NETWORK MARKETING OR MULTI-LEVEL MARKETING (MLM), TO JOIN OR NOT
TO JOIN: WHAT YOU NEED TO KNOW AND DO BEFORE YOU SIGN UP.
By Inem Akpanamasi
KEYWORDS:
Network marketing, Multi-level marketing, Pyramid Scheme.
PREAMBLE:
Money, money, money and more money plus peace of mind! Who does not like that? Who wouldn't welcome an opportunity to grab those two if possible? Whether or not those two realities mix is a topic for another day. For now, should we throw caution to the wind and swallow hook line and sinker any fantastic proposition as an opportunity to have a better life? This is the promise of many a networking business under the sun. As existential and rational beings, more so in the light of the mushroom nature of network marketing business in Nigeria in the recent past (in that they sprout aplenty here today but wither the next day), shouldn't we subject any such fantastic proposition to scrutiny and let it pass through the crucible of rational enquiry to ensure that, at least, it stands the basic litmus test of the MLM industry standard before we embrace it? Here, Anna Matteo’s advice is apt and instructive: “When you work hard for your money, you do not want to lose it. And if you invest your hard-earned money, you want to see great returns. But if you’re looking to invest money, be careful!"
DEFINITION OF KEYWORDS
The Small Business Encyclopedia defines Network Marketing as "a business model in which a distributor network is needed to build the business. Usually such businesses are also multilevel marketing in nature in that payouts occur at more than one level..." Similarly, at wikipedia.org, Multi-level marketing (MLM) is said to be "a controversial marketing strategy in which the sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant's "downline", and can provide multiple levels of compensation." Going further, the site states that "other terms used for MLM include pyramid selling, network marketing, and referral marketing." It also adds that "many pyramid schemes attempt to present themselves as legitimate MLM businesses" and that "some sources define all MLMs as pyramid schemes, even if they are legal." Equally at wikipidia.org, the definition of Pyramid Scheme goes thus: "A Pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services." Explaining why and how pyramid schemes usually crash and why they are often illegal it states: "As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal." Wondering how long this business model has been around and whether MLM can be so classified? Well, wikipidia.org says that "Pyramid schemes have existed for at least a century in different guises. Some multilevel marketing plans have been classified as pyramid schemes." Need we add more in terms of definitions of these keywords? No. The foregoing are explicit enough.
NEBULOUS NETWORKING SCHEMES
Lately, there has been a resurgence of proliferation in Nigeria, especially in Akwa Ibom, of nebulous networking schemes or 'businesses' that promise mouth watering returns that will sooner than later catapult their members or partners to an Eldorado of financial independence, freedom and peace of mind. At face value, it would appear only a maniac with unbridled appetite for lack, despondency, servitude, self torture and dependence on others would not welcome an apparently 'free golden opportunity' to earn a decent income amidst a full blown recession and worsening inflation, especially when the opportunity promises more than pecuniary benefits. When the opportunity is well garnished with the moral authority of humanitarian intent and served with the full course appetiser and deserts of a patronizing and seemingly doting parent-like figure, the stakes are raised even higher that resistance from inexperienced people is reduced to the barest minimum. When one adds to the mix the fact that recessions and tough times usually provide the perfect climate for pseudo network marketing businesses to rapidly rake in new registrations from people who are too eager to escape the rat race or make quick money overnight, then one will begin to understand what gives them impetus to exploit and thrive. The situation is also not helped by the fact that the realities of the times call for entrepreneurial disposition on the part of all. To underscore that exigency, the university curriculum even requires that all students do some form of entrepreneurial studies. Little wonder why people, including students, easily pander to the whims and caprices of these networking businesses. Ensnared by their well orchestrated rhetoric, people become vulnerable when faced with the onslaught of their well targeted aggressive recruitment campaigns.
NO NEW SCHEMES. WE'VE SEEN THEM BEFORE
It is very important to know ab initio that pseudo network marketing businesses otherwise known as Pyramid Schemes, with their pie-in-the-sky promises and convoluted compensation plans, are not new after all. Today they are here, tomorrow they are gone but they often resurface in another guise. At a time like this, cautious optimism, like silence, is not golden enough. Perhaps an even more golden rule of thumb to follow still remains the time tested expression: "If a deal is too good to be true, it probably is." It should be a sufficient telltale sign to trigger the basic defence mechanism that enables one to stop dead in one's track to appraise the deal and ask a few probing questions. A bit of due diligence check usually reveals a whole lot. Know the Nike catch phrase, 'Just do it'? In this case all that one may need to do is: Just Google it.
