Direct Marketing - Dreams and (Pyramid) Schemes

[Mlle. Zabzie]

So, yesterday, a friend from highschool (now facebook acquaintance) sent me a PM re "starting my own business with Rodan and Fields."  Another several friends/acquaintances do "book parties" through Usborne.  I have another friend who is a Beachbody coach.  A college sorority sister kicks it old school with Mary Kay.  My cousin's wife is a Stella and Dot rep.  When I grew up it was Mary Kay, Avon, Amway, Tupperware and Pampered Chef.  Leaving aside the silliness of anyone asking me to join the cult of Rodan (very clear that the person doesn't know me or what I do well at all), all of these (recent-ish) experiences made me reflect on my views on direct marketing schemes (I mean, my mother always cheerfully bought amway detergent from our next door neighbor while telling her that it was a complete pyramid scheme).  I grew up thinking (and still think) that they generally tend to prey on vulnerable folks (generally women) with promises of riches that never quite come through.  They get more products/discounts on products, but not actual useful money.  But maybe I'm jaded and the modern version is better/different?  Maybe some companies are better than others?  Anyhow, would love others thoughts/opinions/discussion.

   

[OldGimletEye]

So here is my experience with (Sc)Amway:

When I was a teenager, I was once over my grandfather’s house. Now, my grandfather was one hard working country boy. When he wasn’t at his job, he was fixing or working on something at home. There were about two things he really enjoyed when he wasn’t working. One of them was watching college basketball. Anyway on this particular day, it was big day for games, but in the morning some distant relatives called and said they’d like to come over for a visit, but didn’t really indicate what the visit was about.

So they came over, and I was coming in and out of the house, doing stupid teenager stuff, and I just saw my poor old grandfather sitting there on the couch listening to the Amway spiel. I could tell he wasn’t happy, as he was having to listen this stuff, while his beloved college basketball games were on. But, he was too reserved and quiet and polite to say anything about it, but I could tell he wasn’t happy.

It didn’t leave me the best impression of Amway or MLM schemes.

Anyway, If I recall there is case out there, decided in the 1970s where The Federal Trade Commission sued Amway over inventory loading. Inventory loading is way of hiding a pyramid scheme. If I recall correctly, the administrative court ruled that in order for an MLM scheme not be an inventory loading scheme a certain percentage of goods have to be sold to the public which are not part of the MLM program. I do not recall what the percentage is, nor do I know if the rule is enforced, or whether it’ still good law, but I’d say it is probably a good thing to remember when somebody approaches you with an MLM program. To wit, ask: well just how much of the inventory is actually sold to the public?

I’d ask other questions about the amount of money an average participate makes. In other words show me the numbers, or I’m not interested. 

I mean, it’s like suppose you were thinking about buying a business? I think you’d insist at taking a look at the books for buying it.

My limited experience with MLM stuff, is that the people can’t really give you the kind of hard numbers and information you’d want. So it seems all pretty shady to me.

[Dr. Pepper]

I find it all incredibly annoying, personally.  I get sick of the invites and 'offers'.

I've seen people sucked in.  My youngest sister bought into it all and got in with two companies, but ended up no better off than she started and I think maybe even more broke.  However, I have some friends who do Lula Roe and they seem to be doing alright with it and it financially improves their lives.  I don't participate, I can't afford $50 leggings that fall apart quickly, but I guess enough people can that they are able to take an extra vacation a year or buy a new car or send a kid to private school.  

[Mlle. Zabzie]

1 hour ago, OldGimletEye said:

So here is my experience with (Sc)Amway:

When I was a teenager, I was once over my grandfather’s house. Now, my grandfather was one hard working country boy. When he wasn’t at his job, he was fixing or working on something at home. There were about two things he really enjoyed when he wasn’t working. One of them was watching college basketball. Anyway on this particular day, it was big day for games, but in the morning some distant relatives called and said they’d like to come over for a visit, but didn’t really indicate what the visit was about.

So they came over, and I was coming in and out of the house, doing stupid teenager stuff, and I just saw my poor old grandfather sitting there on the couch listening to the Amway spiel. I could tell he wasn’t happy, as he was having to listen this stuff, while his beloved college basketball games were on. But, he was too reserved and quiet and polite to say anything about it, but I could tell he wasn’t happy.

It didn’t leave me the best impression of Amway or MLM schemes.

Anyway, If I recall there is case out there, decided in the 1970s where The Federal Trade Commission sued Amway over inventory loading. Inventory loading is way of hiding a pyramid scheme. If I recall correctly, the administrative court ruled that in order for an MLM scheme not be an inventory loading scheme a certain percentage of goods have to be sold to the public which are not part of the MLM program. I do not recall what the percentage is, nor do I know if the rule is enforced, or whether it’ still good law, but I’d say it is probably a good thing to remember when somebody approaches you with an MLM program. To wit, ask: well just how much of the inventory is actually sold to the public?

I’d ask other questions about the amount of money an average participate makes. In other words show me the numbers, or I’m not interested. 

I mean, it’s like suppose you were thinking about buying a business? I think you’d insist at taking a look at the books for buying it.

