The Extinction of Excellence?

January 5, 2013 Leave a Comment

By Len Clements © 1997

Want to know how to make your business grow? Then let me tell you a story – three stories.

A man sees an ad offering a wealth building business opportunity. It instructs him to call an 800 number to hear a “powerful, life changing message,” He listens. He is then instructed to pull down some basic information from a fax-on-demand. He does. Within the documents he receives is a distributor application. He signs up. He places the same ad. Others calls. Others access the fax-on-demand. Others join.

A woman receives a cassette tape in the mail titled “Wealth Secrets.” She listens. The secret? Just mail out tapes like this one. There’s a phone number to call on the tape case and a distributor pin number. She calls the number. She orders some cassette tapes and mails them. Others call in to enroll, providing her pin number. Others order cassette tapes.

You hand a friend an “opportunity video.” He watches it. It closes by offering him an opportunity to purchase a $20.00 “Money Making Info Pak.” He does (eliminating the need for you to inventory or mail promotional material). He joins – and buys 100 videos to hand to his friends.

Simple. Duplicatable. Turn key. Phenomenal systems, aren’t they?

Yes – In theory.

No – in reality!

For most folks, network marketing is a career choice. It’s a way out of the rat race. It’s an endeavor that will, hopefully, earn them a comfortable living. One that will pay the mortgage, feed their family, and provide a secure retirement. Most people take choosing how to create a livelihood pretty seriously. They really put some thought (if not four or more years of study) into what they are going to do for a living for the rest of their lives. And, apparently, many people are willing to base this decision on a two page faxed document or a 20 minute cassette tape message.

As upline sponsors, do we really want them to? Really?

I mean, how serious can a person be taking this business who spent 20 minutes to evaluate it and 20 bucks to join it? Think about it. What is the greatest allure to “systems” like these? Isn’t it the simplicity? The alleged effortlessness? The ease? Don’t systems like these basically say “If you think this business might be too hard, here’s a system for you.” It suggests that the “Wave 3 Technologies” will do the work for you. The “system” will build your downline, rather than you. So, who would systems like these attract? Well, most likely those who feel they can’t do it on their own, or don’t want to work very hard!

It’s kind of like improving the GPA on report cards by separating out all the C and D students onto one class, then grading everyone on a curve — as opposed to improving their study skills and helping them learn more.

Or, a better analogy might be that it’s like moving the pitchers mound further away from the batter to make the ball easier to hit, rather than teaching the batter how to be a “heavy hitter.”

Yes, these systems might help the distributor put up some impressive numbers, recruitment wise, but not the numbers that really count — like, amount of dollars on the check! Hey, I have a system that will allow everyone to recruit 100 distributors an hour!I’m serious. All you have to do it walk up to every person you see, gently tap them on the right shoulder and say “I declare you a distributor!” That’s it. Totally duplicatable, requires no expensive sales aids, easy to teach, and will create a genealogy that will stretch from Fresno to Miami – but, of course, no income what-so-ever.

And many of these “systems” we have today are not that far away from this!

Oh sure, most of these systems do provide at least some sales volume and income. But how much and for how long? Are these participants in your opportunity really getting involved to pursue a long term, career changing business opportunity? Do you really think they are joining because they have a great loyalty towards the product? Or, are they buying into the system? Is the method of building the “product” they are really buying? So what do you think these people do if, or when, that product stops performing, or never performs for them? They throw it away! They have no real vested interest, at least emotionally if not financially, in the business. They likely have little or no affinity towards the real products — it was just stuff they had to buy to make the system work, right?

Sometime a few years ago, it’s arguable exactly when, this product focused, merit based industry metamorphosized into a big, giant recruiting contest. Today, almost every “system” is designed to simply slam people into the business. The introduction of all this “Wave-3 Technology” back in the 80’s was suppose to help uscommunicate with people — not communicate for us. We’ve abused this technology. We’ve let it spoil us. We’ve gotten soft and lazy (as a group – there are exceptions, of course).

