MLM distributors quite often make arguments for their products in public forums. Many times they'll use an analogy or comparison. If only given a quick glance the analogy seems logical. However, when you spend a little more time breaking them down, it becomes clear that they are trying to mislead you. Here are a few of the many poor analogies I've seen used over and over again:
Product Pricing Analogies
Many distributors claim that their product is priced competitively when compared to a product at another location. Popular examples include coffee at Starbucks, soda and popcorn at the movies, and beer at a ballgame. In all these cases, it is the location that raises the price of the products. Coffee, soda, popcorn, and beer are generally many, many times cheaper when bought at your grocery store freed from the overhead of locations needing to pay baristas, movie stars, and ballplayers.
Comparison to Other Business Models
Many distributors claim that MLM is similar to other trusted business models. Here are a couple of poor, highly flawed comparisons they make.
- Real Estate Agents - They make a comparisons to being a real estate agent. I have bought several homes and I know dozens of people who have done the same. At no point did the real estate agent ever try to convince me to become a real estate agent. If he had, he wouldn’t have received bonuses related to my sales. As the FTC says in its guidelines of the MLM and pyramid schemes, the differences rely greatly on how much recruiting is being done and how many sales are made to the public who are NOT distributors.
- Franchising - Many distributors claim that MLM is just like owning a franchise, similar to McDonalds or a Subway. I have been a customer of McDonalds and Subway many times and never has the owner of the franchise approached me about buying a franchise. Referring to the statement above they do zero recruiting and nearly 100% of sales to people who do own franchises in the same company. Owners of a franchise do not earn on-going commissions or percentages of sales of people they recruit.
Bottom Line: It is clear that the real estate agent and franchise comparisons aren't accurate. Anyone involved in the MLM industry using it is either trying to swindle you or doesn't know what they are talking about. In either case, you want to ignore what they say and distance yourself from them and the pitch they are making.This post involves: