Monday, January 02, 2006

DIALOGUE BETWEEN THE BEAST AND THE MLM AGENT

Multi-Level Marketing, or MLM in short…… does that ring a bell? It should, because if it doesn’t you must have been taking a real long nap on Planet Mars.
Probably the most annoying thing that you will encounter is a MLM distributor who, on the pretext of “investing” a little amount of your money and time to participate in their “business venture”, bombards you with tons of information on how to get rich, quickly and easily, in no time at all, through the distributor’s multi-level marketing scheme. So just what is it about these MLM companies that enables them to make such brazen claims to the general public?

For starters, MLM is basically a concept whereby a company attempts to entice one to strike it out in what is claimed to be a business partnership without one having to fork out a huge start-up capital. All that is required of an average Joe is to fork out a small token sum of money to purchase a distributor license, fork out a certain sum of money to purchase company products (in some cases in the form of vouchers that is purchased by the distributor and can be used to exchange for company products), and the newly-fledged distributor will then be allowed to entice other average Joes to join in the scheme exactly the same manner the previous distributor (known as the up-line) did. The newly-converted distributors of the up-line will then be classified as the down-lines. Money from the down-lines’ purchases is channelled to the up-lines, with each level entitled to a certain commission all the way to the top. In short, the more down-lines you build, the more commission you earn.

This enticement goes on and on, until a few levels are formed into a huge network of distributors cum customers. To illustrate an example, say for instance the distributor is required to recruit three persons to join the scheme, while purchasing MLM products at the same. So these three will need to load up themselves with the products as well, and at the same time find another three, and so on. In theory, this would result in a exponential snowballing of distributors under the first up-line. Money from the bottom of the network is thus channeled upwards through the network, as all the distributors below the up-line will be obliged to purchase the products from the MLM in question. The money from the respective down-lines is then channeled upwards through the network all the way to the bigwigs in the MLM company.

On paper, this sounds like a perfectly legitimate business plan and a great way to earn loads of money for yourself, if you decide to participate, that is. The more levels you form, the more revenue you accumulate for yourself, as each down-line will inevitably contribute interest to your MLM account. What the MLM distributors will have you believe is that, through minimal investment of financial purchases of company products and spending a little bit of your time to participate in MLM prep talks to learn about the MLM methodology of recruiting potential down-lines, you will be able to inherit a lucrative residual income for the rest of your life! Sounds like a real windfall on the cards? Well……

In order to actually form a sustainable network to simply break even (i.e neither a profit nor a loss), a average distributor has to overcome numerous obstacles. Not only must he ensure that his down-line is constantly on the hunt for new-fledged distributors, he must ensure that the down-lines are actually purchasing the MLM products. Not to mention that there will be numerous disgruntled distributors who chose to leave the MLM scheme (a wise decision, definitely) because they had not been earning the huge profits they have been promised in a unrealistic short amount of time, instead inheriting nothing but MLM products, literature and in some cases, debts incurred just to sustain the MLM scheme. Not only does a average MLM distributor spend a huge amount of money to purchase a lot of MLM products which he or she doesn’t need (This purchase of products en-mass is also dubbed “front-loading“), the distributor will have to spend long hours recruiting down-lines, attending MLM “motivational” meetings and counseling disgruntled down-lines threatening to quit the MLM network. Not to mention the endless seminars, motivational talks in posh hotels, which provides the MLM companies a perfect opportunity to charge exorbitant prices for the attending distributors.

There are also cases whereby distributors who have made it to a certain status with their respective MLM companies (these people can usually be seen wearing useless title name tags such as :Star Performer”, “Achiever” etc) are coerced to purchase luxury cars on a hire purchase basis. These “lucky” distributors will be lulled into believing that their cars can actually act as a magnet to dub potential MLM distributors that they too, can achieve it if they join the network. But alas, such distributors often bear the blunt of most MLM tragedies, as monthly repayment of loans and money investments in the MLM business will doom them into a life of debt and potential bankruptcy. Whatever money they have managed to squeeze out of their down-lines barely covers their expenses, let alone make them rich. As the saying goes, there is only so much one can do to fool people; beyond that, one becomes a fool himself.

