MLM. Is it a racket or a get-rich-quick scheme?
| Category: Networking(MLM) | Date: 2001-03-16 |
Earn $7,000 in 2 weeks - GUARANTEED! Free Money! Easy Money! Get Rich Quick! Unlimited Income Potential! Many online multi-level marketing and network marketing setups are touting these promises to entice members to join their programs. Their popularity are evidenced by the proliferation of these programs in opt-in mailing lists that are dedicated to promoting Internet marketing and businesses.
Are they rackets or real get-rich-quick schemes? Well, to answer this question, we have to look closely at some of these programs. While different programs dangle different "carrots" to entice members, they all focus on selling points that prey on two human weaknesses - greed and curiosity.
Here is how a typical program operates in its simplest form. On a blank sheet of paper, write down your name and address (email address is optional), clearly stating that you wish to be added to the mailing list. Fold it around a $5 BILL, and send it to the first person on the list.
Remove the first person from the list at the bottom of a sales letter. Move the other two names up, and add your name to the list in the third position. Send out copies of this letter to 20 people or more if you want a greater response.
Now, if we assume that these 20 people respond to your letter and send out 20 letters each. Your name will be moved to second position and the letters are now circulated among 20 x 20 = 400 people. Suppose these 400 people respond by sending out 20 letters each, the pool will be expanded to 400 x 20 = 8000 people. By then, your name will be moved to the first position. If these 8000 people respond, you will be receiving a maximum amount of $40,000.
Is that possible? Well, greed and curiosity alone will motivate people to join this program. After all, it involves a small one-time investment of only $5 and it is legal. There are no laws prohibiting the participation in the program. But will everyone benefits from this program.
DEFINITELY NOT! ! ! ! The old saying of early bird catches the worms applies here. Those who join the program early will make money from those who join at a later stage.
This program works by transferring money from the majorities to the minorities. It does not create "new" money - only the government has the authority to print new money. In a finite population, if someone makes $5,000 from this program, 1000 people stand to lose $5 each.
While the advent of Internet and email has enlarged this finite population many folds, it merely extends the time required to reach the saturation point where a large number of people become disillusioned with this get-rich-quick scam and boycott it. In other words, this program comes on strong and goes off fast. It should not be seen as a career or a legitimate business that you can rely on for the long term.
The fact that the loss is limited to only $5 means that any resentment to this program would be weak. Who would go around town to cry foul for losing $5? On the other hand, voices from people who have made money from this program would be heard loud and clear, despite being the minorities. They make powerful endorsements to this program and propel more unscrupulous people to join them.
So, should we stop the profiteers from reaping off the unscrupulous? We should if we want to promote good moral values among our people. A country and its economy would only prosper if its people work hard to earn a decent living. It is a waste of valuable human resources to see so many people directing their energy and efforts in these get-rich-quick rackets. There is a bright future for electronic commerce in Internet and I believe these people would do well by directing their energy and efforts to building legitimate electronic retailing businesses.
How should we stop these programs from proliferating in the Web? The best way is to educate the people. Spread this message to as many people as possible. These programs will go away if people stay away from them.
But not all multi-level marketing and network marketing programs are scams. Some are legitimate businesses selling tangible products and providing value-added services - most of them limit their marketing networks to two levels. The demarcation becomes blurred as many rackets disguised themselves as exclusive clubs or dangled different "carrots" to entice members.
One good example is a three-level marketing program. In the first level, "Triple Your Money", you cycle with 6 sales in a 2 x 2 matrix and receive $150 and 100 minutes of free long distance calls. You use the $150 to enter the second level. The six sales will contribute $49.95 x 7 = $349.65 to the organizers coffer.
In the second level, "Digital Phone Frenzy", you cycle with 6 sales in a 2 x 2 matrix and proceed to third level. The coffer will grow to $349.65 x 7 = $2,447.55. You will not receive any payment in your first cycle. The company will only pay you $450 or a cellular phone if you make a second cycle of sales, and contribute another $2,097.90 to the coffer.
In the third level, "Computer Cash Connection", you cycle with 6 sales and increase the coffer to $17,132.85. The total payments made to members are a meager $1,000 or a computer plus 216 x 100 minutes of airtime.
The above illustration only considers the first cycle of sales made by a member who completes the three levels. It does not include sales made on subsequent cycles. Although there are higher payments made in subsequent cycles - $150 + 100 minutes airtime + $450 + $1,000 - total payments made will still be kept around 10% of total collections in the organizers coffer.
If you remove the "carrots", this program is simply a variation of the simple program discussed earlier. The key to identifying a scam from a legitimate business is to ask yourself the following questions: What product or service is the program trying to sell? Is the product or service of any value to the end consumers? Is it available free elsewhere?
In the three-level marketing program, there are no exchanges of goods, services or information. It does not take a genius to figure out that the racketeer is the single biggest beneficiary of the program. He will be laughing all the way to the bank as he watches thousands of greedy people falling into his traps.
So, fellow Internet marketers, stop wasting your time and energy pursuing these get-rich-quick scams. The convenience of shopping online is set to change the business landscape and consumer buying behaviors. Invest in your future now by directing your energy and efforts to building your own legitimate businesses as an online retailer or distributor. And dont forget to do the web community a favor by spreading this message to as many people as possible.
