The question for would-be marketeers is... what is "X," and how can it be predicted to maximize profits? The fact that "X" is hard to pin down does not mean that it does not exist, and every Widget built beyond "X" will end up producing a problem for the organization. The market only wants "X" Widgets at $100. What are you going to do with your extra inventory of Widgets beyond "X" that no one wants, and the sales people you hired to sell them?
MLMs are designed to make profit for the owners/shareholders of the company, and a few individual participants at the top levels of the MLM pyramid of participants. According to the U.S. Federal Trade Commission (FTC), some MLM companies already constitute illegal pyramid schemes even by the narrower existing legislation, exploiting members of the organization. There have been calls in various countries to broaden existing anti-pyramid scheme legislation to include MLMs, or to enact specific anti-MLM legislation to make all MLMs illegal in parallel to pyramid schemes, as has already been done in some jurisdictions.
They will claim to have made "new friends," most of which are MLMers or new acquaintances who could be considered "future prospects." The shallowness of these "new friends," the stilted conversations among the "old friends," and the embarrassment, in general, for what seems clear to everyone but the MLMer go unnoticed. Callousness sets in; standards are lowered.
The main attraction of the binary plan is that distributors are only required two downline recruits. Why is this a good thing? Because once you recruit more than two distributors and these excess distributors are placed below your downline, you can start earning commissions; this is a much lower recruitment requirement than other compensation plans.
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Stern decided to get out after she realized she had $20,000 in unsold wholesale inventory sitting in her living room. “It clicked for me that if you order 30 items, they send you 10 quick movers and the rest sit. It’s a false sense of actually being successful,” she says. “I noticed all these people started going out of business. I started getting scared that my inventory would be worth nothing, and I would be stuck with $8,000 on my credit card.”
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Let's say you tried to make it sound, and said "Forget the multilevel recruiting, I'm going to focus on selling the product." Is anyone doing that successfully? It would not appear so. During yet another lawsuit in the UK, the government found that less than one in ten participants ever sold even a single product to another person. Since the company has its distributors as a captive audience required to make regular purchases, the products are typically grossly overpriced compared to similar products available in supermarkets. This makes their sale a dubious prospect for those few distributors who ever do attempt retail sales to customers. Surveys show that nearly all products purchased by network marketers are consumed by the distributors themselves.
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