Is Mlm Scam A Fair Assessment?

Today many people are resistant to the multi level marketing industry

, because they fear being the victim of an MLM scam. You may have even heard someone make a statement like this before: "I was involved in one of those network marketing scams before." Like every other industry on the planet, in the world of multi level marketing there are reputable companies and there are bad apples. Unfortunately, it only takes one bad company to ruin the perception of the industry as a whole. It is important to step back and take an objective look at the industry landscape to get a more accurate picture.

Over the last few years we have seen examples of bad companies in all realms of business. Names like Enron and Worldcom left many with a bad taste in their mouths; however, I have no doubt those same individuals continued using natural gas and the telephone. The reason is clear, these are isolated examples corporate wrongdoing that are not indicative of every company in those respective industries. By the same token, I would suspect that you still deposit money in your local bank, despite the fact that many banks were found to have been involved in predatory lending practices. Again, a few isolated examples do not define an industry as a whole.

The real issue here is education. We often use negative labels to describe things we don't fully understand. In the case of MLM, there are over 4,000 companies in existence today. The majority of these companies are reputable businesses with tangible product lines. They have simply chosen to use direct selling as their primary means of distribution as opposed to spending large sums of money on costly advertising and marketing. In fact in the US alone during the year 2008, the Direct Selling Association (the industry group of network marketing) estimates that nearly 15 million home business owners generated nearly 29.6 billion dollars in sales volume in the United States alone. It is important to remember that some of the most prominent household names are MLM companies. These include names like Avon, Watkins, Fuller Brush, Mary Kay and Tupperware, just to name a few.

The other term often thrown around with MLM is pyramid scheme. Again a little education goes a long way in understanding the tremendous difference between the two. A pyramid scheme, or Ponzi scheme as it is often known, uses the money paid by one group to pay off another group. The most famous Ponzi scheme involved Wall Street tycoon Bernard Madoff. The only way anyone makes any money is through someone else losing their money. Not only is this unethical, but it is illegal. MLM on the other hand compensates a distributor for sales volume of a product or service. In addition that distributor receives compensation through bonuses and overrides on the sales volume of the distributors that they have enrolled into their business. The idea of receiving an override commission is standard throughout most sales based industries. The sales manager at the local car dealership receives overrides and bonuses based on the sales of their sales people. Corporations have long rewarded managers and executives with bonuses and incentives on the productivity of their staff and department.

The next time you hear someone refer to an MLM scam, take a moment to shed some new light on that statement and set the record straight.

by: Carl Willis

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