How To Avoid Multi-Level Marketing Schemes
Now let me preface to all the MLM lovers out there that I’m not against Multi-Level Marketing.
This post is about the endless Matrix Schemes that have been on the web for years, and how they prey on the people desperate to make money online.
I’m just going to tell you a story as an example.
Last week I had a long time friend email me last week to tell me about a new Multi Level Marketing program that was going to be bigger than Facebook, Twitter, even Google.
I should definitely get in right now so I can get at the top of the matrix and let my lists know about this tremendous opportunity..
After all, a Million Millionaires were going to be created with this program. Wow! Does Obama know about this? Maybe the company could get a piece of the stimulus bill.
So as usual, I cringed as I read this because I knew I’d have to respond.
But first, I decided to check out this incredible opportunity to give me some ammo.
It didn’t take long to find about 10 massive red flags. Here are a few.
- The domain was a private registration
- The owners had almost no history online
- The site design was horrible
- The software was less than $500 off the shelf
- Cheap web-hosting
- The outrageous monetary claims
- Etc etc..
I’m sorry but if you’re going to be bigger than Facebook, you need to spend more than $1000 on your website.
Here’s the deal. I’ve been online for a long time, and I’ve seen 100’s of these programs come and go. I’ve been sucked in myself many times, and brought online friends into them as well.
But I got off the Multi-Level-Fly-By-Night-Massive-Spillover-Must-Join-Now-Even-Though-No-Product-Did-I-Mention-Spillover-Forced-Matrix Pre-Launch-Great-Upline Merry Go Round awhile ago.
Why? Because even though I might make my money back, no one I refer ever will.
Here’s the lifecycle of your typical Fly-By-Night Multi Level Biz Opp. I compared it to a relationship… but I have no idea why.
Love at First Sight
This opportunity is exactly what I’ve been looking for to pay off all my debt, buy a bigger house and take expensive vacations.. Where have you been all my life? No work, easy money, I’ll love this opportunity forever!
The Courtship
Lock in your position don’t pay now, while we see if we can sell enough ads to hire a webdesigner, buy software and try to get a Merchant account
The Engagement
Invite all your friends to the big event, they won’t want to miss this opportunity. Just give us access to your email accounts and we’ll mail all the invites for you.
The Big Day! – Launch
Make your first payment and within 48 hours we’ll show you whether you received any spillover. Sorry our backend system isn’t able to show geneaologies for a few days.
The First Fight
Even though you had BIG NAMES in your upline, for some strange reason you didn’t get any Spillover. But it’s coming!!!
The Break Up
It’s been 2 months, still no Spillover… time to drop out ( you and 60% of the members)
The Divorce
About 1% of the members start claiming SCAM on the forums and begin charging back their credit cards for their payments. The company loses their merchant account and has to switch to an overseas provider, who somehow manages to hit everyone’s credit cards again.
The Realization
Looking back at the whole thing you realize it was an obvious scam from the start, and can’t believe you ever got suckered into the program.
Folks…Trust me on this one. I’ve been given top positions in at least a dozen of these forced matrix programs that were well-run, well-organized and had decent products…. but there’s one absolute fact. The bottom always drops out when the vast majority of people realize they are not getting any spillover. The only way these program owners and the “Top Sponsors” can make any money is to keep creating new programs and moving their downline into every new one.
Save your money, your time and your relationships and don’t fall for the forced matrix schemes.
MLM is real. Amway is a good example. So’s Melaleuca; and the one my wife got in by accident when she bought some mineral solution when she got a bone density test result that frightened her, and since then (nearly 10 years now), her bone density has increased marginally but steadily year after year.
Granted, she spends $250.00 a month on the product, but her sponsor is a straight up guy, recruits all the time, and puts a new candidate in her downline two or three times a month, and she earns enough commissions off sales she doesn’t even know are happening, to PAY for her consumption of product, month after month.
People who want to do MLM ought to be aware of WHO they’re doing business with.
Due Diligence, I believe it is called.
Join in haste, repent at leisure, to paraphrase a wizened sage of yore.
When the rep calls you up and applies the old ‘get in now before you lose the opportunity’ ploy, find the shortest distance to the exit and bid them a courteous farewell. It’s always better to be careful than pregnant.
