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Why MLM Can Lead To Failure: A Personal Perspective!

On May 7, 2004, I happened to watch a TV program entitled "Inside Story Of Business That Attracts People With Promise Of Easy Money." It was told by Chris Hansen, a correspondent for NBC's award winning news magazine Dateline NBC. It chronicled the recruiting methods of an Amway company spin-off named "Quixtar." Dateline "donned" their producer Tim Sandler, with a hidden camera, and proceeded to attend a recruitment meeting, held somewhere in my home state of New Jersey. He was met at the door by one of the company pitchmen named Greg Federicks.


Greg Fredericks: "If you're somewhat serious, all I mean by somewhat serious-if you invest maybe, say, 10 to 15 hours a week in your business. This is your own business-you could generate in the next 12 to 18 months, an extra quarter of a million!"

Tim Sandler [Dateline Producer]: "I'm sorry. How Much?"

Greg Fredericks: "A quarter million."

Tim Sandler: "You're making more than $250,000-quarter of a million?"

Greg Federicks: "Umm hmm."

Greg Federicks: " I owe nobody nothing. You know, today I'm looking at a million dollar home, and a thousand dollar Rolex just for kicks. And I just got a brand new Lincoln Navigator sitting in front paid for cash. So things are good."

End Quote.

According to the Dateline report, Frederick's instructed the producer that in order for your dream to come true, you have to buy a "bevy" of motivational tapes from people at the top of the MLM food chain, stay away from negative influences, and attend seminars.

Federicks also suggested that they attend a "Spring Leadership Program" in Greenville, SC. It was a fourteen hour bus ride from New Jersey to South Carolina. When everyone had boarded the bus, and just before they left, there was a call to prayer by Fredricks:

"Lord, we ask you for a spirit of openess so that we might go down to Greenville, South Carolina, Lord, and that we might be changed. In Jesus's mighty name we say, Amen."

After the long trek down to South Carolina, the cargo of the faithful was packed into an arena of about 15,000 people. I thought at one point that I was back in 1977, attending
a Lynard Skynard concert---chanting for another chorus of "Free Bird' while "Flicking My Bic" lighter in a darkened stadium.

If you looked closely, the sounds that were eminating from the stadium revealed that each participant was holding a candle, and the outcry was "Freedom! Flush that stinking job!" Like most events where like minded people are assembled, it is hard to escape the energy. I also realize how a person who is looking for hope, and a way out of their financial scraps, can be attracted to the "mantra" of multi-level marketing."

With a mix of religious fervor, and the motivational pontification of an Anthony Robbins seminar, the glittering jewels that make up the achievement structure of Quixtar, the "Rubies, Diamonds, and Emeralds," preach to the masses on how it can be done.

They emphasis that God has to be in your life in order to succeed in the business. Within a years time, and with hard work, you can quit your job and be on the road to financial freedom, leaving "wage slavery" behind forever! At 23 years old, and just out of college, I was looking for something that would help me make extra money, afford me ownership in my own financial future, and free me from my own wage slavery!

But I didn't know where to start. A friend of mine who owned two ice
cream trucks said he had just the opportunity I was looking for. When I asked
him what that opportunity was, he mentioned that he couldn't explain it in detail right
now, and that if I come over to his house some night, he would tell me about an
opportunity that could make me thousands with just a part-time effort! Needless
to say I was "jazzed."

When I arrived, there was a man with a white easel who started drawing "flow charts"
of circles and straight lines, explaining how I can money from "recruiting" others
people to sell vitamin, detergent, and soap products. This was my first introduction
to the Amway "plan." The "flow chart" of numbers and diagrams, according
to the "man with the plan," could make me a lot of money for just a part time effort
of about fifteen to twenty hours a week!

If I could just find three to five people who would get involved with Amway,
those people could then, in turn, recruit three to five people, and so on,
and so on! Before you know it I would be making tons of cash from my
"army" of commissioned sales people. I thought for sure that this was the
"financial vehicle" I was looking for. Once I exposed the people I knew to
the mutually beneficial financial relationship that can occur from getting
involved with Amway, they would jump at the chance to get involved! Right?

Wrong! Little did I know that the road to Amway riches could be extremely bumpy.
I was told that when I approached a potential recruit, I shouldn't tell them that it was Amway. The reason being, is that people have a general misunderstanding of the business, and that when the saw the "plan" they would change their mind about becoming a distributor.

If people asked me what the opportunity was, I would respond by saying that: "I can explain it to you now, but I am having a few people over my house and we are going to throw around a few ideas. This is an opportunity that I am sure that you are interested in." Gee, that sounded familiar!

There were other excuses that you could have used, but this was as far as I was
willing to go. By not revealing what this tremendous opportunity was, I immediately
cast suspicion upon myself. Most people just refused to take me up on the offer, and
the ones who did, were disappointed and angry that they were "duped" into attending
an Amway meeting.

