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You want to call your own shots? Donald Trump has been attributed (erroneously) as saying multi-level marketing companies (or MLM companies) are the way to go. Amway -- affectionately called Scamway -- is a leader in MLM. Detractors call multi-level marketing companies a Ponzi scheme or a pyramid scheme. Are they? Experiment M sets out to find the real reasons MLM people fail.


 
Home / Success & Failure /
Experiment M
 Why do most multi-level marketers (MLM) fail?
Multi-level marketing

The bet is on that the only money you'll see from Experiment M is what's in the picture.


In a down economy, there are no shortage of people and companies coming out of the woodwork to encourage us to create our own income-generating opportunities who then bill us for all this encouragement.  Multi-level marketing (MLM) operations have field days when economic times are uncertain.  They play off peoples' doubts about their economic futures in order to suck in a lot of new enrollees, nearly all who are doomed to fail.   Now here's the million-dollar or perhaps just $1.25 question:  do most MLM people fail because the MLM deck was stacked against them from the start or because they're just plain lazy?  In MLM Companies:  Where's All The Moolah I Was Supposed To Make (http://www.dougsrepublic.com/201109424-sufa-mlmmoolah.php ) I discussed the reasons I thought most MLMers fail in the MLM game.  I won't repeat what I've already written there.  Suffice it to say that a lot of people wind up dropping out of their MLMs companies with bitter memories and with lighter wallets and go out of their way to call the entire MLM model a scam.  Experiment M, discussed below, proposes to come up with a more exact answer why and how many people fail with the model rather than rely on failure statistics anti-MLMers pull out of their asses.

The other day I got e-mailed a letter from South Africa.  Three names were on the list.  I was instructed to transfer R50 (US$4.90) to each name, then add my name to the bottom of the list as I cycled the other names up.  I was to subsequently contact at least 200 people by e-mail and get them to do the same.  In a matter of weeks, I was told I'd see R3,200,000 (about $314,000) rolling in. 

Do I believe this will work?  Not at all.   But that doesn't mean I think it's a scam.    If 35-40 people I contact follow the instructions and then get 35-40 people to follow the instructions who then get 35-40 people to follow the instructions, I would earn R3,200,000 or more . . . but that's a huge stack of ifs. 

This letter from South Africa was flawed for several reasons.   There were specific South African bank details for each name on the list.  No one but a South African or South African bankholder could easily transfer R50.  I also didn't really know the guy who sent it.  If he'd known me, he'd have realized I didn't live in South Africa and couldn't participate.  The sender had no credibility with me, a major reason not to act on it.

This got me thinking.  How many times have I received an e-mail urging me to pass it on in X number of minutes or days or I'll receive bad luck?  We've all gotten letters like these and until recently, I was passing a few of them on.  Enough people forward these letters or we wouldn't keep getting them, and yet for what?  The promise that good luck will grace them if they forward them and bad luck befall them if they don't?  Can such a lame reward/punishment package be the reason this crap keeps flooding into our Inboxes?  In the last two years, I've gotten crap that Bill Gates and Microsoft  will be paying $200 for each e-mail you forward on asking other people to do the same.  At least on this second scheme, there's some ludicrous promise of a payout, though none of the overly eager participants bothers to question why Microsoft would pay so much money for a task so easy, how Microsoft could track the number of e-mails you send, and where Microsoft is to send your "hard-earned" reimbursement when you never supply them with payment details or a physical address.   

The only reason any of these e-mails ever got read by me in the first place and sometimes, though rarely, forwarded is because someone I know sent them to me.  Had they been spammed into my Inbox, my spam filter would have junked them automatically or I would have junked them manually. 

Successful MLMers follow similar reasoning.  They recruit under them people they know.  Or at the very least, direct acquaintances of people they know.  This is because credibility exists at the very beginning of the contact.  People listen to proposals of people they know and possibly follow their lead if this person is someone they respect.

I decided to devise an experiment, called Experiment M, that would target and pay out like the MLM model, but unlike an MLM, not require any significant investment or time or risk that would scare away potential participants.  If the experiment winds up a success, with most people making more money than they invested and with their results being proportional to their measurable efforts, then I can conclude that it's just the particular MLM companies and the heavy buying demands they expect of their members that condemn most MLMers to failure.  If the experiment turns out a failure, then the only explanation is people's lack of interest or laziness.  We can't blame the failure on complicated business models, high recruitment turnover, or any other reasons critics typically cite to justify the typical MLMers crash and burn rates. 