Dan, Good advice. The real problem is knowing a good Networking/MLM opportunity from the scams. Also, what to do as one builds a good one.
My partner and I always look at any Networking/MLM opportunity one way,
Can the people we bring in make money and is there a real, wanted and neeed product….
Cecil
Hey Dan. I’m back again. I just posted before registering, so I thought, what the heck; I’ll just fumble around here and augment my MLM comments above, by saying that the points you make, particularly with respect to the new ’sign-ups’ in a forced matrix plan are absolutely on target.
While the theory is flawless, the actual, real-world experience of those late-comers to any forced matrix structure is mainly frustration; and that in a relatively short time.
Problem is, the structure is already unwieldy by the time the new recruit has been made aware of the ‘opportunity’, with the dramatic and unrevealed consequence that the opportunity has all of the longevity and character of a mayfly: that is to say, short and hectic.
Everyone urges the raw recruit to bring two prospects to the next meeting, and two more to the meeting next following that, and so on and so forth; and that’s just on the GROUND.
On the internet, it’s even MORE difficult because the often and unjustly maligned canned meat product gets panned every time one of those newbies SPAMs a prospect with an unsolicited email.
So, not only is there very little hope for the new ’signer-up’ in the long term, in the short run, he or she is being encouraged by a faceless ‘Upline’ to ‘tell all the warm bodies in their immediate circle of influence’ how much money they can make and urged to “Fake it til’ you Make if.”
What a Madoff kind of world, huh?
I wrote an article last year on how not to get lost in a matrix. Many people get fooled thinking there will be massive spillover and are left wondering what happened.
Quick example of a 4 x 6 matrix.
Let’s say that a heavy hitter is in your upline but you are placed on level 5. The heavy hitter has filled their first 4 rows (340 total) with “friends” who do little work but live off of the heavy hitter.
You are now on level 5 that needs 1,024 recruits to fill it. You are not going to see any spillover from the heavy hitter until level 6 starts to fill up, which requires 4,096 recruits. That’s alot of new recuits to wait for spillover.
But if you think about it, signing up for an opportunity solely on the basis of posible spillover is the worst reason to join.
I too have been drawn in to several Mlm schemes and online versions. I find it truly sad that people have to exaggerate or even lie about a bus-op, just to make a buck. The problem becomes a bad example in people’s minds to the extent they will not even look at good offers. Business suffers.
I find internet marketing “gurus” do the same trick. They exaggerate and hype their product and even directly lie about the quality of their system and training benefits.
When will people understand, Honesty in all things, is the only way to live.
Been there and done that. Years ago was in Amway and it was a great experience for me for personal development. However, MLM on the Internet, that’s another thing. Dan has hit the nail on the head.
I’m finally learning to read all the ads sent me with a critical eye. I particularly look for such things as easy, 1 hour per week, make millions, published clickbank results, etc. and reach for the delete key.
It’s not easy but I like the straight shooters. Don’t give me pie in the sky, tell me like it is. Those are the folks I want to be associated with. Thanks Dan.
Dan – you are so right on this post. Spillover is non-existent on most mlm deals and anyone who truly thinks they’ll make money based on such promises needs to have their head examined. There are so many who are “smoking hope-ium” thinking that this is a great path to riches…
Just last week I listened to a man state that his program (efusjion) was a “full partner” with Facebook and that the 225 million users there were going to be getting in… he went on to state that we “should not join because of the product, we should join because of the money”. Hahahahaha….
Keep up the great work of protecting folks Dan!
True, while most MLMs are fly-by-night operations, some are here for the long haul.
After some pitfalls of dabling in some myself, I found one that is actually listed in the New York Stock Exchange and is valued at roughly 1.2 billion.
It’s name?
NuSkin.
And, they have some great charitable causes to boot.
So check ‘em out & if interested, drop me a line.
I think the main thing is to temporarily FORGET about the “business opportunity” and look only at the product. If the product itself is nothing without the business opportunity, then it will never escape the confines of the organization and the only people using the product will be the ones selling it.
Wow, what a response! Great newbie report, let’s spread Dan’s message?!
I’m the friend Dan mentioned and I can not thank him enough for spending the time to investigate what I thought was an outstanding opportunity.
