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Multi-level marketing

Is it the road to riches or disaster?

By Katharine B. Reader

 

Issue #46 • July/August, 1997

I'm a freelance writer. I also manage properties, organize events, and am good at squeezing weeks of work into days. For me, time is life. I don't like to waste it. This is the story of my three-year involvement with one of the top multi-level marketing companies in the country. Although the names have been changed, the essential information is correct and paints a clear picture of what the vast majority of people who venture into MLM have no way of knowing beforehand but later wish they had.

Back in late summer of 1991, I'd just finished a book I'd been working on for a long time and was having that kind of "what next" feeling some of us get when one thing has ended and the next has not yet begun. One rainy afternoon, the phone rang. It was my friend Stan.

"K.B., you're not going to believe this. I just got involved in something incredible."

"What's her name, Stan?" I said. "Does your wife know about this?"

"No, no, it's nothing like that! It's a fantastic business opportunity! With your looks, your brains, and your contacts, you'd be perfect! Can you come over Tuesday at 7 p.m.?"

"What is it?" I asked.

"I couldn't possibly do justice to it over the phone. K.B., this is big! You and I are going to make a lot of money! Just be at my place Tuesday night! Trust me!"

Reluctantly, I agreed to go. Stan lives near San Francisco, in Berkeley, and I was living across the Bay in north Marin, but he was a friend and I owed him a favor.

I arrived late. Six other people were there, none of whom I knew. There was a chalkboard set up in front of the fireplace and Stan was drawing circles on it.

"Hey, K.B.! Great to see you! Alice, could you move over so my friend can fit in there? I was just showing these people the Company's unbelievable marketing plan ..." He continued drawing circles on the chalkboard. There was a big one on top that had "you" in the middle with rows of smaller ones underneath. It looked like a pyramid. "...and you sign up five and they sign up five and they sign up five ... soon hundreds of people are making you money!" I was thinking about my bed. Then Stan said, "The top 80 distributors averaged almost $70,000 a month last year and had plenty of free time to enjoy it. And most of them dropped out of high school! Anyone can do this business!"

His wife got up and started passing out samples of this powdered stuff mixed with water, along with some pills, and telling stories about how their neighbor across the hall lost 60 pounds and grew back all his hair and traded his wife in on a younger model, etc.

I'm not sure why I got involved. I knew even $5,000 a month in passive income would make me financially independent. Stan said I could easily earn that working half-days from home, giving me even more time to write. Stan was well aware that freedom in all its forms, living to my potential, and helping other people live to theirs were my highest values. He said the business offered the ultimate opportunity for expressing those values by helping friends and loved ones, as well as myself, improve our health and change our lives. It sounded too good to be true!

I've always believed in giving things my best shot, so I took the business seriously and listened to my sponsor. "You won't make peanuts selling products," Stan said. The name of this game is, 'Sell the dream!"' I invested $1,000 in the recommended assortment of products and started calling everyone I'd ever known to invite them to meetings or ask for referrals.

I let my writing go. There was no time for it. I was driving 300 miles a week to talk with prospects or cart them to meetings. Stan was ecstatic; my family was suffering.

Stan assured me if I hung in we'd make a fortune in two years, max. He said the ones who failed were lazy quitters. Anyone could make it if they worked hard enough! I was working twelve to fourteen hours a day, seven days a week, looking forward to financial freedom and the gratitude of my friends and loved ones. Unfortunately, the people I most wanted to save were not interested, but I signed up a lot of others. Most of them dropped out but enough stayed in to keep me going. I'd spent most of my savings so I really couldn't afford to stop. I liked the products, took care of my customers, and referred customers to the people in my group. Sometimes I signed new distributors under mine to help them along. I wanted the business to work for everyone.

In December of 1992, Sarah, an old friend and one of my best people, called to say she was quitting. She was out of money and out of contacts. Her friends were avoiding her. I was devastated! I was almost as invested in my group's success as I was in my own, quite literally, since I would buy "sales volumes" from time to time for those who couldn't make their quotas (a practice unofficially endorsed by the Company). I was pretty far out on a limb.

Sarah wasn't right for multi-level marketing. She was intellectual and shy, not at all a salesperson. She tried to quit three times and three times I talked her out of it. I told myself it was for her good, but it was for mine. I couldn't afford to lose her. Sarah fell into a depression and her boyfriend left her. She stopped returning my calls. I lost more than a business partner; I lost a friend.

