Beware of illegal multilevel marketing practices

Entrepreneurs and workers adversely affected by the COVID-19 pandemic need a way to earn replacement income quickly. One way is to start a multi-level marketing (MLM) distributor business, also known as network marketing.

The Value Proposition Or The Benefits Of MLM? There are a few including: No Rent; no big capital necessary; no qualifications such as minimum education, age or professional background required; no franchise fee as in the franchise business; and then the psychological reward of seeing the success of downlines.

Great idea

The big idea is simple. Rather than having companies pay a large amount to traditional distributors and wholesalers and allocate an additional budget for mass media advertising, MLM companies are redistributing trading margins and advertising for the disbursement of MLM compensation, a win-win promise between the company and their independent MLM partners. Distributors who provide services as both a sales channel and a communication channel. Different products then have different equivalent royalty payouts, much like what would have been spent on the more traditional type of distribution and advertising. For example, beauty products pay more MLM royalties because traditional retail ad spend is much higher than home appliances, but there are also many more established and high quality brands sold in stores at very competitive prices.

To make a big payout, MLM distributors need to build and maintain a pipeline of qualified prospects, dedicate the time and effort necessary to both sell products and sponsor others to run the business, and have people and leadership skills to attract newcomers to successful distributors in a copyable way. Most legitimate MLM companies in the Philippines do not provide loans to their distributors.

MLM companies have low barriers to entry with either free or low registration fees and low barriers to exit with specific product return policies. If there are high entry fees and no return policies, avoid joining these companies as they may masquerade as legitimate MLM organizations but are either pyramid schemes or sell unregistered investments (business centers where you can sign up and pay multiple times) what is illegal and untenable.

computerization

The idea of ​​MLM grew with the increase in computerization, changing lifestyles, and the decision by the Fair Trade Commission in the United States to legitimize the stair abandonment compensation plan in MLM in 1979.

I have written about legitimate MLM as well as illegal pyramid scheme and unregistered investments many times and readers are invited to review my previous articles for in-depth explanations including the eight point test. I particularly recommend these posts:

“Investment Scam Spotting”: business.inquirer.net/282779/investment-scam-spotting (published in November 2019)

“Beware of Binary-Type Pyramiding”: business.inquirer.net/260208/beware-of-binary-type-pyramiding (published in November 2018).

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