From: steve@unipalm.co.uk (Steve Ladlow)
Subject: Re: Network Marketing
Organization: Unipalm Ltd., 216 Cambridge Science Park, Cambridge CB4 4WA, UK
Date: Thu, 19 Nov 1992 08:30:13 GMT

paj@uk.co.gec-mrc (Paul Johnson) writes:

>In article <721456841snz@mccomp.demon.co.uk> imcneill@mccomp.demon.co.uk (imcneill) writes:
>>Has anyone come across network marketing?.  I was recently at a seminar
>>(selling spree), where this method of distribution was being touted.  It
>>seems a facinating system, where the product is almost secondary to the
>>selling method.  The main people involved were at pains to point out that
>>this is NOT pyramid selling.  The difference does seem rather subtle however.
>>Mainly unlike pyramid selling, this system allows you to move up to the top
>>of the tree.  Also the company gaurantees to purchase back 90% of any unsold
>>stock.  The one point that really stood out was that quite a large number of
>>people involved had never sold any products.  They had merely introduced new
>>people and were now profiting from their sales and introduction etc, quite a
>>facinating concept.

>The problem with this kind of system is that someone somewhere
>actually has to sell something for the network as a whole to make any
>money.  A group of people selling rocks to each other will not make
>any money at all.

>Conventional selling gives each salesman a patch to cover.  Network or
>pyramid selling (I can't actually see any real difference) just tries
>to draw people in to the net and sell stock to them.  They can't sell
>this stuff because the market is heavily over-supplied by other people
>selling the same stuff, and so the sucker rapidly finds that the only
>way to make money is to sell more stock to more suckers lower down the
>line.  The only suckers who are likely to listen to you are friends
>and family, so this is a good way of loosing friends and making
>enemies.

>This scheme is rather like those "multiplication factor" chain letters
>which ask you to send five pounds each to a list of people and then
>send the letter on to lots of other people, each of whom will then
>send you five pounds.  The fallacy in the chain letter is that it
>assumes an infinite population.

>Chain letters are illegal (a form of fraud).  However I imagine
>pyramid selling of the sort you describe is not illegal because the
>money you pay into the scheme at the start is in return for stock.
>Whether that stock is shiftable is another matter.

>The 90% buy-back promise is interesting.  I would take a good look at
>the contract before signing anything.  Do they guarantee to buy it
>back at the original price?  After how long?  What hapens to the
>interest on the money meanwhile?  Are there any get-out clauses such
>as "original condition" in the contract?  Remember that these people
>are out to get money from you, not to give you a fair break.

>Try doing some arithmetic on the profit margin, number of sales per
>day etc.  Try phoning around a sample of the target market and see
>what response you get.  Consider whether you personally would buy one
>of these widgets from a door-to-door salesman.

>Paul.
>-- 

Paul is correct in presenting his views to make sure anyone considering
Network Marketing is aware of the response they would get from some people,
and to make them think hard before signing up.

However all reputable Network Marketing companies do not run in the way
he describes. I am not sure what the statistics are in the UK but it is
estimated that 95% of Network Marketing companies started up in the US
fail. There are no doubt many reasons for this and this may include the 
stock situation described above.

I have been monitoring this kind of activity for some time now. A lot of
this has been thanks to the Internet. My personal thoughts are not to 
get involved in a product that you can only sell once to a customer e.g.
water filters. Ask any salesman and you will be told that the easiest
sale is the repeat sale. You would be very unlikely to sell another water
filter to someone who already has one! Sell someone good washing up liquid
and you know that at some point they will need more.

Do be wary of any company that suggests you buy stock. Depending on what 
you are trying to sell you may need to buy yourself a few items to show
people what you are selling. As your earnings increase then you are likely
to want to invest in a little more stock.

Network Marketing , Multi-level marketing (MLM) - call it what you will
is not pyramid selling. This has been proved in the courts. There are
some great opportunities but do investigate each one carefully.

An arguement that often crops up is that of saturation. This is something 
that worried me for a while. But I guess you only need to look at Amway.
Amway has been around for 30 years and there are still a lot of people
who have never heard of it. I have been given the Amway sales pitch and
I don't like it. I don't like their method of selling the concept and 
I don't like the organistaion. However we do buy Amway products for the 
home.

I have been waiting for the right opportunity to come along before I get
into MLM. Ideally I want to get in on a US company when it starts up in the 
UK. This is where the big money can be made. If you start off early enough
and the scheme succeeds then your made. Unfortunately the US company I
have been keeping an eye on has decided to put off their entry into the
UK until 1994. I don't want to wait that long.

I went to see a presentation from a UK company only last night and I 
think I will be signing up next week. I won't bore you with the details
but I will tell you that I saw photocopies of the latest monthly statement
from two people. One had been in the scheme 4 months and his last cheque
was for 897 pounds (for October) and another who had beenin the scheme 
for 6 months had an October cheque for 2600 pounds.

BTW this company buys back unused stock, if you want to pull out, at
92.5% of original value.

Further dicussions on this subject should really continue in 
alt.business.multi-level. From there you will get a lot of views from
people in and out of the business from around the world, but mostly in
the US.

Steve Ladlow
steve@unipalm.co.uk

Newsgroups: uk.misc