With all these seemingly insurmountable obstacles standing in the way of MLM distributors, are there any distributors who actually succeed in the MLM enterprise? The answer is a definite yes, only for the privileged and lucky few that is. Only those at the very top hierarchy of a MLM network will ever stand to reap huge financial rewards from get-rich MLM schemes at the expense of down-lines, who are the ones bearing the financial blunt of MLM schemes.

The MLM model shares a lot of characteristics with the pyramid scheme, which is illegal in Singapore and most countries, including the United States of America. The only difference between the two schemes is simply legalistic in nature. The products sold by MLM companies are akin to a man wearing clothes; without the products the whole nature of the MLM scheme will be exposed as nothing more than a pyramid selling scheme.

My personal opinion of MLM companies is this: Their existence depends on their ability to sell people a dream; a dream of a quick buck, to make tons of easy money. The products they sell are but feeble attempts to masquerade as legal retail companies, lest they become accused of conducting illegal pyramid sales. The MLM companies will promise their distributors a quick way out of the proverbial rat race, and then place them in another race of money-spending to achieve an almost unattainable dream. I won’t say it doesn’t work though, because I know they do, but out of the thousands that join, probably not more than 10 will eventually make a real killing out of the scheme.

Without dwelling on the moral (or immoral) implications of MLM schemes, a typical dialogue session with a agent would be the best guide to the psychological insight of a MLM distributor.

The following is a typical dialogue between myself and a distributor/agent of a MLM company. I had barely warmed up my seat in a food court before this gentleman, a short bespectacled lad with dyed blond hair spotting typical office wear came to me to make a nuisance of himself during lunch time. I intend to make this dialogue one which he will not forget in a hurry.
(Agent approaches Beast, who is reading a newspaper)

Agent: Good day, Sir, my name’s Peter, and how should I address you?

Beast: You may call me Beast. That's my middle name (Sticking middle finger).

Agent (looking a little sheepish): Oh I see, it seems you are a little offended by my intrusion, In that case I shall not overstay my welcome (Prepares to leave)

Beast (Pretending to look slightly aback): Oh no no....please stay my man. I was only joking, dude. You come all this way to my place, all sweating and all, surely you are not about to leave? In any case, you spoke to me over the phone, saying you have a great business opportunity for poor peasants like me…… Low start-up course, high returns. You don't expect me to turn down such a tempting offer, do you?

Agent (Looking a little relieved): Oh yeah, sure man. This is the attitude I am looking forward to, not that (points a middle finger, laughs like a fool). Ok, Before I continue, let me ask you a question. Mr Beast, are you currently employed or are you self-employed?

Beast: Employed, of course.

Agent: Ok, Let's just say, if you do not work tomorrow, or the day after, will you be getting paid?

Beast: Definitely not! Who do you think I am, the Prime Minister? Or the CEO of the money printing press?

Agent (Laughs): That's right. You work, you get paid, am I right to say that?

Beast: Spot on.

Agent: If your boss closes his operations for a day, does he earn any income?

Beast: I wouldn‘t bet on it. In fact, he may still have to incur losses for any lost time, or when the plant is not in operation.

Agent: Precisely. Now I shall explain to you the definition of active income. You are the employee, and your boss, the employer. Am I correct to say that?

Beast: Yes, yes...go on.

Agent: Ok, as an employee, you contribute a input to your company, through your time and effort spent in the company. As an employer, your boss contributes money to pay for the expenses essential to the smooth running of the company. As a employee, your continuous efforts ensures that you have your paycheck every month. In short, no input, no output. This is active income. Do you understand me so far?

Beast: Absolutely. Now you are making me feel like some lowdown outcast slave, with no future already! (Laughs)

Agent (laughs): Oh well, this is the fate of the working class. It's a never-ending rat race.

Beast: Ok, I understand, so you must have an alternative plan, then?

Agent: Which is why I am approaching you in the first place. Now, let me ask you a question: how does a singer earn so much money?