My limited experience with MLM stuff, is that the people can’t really give you the kind of hard numbers and information you’d want. So it seems all pretty shady to me.

There was a whole bunch of stuff that happened in connection with Herbalife, too.  In any case, I wouldn't ask about average if I were looking.  I'd be asking about median.  And I do think all of these programs are incredibly shady, but that's just me.  And historically, maybe things like Mary Kay and Avon were good from a business perspective in that it might have been one of the few ways a woman could earn some money of her own.  I dunno.

[OldGimletEye]

Just now, Mlle. Zabzie said:

There was a whole bunch of stuff that happened in connection with Herbalife, too.  In any case, I wouldn't ask about average if I were looking.  I'd be asking about median.  And I do think all of these programs are incredibly shady, but that's just me.  And historically, maybe things like Mary Kay and Avon were good from a business perspective in that it might have been one of the few ways a woman could earn some money of her own.  I dunno.

Yeah you're right about the median, rather than the average.

I think anyone thinking about doing any of this stuff really has to do their homework. And demand good information. In my view they aren't usually likely to receive it. And if someone isn't willing to provide it, then it's probably not legit or,at least, be very, very leery.

[S John]

Was visiting family last weekend and my uncle was complaining about some friends he knew who were the first in the local area in one of these companies and seemed to be doing pretty well for themselves, going on sweet vacations and what not, but had all of their friends running around the valley selling this crap and apparently not getting much out of it.  Some kind of cosmetic cream or lotion thing, I think, but it wasn't Mary Kay or Avon.  

Anyway, anything that depends on bringing in more and more people to boost my own status in the company is not something that I would be interested in doing or pitching to all of my friends and family.  Then again, I'd make a shitty salesman in general.  "Oh, you aren't interested?  OK, see you later!"

[OldGimletEye]

Just now, S John said:

Then again, I'd make a shitty salesman in general.  "Oh, you aren't interested?  OK, see you later!"

I wouldn't be a good one either.

[Iskaral Pust]

My wife had an outrageous experience recently.  An acquaintance of ours through our son's school -- a former CEO of an ad firm -- sent an invitation to a lot of the class moms to "join me in a party to celebrate a new venture I'm starting and really believe in".  I got dragged along because my wife assumed it was an actual party and we had to go and make nice and wish her well since she invited us, even though we haven't socialized with her since a single play date for our boys five years ago. 

But we arrive at the party, bearing a decent bottle of wine, to find that it's a sales pitch "party" for some froufrou cosmetics.  And I'm the only husband who got dragged along.  My wife was aghast.  For the next couple of hours, all these women squirmed as their outrage at being tricked into attending and discomfort at being hard sold was confined by their compulsion to be nice.  My pushover wife even signed up for a $100 tiny tube of eye-lash something-or-other, just out of pity for the hostess.  I told her if you want to indulge in charity then she and we will be better off if you just give her $50 and forget this junk to maintain a pretense.  A few days later something arrived in the mail that said it was actually a monthly subscription of $100 for an ongoing supply.  I went fucking ballistic at this level of parasitic exploitation and my wife called them to cancel it.

I still can't believe this woman thought it was ok to scam people like this.  

[Mlle. Zabzie]

14 minutes ago, Iskaral Pust said:

My wife had an outrageous experience recently.  An acquaintance of ours through our son's school -- a former CEO of an ad firm -- sent an invitation to a lot of the class moms to "join me in a party to celebrate a new venture I'm starting and really believe in".  I got dragged along because my wife assumed it was an actual party and we had to go and make nice and wish her well since she invited us, even though we haven't socialized with her since a single play date for our boys five years ago. 

But we arrive at the party, bearing a decent bottle of wine, to find that it's a sales pitch "party" for some froufrou cosmetics.  And I'm the only husband who got dragged along.  My wife was aghast.  For the next couple of hours, all these women squirmed as their outrage at being tricked into attending and discomfort at being hard sold was confined by their compulsion to be nice.  My pushover wife even signed up for a $100 tiny tube of eye-lash something-or-other, just out of pity for the hostess.  I told her if you want to indulge in charity then she and we will be better off if you just give her $50 and forget this junk to maintain a pretense.  A few days later something arrived in the mail that said it was actually a monthly subscription of $100 for an ongoing supply.  I went fucking ballistic at this level of parasitic exploitation and my wife called them to cancel it.

I still can't believe this woman thought it was ok to scam people like this.  

Has to be Rodan + Fields.  Everything about that company seems cult-like to me.  And they absolutely give people scripts for publishing for social media, etc. as advertising.  It's all over my facebook newsfeed and has caused me to unfollow several people.  

[Larry of the Lawn]

A highschool buddy of mine stopped by a few years ago with some MLM life insurance pyramid scheme.  Made it sound like he just wanted to catch up.  I listened to him politely until the beer was gone, then told him I didnt want to hear anymore about it but would be happy to talk about something else.  He left.  Haven't seen or heard from him since.  Just another shitty predatory business practice.

[Ser Scot A Ellison]

I didn't know Usborne marketed like this.  We have a lot of their books for our kids.  Mostly bought them at the South Carolina Book Festival over the years.