So, rather than lowering the bar, how about if we all get back to training people to jump higher? Rather than bringing the business down to meet the mediocre, why don’t we bring the mediocre up to the level of excellence that is required to succeed in this business?

One way we might accomplish this is to stop creating systems that are based on what we wish people would do, or what we think theyshould do, and start developing more systems based on what theywill do. This age old concept of “Find a need and fill it and the world will beat a path to your door” is, at least semantically, quite flawed. We, as a society, don’t buy “needs,” we buy wants. We “need” to eat low fat foods — we want bacon double cheeseburgers. We “need” to exercise more – we want to just take a pill that will create the same results. How many of us “need” to see moving pictures projected on a screen, or ingest carbonated sugar water? No one. Yet, the motion picture and soft drink industries are two of the largest on Earth. Why? Because it fulfills a major want, not a need.

Sure, it would be wonderful if all your new recruits could afford to distribute $20 “prequalifying” or “prospecting” packages. It would be great if all those prospects would actually read the book you send them or thoroughly study the product and comp plan material, watch the video, and listen to all the audio cassettes. Life would be grand if, by the time you followed up with them on the phone they were fully informed, objectionless, and ready to dive right in. Or, better yet, if all this could be accomplish without even making the follow up call! It would be MLM Utopia! A land where the whole world wants to hear about your opportunity, is excited about attending your next opportunity meeting, and fully cooperated with the entire recruiting process. Am I exaggerating? Have you listen to any presentation on any “system” that does not describe a perfect world scenario where you ask your friend if they have time to listen to an “exciting, life changing message” and your friend says “Sure, Bob, sounds great. What’s the number?” Or, have you ever heard anyone describe the “referral” prospecting technique where you ask a friend if they “know anyone who would be interested in making an extra 5 to 10 thousand dollars a month” and the friend actually believes you’re not really asking them? All the time, right? – and it’s pure fantasy!

So, you’ve got this great, automatic, turn-key, duplicatable system. Great. Now, where do you get the leads to run through it? Who sells the prospect on why they should listen to the 800-number or cassette tape? Who answers their detailed questions about the compensation plan or products? Who addresses their concerns or objections? Who motivates them once they’re in? Who teaches them, if they do join, how to do all of these things and how to teach it to others?

This is direct sales, which does not lend itself to the cookie cutter approach of franchising (although many “system” proponents will rationalize their approach by siting the success of the franchising industry). Two of the most fundamental, basic aspects of sales, at least in every other direct sales related business, is describingbenefits as opposed to features, and discovering what your prospectwants, and tailoring the “pitch” to match. In other words, don’t tell them what your product does, tell them what they are going to get out of it. How is it going to improve their life? How can you do that without first discovering what aspect of their life needs improving? Very few people teach this benefits focused approach in network marketing, yet it’s an extremely acquirable skill that you wouldn’t last even one day without in any other sales profession!

These “systems” take a blind, shotgun approach. There is absolutely no customization of the “pitch” to match the wants of the prospect. They all just assume it’s money. It’s not. Ever. If all we wanted was money, then why do we quickly exchange it for something else the moment we get it? What they want is the something else! And the “system” has not the slightest clue what that is! Furthermore, the system is one of dozens, selling an MLM program that’s one of hundreds. So your fax-on-demand spits out a page that exclaims, in big bold print, that your comp plan has a “Matching Bonus!” Or, your product contains “HGH precursors!” So what? What does that mean to me, the prospect? How do these things benefit me, and how will they provide me with a marketing advantage if I choose to be a distributor?

These automatic, turnkey systems are like shooting at a target with your eyes closed. Sure, take enough shots and your bound to hit the bullseye a few times, by accident. Yes, opening your eyes and actually aiming at the target will take a little more work. You’ll also hit the bullseye, oh, about ten times more often!

What’s more, federal and state regulatory agencies have us all on a short leash when it comes to describing the benefits of our products, especially those in the nutritional arena. Does the “system” teach you what you can and can’t say? Does it protect you and your company from regulatory action? How could it? There’s only so much you can cover in a five minute recording or a five page fax.