"Forget about females!" Stan said. "Recruit men! They're less emotional. This is a numbers game! Just say 'Next!' (the MLM mantra), get your fanny off the floor, and go sign up some more people!" That's what I did.

Larry was an ambitious real estate agent bound for success. He called one day to say, "I just signed up a single mother who lives in a trailer with her four children! Last month she was diagnosed with lymphatic cancer but she's really excited about turning her life around. She sold $1200 worth of their furniture to get started!" This stopped me cold. I called Stan and told him I did not want to make money in this way. Stan said I couldn't hold myself responsible for the actions of others and, who knows? Maybe it was her only chance to turn her life around. I swallowed my conscience and said a prayer for the single mom as I reinvested the small commission she had made me.

I'd been in the business almost three years and was climbing the ladder of success. In July 1994, Stan's sponsor, Max, organized a gathering of top distributors, the ones making the "big bucks" they dangled like carrots in front of their followers. A few lesser beings, including me, were invited. One of the stars, an ex-football coach, said, "MLM is a legal pyramid. If it were an opportunity for everyone, it wouldn't be an opportunity for anyone. Just put on blinders and go for it! It won't last forever. He led us in some goal-setting exercises to help us clarify what we want from life and how the business could help us get it. I began to open my eyes. What I saw were a bunch of burnt-out, grumpy egomaniacs, fighting amongst themselves and looking not at all like I'd seen them at the conventions or sounding like I'd heard them on tape. I asked myself if this was where I was going and if these were the people I wanted to go with. The answer was, "No!" I decided to quit. Stan, like so many before him, had run out of money and dropped out, so Max talked me into staying. His success, after all, depended on the efforts of workaholics like me lower down on the pyramid. The "dream" was turning into a nightmare.

The following week there was a message on voice mail about the "Fortune 5000 Club," referring to distributors earning monthly commissions over $5000. I wondered how many of the 110,000 or so active distributors were in the Club. I called distributor services and was told, "The Company does not release that information!" If this business taught me anything, it taught me how to persist. I called back and got a new person who evidently didn't know the Company's policy on covering up the facts. She told me that it was about 200. I was stunned! When confronted with that figure, the person I first spoke with reluctantly confirmed it. I asked why information like this was withheld from us. His answer was, "If people knew the numbers, no one would sign up!" I think he went on unemployment shortly after that.

I felt like an idiot. Out of curiosity, I called four or five other multi-level companies I hoped would be more forthright. The responses I got were variations on, "That information is not available, but would you like to hear some testimonials, buy some products, or sign up?"

And what about those 80 distributors averaging $70,000 a month? After travel, trainings, entertainment, phone and mail costs, samples, sales aids, products, office supplies, volume buy-ings, and audits by the IRS, the vast majority were a far cry from breaking even. As for the few at the top whose incomes ($800,000, $900,000 a month) skew the numbers, their contempt for the thousands behind them picking up the pieces of their dreams makes those slick TV evangelists look like Santa Claus. The meaning of "It's a numbers game!" suddenly became clear. I had unwittingly involved myself in a "win-lose" of unthinkable magnitude.

Max insisted that what distributor services had told me couldn't possibly be correct, but admitted he didn't know himself. After making some inquiries, his spiel was that even if only one person were in the Club, the potential was there for everyone. I said, "Yeah, and you can potentially win the lottery too, but I'm not going to be selling tickets to my friends." I quit without looking back.

Two and a half years later I still haven't cleared that business out of my life. Like fleas, it infested everything: bathrooms, pantry and file cabinets, video shelves, car, and garage. The worst was that it infested my friendships, separated me from my family, and almost made me forget who I am and what I want my life to stand for. What amazes me most is that it took so long to see it. Almost as amazing is that of the dozens of people who have tried to involve me in their MLMs (which, of course, are "completely different" from all the other MLMs!) only three that I know of have asked their companies how many distributors are at the income level to which they aspire. These three were told, "The Company does not release that information."

I guess the rest went "Next!," adjusted their blinders, and continued on down their lists. Do I have any advice on what to do if you're prospected by an MLMer? You bet! It's simple: Just say, "No!" I remember that Max used to say, "Even if you win the rat race, you're still a rat."




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