Beast: Simple. Singers sign up contracts with recording companies, who record their songs and sell them to the masses via CDs and other recording media. And occasionally they open concerts. (Smiles) Now you are not suggesting that I embark on a singing career, do you?

Agent (smiles): Well, no, but something much simpler. What I mean to explain to you is, singers make money because they are earning passive incomes.

Beast (Looking slightly puzzled): Passive incomes? Explain.

Agent: The definition of passive income is the complete opposite of active income. Let me explain to you with the singer's analogy. The singer's income is directly related with the sales of his or her CDs and the tickets of his concerts. Concerts aside, the direct sales of the CDs will be where his rice bowl is. The more CDs sold, the more money the singer makes through commissions and royalties which are directly connected to the sales, and also radio stations which pay a certain sum of money in the form of royalties for playing their songs. You catch me so far?

Beast: A little...please, do continue.

Agent: Ok, which means if the singer decides to retire, he or she will still be able to obtain revenue from the sales and loyalties derived from his or efforts. And when the singer dies, the royalties will continue to be bankrolled to his or her children. This is passive income. Basically, it involves a initial capital, which will subsequently generate continuous, passive income. What I am about to present to you is a very effective business strategy which requires a minimal effort and some financial investment from you, which will also generate this passive income for you.
Would you be interested?

Beast: That will have to depend on the feasibility of your business strategy.

Agent (takes out some brochures): First of all, let me explain to you about our company. I represent ABC International, which is a reputable multi-national company. We due with products ranging from cosmetics to....

Beast (pretending to look slightly aback): Wait a minute, this is odd. You told me earlier that you are presenting to me a business strategy. Now you want to sell products to me?

Agent: Ok, let me finish my explanation. Yes. Our company specializes in the sales of these products. However, let me assure you that you will not be only a mere customer, nor will you be a company salesman. Now, I want you, yes, you, to be our business partner. We want you to sign up with us as a distributor for these products.

Beast: Hmm.....So do I get paid as a distributor? And how should I go about selling?

Agent: Well you do get paid on a commission basis. And no, you don't need to sell anything. All you need to do is find three persons to join our business plan, and then each of your three friends must find another three friends, and so on. You get a commission based on the number of levels you have acquired in your network. Its really easy, believe me.

Beast: Now I am beginning to see the bigger picture... let me see....what the newspapers used to harp about....pyramid sales?
Agent: No, no, no! This is not pyramid sales. With pyramid sales there are no products involved. We are what is defined as "multi-level" marketing. We have the best cosmetic products, as well as very excellent health products. If you can take a look here…

Beast: Ok, hold your horses for a moment, Mr Peter. I have a question for you at this point of time. So you are saying, I need to find three friends and they each find another three so that I can set up a network, is it not?

Agent: Yes, it is that easy, is it not? Finding three friends, make sure they do the same. Isn't that very simple? You do have friends right? I am sure you have. And then every month, you and your friends each will purchase $200.00 worth of our products every month, and a commission shall be sent to you every month via check. All you need to do is buy our products, get three friends and ensure they carry on the search for new distributors, as well as contributing the $200,00 monthly fee to purchase our products. Simple right?

Beast (acts puzzled): You didn’t say anything about purchasing any products earlier , now did you?

Agent (surprised): Glad to know that you are very observant. At least you have been listening.

Beast (laughs): Of course I am. This is a interesting scheme, you know.

Agent (looking jubilant): Good that you can think positively. With regards to the 200 dollars, yes, I missed that one just now, my apologies.

Beast (waves a hand): No apologies required. We are all humans, eh? It is fine to err, but at least be honest about it, so no problems from me on this count.

Agent (Heaves a huge sigh of relief): Thank you. So what is your opinion of my business strategy?

Beast: Let me tell you, your business strategy doesn't work at all.

Agent (Slightly taken aback): And why not?

Beast: First of all, how many levels in the network do I need to earn at least, say a comfortable $2,000.00 a month?

Agent: Easy. Forth level. You can do that in months...

Beast: Ok. First level, 3. Second level, 3+9. Third level, 3+9+81. Forth level, 3+9+27+84. By the forth level, I will need at least...(Checks with calculator) 114 people! Phew! That is a lot of people to look for in three months, man!