This is a 53 year old business. There’s really nothing new or “revolutionary” about it. Everything’s been tried, and what you see today are just variations of what’s already been done in the past. If we want to discover what works, all we have to do is look back over the last half century and see what has worked, then do that! The stuff that doesn’t work, well, don’t do that! Take a look at the most prolific, wealth generating era of network marketing, from about 1982 to 1992. Most of the obscenely richest distributors today (were talking six digits monthly) originally made their fortunes back then, and they simply maintained it through the rest of the 90’s. Many have lost most or all of it since then. Compare the number of mega-earners from back then to those that have appeared within the last six years. It’s a small fraction. There are a myriad theories to explain this phenomenon, but one certainly must be the advent of the “simple, turn-key, duplicatable system” and the turning away from tried and true methods of building. Things like, oh, talking to people!

Fortunately, there appears to be the very beginnings of a migration back to the, yes, more difficult, but more successful form of network marketing (yes, excellence in network marketing isn’t extinct, just endangered). Even a few of the most die-hard “system” guys are now converting over. Even perhaps the biggest advocate of machine made downlines (you know, the guy with the bag on his head?) I hear is now promoting a more personal, product focused approach (and good for him). And I didn’t just use the term “guys” generically. MLM’s women, in general, still seem to have no problem with making prolonged human contact. It seems to be only the guys who desire an alternate form of communication (as any John Gray book would attest).

Never, in the history of network marketing, has someone built a large, lasting, big income producing downline using any type of simple, automatic system (name one!). Now, make a list of all those who have achieved lasting success and you’re have a list of people who are professional, hard working, excellent network marketers! Or, a few who got lucky and enrolled one or twoprofessional, hard working, excellent network marketers! And, you’ll also have a list of people who, at one time, were NOT professional, excellent network marketers! Professionalism and excellence IS duplicatable! Although it might require some, God forbid, hard work.

But as the last 53 years of MLM, and the last six million years of human existence, has taught us…

Work works!

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Why Internet Based MLM Opportunities Will Never Work

January 5, 2013 Leave a Comment

By Len Clements © 2003

There were times in our country’s history when both the automobile and television were considered by some to be nothing more than passing fads. In the 1960’s many folks, including those with the highest intellect and reason, laughingly scoffed at the idea that someday we’d all have computers in our homes. I suspect there were even some among the most astute of the cro-magnon who grunted with amusement over Og’s silly wheel idea.

And then there was that guy who, back in 2000, said internet based MLM would never work.

While some may suggest I have a severe lack of “vision,” I believe I’m one of the few who actually has their eyes open. In fact, from my objective, outsider’s point of view, I think I can see through the smoke and blinding glitter that seems to be surrounding this new, hot segment of network marketing. Let’s fan away the hype and see what’s underneath.

First, a caveat…

Yes, the internet is, and will continue to be, a phenomenal tool to help us present our opportunities. Soon, on line, live video opportunity meetings and training sessions will be commonplace. I see a day when brochures, applications and order forms will be all but obsolete. The U.S. mail will be virtually void of audio cassettes, which will then be downloaded off the net in a matter of seconds. And yes, people will be ordering cookies, shampoo and vitamins from their company’s web site, which is already a common practice. I’m not talking about this stuff. This is all fine and dandy (and will get far dandier in the near future). No, I’m talking about MLM programs that are based solely or primarily on either recruiting over the net, selling web sites, internet access, or other company’s products.

