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FIB - Scams 101 - Ye Olde Archives
Posted By: Jimbo In Response To: Pssst... (Bob Baroner)
Monday, 5 December 2005, at 6:19 a.m.
No offense, but it seems like you don't understand the difference between scam, badly run businesses, and bad business models.
Now, way back when I was in college and taking business courses, they went over a lot of this stuff in the most BORING classes imaginable: economics. I'll spare you the hours of yawn-starters that I learned, but in a nutshell:
- most NEW businesses fail unless the owner has been in business before OR has a good business model plan.
- good businesses lose money sometimes.
- badly run businesses are disasters but not necessarily scams.
- bad business plans will wreck the best businesses.
Nobodys' saying MLM is a scam.
They ARE saying that it's inefficient.
Now, I hang around the MLM forums and I notice that very few MLM companies (no matter who they're started by) last for more than 5 years. Most don't last the first year. MLM-ers typically end up switching companies every 8-24 months. When the "distributor" is also the "customer" then this means that the only way the company is keeping the distributors is by promising them a "living wage" (which only one in 10,000 make... to me, a living wage covers your rent AND the insurance AND medical AND food AND gives you money to make purchases.)
The business model loses customers very rapidly. Typical "loyalty" is less than eight months, according to the MLM boards.
So you've got a business model that can't even keep the customers it PAYS to stay!
Now everybody knows that the most expensive client to get is the new customer. So the MLM model is constantly wasting money with refunds that don't bring real loyalty or longevity as a client AND it is constantly having to recruit new clients who also don't stay.
That's wasteful.
Not a scam, but a waste of money, and everybody loses (the companies are unstable and most bankrupt quickly leaving the top line scrambling for another company, the downline never gets a real piece of the pie, and the few who are buying the product have to look elsewhere.) They'd do better to set up straight distributorships and teach people to sell product (and the ones that survive do just that) rather than to recruit other "dealers."
Nobody's saying MLM is a scam. They ARE saying that it is a very bad way to run a business.
And that's what they say in microeconomics, too!
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