Let’s not hold back any punches here, the MLM that had me convinced of riches within my grasp was “hello hello”! I think Dan renamed it “hello buy now”, and rightfully so. I had a lot of fun and continue to check my profile, messages, apps, etc without any investment (no launch yet).
If anyone would like Dan’s complete report please email me for copy.
If anyone has joined “hello hello” be forwarned before launch.
If anyone questions Dan’s sincerity, friendship, dedication and ability to
root out the good from the bad, shame on them.
investigate
I agree with you 100% about matrixes (sp?). It’s unrealistic to think that they will work unless they are very small and there is a good reward at the end with product involved. Too many people lose if they get in near the bottom and can’t decipher all the details. Always make sure whatever you’re getting into is even legal!
Over time a unilevel compensation plan seems to be the most sustainable MLM plan.
Everyone should read a good book about MLM, Network Marketing before starting with any company new or old. I have road that roller coaster before and could not seam to get off of it. I must have liked all of the excitement. Many years later now my friend and I wrote a book we used to joke about writing called “What Not To Do In Network Marketing”. You can not buy it yet the proof copy is on my desk right now. If you would like to get a copy look for it on amazon in a few days. But really any business is tricky if you do not do your home work. I lost in computer software, car lot, selling my company. If you do not know who your are doing business with you will loose.
ABSOLUTELY FREAKIN ACCURATE DAN!
Even at my advanced age and great state of wisdom I got talked into the ACN “opportunity” then soon realized that though they were marketed as a company that simply diverted what you were already spending on your cell phone etc – they charged out the wing-wang for so many things that the costs actually doubled.
NO spillover – even though my friends were hustling the thing and slamming tons of people in through their spammy hypie webinars.
I’m stuck now with a piece of junk $200 video phone (useless) that I am paying $36 a month for service on – and if I terminate it is a $200 cancellation fee!
I hate ACN _ and will smite down any MLM I see from this time on.
Thanks for your great article. (Especially the stages from romance etc)
Rick
Great post Dan. Yes there is a lot of hype out there in MLM, especially when you are talking about a forced matrix or power line situation. It never seemed logical why you would want to recruit a bunch of lazy people who wanted something for nothing – and that is exactly why they don’t work long term.
I have been a network marketing professional for many years (was able to retire from medicine at age 35 thanks to mlm). Since I began I have always been a top recruiter, but I have never had to promise any spillover or hype the opportunity in order to produce. Professional network marketing is a predictable and safe way to go these days and we no longer have to validate that or defend it. In this economy, I can’t imagine a better choice if you want to put some effort and focus into something.
In my experience over the last several years, internet marketers are way more hypey and promise way more BS than all of the network marketers put together (and I have been doing internet marketing a lot longer than network marketing). The globe is littered in corpses of once hopeful internet marketers who bought into the hype of easy money only to find that had spent all of the savings and had nothing to show for it in the end. If we are not careful, internet marketing will soon have to face the stigma that has taken network marketers decades to overcome.
Tim
Dan you are right about the MLM scams. I just wish people would be consistent in their critique. There are scams in every field ie: internet marketing, job scams, corporate scams, mlm, etc. If you look at every profession only a few really ever make the highest incomes in that field for various reasons; some never got in to make a lot of money, some got involved and found out there’s work (ugh) and then there are those that quit because for whatever reason it’s not a good fit. This happens in every field, yet people act as if it’s strange that it would happen in MLM. Also in any field of endeavor you must learn to have discernment, because unfortunately there are always people who prey on others. Case in point, I did a Google search on “Internet Marketing for Newbies” and of course I got a lot of results (some good and some scams) and forgive me, but I’d never heard of you, but you were highly endorsed by Joel Comm and I’ve read his book “Twitter Power” and he comes highly recommended. Since he endorsed you, that was good enough for me, plus it didn’t hurt that it only cost $22.00 (not much to risk for so much fantastic content). I think you get the point. There are some solid companies and MLM professionals and well as some scammy companies and crooks posing as professionals. So maybe we can take our licks like grown men and women (if we’ve been taken and I have too) and take responsibility to educate ourselves so we can pick wisely. Your article was great and I appreciate your disclaimer for those of us who are always looking to take the high road in MLM and all our dealings the best we can. Thanks Dan.