Once you crack through the brilliant chrome casing and really see what’s inside these “opportunities” you’ll discover the monumental challenge they will all face – there’s simply not going to be enough sales volume to generate any significant income. Think about it. Let’s say you sell web sites for $100 per year. Okay, all of you who are in one of those old “lotions and potions” companies (the derogatory term most service based MLMs use to define personal and health care products) imagine what would happen if every person in your downline were generating only $8.33 per month in commissionable sales volume. Well, that’s $100 divided by 12. I don’t care if the company pays out a whopping 70%, they’re paying out 70% of an average $8.33 per month, and then they have to divide that among several levels of distributors. When you look at MLM ISP’s (Internet Service Providers) the picture gets even uglier. The best monthly rates I’ve seen fall around the $7 level (although some MLM ISP’s are charging two to three times that much) and paying out little more than half in commissions (which, again, is then spread across several levels of distributors). Not unlike long distance service, as competition continues to drive the price down the consumer will benefit, but the networker trying to make a living selling to them will suffer.

E-Commerce based MLMs will be the most challenging of all. Remember, I’m talking about deals where you can buy name brand products from many vendors (think Amazon.com if they were MLM). Let’s follow the flow of sales volume (or, lack of such in this case). First, you must enroll someone in your downline. Second, they must actually buy something from your web site. Third, the company, which is typically a reseller (a middleman between the supplier and the buyer) only counts about half the volume as commissionable (as in 50% BV). Fourth, they pay out, let’s say 60% of that in total commissions. Fifth, that portion is then divided among, let’s say, seven distributors upline to the sale (assuming a common seven level pay plan). Therefore, you get 14% (one-seventh). So, of whatever sales volume is generated by that new recruit you just placed in your downline, you’ll be paid 14% of 60% of 50% of it. I’ll do the math. That’s 4.2%. And both the 60% and 50% assumptions are extremely optimistic.

Oh, but those people can buy cars, and expensive jewelry, and book thousand dollar travel packages – they can even buy houses off the net now! Yes, they can. But, they’re not.

The U.S. Department of Commerce does not yet provide definitive data regarding e-commerce (although they have announce their plans to do so by mid-2000), so for now I have compiled statistics based on a number of surveys conducted by web related business, university studies, and estimates by industry analysts. The general consensus is that about $9.5 billion was spent on-line in 1999. However, the percentage of those on-line who bought anything, even once, ranged from 20% to 38% (depending on the source of the data). What’s more, the average shopper purchased only nine items all year, and spent a total of $475. What would create an even greater challenge for an MLM distributor trying to earn a living is the fact that about one-third of the total annual purchases made on-line occurred between November 25th and December 25th. Thus, those in your downline who are ordering would purchase an average of $28.93 per month for 11 months, and $156.75 in December. Based on the very optimistic 4.2% we arrived at above, and that 38% of all those on line actually order anything (based on the most optimistic data I could find) you would earn about 46¢ per person in your downline in each of the first 11 months of the year. And this isn’t even factoring in the fact that only about 45% of all Americans are “wired” (currently have direct access to the internet).

To put this in perspective, a $3.00 per distributor earnings ratio is considered weak by today’s standards. Most tangible, consumable product companies are paying anywhere from $4.00 to as much as $9.00 on the sales volume of each active downline person. Not because the comp plans pay so much more, but because so much more sales volume is moving. For example, I have one, al beit exceptional, retailer in my downline who moves $2,000 to $4,500 in volume each month. That’s one distributor! It would take dozens, perhaps even hundreds of people to generate the same sales volume in an MLM opportunity selling web sites for $8.33 per month, internet access for $9.95, or on-line purchases of which $15 is commissionable. I agree a retailer moving $4,500 in a month is an aberration, but the point is, a spectacular event like this will never occur in an internet based MLM opportunity. The monthly cost of a web site or internet access is a fixed amount, and commissionable on-line purchases by any single downline member will likely never reach these levels in a single month, let alone every month. Even if we consider the more common monthly volume figure of $100 (the average monthly purchase in five product based MLM companies that I know of who disclose such numbers is $109) it would still take 7 to 12 times as many downline distributors in a net based program to achieve the same sales volume.

The internet revealed even more interesting data about itself. For example, 57% of those on-line use the web to research their purchases, then actually bought the item by conventional means (phone, or in person). Only about 12.5% went on-line specifically to purchase something (78% did so just to browse around, 64.5% were just looking for entertainment, and 51% used the web for research).

