Today we’ll be looking at what is probably one of the most controversial start-up ‘concepts’ to date: Multi-Level Marketing, or ‘MLM’ for short.
You’ve probably read a lot of hate articles on how MLMs are unethical, ‘cheating’ people of their money. However, I feel that these articles cast a light so negative, even pre-developed photographs look optimistic.
Just to make things clear: I’m not trying to sell anything here. I simply wish look objectively at this ‘unethical Trojan horse’.
Here we go.
What are MLMs?
MLMs are the 21st Century version of Pyramid Schemes. A ‘Pyramid Scheme’ (don’t confuse this with MLMs, the two are totally different) is a business model that starts with one guy at the top. He ‘recruits’ people below him. These people have to in turn pay him a commission. These people then ‘recruit’ others below them and a chain is formed. Eventually, a pyramid is formed, as shown here:
This creates the mental picture everyone is familiar with: a pyramid is basically a money-making scheme for those at the top to earn at the expense of those at the bottom.
However, here are two things to note:
1. Pyramid Schemes are now BANNED in most parts of the world, including Singapore.
2. Pyramid Schemes explain only about 50% of how an MLM operates.
The big difference between MLMs and Pyramid Schemes is that MLMs have products attached to them. In other words, MLMs are in the business of selling something, be it health products, etc.
So, with products attached to them, MLMs become legal.
“So what do you think about MLMs?”
To some people, MLMs already leave a bad taste in your mouth when you talk about them. They feel like con jobs; like a way to manipulate friendships. So let’s dissect them one by one.
Can MLMs make you money?
Short answer, yes.
MLMs come bearing the promise of financial freedom, of not needing to work a full-time job anymore. Half of this is true. MLMs are a way to generate passive income, but this comes from recruiting people. You ‘retire’ when people at the bottom recruit more people, and you get your cut. So, yes, you do earn money.
There’s a reason why this article fell under ‘Entrepreneurship’. They actually provide an avenue for you to earn money passively and without slogging your days out.
This brings me to the next question..
Is it ethical, or socially acceptable?
Here’s where I talk about my opinion. (Yes I know, objectively takes a break here)
MLMs have become twisted recently, most possibly by the avaricious nature of humans.
MLMs have reverted to being Pyramid Schemes, where nothing else matters other than recruiting people and asking people to recruit for you.
This is no different from asking someone to pay for your retirement. Whether that is socially acceptable or not, I leave it to you.
So you’re against MLMs?
No. Absolutely not. I think MLMs are a fantastic innovation. But this is what they should be:
MLMS are should be like a friend asking you to try his favourite chicken rice. You may or may not like it. It doesn’t matter. If you like it, you’ll end up eating it with him from now on. If you don’t like it, you don’t follow him to lunch from now on, but you can still remain friends.
MLMs should focus on the products, not the recruitment. MLMs should tell you that this product they’re selling (Product A) is awesome. You buy it, you try it, and maybe you decide it’s awesome too.
You then either
- Buy more from your friend who introduced you to the product, or
- Enter into a venture with him.
If you buy more from him, he earns a cut. But you don’t mind, you love the product anyway. If the product isn’t something you like, it doesn’t matter. You both move on, and remain friends.
In some cases, you think this product would be a huge hit in the market. You say, ‘I’m willing to sell this to my friends as well!’ You pay money to buy an inventory of Product A to sell to your friends, because you think your friends would love Product A too. This is how you ‘join a friend in his venture’, not so much of ‘him recruiting you’.
The Pyramid Scheme is still there, yes, but there’s no ‘forceful selling’. You don’t force a friend into joining your business. You simply ask if a friend if they would like to buy Product A, just as you would ask them if they would want to eat chicken rice with you.
This is how a MLM should be! Not the unethical selling that’s done by focusing on recruiting friends via forceful sales pitches in the office.
Imagine the possibilities…
…when MLMs don’t focus on recruitment. They would be forced to come up with innovative product ideas with a low barrier to entry when it comes to franchising that idea. MLMs could become an innovation-generating industry where people keep thinking of ideas to improve society so that people would willingly join the venture, instead of the need to force people to join you so that you can earn your ‘retirement fund’. All they need to do is to make sure their products are good and beneficial to society.