Beware Of Multilevel Marketing Scams

Beware Of Multilevel Marketing Scams

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Have you seen Penn and Teller’s television show on Showtime, or online? We can’t mention the title because it’s not a word we can use in polite company. Also, it’s not really a show you can watch with your kids. But it is an interesting program (hint: the initials are B. and S. Sorry we can’t be any more helpful than that) which takes a look at different facets of Western Society and whether or not they, well, live up to the what they seem to promise. For instance, one program deals with diet fads, and why they don’t seem to work. Another program deals with why politicians seem to feel the need to be dishonest. There are episodes about alien abductions (and the veracity of such claims), uses of alternative medicine, so-called ‘fountain of youth’ products… you get the idea. We want to caution you again, should you decide to search for episodes online: this is not a family show. Viewer discretion is strongly advised.

One episode we find particularly interesting is entitled “Easy Money” which takes a critical look at the multi-level marketing industry. You might know some of the companies that operate in this industry, such as ‘Amway’,’ Mary Kay’ and others. We’re not judging the validity or ethical implications of such companies. Penn and Teller actually do a pretty thorough job of that. But we do want to take a look at one specific aspect that seems to be common in just about every company associated with the process of multi-level marketing. We’re talking about what is commonly called the “initial investment”.

Generally, when you decide to sign on with a multi-level marketing company, you are required to make an up-front investment in the product in order to secure your commitment to the product and selling it to the general public. In addition, it is generally expected that when you join such a company, you will be recruiting others to sell the same product you do and thus generate more income for yourself based not only on what you sell but what your recruits have sold as well.

This practice dates back to the 1920’s and 30’s with the advent of the California Vitamin Company (you can probably guess what they sold), and Avon; a cosmetics company that still exists today. This practice is sometimes called “affiliate marketing” or “home-based business franchising”. The initial investment phase of entering multi-level marketing company involves buying a certain amount of product to re-sell as well as sales materials, presentation displays and sample products that allow a potential client to try the item for themselves.

Multi-level marketing is big business in the United States. According to ‘The Economist’, it was a thirty billion dollar a year industry as of 2011. Clearly, people are making money through this business practice. If you are thinking of signing up with a multi-level marketing company, please make sure you have done your research. Do they subscribe to the practices of the Better Business Bureau? Do they have favorable independent ratings and testimonials? If you’ve done your homework but find yourself short of the funds necessary to make that ‘initial investment’, come see us at CASH 1. And we wish you all the success in the world.

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