About the author:
Patrick Tan, an entrepreneur and former journalist, offers a complete range of e-commerce solutions and services (editing, writing, translation, content development, web design, etc) to help you build a successful career online. Visit his site at (aloha-city.com) for more information. He publishes a free newsletter to share his experience and business know-how. Subscribe Now! basics@aloha-city.com
Patrick Tan
mailto:
patrick@aloha-city.com
http://www.aloha-city.com
Are they rackets or real get-rich-quick schemes? Well, to answer this question, we have to look closely at some of these programs. While different programs dangle different "carrots" to entice members, they all focus on selling points that prey on two human weaknesses - greed and curiosity.
Here is how a typical program operates in its simplest form. On a blank sheet of paper, write down your name and address (email address is optional), clearly stating that you wish to be added to the mailing list. Fold it around a $5 BILL, and send it to the first person on the list.
Remove the first person from the list at the bottom of a sales letter. Move the other two names up, and add your name to the list in the third position. Send out copies of this letter to 20 people or more if you want a greater response.
Now, if we assume that these 20 people respond to your letter and send out 20 letters each. Your name will be moved to second position and the letters are now circulated among 20 x 20 = 400 people. Suppose these 400 people respond by sending out 20 letters each, the pool will be expanded to 400 x 20 = 8000 people. By then, your name will be moved to the first position. If these 8000 people respond, you will be receiving a maximum amount of $40,000.
Is that possible? Well, greed and curiosity alone will motivate people to join this program. After all, it involves a small one-time investment of only $5 and it is legal. There are no laws prohibiting the participation in the program. But will everyone benefits from this program.
DEFINITELY NOT! ! ! ! The old saying of early bird catches the worms applies here. Those who join the program early will make money from those who join at a later stage.
This program works by transferring money from the majorities to the minorities. It does not create "new" money - only the government has the authority to print new money. In a finite population, if someone makes $5,000 from this program, 1000 people stand to lose $5 each.
While the advent of Internet and email has enlarged this finite population many folds, it merely extends the time required to reach the saturation point where a large number of people become disillusioned with this get-rich-quick scam and boycott it. In other words, this program comes on strong and goes off fast. It should not be seen as a career or a legitimate business that you can rely on for the long term.
The fact that the loss is limited to only $5 means that any resentment to this program would be weak. Who would go around town to cry foul for losing $5? On the other hand, voices from people who have made money from this program would be heard loud and clear, despite being the minorities. They make powerful endorsements to this program and propel more unscrupulous people to join them.
So, should we stop the profiteers from reaping off the unscrupulous? We should if we want to promote good moral values among our people. A country and its economy would only prosper if its people work hard to earn a decent living. It is a waste of valuable human resources to see so many people directing their energy and efforts in these get-rich-quick rackets. There is a bright future for electronic commerce in Internet and I believe these people would do well by directing their energy and efforts to building legitimate electronic retailing businesses.
How should we stop these programs from proliferating in the Web? The best way is to educate the people. Spread this message to as many people as possible. These programs will go away if people stay away from them.
But not all multi-level marketing and network marketing programs are scams. Some are legitimate businesses selling tangible products and providing value-added services - most of them limit their marketing networks to two levels. The demarcation becomes blurred as many rackets disguised themselves as exclusive clubs or dangled different "carrots" to entice members.
One good example is a three-level marketing program. In the first level, "Triple Your Money", you cycle with 6 sales in a 2 x 2 matrix and receive $150 and 100 minutes of free long distance calls. You use the $150 to enter the second level. The six sales will contribute $49.95 x 7 = $349.65 to the organizers coffer.
In the second level, "Digital Phone Frenzy", you cycle with 6 sales in a 2 x 2 matrix and proceed to third level. The coffer will grow to $349.65 x 7 = $2,447.55. You will not receive any payment in your first cycle. The company will only pay you $450 or a cellular phone if you make a second cycle of sales, and contribute another $2,097.90 to the coffer.
In the third level, "Computer Cash Connection", you cycle with 6 sales and increase the coffer to $17,132.85. The total payments made to members are a meager $1,000 or a computer plus 216 x 100 minutes of airtime.
The above illustration only considers the first cycle of sales made by a member who completes the three levels. It does not include sales made on subsequent cycles. Although there are higher payments made in subsequent cycles - $150 + 100 minutes airtime + $450 + $1,000 - total payments made will still be kept around 10% of total collections in the organizers coffer.
If you remove the "carrots", this program is simply a variation of the simple program discussed earlier. The key to identifying a scam from a legitimate business is to ask yourself the following questions: What product or service is the program trying to sell? Is the product or service of any value to the end consumers? Is it available free elsewhere?
In the three-level marketing program, there are no exchanges of goods, services or information. It does not take a genius to figure out that the racketeer is the single biggest beneficiary of the program. He will be laughing all the way to the bank as he watches thousands of greedy people falling into his traps.
So, fellow Internet marketers, stop wasting your time and energy pursuing these get-rich-quick scams. The convenience of shopping online is set to change the business landscape and consumer buying behaviors. Invest in your future now by directing your energy and efforts to building your own legitimate businesses as an online retailer or distributor. And dont forget to do the web community a favor by spreading this message to as many people as possible.
About the author:
Patrick Tan, an entrepreneur and former journalist, offers a complete range of e-commerce solutions and services (editing, writing, translation, content development, web design, etc) to help you build a successful career online. Visit his site at (aloha-city.com) for more information. He publishes a free newsletter to share his experience and business know-how. Subscribe Now! basics@aloha-city.com
Patrick Tan
mailto:
patrick@aloha-city.com
http://www.aloha-city.com
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