multi-level marketing is a fraud!
Debate Rounds (3)
Another interesting topic..
A strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits' sales. The recruits are known as a distributor's "downline." All distributors also make money through direct sales of products to customers.
As always, acceptance first:)
Multi-level Marketing is also called mlm, network marketing, referral marketing and pyramid selling. The concept of this type of commerce has existed in the underworld for ages and it has been widely known as "Ponzi Scheme".
The actual product of Multi-level Marketing is the distributors:
The job of each distributor is to find new distributors who will give him a slice of the comission on sales. The recruits have to do the same thing in order to earn money. So far, so good. Every time a distributor sells something, the upper distributor gains money and everyone's happy.. right?
No, this is the fraud! Each distributor, no matter the level he belongs to, is obliged to pay a subscription or make a purchase. All this money goes to the founders of the enterprise. In fact, you do not make money by selling a product because you have already spent this money when you made the initial purchase. You gain profit by creating a netwrok of distributors and collecting the money they're obliged to pay.
Distributors almost never make profit:
Let's see why:
Supposing you're a distributor and you find 5 recruits. Then, your personal network is 5+(5*5) = 5+25 = 30 persons. Thus far, once again there's no problem.
Now let's see what happens if there are more levels:
If ,for example, there are 5 levels, then the pyramid consists of: (5^5)+(5^4)+(5^3)+(5^2)+5=3,905 people.
All these distributors have to find 30 recruits each in order to gain profit.
If the pyramid has 14 levels, then it should consist of (5^14)+(5^13)+(5^12)+(5^11)+(5^10)+(5^9)+(5^8)+(5^7)+(5^6)+(5^5)+(5^4)+(5^3)+(5^2)+5= 7,629,394,531 distributors. More than the earth's population!
The basic question that needs to be asked is this: If this type of marketing is ideal then why it is used only by few enterprises? Specifically, there have been only 45 multi-level marketing companies of which the 11 have been dissolved. We can not claim that it is an innovation as despite the fact that it existed even in the 1920s, it became widely known in 1990s. So, why other companies do not use this business model? The answer is simple: Because it's not effective.
In fact, even the legitimacy of MLM is questioned:
The U.S. Federal Trade Commission (FTC) states "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people"except perhaps those at the very top of the pyramid"end up empty-handed."
So, another reason for this unreliability is perhaps that companies do not want to "get into trouble".
excerpt from Robert Fitzpatrick's interview posted in CNBC.COM:
Q: How many multi-level marketing participants fail?
A: Ninety-nine percent don't ever make a net profit.
Q: How do you know that?
A: Well, I studied the income disclosures that are available from representative companies. And many of them have been forced by lawsuits and regulatory actions to present some basic data. It's presented in a very insufficient manner, but with a little analysis, a little extrapolation, the data is there.
Q: You talk about the amount of money that's being lost. How much money is being lost?
A: Ten-- tens of billions.
Q: How do you know that?
A: Well, again, you just take the numbers of people who are involved. Look at how many could and have earned a net profit. Therefore, you can determine the losses. Multiply those losses over years. And you're up into the tens of billions of dollars.
Less than 1% of all MLMers make any profit:
(The estimates are based on careful analysis of reports published by the MLM companies themselves.These extraordinary loss rates were derived by removing three sources of deception from the reporting of these MLM"s:
(1) the practice of not counting ALL who signed on as distributors (agents, consultants, etc.) in the population of recruits who attempted to make the program work for them, but instead counting only those still "active;" i.e., deleting all dropouts in the calculation,
(2) not subtracting expenses, especially products and services purchased from the company to qualify for commissions, plus minimal operating expenses, and
(3) assuming legitimate sales of products (to customers not in the network) that did not occur.)
The tables on these pages:http://www.knowyourluck.com... and http://www.knowyourluck.com... show that if someone has saved some money and he/she wants to invest it in a mlm company, statistically a safer decision for him/her would be to visit a casino.
Finally, I would like to apologize for the presentation of my arguments but because of an error I can not change even the size of the letters.
Avon is a MLM company. http://www.bloomberg.com...
When I was a kid my parents were in a very bad marriage and my mother started selling Avon to make extra money. Had it not been for Avon, we would have had many mots where we couldn't eat. The bad marriage point made me think of how many women in abusive relationships that Avon saves. Women in abusive relationships can use Avon as a tool to get some extra secret income and squirrel it away so they can escape it.
This is on top of all the money that this company gives to domestic violence programs (according to wikipedia). http://en.wikipedia.org...
Most people are going to fail in MLM regardless of how credible the company is. That's not to say it's a scam but just a tough business model. A lot of MLM companies are scams but those are the ones that focus on recruitment. Avon focuses on direct sales.
Furthermore, there are some people who gain money by these companiesand these people are the founders of the company as I have already explained..
"Avon focuses on direct sales"
1) I have no reason to believe this
2) even if it's true it's just an exemption and we can not rely on the exemptions in order to reach a conclusion
3) even if this was the rule and not the exemption as I have already explained the mlm model itself prevent distributors from making profit
There is problems in the MLM industry but I've proven at least one company isn't a fraud it she admits that it's not a fraud for people higher up on the chain.
Since distributors in Avon, typically focus on direct sales as opposed to recruitment, it's not a pyramid scheme.
My opponent had the BOP here and she failed to show how all MLM companies are frauds. She laid out a case for why they are in most instances but it's not good enough.
Even if you don't buy any of my arguments, even if I forfeited every round, the voter would still have to vote for me, because My opponent failed to meet her BOP. Her job wasn't to show a lot or most MLM is a fraud. She had to show, how they are all a fraud.
1 votes has been placed for this debate.
Vote Placed by Zarroette 1 year ago
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Reasons for voting decision: "My opponent has failed to meet her Burden of proof. She must prove that MLM is always a fraud." - This line from Con pretty much sums up the debate. Pro gave an excellent argument for how some MLM are scams, but the BoP required all, as Con pointed out. Source points are a bit tricky. It's obvious that Pro gave plenty of sources, yet Con's was integral to the debate yet it was also quite basic. So, because Con's sources were integral to his win, I'm giving him source points.
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