1) All businesses are designed to make money. It’s part of the definition of “business.” And those who found the business (of which there are always only a few) will make, in general, much more money than anyone working for them.
The BIG difference is where the money comes from, who provides it. In a traditional business, the money comes from an outside source – customers. Customers DO NOT have any sort of vested interest in the financial well-being of the company, other than being able to support or replace a product he buys from that company. There is no incentive for the customer to purchase the product other than liking or needing the product. There is no promise of getting rich or having a thriving business if he purchases products from this business. It’s an arm’s-length transaction that ends when the transaction ends.
In MLM, as I imagine you’ve gathered by now, most of the people who buy the products do so because they have all sorts of stories built up around the products they buy, the company that makes them and the opportunity all of this represents to them. It’s not a simple thing, and it’s usually designed to cover up something – usually where the money is coming from and where it is going.
The red flag here should be the money trail – who provides it in any transaction and where it goes.
2) There are a few products provided by MLMs that are unique to the marketplace. BUT the more (most?) important question is why anyone would choose to market a product, unique or not, in a non-traditional venue. The traditional means of producing and bringing a product to market have functioned from time immemorial. If a product is SO good or SO unique, why does it need a non-traditional sales model to succeed. To me, the real measure of any product is how well it does in the general marketplace. If the product or service has value, it will succeed, until something better comes along, or until someone with better marketing skills and resources does.
Maybe someone can enlighten me, but as far as I know, NO product or service that was introduced exclusively by an MLM has outsold a similar product on the open market. Most of the time, those MLM products never even see the open market. (Avon products are among the few examples I can think of at the moment that would qualify.)
So to me, anyway, uniqueness of a product isn’t really a standard to be met when it comes to the viability of an MLM company. The standard should be whether or not the product and its price compare favorably with similar products on the market. In most cases, the MLM product is sold at a higher price and is usually not similar in quality to non-MLM counterparts.
3) I often stun Amway critics when I inform them that Amway is not a pyramid scheme. And it is not. Amway is a corporation that makes and sells products. They are not actively involved in the marketing of their products to the public. Any company that uses Amway as a model is not, in and of itself, a pyramid scheme.
Where the pyramid exists is in the sales force – in Amway, it’s the AMOs (Amway Motivational Organizations). Similar organizations exist in many (most?) MLMs. These organizations exist to build a sales force, usually for profit.
And that’s where the pyramid scheme gets created. And in the case of Amway, it’s Amway’s tacit approval of its AMOs that condemns them.
People are lured into a sales group for a particular MLM company on the premise that if they use and sell the products and teach others to do the same, they can build a profitable organization. The cost of getting involved is usually low, especially since recruiting fees are one of the red flags investigators use to detect a pyramid fraud.
The ongoing costs, though – books, brochures and other sales materials, audio CDs, catalogs, seminars (often including travel and lodging), essentially, the costs of learning and doing business – are funneled through these organizations at a price point that allows the org to profit from the sales force, even if there is no retail selling going on.
So again, FOLLOW THE MONEY. And don’t believe anything just because they say so. When my wife and I were involved in Amway, we were told that no one profited from the seminars or the tapes, yet all the evidence shows that they HAD to have profited from them. So don’t follow the lies. Follow the money trail.
There may be a few MLMs that allow for a person to make a small side income selling products, but NONE of them fulfill on a promise of a full-time income or a wealthy lifestyle. And even a viable retailing business with an MLM company will fail if it is coupled with a motivational organization.
If your recruiter did not share this when he/she convinced you to sign up, you now know what the reality is.