Agent (Taken aback): Yes, I understand what you mean, but our products are simply the best....

Beast: Ah yes.... all you MLM agents say the same things. Great products, great sales plan. Now let me analyze with you, or rather give you a blow-by-blow account of MLM's inherent problems. Yes, it seems easy, hunting for three people. But how would you ensure that those way down the network will follow suit? What if somewhere along the way, a distributor decides to quit the scheme, or fails to purchase the necessary $200.00 worth of company products? And can you ensure that those at the bottom of the network will continue to seek out new potential distributors? What's the saturation market point of your products? Does your company carry out any in-depth surveys on the potential market saturation point of the products? There's only so much people in town for you to sign up, not to mention competition from other MLM companies. And the most important question of all, where's my stand in the huge network of yours? Am I at the bottom, the middle or at the top?

Agent: Bottom, of course. All distributors start from the bottom.

Beast: So how deep would the bottom be?

Agent (Pauses): That would be difficult to gauge.

Beast: Assuming I am at the very bottom, there would be many up-lines above me. All my hard work will probably just be benefiting the big wigs “upstairs”, and I will be running around like a headless chicken begging people to join useless schemes and buying products I do not require in such bulk. Who do you think I am? A dull-witted rich kid?

Agent (Confused): I don’t get it. Where did you get all your information from?
Beast (Laughs): Not everyone’s a country bumpkin, Mr Peter. As a matter of fact, you are neither the first, nor will you be the last, to approach me with such dubious business opportunities.

Agent: I assure you, Mr Beast, that our business plan is far superior to others out there in the market. Sure, there will always be a few black sheep out there; they just come in and cheat people, you know, get people to buy and buy and refuse to release the commissions as promised, or others simply mouth off empty promises, and ultimately fail to live up to their promises. But we from ABC international will ensure that you, the distributor will gain access to our top-of-the-range cosmetic and other daily products. Think about it, these are products you will buy anyway in supermarkets, why not buy from us and reap the benefits of a sound business plan? Is that not killing two birds with one stone? If you accept my business plan, or rather ABC International’s business model, I assure you this will be the best and last MLM deal you will ever need. If you decide to join my scheme, I will become your up-line and your mentor. Your ability to succeed will definitely become my concern. Your success will be intertwined with mine. You will not have to worry about your stand in the network scheme, for the market is big enough for you to recruit many more potential distributors, and I am not even talking about many down-lines here. All you need is three potential distributors, that’s all. And 200 bucks a month is certainly a small sum of money to invest every month, which will go to supermarkets and stores anyway. Won’t it be great if this money you use to buy everyday products provide you a perfect business opportunity? A little money contribution, a little bit of your time to recruit just three distributors and attending our weekly meetings, isn’t that a fantastic deal? Wait no longer, my friend! This is a once-in-a-lifetime opportunity for you to make big money. You have nothing to lose anyway!

Beast (wears a fake, comprehensive look): You sound convincing, dude. But you are looking at a guy who can’t afford that kind of money for everyday groceries. (Takes a look at brochure) Washing detergents, toothbrush, soap, stuff like that, do you really think that I need to fork out that kind of money every month, 200 bucks, to buy stuff like that? And the cosmetics… (laughs hysterically)

Agent: Don’t you have a mum, a sister, a girlfriend? You can buy the cosmetics for them.

Beast (points to Agent’s head): You must be terribly sick in your head! I can hardly make ends meet as it is! My mama hardly, if ever, uses cosmetics. Even if I do have a girlfriend, I don’t think she would have wanted me to turn her home into one gigantic store room for cosmetics she can’t finish using anyway. Besides that, the amount of time I need to persuade three boys and girls to join me in a hopeless quest, and then making sure they buy and continue recruitment, I don’t think I will have any time for my meals and toilet breaks, let alone keep my permanent job.