Experiment M is designed to be as simple as possible.   We take the same letter I received from South Africa, but instead of listing complicated bank account transfer details or requiring monetary notes be stuffed into envelopes at the post office, we make things as easy as can be by requiring that all money be transferred electronically via Paypal.  It used to be free to transfer money with Paypal; with a personal account, the Paypal recipient was charged nothing.   Times have changed and now Paypal takes a transactional charge of several percent no matter what type of account you've got.  Nonetheless, while it ain't like it used to be, Paypal payments can be made across different currency zones and allow for the instantaneous transfer of money vs. reaching for a checkbook and having to send money through the postal services.  And since most of us buy stuff on eBay, we're all likely to have accounts.  If you lack a Paypal account and have no intention of signing up to get a free one, you cannot participate in Experiment M.  Simple as that.

Up front, we deal with people's fear of investing a lot of money in a scam by not asking for much to participate.   Total required: US$8.  Who among us can't afford to lose $8?  If you're among those who can't, you shouldn't be wasting your time at Doug's Republic reading about experiments.  You should be out there earning more money. 

Since I, as the initiator of Experiment M, have no one to pay US$8 to, I have donated US$13.60 of my own hard-earned dough to a local school, so that I'm as vested in this as any other participant.  Where did I arrive at $13.60?  $8 covers my initial inclusion at the #3 spot, just as it does for every other participant.  I also had to place two other people in the #2 and #1 spots.  These two don't get to profit through all three positions, so their cost to participate becomes less.  Spot #2 allows one to recoup $8 twice as fast as spot #3, and spot #1 five times as fast as spot #3.  Therefore, their cost to participate lessens in proportion to the quicker recoupment times, to $4 (= $8 ÷ 2) for spot #2 and to $1.60 ($8 ÷ 5) for spot #1.  $8 + $4 + $1.60 totals $13.60.

If you agree to join us in Experiment M, your first step, before doing anything else, is to login to your Paypal account and send over the three paltry amounts to all three names listed here.  For later tracking results and to spare any wrath from Paypal, send the money over as a personal gift titled "M Gift" or "M Repayment" or some other moniker of your own devising.   If your account is denominated in a currency other than U.S. dollars, you can still send the amounts in U.S. dollars and they will be converted for the recipient.   

Next, move the name and e-mail in the #3 spot to the #2 spot, and the name and e-mail in the #2 spot to the #1 spot.  The name currently in the #1 spot should be removed altogether.  Place your own name/business and your Paypal e-mail address in the #3 spot.    The payable amounts listed on each line should remain unchanged.  The #3 spot always gets paid US$1, the #2 spot US$2, and the #1 spot US$5.

Last, copy or alter the message here, with your amended list at the end of it, into your e-mail client and contact as many qualified people as you can.  Take the time to translate the message if the recipients are not native English speakers since they will be forwarding the message on, most likely, to other non-English speakers.   Do not spam anyone!   This is not an empty disclaimer meant to cover my own rear.  Spamming is a waste of time for this experiment.   It won't work.  Following the MLM recruitment procedure, you should only contact people you know on some level in order to have credibility established from the onset.   Your contacts should receive the e-mail and at least recognize your name or you can kiss off any chance of them participating.  If the person receiving your mail doesn't know you all that well, I'd suggest adding a short introduction at the very beginning of the post explaining how you know them.   Example:  "Dear Frank.   This is Peter McKinnick.   I contacted you about six months ago to see if you were interested in buying that prime ocean front real estate in Afghanistan.  Don't worry.  I'm not following up about that.  This correspondence deals with something else entirely I think you'll have fun with."  Then, copy the rest of this post along with your updated Paypal list of beneficiaries. 

