Couple of week’s back I got a call from a an old friend whose name I will not disclose here. Let us call him S. Mr S is a web designer by profession and apart from his days job he is also trying his hands out with MLM (Multi-Level Marketing) with Amway or I would term it as Mr S is trapped into MLM of Amway.
He knows that I am an entrepreneur and so thought of making me his referrer and there is nothing wrong in it but as I am aware of the fundamental flaws of MLM programs I prefer to avoid it. Let us first see the fundamental flaws of MLM Programs.
1. You recruit competitors
You found a superb product. What would be your next step? No no you are wrong. You would not sell that product but instead the MLM model encourage you to find people who would be under your referral and sell that superb product.
You actually are not selling anything but you are recruiting your competitor to sell that superb product. Don’t you think the model sounds a bit fishy?
2. Costly Products due to commission at many levels
You are not directly selling the product but actually selling the product for your entire hierarchy of people above you and this actually means commission being paid on each level, making the product more costly.
This is one of the main reasons why you would not see any branded product being sold in MLM marketing because as a customer you can soon argue that the price of it is something less than what you are selling at.
3. Un-Ethical Marketing
The products are so costly that at times people are not willing to use those products themselves but you are forced to be buying them to keep their membership alive. If you remain a member you give yourself a chance of getting few referrers under your name. This is where you make the second mistake (First of-course is joining such program) and you start calculating how to recover the joining fees you paid to promote those craps. Ideally you should forget about the fees and move on.
Internet is no difference
At times I find it very funny that internet marketers and bloggers promote products that they hardly use it. I term this as Un-Ethical Internet Marketing and try to avoid such scams to the extent possible.
This does not mean that you should make a rule of not purchasing any products referred by other fellow affiliates. I myself do purchase lot of products under other affiliates but I follow a simple rule of asking myself a question just before committing to it – Is the referral based on personal experience or not?
If you find that the review of the product is based on years of experience and the reviewer is using the same product then I go for it.
I also promote lot of affiliate products (and get paid for the same) but I hardly promote anything that I myself don’t use because I believe in Ethical Internet Marketing and sharing of knowledge.
Share your experiences in comments below.
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{ 2 comments… read them below or add one }
ys i agree with you on some pts but i had come across and MLM which was selling a mobile cover which avoids the Xtype of rays to harm people. They were charging it 900 odd bucks but it was really good product. i agree the heirachy carried in MLM, tht is wht makes people earn according to m. I don't support MLM business as i was previously a victim of it!
1. By MLM maketing, the manufacturer avoids paying any sales tax to India. The foolish Indians have supported this by becoming members.
2. He will aviod paying godown rent, transportation cost, hiring staff etc
3. Customers will not be able to trace his address if any one want to sue him – for whatever is the reason (for eg. GOI will not be able to recover sales tax !)
4. The seller is adopting ‘risk is yours gain is mine’ policy.
5. Every member have to pay initial subscription fee – which he earns without any investment. The commission paid down the chain is very less, and a major chunk is pocketed at the top. No risk at all.
6. He does not spend on any marketing/advertisement. The greedy fools who have got trapped do that. In most cases a member tries to sell the products to his relatives and friends . In the long run, he spoils his relation with these people. They will try to avoid meeting this member.
7. In most cases , the product is made by one of the local companies, a small variation is done and patented. (any one can do this). Then priced high. There are many Indians who buy only a high priced product. These people think that a high priced product is a good product.
8. No doubt these products are good quality only. But they are a small variation of a already existing very good product, in a new wrapper and a new foreign name and a very high cost. This is good enough for cheating Indian customers. (Eg. Add one more flavour to Pears soap and create a new product. Does not matter, if the change does not add to it’s main function – of cleaning the body).
Before becoming members , people should think, how long down the chain one can pay the commission. Can the total amount of commission paid exceed the cost of the product?
So be wise. Do not attempt – the so called direct maketing. Let the seller come through the regular route. pay taxes and compete in open market.
arvind