After about three months, I was starting to get discouraged. I did not sign up one
person. My sponsor then told me that I should attend Amway rallies to keep me motivated. I attended a few meetings, and, like most people that go to Amway rallies today I was "instantly energized!" The featured speakers were electric, and everyone had a positive attitude. There was even a young man who was wheel chair bound that became a Direct Distributor! I figured that I was just feeling sorry for myself, and I wasn't working the business hard enough. It was all my fault! I am the failure, not Amway!

So, with renewed vigor I set out to recruit as many people that I could. With my
sponsor by my side, I scoured the landscape for new recruits. I was reluctant
to find prospects at my place of employment, but I did it anyway. I got two people
to attend an Amway rally, and once again they were "less than impressed" with the
rally, and the "plan."

Three months turned into six months-six months became a year. And still, not one person was on board the Amway opportunity train! I felt that is was time to "pack it in." I told my sponsor that I was not very comfortable with what I was doing, and once again, he suggested that maybe I should go to more rallies, and buy more tapes. I politely said no, and I think that he was more than happy to let me go. After one year of his help, I produced nothing for his down line, nor did I improve his bottom line. I felt bad, and was disappointed. But, I had a feeling that I was doing the right thing despite the fact that I had failed.

As the years have gone by, and after seeing the Dateline NBC piece, I found out that there are some undeniable truths that have not changed since I was a brief participant in the Amway plan. Multi-Level Marketing, in general, can be a powerful tool and is a legitimate way to market products and services. You employ commission sales people from every walk of life to sell your product to consumers of all economic strata throughout the United States and abroad.

Companies other than Amway/Quixtar have adopted the MLM model successfully. Those that participate in most MLM programs, don't have to carry inventory, (accept for direct distributors) and they can earn commissions from other people that they recruit in their "downline." However, the devil is always in the details. There are glaring distinctions when it comes to the Amway/Quixtar MLM model. Even though Amway/Quixtar promotes self-reliance and the idea that you can become an Independent Business Owner (IBO), you are more "dependent" then "independent."

While I did not spend thousands on "tapes and travel" to Amway seminars, there are people who are pushed by their sponsors to spend money in these areas in order to be successful in the business. Even when I was involved, (1983) there was always a "push" to fill seats, and buy tapes. I only traveled to rallies that were within a few hours of where I lived. I borrowed most of my tapes from my sponsor, and a direct distributor that I knew. I spent a total of about five dollars on a few tapes that I thought were instructional, as well as inspirational.

I never understood spending money on what was called "Business Support Materials,"
that were nothing more than motivational speeches by the upper echelon of Amway
management. Most trade or business organizations that hold seminars, or distribute tapes, usually give specific details regarding how you can improve your sales techniques, or hone your prospecting skills. While some tapes did provide
such advice, most of the information amounted to no more than a motivational

Some of the same speakers that I was familiar with twenty years ago, Bill Brit,
and Dexter Yager, truck driver turned Amway devotee, are a still part of the
"puveyors of pontification," I heard twenty years ago. I understand that company
leaders, and those at the head of the pack need to be heard from-and heeded..

They are at the top of the Amway/Quixtar food chain, and they have benefited
from hard work, and the creative oratory that they use to transfix and motivate
people into selling the Amway product line. But, had they really been
that successful selling Amway products, or was it something else?

I came to realize, and as the Dateline NBC piece mentioned, the BSM, or
"Business Support Materials," (tape and books being sold at Quixtar seminars)
generate a substantial amount of income for most of the "Amway Orators." A good
portion of their money comes from what they are saying-rather than from what they were actually doing.

Other than selling "charisma," and a dream, most of the Amway higharchy either
had money, or owned thriving businesses before they got involved with the company.
I noticed that my sponsor had two ice cream trucks that he worked on a daily basis, and worked even harder in the summer months. If he was so successful with Amway, why would he need to keep up such a break neck pace?

I once asked a direct distributor--if I am not making any money from the Amway/
Quixtar business, how could I convince other people to join an organization that
really hasn't made me any money so far? He replied by saying: "Fake it till you
make it!" In other words, tell people that you are doing well, even though you
weren't doing anything at all! I would assume that is still part of company
philosophy today.

The "problem with products" is also another stumbling block when trying to sell
the Amway/Quixtar opportunity. Still in use today is a detergent product named
"SA8 Concentrated Laundry Detergent." If my memory services me correctly,
a ten pound box (1983 prices) cost around eight or nine dollars. It was very hard
to get people to understand that this product was concentrated, and was actually a savings in the long run. Some could not seem to justify spending eight or nine dollars
for a box of detergent-when you could spend two dollars for a box of Tide.

It came down to perceived value. It was the perceived value and over pricing of the product line that was hard to justify in some people's mind. In turn, this kept people
away from getting involved with Amway/Quixtar line. In addition to "price and perceived value", keeping people motivated was another bump in the road. Going to seminars, and listening to tapes is a great way to stay positive. However, they have a limited time span. Like a good Chinese meal, a few hours later you are hungry again, and need more seminars to overcome the rejection that you will ultimately encounter when you are out recruiting prospects.

