MLM Software development in India
Added: (Fri Feb 19 2010)
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Multi-level marketing (MLM), (also called network marketing, direct selling, referral marketing, and pyramid selling is a term that describes a marketing structure used by some companies as part of their overall marketing strategy The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation in the form of a pyramid.
The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.
Criticism of MLM
The Federal Trade Commission (FTC) issued a decision, In re Amway Corp., in 1979 in which it indicated that multi-level marketing was not illegal per se in the United States. However, Amway was found guilty of price fixing (by requiring "independent" distributors to sell at the low price) and making exaggerated income claims.
The FTC advises that multi-level marketing organizations with greater incentives for recruitment than product sales are to be viewed skeptically. The FTC also warns that the practice of getting commissions from recruiting new members is outlawed in most states as "pyramiding". In April 2006, it proposed a Business Opportunity Rule intended to require all sellers of business opportunities—including MLMs—to provide enough information to enable prospective buyers to make an informed decision about their probability of earning money. In March 2008, the FTC removed Network Marketing (MLM) companies from the proposed Business Opportunity Rule:
The revised proposal, however, would not reach multi-level marketing companies or certain companies that may have been swept inadvertently into scope of the April 2006 proposal.
Another criticism of MLMs is that "MLM organizations have been described by some as cults (Butterfield, 1985), pyramid schemes (Fitzpatrick & Reynolds, 1997), or organizations rife with misleading, deceptive, and unethical behavior (Carter, 1999), such as the questionable use of evangelical discourse to promote the business (Hopfl & Maddrell, 1996), and the exploitation of personal relationships for financial gain (Fitzpatrick & Reynolds, 1997)."
Another charge is "By its very nature, MLM is completely devoid of any scientific foundations."
MLM's are also criticized for being unable to fulfill their promises for the majority of participants due to basic conflicts with Western cultural norms. There are even claims that the success rate for breaking even or even making money are far worse than other types of businesses: "The vast majority of MLM’s are recruiting MLM’s, in which participants must recruit aggressively to profit. Based on available data from the companies themselves, the loss rate for recruiting MLM’s is approximately 99.9%; i.e., 99.9% of participants lose money after subtracting all expenses, including purchases from the company." In part, this is because encouraging recruits to further "recruit people to compete with [them]" leads to "market saturation."
Various other reports regarding profits by MLM members have been stated by
• The Times: "The Government investigation claims to have revealed that just 10 per cent of Amway’s agents in Britain make any profit, with less than one in ten selling a single item of the group’s products."
• Scheibeler, a high level "Emerald" Amway member: "UK Justice Norrisfound in 2008 that out of an IBO [Independent Business Owners]population of 33,000, 'only about 90 made sufficient incomes to coverthe costs of actively building their business.' That's a 99.7 percent loss rate for investors."
• Newsweek: based on MonaVie's own 2007 income disclosure statement "fewer than 1 percentqualified for commissions and of those, only 10 percent made more than$100 a week."
• Business Students Focus on Ethics: "In the USA, the average annual income from MLM for 90% MLM members is nomore than US$5,000, which is far from being a sufficient means ofmaking a living (San Lian Life Weekly 1998)"
• USAToday: "While earning potential varies by company and sales ability,DSA says the median annual income forthose in direct sales is $2,400."
Because of this some people have even gone so far as to say at best MLMs are nothing more than legalized pyramid schemes withone of them stating "Multi-level marketing companies (MLMs) have become an accepted and legally sanctioned form of pyramid scheme in the United States." and the other "Multi-Level Marketing: A form of Pyramid Scheme, not necessarily fraudulent.
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