Multi-level marketing is a unique way to create wealth. You can make money by selling a product or service, as well as make money from getting other to sign in in your down line. Where this is different from a Pyramid Scheme or a Ponzi scheme is that it actually delivers a product or service.
So if you are influential in your sphere of influence, it is possible to get a lot of people to sign up in your down line. The challenge is that maybe all of those people you have signed up are not influential and do not feel comfortable approaching their friends and family about a business venture. This is sales 101, create your warm list. After you have burned through your family and friends most people flame out. Some stay in for decades, because they see others that have made it by just keeping after it. It is a numbers game.
The emotional toll of having your friends and family not want to pick up the phone when you call is quite high. I have been susceptible to the MLM multiple times. Some will declare that this is cutting edge technology that they are promoting or a breakthrough cure for cancer and the distribution model just happens to be MLM. Certain ones like Amway always have something new, but it is not quite fully baked in order for people to be able to replicate success.
A Ponzi scheme is an investment where an individual, pays a very high rate of return to investors, and that money is coming from new investors. The tell-tale sign is an unusually high rate of return or where the return is so consistent that it raises red flags.
The business feels real, because investors are getting real returns. These investors tell friends and loved ones of these great returns and everyone wants in. The influx of cash is what continues to pay the investors to sustain the scheme. Then a tipping point is hit when the amount of new investors is not enough to pay to investors. The dollars are held by one person that keeps those dollars as the Ponzi scheme breaks down.
The end game is when the holder of the Ponzi scheme disappears taking all of the money that has not yet been distributed.
A pyramid scheme also presents an unreal rate of return. Where it is different from a Ponzi scheme is that their is one central holder of funds. In a pyramid scheme, those that recruit others derive money. If one does not recruit, then they fail. Ponzi relies on you think you are working with a Hedge Fund Genius like Bernie Madoff. The Pyramid scheme is quite transparent as to all payouts come from people down the line coming on board.
So are there good MLM to jump in on. Probably, but if the product does not stand out on its own, the MLM is utilized to try and get people to move an inferior product if they think they can make money doing it. I go back to the 800 pound Gorilla in the room. When I sat in on an Amway meeting and they showed all of the things that you can buy from Amway, you thought great. They promote the soap, because that is the one product out of thousands that is cost effective. All other products you pay a premium price for so that your up line can make money. I was sitting in one of these meetings with my brother and sister and law and she knew what price she would pay for compared to what was in the catalogs and was able to discern that the you would have to falsely present the opportunity without stating the truth that everything someone buys from you will cost more. They change the language, like that helps your business, because the additional cost goes into your business volume. This is double talk and MLM’s are famous for it.
Other techniques are to alter the number of people that you need to get in your down line. i went to one and instead of needing 5 or 6 in your core members, you may only need two. they psychology of only having to get two is a whole lot easier to get five plus.
I tend to want to find a way to retire that does not have me exploit those closest to me. That does not mean that there is not a great product that could leverage this model. I just may not be aware of it.