Things that used to be on a blog.

Creating Distrust with Multi-level Marketing

April 7, 2012

One of the things that irks me about multi-level marketers is how they appropriate legitimate business terms and expressions in an attempt to legitimise their activities. The unintended consequence of this is that people become suspicious of any attempt to approach in a certain fashion or using certain words and phrases. Here are three examples of this problem..

A few years ago friend of mine started an organisation to promote business networking. The idea was to have groups of people meet for lunch, where we would swap business cards and describe our businesses to each other. This was an extension of the informal networking which has underpinned much business growth over the years, but it formalised the process and put the members in contact with new people at each meeting. The system worked very well and, in fact, became the major source of new leads for my consulting business (where networking and referrals are essential, because the person is the product).

The business was launched just about the time that the multi-level marketers had started using the term "network marketing" to hide what they did. My friend met a lot of opposition in his initial marketing of the business, because people were very suspicious of the term "networking", although most were convinced when they asked "It isn't XYZ, is it?" and were told that not only was it not XYZ, but people promoting XYZ and similar schemes were banned from attending. Naturally, the MLMers complained about discrimination, but they were told this was about promoting real businesses. A couple of them managed to slip through the net occasionally, but they never got back in a second time.

The second business affected by the MLM scourge was another organisation promoting business networking, but this time based on a loyalty card type of system where members were encouraged to look to other members first for business needs and opportunities. The owner of the business wanted some incentive method to encourage members to find other members, so he asked some "expert" to devise a scheme for him. The result was a system which paid a commission on membership fees, but included a smaller commission for people brought into the system by people whom someone had brought in themselves (sound familiar?). Two months after this scheme was introduced, meetings consisted totally of people with no legitimate business – everyone there was just trying to make money out of recruiting into the system. The original intent of the business was lost, because there was no possibility of members doing business with each other, and the proprietor was left virtually bankrupt and exposed to criminal charges.

In the third case, I had been approached by two MLMers in a week and I was feeling a little suspicious. Someone whom I had met at one of the networking lunches mentioned above rang me and suggested that he might have an interesting business proposition for me. As he worked for a stockbroker and my company is not public and never likely to be, I was instantly alert. When he said that my wife should also be at the meeting, alarm bells started to ring and red lights flashed. I agreed to meet him, and spent the next day or so planning out what I was going to say to his boss after he left (or maybe even while he was in my office).

When the big day came, the business proposition he had was a retirement investment and insurance product his firm had developed especially to suit the needs of small businesses. The reason he wanted my wife to be there was that he had made the quite reasonable assumption that, as in most small businesses, she would be a shareholder and director and therefore be interested in the company's investment activities.

After he left, I no longer felt like ringing his boss and complaining. Instead, I felt sad that someone with a legitimate business had been unfairly suspected simply because his quite reasonable method of approaching prospects had been irretrievably tainted when it had been stolen by the MLM scamsters.

The moral of all this is that it isn't only the dupes who get conned into these schemes who get hurt. Nobody can know how many people missed opportunities themselves by rejecting the two networking businesses or the stockbroker, or how much business those three lost because prospects had been burnt in the past by liars telling the same sort of story. These weren't people who went into some scheme to get rich and then didn't. These were innocent bystanders.