THE BIG DISTINCTION
Multi-level marketing (MLM) or Network marketing is a 21st century industry alright but like anything with its merits and demerits, it needs to be considered carefully. The huge influx of players to the industry within a short period of time occasioned by the promise of high returns which grows in geometric progression and makes the industry very lucrative has engendered lots of variations of this industry's practice such that the lines between what truly constitutes MLM or Network marketing as distinct from Pyramid Scheme with the toga of MLM is blurred today. However, a distinction between the two still exist.
Primarily, marketing of any sort presupposes availability of a product or service to be marketed, in which case it is the product or service, as long as it is still on offer and patronized by the buying public, that generates the money for the compensation or payout plan of the company or business. That is simple enough to understand. Note that a product or service (not recruitment of new participants or partners.) will always be the pivot around which revolves the compensation plan of a sustainable MLM business. This is a bankable assertion. Things get sticky once the compensation plan is exclusively or overly dependent on the recruitment or registration of new participants or partners. This is often a sure signal of the eventual collapse of a typical pyramid scheme business. And crash it will because there cannot be an endless (exponential) chain of new recruits to sustain the scheme. As such, many countries consider Pyramid schemes illegal.
DUE DILIGENCE
The result of the background checks (due diligence) that have so far been conducted by me reveals that Network marketing or Networking businesses whose compensation or payout plans are exclusively dependent on a once-off or continuous recruitment of new participants or partners have the trappings of a classic Pyramid Scheme, a close relative of Ponzi Scheme. Pyramid Schemes and Ponzi Schemes have repeatedly proven to be fraudulent and are considered illegal in many countries, hence people should be wary of Networking businesses that fit that paradigm. Are we insinuating that a Networking business such as those described above do not payout at all as promised their partners or participants? Of course NO. We are not saying a Network "business" like the ones described above will not pay when one does what is required. Yes, it will pay but there is more to it than meets the eye. It is unsustainable. It is a Pyramid Scheme, a very close relative of Ponzi Scheme and it is bound to crash. Yes, it's a bubble that will burst sooner than later. Many of its kind have busted already but people don't learn, unfortunately. Incidentally, the selling point of "You don't have to market or sell any product" is and always will be their Achilles' heel in the long run.
GAINERS AND LOSERS
The architects of these businesses and their top managers or coordinators know this very well and will not be happy with anyone who exposes them in this manner. So, this author is clearly not unmindful of the risk involved in doing this expository piece. It will most certainly not sit well with them. They will, no doubt, make as much money as possible from the pyramid scheme before it crashes. The early participants will also make some money but the vast majority of the later participants who have no inkling of the dynamics of this scheme are the ones that will bear the full brunt of the eventual collapse of the pyramid scheme. They are the ones who will weep and gnash their teeth when the scheme crashes like a pack of cards without yielding them any returns. More than the pain of loss of money, the participants also have to deal with the more long term pain of rebuilding lost trust and shattered relationships between friends and loved ones whom they invited to participate in the crashed Pyramid Scheme.
WHY BOTHER TO WRITE?
Why bother to take time to do this exposition when the easiest thing to do is look the other way? Well, looking the other way is not easy and certainly not an option for me when it is possible for me to contribute to the wellbeing of others, especially the young and vulnerable, who face imminent danger. I have observed that students have been seriously targeted. So many inexperienced students are about to fall victim. They may plow in their school fees, the hard earned money given them by their parents despite the biting effects of the current recession. To learn or not to learn is entirely one's kettle of fish but if this piece saves students the impending heartache and agony that will follow the loss of their money, my motive will have been served. However, if students choose to be gullible after being aware of the pitfalls highlighted here and in all the online articles that follow this piece, they will surely have themselves to blame for it.
LAST WORD
For your further reading, there are links to a selection of very informative and educative online articles below. Do well to read them and do as much more independent due diligence as possible before you sign up with any Networking business. It will do you a world of good. As a guide for your independent due diligence, the keywords to google are: Network marketing, Multi-level marketing, Pyramid Scheme, Ponzi Scheme, Matrix Scheme and the likes. Don't rush. Take your time to make an informed decision. Look before you leap. To before warned is to before armed. A word is enough for the wise. In the words and voice of the immutable TV series character 'Professor' John Bull played by Nollywood actor Kanayo O. Kanayo, am over and out.