Agent: You won’t need to worry about spending a lot of time on your business, my friend. Your up-lines, including myself will assist you in your tasks. Just find three potential down-lines, and we will do the talking for you. Of course as you participate in our weekly motivational meetings our leaders will teach you effective methods for you to succeed in our highly lucrative scheme. We have leaders who earn as much as $10,000 US dollars a month. They will conduct seminars to fellow distributors once every month to share the secrets of their success, and these seminars cost as little as $15.00 per person. All you will need is spend a few hours of your time managing this business, I guarantee you in a year’s time or maybe even less if you work hard, you will make more than enough money for you to quit your day job.

Beast (Shakes head, emphatically): Are you very certain of this? A few hours each week? Doesn’t seem that way to me.

Agent: That’s what I said. Believe me.

Beast: I am not convinced, unless you furnish me actual documentation of how much time you actually spend talking to complete strangers like myself (not to mention someone who is wacky enough to call himself the beast) talking about business plans. And the meetings, hell I am a corporate personnel. Meetings require a lot of time investment.

Agent (sad look on his face): I do not catalogue my time spent, and even if I did, I doubt you will be convinced.

Beast (Gives a wry smile): Maybe so, but at least I may be a little touched by your gestures?
Agent: Really? (Smiles reluctantly) Perhaps I might take that into consideration.
Beast (Brightens up suddenly): Ah! Why don’t you make a record of the money spent on purchasing products which you do not need in bulk as well? And those seminars, they cost money too!

Agent: Uh huh……

Beast: And try visualizing this: All those up-lines above you doing nothing but talking and collecting cash incentives, and all those down-lines left with nothing but products and a dream of someday being up there with the rest of them. Am I right to say that?

Agent (Shocked look on his face): You seem to harbor a terrible prejudice against MLM schemes. Pray, tell me, have you been burned by other MLM companies before?

Beast: No, I have not been burned, so to speak. But I have personally witnessed friends who fall for MLM schemes, splurged huge chunks of their entire savings on MLM products, motivational tapes, books and seminars, with little earnings, if at all, to show for it. They end up losing a lot of time and money to chase impossible dreams promised to them by their MLM companies and up-lines.

Agent: Just because there is but a few black sheep in our industry does not mean we should all be branded as such.

Beast: That may be true, and I deem you an honest fellow. But I regard the MLM model as a intrinsically unstable business model, based on the silly assumption that the market has a infinite supply of people for MLM companies to con and expand their network. This attitude usually results in either one of two scenarios: The network will either die a natural death when everyone at the bottom decides to quit, or someone decides to sue the respective MLM companies for fraud and other legal discrepancies.

Agent (Shocked): Multi-level marketing is a perfectly legal business model! We are not breaking any laws when we conduct our recruiting.

Beast: Yes. MLM is legal, only because the law states that MLM companies must conduct retail sales in conjunction with recruiting in order to maintain its legal status. As it is I don’t think your MLM company conducts any retail sales outside of your marketing network, am I correct to say?
(At this point Mr Agent apparently came to the realization that he had just wasted his time barking up the wrong tree. Poor dude. I wished I could lend him my shoulders to cry on…… sobs……)

Agent (looks disappointed): Well, looks like you are not interested with my business plan.

Beast (In a consolatory tone) : Look, Peter, I respect you as a man, that you have the balls to come up to me with such a difficult preposition. But it does not interest me. If I have the financial means perhaps I can give this scheme a second look. But nice try though. Perhaps the next guy you hitch may just get you the commission to stay alive…… and who knows? You might just make it up there (Points finger to the sky)…… but hell, you can never beat your up-line, can you?

Agent (looks displeased): Well, Mr Beast, I have another appointment coming up, now if you will excuse me……

Beast (gives a fake, broad smile): Oh of course! Be my guest! (Shakes Agent’s hand) Nice to meet you. I am sorry I can’t be of much help to your cause.

Agent: Its ok. Thank you, Sir, for your time. Goodbye.

Beast: Goodbye……… Wish you better luck next time round.
(Agent walks away, approaches a couple nearby. Better luck next time, Mr Peter. Tsk tsk)

3 Comments:

At 1:48 AM, January 03, 2006, Blogger The Legal Janitor said...

good post. I still don't understand how can intelligent people fall for MLM schemes. It is simply not a logical proposition.

 
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