[OldGimletEye]

Just now, larrytheimp said:

A highschool buddy of mine stopped by a few years ago with some MLM life insurance pyramid scheme.  Made it sound like he just wanted to catch up.  I listened to him politely until the beer was gone, then told him I didnt want to hear anymore about it but would be happy to talk about something else.  He left.  Haven't seen or heard from him since.  Just another shitty predatory business practice.

A lot of these companies really encourage selling their wares to friends and family members, from what I know.

That sort of thing would always be a big no no with me. My relationships with friends and family are just too important to screw up over bull crap.

And besides I just prefer to keep my professional life and personal life in completely separate spheres cordoned off from one another.

[The Mance]

My ex-SiL got into Silpada Jewelry pretty early on and managed to do very well for herself.  She went from lowly small town hairdresser, to getting awards for regional and national sales and pulling in low/mid 6 figures.  

i got the feeling that pyramid sales can work out great if you get in near the top and/or sign up lots of folks under you, but expecting to make a noticeable income just from having parties and "earning" a percentage is ridiculous.  SiL had hundreds of people in her downline, each with their own pyramids under them, all of which sent a percentage up the ladder.  I'd be surprised if her own personal sales amounted to more than 1 or 2% of her income. 

[OldGimletEye]

Just now, The Mance said:

SiL had hundreds of people in her downline, each with their own pyramids under them, all of which sent a percentage up the ladder.  I'd be surprised if her own personal sales amounted to more than 1 or 2% of her income. 

I think this a key indicator of whether something is legit. That is to say, where is the emphasis: Is it on actually selling the product or is it really about recruiting new members?

[The Mance]

1 minute ago, OldGimletEye said:

I think this a key indicator of whether something is legit. That is to say, where is the emphasis: Is it on actually selling the product or is it really about recruiting new members?

Well, somebody has to be selling whatever, or else there's no money to funnel up the chain. But, ya, there is definitely a big incentive to sign up new people.  

[OldGimletEye]

Just now, The Mance said:

Well, somebody has to be selling whatever, or else there's no money to funnel up the chain. But, ya, there is definitely a big incentive to sign up new people.  

Most of the "selling" might be getting new members ie selling them champagne dreams. And that's how money keeps going up the chain. I believe that's what that whole inventory loading case was about.

[maarsen]

16 minutes ago, The Mance said:

My ex-SiL got into Silpada Jewelry pretty early on and managed to do very well for herself.  She went from lowly small town hairdresser, to getting awards for regional and national sales and pulling in low/mid 6 figures.  

i got the feeling that pyramid sales can work out great if you get in near the top and/or sign up lots of folks under you, but expecting to make a noticeable income just from having parties and "earning" a percentage is ridiculous.  SiL had hundreds of people in her downline, each with their own pyramids under them, all of which sent a percentage up the ladder.  I'd be surprised if her own personal sales amounted to more than 1 or 2% of her income. 

Consider the person at the top of the pyramid and how much they would get from those below. These types of sales schemes are banned in Ontario just for this reason. The sales need to grow at an unsustainable exponential  rate and then inevitably they collapse.

[The Mance]

15 minutes ago, OldGimletEye said:

Most of the "selling" might be getting new members ie selling them champagne dreams. And that's how money keeps going up the chain. I believe that's what that whole inventory loading case was about.

Could be.  I remember "we" bought more than a few display pieces to show at the parties my ex would host.  Mostly SiL would send us a variety of last years samples from her collection, but I can see where someone without that connection would get overhead trying to keep up with updating catalogs.  

[kairparavel]

I've never heard of Rodan + Fields but Arbonne and Isagenix are two that I've encountered through social media. Thankfully no one has pitched anything to me directly beyond FB group invites ignore.

It's the adult version of wrapping paper and magazine subscriptions except instead of sponsoring Mrs. Smiley's third grade class, you're trying to sponsor your resort vacation or pay off your car. In all cases it involves hitting up family and friends first, which is the worst part to me. I know someone who has three or four of these 'side' projects on the go and it all seems exhausting, extra money or not. Facebook filters have generally made me unaware though.

[Mlle. Zabzie]

2 minutes ago, kairparavel said:

I've never heard of Rodan + Fields but Arbonne and Isagenix are two that I've encountered through social media. Thankfully no one has pitched anything to me directly beyond FB group invites ignore.

It's the adult version of wrapping paper and magazine subscriptions except instead of sponsoring Mrs. Smiley's third grade class, you're trying to sponsor your resort vacation or pay off your car. In all cases it involves hitting up family and friends first, which is the worst part to me. I know someone who has three or four of these 'side' projects on the go and it all seems exhausting, extra money or not. Facebook filters have generally made me unaware though.

Right, it's one thing to buy your friends' kid's girlscout cookies, because thin mints, but honestly I'm not buying your face cream, or chintzy costume jewelry or whatever.  And blasting out "invitations" to folks who you haven't seen in 20 years isn't really going to be productive.  I have worked on deals for financial investors in these kinds of companies.  Let's put it this way, it hasn't made me eager to sign up to be part of that work force (even as regulated).  I need to fix my filters a bit better