the goose

While I was at the excellent bizcamp event at the weekend, a multi-level marketing (MLM) affiliate stodd up during the final session and proceeded to pitch to the audience on the benefits of her particular product. She was well scripted and despite an audible intake of breath as the audience realised there were about to be sold to with both barrells, she steamed on regardless. The facilitator eventually managed to stop her in her tracks but only after a good minute of ‘discussion’. It was all a bit hairy.

On the train back to Dublin we got talking about her little outburst. Apparently she had attempted the same thing in several of the talks on the day and had succeeded in hi-jacking a good 15 minutes of fame in at least one. My traveling companions were disgusted with this blatant attempt to force a marketing message down the unwilling necks of the bizcamp attendees. I can see why she attended however. MLM schemes do offer a means for ordinary people to start a business of their own without any capital outlay. There are millionaires out there who have managed to achieve their own financial freedom by selling these products. I’ve never met an Irish MLM millionaire but I’ve met an American or two.

So what makes MLM so repulsive? This lady didn’t really do any big favours to her product or MLM in general. The audience hadn’t signed up to listen to her opportunity. That aside however, there seemed to be a general dislike of MLM schemes.

The theory is simple. Consumer products such as household cleaning items, vitamens, telephone services and broadband typically spend a good proportion of their budget on advertising. This normally means advertising through mass market channels such as TV, print and radio. A certain percentage of your eircom bill every month winds up in marketing budget which ends up on your TV screen.

MLM companies take this ‘above the line’ advertising spend and instead create a massive reseller network. Many MLM schemes deliberatly don’t offer their product through any other channel other than this network. So what is the problem? Well here are a few of the opinions that came up:

They would give a Jahova’s witness a bad name: These products are sold one-to-one by sitting down with a prospect and explaining the service and the business opportunity. This might take up to an hour or so. This is a fair chunk of time and while we might be able to put up with a 30 second toothpaste add in between the Saturday matinee, fourty minutes spent on one product is hardcore. Who would really spend that long making such a ’small’ decision. It seems inefficient.

They sell a ‘get rich quick’ scheme, not a product: There is always two products on offer in an MLM pitch. The first is whatever product or service it is (phone service, health drinks etc) and the second is the business opportunity. The opportunity is a way you can in turn sell on these products for a profit. For me this is probably what gives me a bad taste. If the product was that good – would you need to drop in a dream of eternal wealth to sweeten the deal? Of course it doesn’t mean that the products are not good (and many of them are great) – it just means our innate greed is going to be appealed to rather than a need or desire related to the product on offer.

They are a pyramid scheme: There is a perception that MLM companies are a massive scam, a little like franchise opportunities used to be seen as a scam until recently. What makes MLM different from a pyramid scheme is that there is a product or service being offered which could be considered to be reasonable value for the payment even if there was no business opportunity available.

Once you sell the product to your (ex)friends and family, the game is up: Once you sign up as an member of these schemes you are expected to offer it to all those people that you come across. There is a lot of potential of mucking up your social life. The last thing you need to do is end up as a billy-no-mates. Of course, this could kind of be said for anyone in business. My old man is a solicitor and besides a plaque outside his office, there isn’t much other than word of mouth that drives his business. He does a good job and because he does, word of mouth spreads and he comes into contact with new clients. I would imagine this is the same for a MLM affiliate. If I buy the product and it works well – I’m likely to recommend it. As an affiliate you have to treat your selling as any other business would, finding more leads to fill your pipeline.

Finally: The business opportunity looks easy: Rather than having to sign up customers yourself, the MLM model works on the assumption that if you sign up X number of people, then they sign Y number each etc – you will end up with a significant monthly cash flow. It sounds easy, ‘just’ sign up five and the system works itself out. MLM members will warn you that is isn’t as easy as it sounds but this simple proposition is very hard to ignore. Just get five people to buy and you will be rich! A friend of mine explained the reality to me in a more realistic fashion. She had met a MLM veteran who was now wealthy having sold MLM opportunities for 20 years. In that time he had sat down with 4,096 people . Of those 52 were interested in building a business from MLM. Of those 13 signed up. Of those, 8 stayed and 6 were now millionaires. I’ve no reason to disbelieve these figures, but I note that the MLM pitch never makes mention of having 4,096 meetings.

So what do I think about MLM? Well – I have to admit I admire the moxy of that girl who stood up at bizcamp. I’m not sure how effective it was for her. I can’t imagine she had many sign ups – but she did give it a go. And that is what any entrepreneur has to do.