During the epoch of last two decades, multi level marketing (MLM) has come a long way and has impacted the lives of hundreds and thousands of people. Few of them have earned lucratively while the list of people who have lost their money is much bigger than the earners. This is the essence of multi level marketing. You join at an initial stage and earn good returns, induce others to join and with each level beneath you, people are exposed to risk of losing their hard earned money. Let us start by discussing the concept of multi level marketing or pyramid level of marketing.
Concept and Working of Multi Level Marketing
The multi level marketing schemes basically rests on networking and convincing power. Whenever anybody hears MLM, I am sure the name ‘AMWAY’ must have come to their minds. Well, if we talk about AMWAY and their business model works somewhat like this:
You pay Rs. 5,000 to be in the business. You will get a start-up kit and products at a discounted rate. All you have to do is keep adding people to the business and you will get some percentage of total sales made by you and people beneath you. That is, harder the people under your tree will work, more the money you will be able to make. There are different layers in this business like silver, gold, diamond, etc.
Can Everybody Make Money From Multi Level Marketing?
The answer is bluntly negative. Those at the top of the pyramid earn and the laggards and followers tend to lose. Let us understand it clearly with the help of an example:
The scheme says, pay Rs. 2,000 and become a business partner. For every new member added by you in the pyramid, you will get Rs. 500 and each new member will get a product worth Rs. 500 absolutely free.
Top level (i.e. Level 1) – I am there at the top level and I added 10 people under me. Each will pay Rs. 2,000. I will get a total of Rs. 20,000. I gave free product of Rs 500 to every new member, that is, my expenses will be Rs. 5,000. Still I saved Rs. 15,000.
Level 2 – Each of these 10 people managed to influence and add 10 people under them. That is, 100 new members will be added in the chain giving me Rs. 2, 00,000. As a bonus I will give Rs. Rs. 500 to each of the 10 members of level 1 for every new member added under them, i.e. Rs. 50,000 (500 * 100). In addition, products worth Rs. 500 each will be given to 100 new member, adding my expenses by Rs. 50,000. In this case, my total expenses come out to be Rs. 1, 00,000. At this level, I saved Rs. 1, 00,000 and since each member of level 1 has got Rs. 5,000 each, they have not only recovered their investments but has also earned a profit of Rs. 4,000 each.
Level 3 – Now, the 100 members individually managed to add 10 new members under them. I will get Rs. 20, 00,000 (2,000 * 1000). Bonus amount will be Rs. 5, 00,000 (500 * 1000). Free products will cost Rs. 5, 00,000 (500 * 1000). Total expenses are Rs. 10, 00,000 and my savings will stand at Rs. 10, 00,000.
Last Levels – These 1,000 new members added 10 members each, i.e. 10,000 new members will be added giving me a total amount of Rs. 2 crores (2,000 * 10,000). Similarly at level 5, I will get Rs. 20 crores (2,000 * 1, 00,000 new members) and at level 6, I will get Rs. 200 crores (2,000 * 10, 00,000 new members). Woo, this is a sufficient amount for me to run away and I will never be required to be in business again. This will make last levels to lose money.
Apart from money, what do I lose in multi level marketing?
Money is one thing that can be earned again. But more than the monetary loss, you tend to lose your personal relationships with MLM. I still remember when I was in college, my best friend was a member of some MLM scheme and even while attending classes, she tried to influence me to join the business and I started avoiding her. Ultimately, at that age my goal was to attentively attend the class. One fine day, I found her crying and the reason was the business she was associated with was fraud and she lost her entire pocket money into it. At least I was saved.
Not every company is a fraud. However, to be on safer side, before joining any such scheme, check for its genuineness.