Several internet related MLM programs have recognized the severe volume shortage that exists and attempted to compensate for it by introducing $200-$495 training or start up packages. The bonuses that are paid on these packages can be substantial, but they create two new challenges. First, it’s a non-consumable, one time sale, thus a one time income. Second, it’s very likely illegal. Based on numerous legal precedence, an MLM company would be at great risk of regulatory attack by paying bonuses on a “product” that was not retailable to a non-distributor. Such bonuses would essentially be a reward for recruitment since, obviously, only new recruits would purchase the initial package For example, there are a growing number of schemes going today where you pay $200 to $900 for access to an internet mall (with links to Amazon.com, Barnes&Noble.com, etc.). You earn a percentage of all the purchases made by those in your downline who visit the mall. Although the pay outs appear high, it’s on only a fraction of the sales volume (one popular deal shows a 100% pay out down 9 levels – but only seven percent of the volume is commissionable!). The challenge is that the $200 to $900 is also used to pay upline bonuses and this is clearly sales volume that is entirely based on recruitment. Obviously, these malls are not “products” you can mark up and resell to non-participants in the income opportunity. In fact, I just got a post card from Citibank offering me access to an almost identical conglomerate of online shopping sites (where I’ll receive discounts if I use by Citibank card) and access to the entire mall is completely free!

There are a growing number of downline building systems, and in a few cases even entire MLM programs, where the entire recruiting process is automated. People just go to a web site and sign up! First of all, signing up does not necessarily mean they’ll order anything. Many of these systems are based on just placing people in a matrix and hoping some will get inspired to try a few products. Essentially, they create a hierarchy of prospects, not distributors. Even those internet based recruitment systems that do generate product ordering distributors are building a house of cards on quicksand. Don’t we want astute, committed folks in our downline? Don’t we want people who are taking this potentially life changing decision seriously? I mean, we are talking about someone’s career, their livelihood, how they are hoping to feed their families someday. How seriously can a person be taking this decision when it’s based on their viewing a few colorful pages of a web site? The “network” in network marketing isn’t referring to computer networks, folks. It’s a network of people. People talking to each other. The internet is and will continue to be a phenomenal tool to help us communicate the benefits of our products and opportunity, but it will never be able to do it for us. Not completely. Nor should we ever want it to.

Many proponents of MLM e-commerce would surely counter my lack of sales volume argument by pointing out the massive growth of e-commerce (most estimates show internet sales increased 10-fold from ’98 to ’99). Granted the number of folks surfing the web will continue to increase dramatically over the next few years, but then, so will the number of sites they can order from. This massive proliferation of internet based vendors will be wonderful from a consumer standpoint, and a nightmare from an “income opportunity” standpoint. Although overall internet sales will increase, clearly the average purchase volume (per person) from any one particular site is going to go down as competition increases. Those purchases will be spread thinner and thinner over more online vendors. Sure, you’ll have access to more people who you can enroll into your downline, but the competition for them is obviously going to increase as well as more and more e-commerce based MLMs start up (the fact that a certain concept doesn’t work with MLM has never stopped anyone from trying it anyway – look at the number of downline building schemes, portfolio deals, Australian compensation plans, and discount buyer’s services that start up each year).

Another common counter-point to my position is Amway’s Quickstar. There’s some really big bucks being made there, so I’m wrong, right? Well, sure, when you have an already existing Amway downline of several hundred, or several thousand people, and when there’s a gold rush mentality that sweeps through the industry causing otherwise loyal, committed MLMers to jump over in droves in hopes of landing a prime spot to ride the wave, some money is going to be made by somebody. I’m talking about the average man or woman who’s starting from scratch. I’m talking about duplicatable success.

Remember, the gold rush didn’t last very long, and very few struck it rich.

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Working Multiple MLM Programs: A Gross Fallacy of Logic

January 5, 2013 Leave a Comment

By Len Clements (c) 1998

Of over 6,000 active network marketers who were surveyed from 1990 to 1999, 55% said they were focusing on building one, and just one, network marketing company. Nineteen percent said they were an active distributor for two MLM companies. Three or more MLM programs were being simultaneously pursued by 26% of those surveyed. The record, to my knowledge, for most MLM opportunities pursued at one time is 36!

