Pyramid schemes continued


Within 12 hours of my previous post about pyramid schemes, I received a comment from an organizer of one.  I’m reluctant to post the comment because it has a link to his product, however I will share verbatim what he said:

There are people out there that just do not know how to build a viable business. For me I first want customers that use my product. I have a product that people do need and I just want them to receive the benefit of the product first. My best team members are my best customers in building this business. If you are so anxious to reach the top of a Network Marketing business you first need to realize why these products are not on the grocers shelf. It is very simple math. The Manufacturer who goes the retail store route first needs to spend millions of dollars to advertise the product just to get the product on the public’s radar. The Network Marketing Manufacturer spends a lot less by going the word of mouth route. The Retail Manufacturer must produce thousands of products before the sale. The Network Manufacturer makes the product on existing orders and has no losses. This is a very simple explanation.
NOW IF, you are serious and want to see exactly how you could receive the product that has many benefits that fits the majority of people’s needs at either a very low cost if not free plus receive an income besides then you should go to a web address that will explain everything to you.

This seems to be a compelling argument.  Maybe I came down a little harsh on people who STILL get involved in pyramid schemes, even though it is 2009.  However, there are many problems with what the commenter said and I will go into them below the fold.

First, he seemed to take the title of my previous post, “I need to get to the top of one of those pyramid scheme” too seriously.  No, I’m not interested in pyramid schemes because I’m not an idiot.

Next,the commenter seems to be making the argument that Multi-Level Marketing (MLM) is a viable option for people trying to sell a product, but don’t have the money to invest in the endeavor.  Instead of giving my rebuttal, a section from What Is A Product Pyramid sums it up nicely:

If an MLM’s product is primarily sold to actual customers who buy the product at the MLM’s price and who don’t participate in the “business opportunity”, it practically guarantees that the “product” is not a cover for a pyramid scheme.

Understand that the “product” can be a shill for an illegal scheme in two ways:

(1) it might not be a real product at all – e.g. those one page “reports” that are “sold” in chain letter schemes; or,

(2) it may be a real product but sold at an unreal “pyramid premium” price (as in my widget example).

If it is the latter, there will not be a significant market for the product. If there is little or no reasonable retail market (i.e., the products aren’t price competitive) the only people likely to buy them are the participants in the scheme. The only way for participants to make money is to recruit more participants to make the purchases and we are back to square one, with the vast majority of participants losing money so that a small number can profit.

And guess what?  I went to the commenter’s product website and you can only purchase it for $100 per case (4 bottles); not to mention a required membership fee.  But even if the previous arguments are ignored, numerous studies show that MLM is not profitable.  In fact, some studies say that MLM is even worse than gambling.  Therefore, it is very unlikely that any (legitimate) entrepreneur would consider it a sound business model.

Stay tuned for some posts on the actual products of these scams and the pseudo-science used to sell them.


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