The Multi-level Marketing (MLM) Trap

In the search for the quickest way to get rich, many people fall prey with promise of easy money. One example is the idea of multi-level marketing (MLM). Multi-level marketing (MLM) is also known as network marketing and referral marketing. MLM is easy enough to understand. Imagine you have a product to sell. A common MLM product is a vitamin or mineral supplement. You could do what most businesses do: either sell it directly to consumers or find others who will buy your product from you and sell it to other people. MLM schemes require that you recruit people not only to buy and sell your product, but who will also recruit people who will not only buy and sell your product but also recruit people thus perpetuating a never-ending cycle. Only there is an end to the supposed self-sustaining business practice of MLM.

If MLM sounds too good to be true, then maybe it is. Most traditional business people would never consider such a venture. Why would you recruit people to compete with you? Isn't that what you are doing when you recruit people to sell the same products you are selling? The MLM lure will convince you that it is reasonable to recruit competitors because they won't really be competitors since you will get a cut of their profits. This will take your mind off the fact that no matter how big your town or market, your possible recruits will never be exhausted. But the well will go dry soon enough.

Multi-level marketing (MLM) is system of marketing which puts more emphasis upon the recruiting of distributors than on the selling of products. MLM is very attractive, however, because it sells hope and appears to be outside the mainstream of business as usual. It promises wealth and independence to all. Unfortunately, no matter what the product, MLM is doomed to produce more failures than successes. For every MLM distributor who makes a decent living or even a decent supplemental income, there are at least ten who do little more than buy products and promotional materials, costing them much more than they will ever earn as an MLM agent. There will always be some MLM distributors who will make money in an MLM scheme. The majority, however, will fail due to the nature of all pyramid schemes.

A pyramid scheme is a fraudulent system of making money, which requires an endless stream of recruits for success. Recruits (a) give money to recruiters and (b) enlist fresh recruits to give them money. A pyramid scheme is called a pyramid scheme because of the shape of a pyramid: a three dimensional triangle. If a pyramid were started by a human being at the top with just 10 people beneath him, and 100 beneath them, and 1000 beneath them, etc., the pyramid would involve everyone on earth in just ten layers of people with one con man on top. The difference between a pyramid scheme and MLM marketing is that the latter is a legal business practice. A pyramid scheme does not sell any product and only requires a monetary investment from the down line for them to succeed.

MLM only benefits the company because the more recruits they get, the more money they receive from their share of the down line's recruits. Aside from that, the costs that these recruits spend on are not covered by the MLM company. In the end, they lose more money than earn it.

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