on the shape of a pyramid -- a three dimensional triangle -- when it expands with new recruits. If a pyramid were started by a human being at the top with just 20 people beneath him, and 200 beneath them, and 2,000 beneath them, etc., the pyramid would involve everyone on earth in just ten layers of people with one person on top raking in the real money.
Logically, no matter how good the product is, there will reach a point were there will not be anyone left to sell the product to, hence the people on the lower end of the pyramid are the ones left with the short-straw. Many top companies employ multi-level marketing to a certain extent because recruiting people with the aim of having the new individuals recruit new people is perfectly legal, and it is legal to give money to people, where it becomes illegal is offering promise that cannot be sustained in the long-term, hence it becomes fraud.
The dangers in such practices is that many pyramid schemes and MLM company's will begin to die when the later recruits do not sign on large enough numbers to pay off the earlier recruits.
Romania suffered the brunt of these illicit forms of alleged network marketing methods in 1993, where people were swindled by pyramid schemes and Romanian newspapers claimed that millions of Romanians lost their life savings in a scheme called Caritas. A similar story emerged from Albania in 1997 that reported hundreds of thousands of Albanians falling prey to the opportunity to make it big.
Why do these schemes work? The answer lies in the fact that people are greedy and the desire to make a lot of money from a small investment in a short time affects critical thinking and replaces logical deduction and analysis with a dream.
Before any such multi-network marketing method is employed, the potential recruit must investigate the genuineness of the company involved and be very aware of what to expect in the end. If a person decides to become a distributor for an MLM company, that person is legally responsible for any claims they make about the company, its products and the business opportunities it offers -- even if they are simply repeating claims they read in a company brochure or advertising leaflet.
Reputable companies offer various forms of MLMs but the difference is that they usually make promises they can keep and do not involve unrealistic earning potentials, yet, even the methods they employ are subject to debate. The trick is to know the difference between them and the fraudulent ones.
When these companies start to solicit new distributors, they are responsible for any claims they make about earnings potential. If they make unrealistic promises, they could be held liable if those promises fall through, but for many the loss is unrecoverable.Mario Najm
© ArabAd 2004
