From: paj@uk.co.gec-mrc (Paul Johnson)
Newsgroups: uk.misc
Subject: Re: Network Marketing
Date: 17 Nov 92 11:39:31 GMT
Reply-To: paj@uk.co.gec-mrc (Paul Johnson)
Organization: GEC-Marconi Research Centre, Great Baddow, UK

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 Johnson (paj@gec-mrc.co.uk).	    | Tel: +44 245 73331 ext 3245
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