Multi Level Marketing

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Occasionally known as MLN's (for multi level networks); also known as "MLM" (for multi level marketing.) A type of business organization in which individuals are recruited to become independent "businesses" (IBO's, or independent business owners) responsible for sales and distribution of some product. The most famous example is Amway, which markets its products through an MLM with sales materials and training literature circulated by numerous firms.


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Aspects of MLM's

Multi level networks are legally murky entities that differ considerably from each other; moreover, some organizations have more MLM-like aspects than others do.

  1. IBO structure: the member of the "firm" is actually an independent business owner (IBO), and hence wholly responsible for revenues.
  2. Marketing materials: Unlike real business owners, however, the IBO is subject to extreme pressure from the firm whose products she is distributing to buy marketing materials. Typically these impose a "capital expenditure" of at least $5,000 annually.[1]
  3. Numerous incarnations: MLM enterprises include a firm that makes the product, such as Amway, and a network marketing system which includes the promotional materials and seminars ("TEAM" or "TEAM of Destiny"); the MLM structure itself ("Access Business Group" for Amway, "Vector Marketing" for Cutco Knives); and collateral entities that are likely affiliated with other MLM structures (e.g., International Network Training Institute, which publishes literature with the sleazy bromides about immense wealth).
  4. Recruiting mystery: MLM's keep recruits in the dark as much as possible about their organizational aims, the actual business plan in use, and the prospects of success. For example, recruits are taken to a seminar given by a high-powered spokesman who harangues the listeners for about two hours with bromides about how great it is to be rich, followed by scornful asides about the workd of steady jobs and the immense opportunities from "residual income." ("Residual income" is the money that the recruiter gets from recruits and people that the recruit, in turn, recruits. This is what is supposed to make the MLMer rich.) MLM's usually insist on spectacular and implausible claims for immense wealth, ridicule the naysayers, and later defend themselves by arguing that the MLM is "not that bad."[2]
  5. Acromania: stupendous overuse of catchy acronyms (JOB="just over broke"; you don't need one of these, you need to be an IBO!). MLM use of acronyms is used to deliberately cultivate a mystique of professionalism and newness;
  6. Paranoia about the outside world: typically, MLM recruiters have an odd mix of "Objectivist" optimism about the possibility of personal success, and scorn for mainstream institutions, such as conventional firms or the government.[3]

MLM's are extremely common, although most seem to have very short lifetimes. They are prone to rapidly changing their modus operandi, such as embracing the internet, changing their name, spinning off business units, buying units back under a sleazy arrangement, copious use of SLAPP against criticism, and dodging guilt through technicalities. For example, the most famous MLM products (such as Amway) have insulated themselves from legal responsibility through numerous layers of contracted firms, like Quixtar (e-commerce).

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Examples of MLM's

Amway is the canonical MLM, but there are many others. Cutco Knives are marketed through Vector Marketing; both Vector and Cutco are owned by the same parent company.[4] Here follows a brief listing:

  • Aflac (borderline case, like Farmers Insurance); Aflac sells supplemental health care insurance, including in Japan (which has a vestigial and increasingly inadequate national health care plan). It is not a full-blown MLM, but has many attributes of one.[5]
  • Alticor: parent company of Access Business Group and Quixtar (in the USA) and Amway (in other countries, such as China). Originally, Alticor was Amway, but changed its name and incorporated Amway outside the USA as a wholly-owned subsidiary. Amway/Alticor is partly owned by the DeVos family; Amway was founded by Richard DeVos. The DeVos family is extremely generous with the Republican Party (of the USA). It is connected by marriage to the Prince family (of Blackwater USA fame).[6]
  • Farmer's Insurance: mostly sold through inexperienced agents recruited by district managers. While most insurance is sold through third party firms, Farmers has a peculiarly MLM-style of recruiting agents who have no experience whatever with insurance.[7] Farmers is not an actual MLM, since it lacks all of the attributes of a pyramid marketing scheme, but it has many aspects of one.
  • Mary Kay Cosmetics (extremely well-known; recruits are supposes to show customers how to use the products). Uses a scheme of leasing cars to sales people who make monthly targets.[8]
  • Nikken (Japan-based health care products, dominated by magnets)[9]
  • Nu Skin (Japan-based health care products); product was Interior Design Nutritionals (IDN), since renamed Pharmanex; also markets.[10]

This listing is very brief, and leaves out many very important examples. Please note there are usually several MLM's for every industrial sector in the economy, and that their lifetimes tend to be short (the famous ones, of course, last for decades). A lot of criticism comes from rival MLM "alternatives," and there are dedicated participants who have tried several different models. Hence, exposes of one model may merely redirect the faithful to new models, and there is a sectarian strain in the rivalry between different schemes. In some cases, the product may be quite good (Kirby Vacuum Cleaners, for example, are splendid machines), but sold by a dubious entity. Finally, MLM's are usually demographically specific, as, for example, the military-family based "Team National."

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Notes

  1. ↑ "The Tools Scam," from Amway: The Untold Story
  2. ↑ "Your Comments, Part 27", [Amway: The Untold Story] (3/97)
  3. ↑ Personal experience of the author. I was given a copy of Burke Hedges, Who Stole the American Dream: The Book Your Boss Doesn't Want You to Read International Network Training Institute (1992). The book is a compendium of bromides about the worthlessness of a steady paying job, the corruption of government, and the boundless wealth that you'll make with MLM residual income.
  4. ↑ "Students Beware: Vector Marketing/Cutco Knife Selling Scam" (Sept 2004); "[Firm misled sales recruits to sell knives, students say]," Oregon Statesman Journal (Aug 2004). Webpages denouncing specific firms tend to have short liftimes, although this one (Beth Bonady, "PioLog classified ad misleads student" is about ten years old.)
  5. ↑ Aflac's name comes from "American Family Life Assurance Company"; it pays out handsomely to the family of the management (10Q Detective). Fortune ranked it highly as one of America's best places to work, but this applies to Aflac employees, not to IBO's selling the product.

    Aflac is included on this list because of consistent reports of recruitees that they recruit complete novices to the industry, harangue them with the usual bromides, and make sucker bets with them.
  6. ↑ For a snippet of the "old" (c.1990) Amway's mixing of evangelical theology and far right politics with business, see "Mike Knight's Story" (from The Alticor Memory Hole). A customer at the author's place of work attempted to recruit him into Amway at this time, and he experienced something similar.
  7. ↑ "[http://www.farmersinsurancegroupsucks.com/farmersinsurance_agent_employee.htm Farmers Insurance Agent & Farmers Insurance Employee Information]" (Farmers Insurance Group Sucks; closely related is "What is a multilevel marketing scheme?"The Comprehensive Resource Site for Agents; also, personal experience of author.
  8. ↑ See Pink Truth; includes segment on the cars which clears up a few points.
  9. ↑ This is another MLM with which the author has personal experience. See "My Nikken encounter," a very well-researched and written essay by a Norwegian non-participant. Nikken and Amway have sued each other over product infringement. See also QuackWatch, "Magnet Therapy: A Skeptical View" (Stephen Barrett, M.D.).
  10. ↑ "Nu Skin's Naughty Numbers," MLM-The Truth
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External Links

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