My sponsor had problems keeping people motivated. In our small circle of Amway participants, we usually drove to seminars that were no more than about two hours from where we lived. No "busloads" of the faithful traveling to rallies in other states. We would take turns driving. Overtime, there seemed to be more and more room in both are cars. Pretty soon, it was just my sponsor, myself, and sometimes his wife. The negativity
that surrounded Amway, and the constant up hill battle to keep people motivated,
started to take it's toll on me, and eventually my sponsor.


Despite the "No Selling" credo that was touted as one of the "Advantages Of Amway," this perception is false. When you are shown the "plan" there is a suggestion that
you really don't have to do much selling-just recruit other people to sell for you,
thus, making the commission from the "down line" you build…The one exception
to this rule is if you make to "direct distributor" status. You then have to carry a
certain amount of product and supply for your down line.

Someone has to sell something, or nothing happens. In order for an individual to make money from the Amway/Quixtar model, your down line has to have "deep legs," and they need to be selling a lot of product in order for you to increase your point value, or "PV." Also, if you do make your mark in the business, and start getting a lot of people under you, eventually you will have to help other people sell the plan to their potential

My sponsor had over 100 people in his down line, and he only made (as he later admitted) around 80 to 100 dollars a month. If no one sold anything that month,
he would get nothing at all. If you took the high number (100 dollars per month) then it would fall in line with some of the average yearly income of most Amway/Quixtar distributors-about 1200 a year. Not the 250,000 part-time that Fredricks and other
recruiters might tell you..

I never bothered to ask about what happens when you don't work the business anymore, and you have a large down line. Do you still make money from the people under you?
While I did not know the answer to that question, I did know this. If you have a small down line (like my sponsor did with 100 people) if just twenty of them decide to defect to another group, or sponsor, there goes your income!

Defections are another negative aspect of the business. My sponsor ran into that exact problem. Another distributor convinced some of my sponsors down line to join his organization. The rules might have changed since then, preventing people from jumping to another down line. However, if it hasn't , and you build a substantial organization, then it can be wiped out in a matter of weeks due to mass defections to another down line.


It has been suggested that the Amway/Quixtar business is a "cult." I would say that the "Heaven's Gate" consortium of UFO nuts, started by a man named Marshall Applewhite, a.k.a., "Do" (pronounced "Doe") by his disciples, was a cult. In addition to their bizarre beliefs about "other beings," they came to the conclusion that the "Hale-Bopp" comet was a spaceship, and a sign from another planet that this was their ride into the "Heavens" beyond the earthly realm.

In order to get your ticket punched to "galactic nirvana", they needed to check out from planet earth. Over 30 of it's members committed suicide in the belief that their spirit, would be whisked aboard the ship that was passing through galaxy, via the "Hale-Bopp" express. IN NO WAY does the Amway/Quixtar business come close to that kind
of "outer limits" thinking. In the time that I was involved with Amway, the message was the same. Keep negative influences out of your life, limit your exposure to news, and television, attend seminars and buy tapes. I never witnessed any extreme devotion to the Amway business. Most of the stories of people who have went broke spending money on tapes and seminars are purely anecdotal. I am not saying that they are not
true, I am saying that I never personally experienced that type of extremism.

Such experiences can be found at websites like MLMSurvivor.com. There is, however,
a "if you are not with us, you are against" us type of mentality. The promises of riches, reinforced by the belief that you have to "Get right with God" in order to be successful in the Amway/Quixtar business can be a powerful lure. For those who are susceptible to "group think" mentality, or, who have a particular financial or spiritual void in their life, I can understand how a "cult like" devotion can develop. Amway becomes their new family, and anyone who gets in the way of that family, could be pushed out of their life,
and branded as a "negative influence." However, the opposite of unbridled devotion is also true. Once people realize that it takes longer than a "part-time" commitment to make the business work, and the other negative aspects of the business, the seeds of doubt are usually planted. The drop-out average for most Multi Level Marketing "newbies" is
over 90%.


Even though Amway is now Quixtar, the new name hasn't done anything to change
some of the core business practices that some sponsors and up line management employ. The name change is an indication that the negative publicity surrounding the Amway brand, had probably reached critical mass. That same negativity will catch up to Quixtar as well. Are all Multi-Level Marketing companies and practices the same? I can't answer that with any certainty, nor would I try to.

Not every company will mirror the Amway/Quixtar model. It is up to all of us to perform "due diligence," before we get involved with any Multi-Level marketing company, or direct sales opportunity. I wondered as I watched the Dateline NBC video pan over the sea of faces packed into that stadium in the Greenville, South Carolina.

How many people will toil away over the next few months, or years, on what they think is financial freedom? How much will they spend on tapes and seminars chasing the American dream? How long will it take them before they realize that it takes hard work to build this type of business? Can they overcome the negativity and rejection that comes with the "Amway/Quixtar" territory? I can only hope that the prayers that are said at each
and every Amway rally, can show them light, and show them the way……

Robert C. Potter is the author of "The Ultimate Guide To Products For Resale!"
Over 300 Wholesale & Surplus Supply Sources For Ebay Auction Sellers, E-Commerce Websites, Flea Market Vendors, and Retail Store Owners! You can find his 160 page ebook at: http://www.productsforresale.com

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