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Money Expert - Diana Clement - Financial Planning, Career, Investing, Economy, Property - MSN NZ

Multi-level marketing

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We've all heard of companies such as Tupperware, Nutrimetics and Amway which use a method of selling called multi-level marketing (MLM) or network marketing. In plain English it involves self-employed individuals selling products usually direct to consumers.

As well as earning money from the sales they personally generate, they also earn money from the sales of other people they have introduced to the company. It is sometimes difficult to distinguish legal and reputable MLMs from illegal pyramid or Ponzi schemes where more and more investors are recruited, putting their money into non-existent investments — with the money being channelled to the people at the top of the pyramid. Eventually there isn't sufficient income to pay everyone the fantastic interest or dividend promised and the entire pyramid collapses.

A good friend of mine is starting up as a multi-level marketer. She asked for my opinion on the business idea, but I couldn't get excited about the cleaning products and health supplements the company offered. They seemed no better than those available at the supermarket and cost significantly more.

Multi-level marketing is a legitimate business — don't get me wrong. You can make lots of money doing it if you're motivated. I noticed recently that wealth gurus Robert Kiyosaki and Donald Trump both recommend MLM businesses.

Where I do object to MLM from a business perspective, is that in many cases people who sell the product are encouraged or even required to spend hundreds of bucks a month buying product themselves. One I looked at required you to spend $200 a month on their products. This is how the company really makes its money — its own sellers buy the majority of the product.

My objection is from a consumer's perspective. With so many people clicking the ticket along the way the goods are overpriced for what they are. It's as simple as that.

Much as I love Tupperware products, I think they're a total rip-off. And I don't believe that the average Kiwi needs to take health supplements every day of the year. If you're eating a good, well-rounded diet, supplements are unnecessary and a total waste of money. As far as cleaning products go, you can make your own for next to nothing.

Consumer magazine did a report about "super-juices" in December 2008. Two of its conclusions after testing MonaVie and other similar products were:

  • Super-juices are seriously overpriced fruit juices and — at their recommended doses — deliver no more of an antioxidant punch than a glass of ordinary fruit juice.
  • Be wary of signing up to a multi-level marketing scheme to sell super-juices — check the level of sales required to make a decent living.

Views on MLM are polarised and I wouldn't be surprised if some of you stick pins into an effigy of me for writing this. But if I can save one person from spending $200 a month on unnecessary products then I'll be happy.

I did try to find some balanced articles on the Internet from reliable sources, including:

Or make up your own mind by checking out the many of millions of web pages that have discuss multi-level marketing.

Have your say: do you think multi-level marketing a scam?

User comments
Dear jezza, christchurch, I suggest that you buy and eat fesh food, not packaged food. But the reason I am posting is that I have just discovered that Guarana, used often in supplements, is in fact a plant that is higher in caffeine than coffee. Too many of the multi-level marketing supplements contain caffeine. I may be a cynic, but to me the only reason to put caffeine in is to give people an artificial boost and to get them addicted to the product. Ironically caffeine reduces vitamin absorption. If you are going to take vitamins, then buy them from the supermarket or health food shop from a reputable brand such as Healthries or Red Seal, not from dubious mutli-level marketing companies.
Could be worthwhile if you don't follow the pack. Alot of people in the MLM will say, 'you just need to keep positive, keep trying' my advice is, don't go searching for your potential clients, find a way of getting them to you. Also be aware that the majority of the superstars who are at the 'top' of the game may possibly have once or are running there own business where they are 'exposed' to more potential customers or already have built a relationship with them through their own businesses. Undercut and beat them by being smarter hahaha
Total bs..have seen mates get ripped off, family and friends are invited to diner to get the hard sell by people believing they are go-getters and realising their dream, but are only pressurising family and friends into joining these scams through being brain washed and their personal greed. Beware there intoxicating claims of easy wealth...remember the saying a fool and there money?
Hey guys get real.. What other business can be run from home .with such low start up costs.. tax advantages and a monthly business expense under $200..Using products you already use anyway.. maybe not the brand you will now be using as part of your business.. .. I am sure anyone in retail spends much more than $200 per month to keep their business running... And good luck.. Like any other business.. what you put in is what you get out of it..
My personal opinion from experience.. for the same amount of time in researching a MLM that is genuine and will be profitable for you (still with hard work of course), you can spend that time researching your own business idea. Gaining as much information and practicing business development is key. Also creating something on your own that you have total control of is the most rewarding factor, and can get you through the toughest times.
Interesting that you believe no need to supplement. An independant scientific analysis takes place every 7 yrs in the UK where supermarket food products are chosen across the board,analysed and compared. The last publication I accessed was 5 yrs ago for the preceeding 7 yrs, the result, there was a 40% decrease in the nutritional value of foodproducts. If a Dr tells me all I need to do is ensure that I eat a well balanced diet of fruit and vegetables I change my Dr immediately as that indication is that they are living in a cave and are not in touch with the realities of the nutritional value of food products in todays supermarket chain,cold storeage, transportation, chemical ripening for colour etc Also all supplements are not the same, chemically produced are not the same as phytofactor rich plant supplements from true organic origin. Question,why are pharmaceutical companies quietly investing in supplement companies ? the evidence is now too strong in favour of supplementation.
I always read your blogs something everyday because I like your thought and I got much advice after read you. I tell to my other friends about this & it’s blog. I hope you will read my this comment and you will remember me. i want you to always make new articles like this. I appreciate this. Thanks a lot. =================
As a former Sales &Marketing Manager for Amway Corporation in Chile, I got to see the good, the bad and the ugly. The products are great but more expensive than your budget priced supermarket brand ..... in fact Procter & Gamble, Unilever and Johnson & Johnson launch copies of Amway products 2-3 years down the road, cashing-in on the product concept and features. The negative side to Amway is that some fat-cat independent distributors tend to exagerate their claims and promises of riches and prosperity, something the company constantly warns of. I guess the bottom line is that if you buy and sell (or distribute) a quality product from any company, you may have success in earning some good income, but only if you work hard. Easy money does not exist.
Stoatygirl, for your sake I hope youre not involved in anything to do with globalVerge or any of these other dreamers that think a group of MLM'ers are going to take on the worlds largest phone producers and networks with their wireless cell phones and amazing plans. It wont happen.
Basically the leaders of these MLM scheme do get rich, the little people do not. They leaders get rich selling books and seminars and tapes etc to their captive market place. Their books and tapes etc sell the wealth dream keeping the little people enthralled, and of course returning lots of $$$ to the leaders. The little people believe the dream, the leaders sell the dream.

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