Ideally, each of the e-mails you send out should be mailed one at a time and personally addressed (i.e. "Dear Bob").  If any of your contacts sees himself cc'd with 99 other names in a group e-mail, your mail won't get read or acted upon.  Try to imagine the more respectful way you'd treat the e-mail if you received it addressed only to you or cc'd with half of greater New York.  The subject of the e-mail should, preferably, be something personalized like "Frank, check out this experiment . . . from Peter McKinnick."   If there are the two characters FW: before your subject title, meaning you're just forwarding on the e-mail, you've significantly lessened the chances of anyone looking at it, let alone acting on it.  Just think about all the junk e-mails you delete without opening them first.   You do so because the subjects are irrelevant and the sender has no relationship with you or the sender has contacted you with so little enthusiasm and conviction.

For this reason, I would advise you not to invite people via your Facebook wall. Lots of us have multiple "friends" we have very weak ties with. These friends might enjoy finding out if your kid just won first prize in a school competition or what feast you cooked up that evening, but you lack the necessary credibility to motivate them to action. Would you join an MLM a similar "friend" told you (and hundreds of others) about mindlessly on his Facebook wall? I think you know the answer, so why would you do the same? You're trying to MAXIMIZE your chances to succeed. Only contact people you genuinely know and make that contact thoughtfully and respectfully.

Ground Rules.  Do not try mailing out letters first in order to earn the US$8 to then pay your way in.   In micro-economics, this is called the free rider problem, and if everyone thinking to participate refuses to put in $8 because they think no one else will, the experiment will fail before you've started.  They'll be a lot of Experiment M e-mails floating around with no one actually getting paid, and we'll only be verifying what everyone already knows:  you don't get paid for not doing any work.   Come on, folks!  It's only US$8 we're talking about, less than a cocktail in a bar.  Another warning:  don't cheat your position on the list.  It might be tempting to try to sneak yourself into the #2 spot right away since the #2 spot gets paid double the initial #3 spot.  You'll actually wind up making less.  The power to make money with Experiment M or any MLM comes from cycling fully through each of the levels.  You can do the math to prove this to yourself.  If you're mathematically incompetent, then just trust me on this point and enroll in a remedial math class.

You can only participate once.  A lot of us have the same names in our contact list as our friends do, so there's a chance you might be contacted to participate even though you're already on the list.  Delete any future e-mails you receive if you're already participating or have participated.

How much money will you make?   Logically, it should be a piece of cake for anyone to recoup their initial $8 investment.  All of us know 8 people who'd be willing to gift us a dollar, and I'm equally sure each of us knows 8 people we'd be willing to give one.   But realistically, I'm of the opinion most people will be too busy sitting on their chubby butts to make back even $1.  I'm already convinced my $13.60 has faded forever into the sunset, but I'd love to be proven wrong.  I dearly want to be shown that MLM failure is due to the MLM companies themselves and not the people participating.  The payout works exponentially so that by the time you reach the #1 spot -- that's if you reach it, mate -- you'll be paid out $5 multiplied by everyone in your downline.  That's why manipulating your position on the list is a ticket to failure.  You'll just be shrinking the potential size of your downline. 

As a reference, if everyone participating makes it a goal to quickly recoup their $8 investment by getting 8 of their personal contacts to send them $1 apiece, at the end of it all, you'd earn about $2,600.  It's mathematically possible to make a helluva lot more as well as a helluva lot less.  As I'm already forecasting most people are practiced ass sitters, a helluva lot less than $2,600 -- for example, $0 -- is the more probable scenario.

Please make a note how many e-mails you send out and the date you sent them out.   We need this information to be able to effectively measure effort vs success.  Log your results, even if they wind up as nil, at this location so that the rest of us can be a witness to your success or failure.   My heart beats with anticipation.

Now for the real disclaimer.   This is neither a Ponzi scheme or an MLM operation.   It most closely resembles an old style chain letter, but with important differences to bring it into line with an MLM. 1) You have some kind of financial incentive to forward on the 'opportunity' 2) You can measure your results very quickly 3) You are only presenting this 'opportunity' to people you have some kind of credibility with. Look at this like a controlled experiment meant to test a particular business model in an entertaining way.  Every step of this experiment was designed to make it as effortless and as simple as possible for fear that potential participants will shun it if more than the slightest work is asked.   

My personal experience with Experiment M is here.

If you liked reading this, consider:
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