So, 45% of all those surveyed are basing their MLM careers on a gross fallacy of logic.

The rationalization for trying to build a downline in more than one MLM program usually includes the quite factual statement that over 96% of all MLM companies fail, thus we should “diversify” our effort. The dread of building a successful organization only to see it evaporate when the company falters can be an enticing motivation to build a downline in more than one deal. It can also create a self fulfilling outcome. By diversifying your efforts you actually increase you chance of failure in all of the opportunities you’re working!

This same logic was employed by my fourth grade teacher just before a field trip (true story). We were told to bring $20 for spending money in the form of four $5 bills. Then, she suggested, we could put one bill in four different pockets thus decreasing our chances of losing the whole 20 bucks (because we might have a hole in our pocket). But even at the age of nine I was old enough to realize that while I was reducing my odds of losing it all, I was quadrupling my chances of losing something. At best, this strategy seemed to be a break-even proposition.

Let’s apply this same logic to other situations in our lives. Since there is always the threat of being laid off from your job, or your employer going out of business, let’s work three or four jobs. And to keep with the same logic used by multi-MLM promoters, you’d be working all three or four of those jobs at the same time. Or how about the high divorce rate? Over half of all marriages in this country now end in failure. Well, let’s marry five people. That way if one relationship fails, we’ve got the other four to hold the family together. What about religion? There are dozens, if not hundreds, to choose from. Since there is (allegedly) only one true path to God, let’s put our faith in Christianity, Hinduism, Buddhism, and Judaism — that way we’re sure to be covered.

Obviously, to do any of the things I’ve just described would be absurd. Clearly, in every situation your chances for success would be reduced to zero. Yet this is considered a very practical, common sense approach by some MLM enthusiasts. They suggest that if you could have success in one MLM program, you could have even more success if you joined several. But the one constant, absolute fallacy that exists in all of these scenarios is that you can give 100% of your attention to more than one thing! Any fourth grader who got a C+ in math will tell you that’s simply an impossibility. For every minute you’re building the downline in Company A, you’re not building the downline in Companies B, C, D and E. Some MLM portfolio promoters will tell you that, in fact, they are. They somehow manage to get folks to join several MLM companies at once. Besides the serious legal implications (more on that in a moment), it’s also very likely a misleading ploy. Here’s the catch: They only get them to enroll — that’s all. It’s easy to get people to fill out a few lines on an application, or call an 800 number. Hey, let’s create an even “better” recruiting system where all your prospect has to do to join is make eye contact with you. Then you can exclaim in your fax blasts and on-line spam how your system has “built a downline of over 10,000 people in less than 30 days!!!” (unfortunately, I’m only slightly exaggerating). Think about it. Why would someone buy qualifying product from five or six MLM programs that they’ve just joined? What would they be qualifying for? They have no downline!

Actually, it is far more common to see MLM portfolio promoters build their downlines in each company on a serial basis rather than parallel. In other words, they get you to join Company A, then once your income has reached the point where it will pay for the qualifying order in Company B they instruct you to join (or automatically place you in) Company B. Once your income from B will pay for the monthly qualifying order in Company C, you join your third company, and so on. So, by the time you’re in all six companies you can finally afford your dream home — assuming your mortgage company will accept the mountain of vitamins and shampoo you’ve collected as payment.

Over the last few years, in an attempt to resolve this challenge, the trend has been to fill the portfolio full of service companies. The result is, yes, less stockpiling of product – and far less income. The portfolio collapses even if it does succeed in building a significant downline because no one can make any money from 1/4% of a $25 phone bill or 2% of a $9.95 internet access fee, no matter how many such companies you’re in.

Another argument put forth by multi-program builders is that it’s okay to build more than one opportunity as long as the products don’t compete. However, as we all know, the business opportunity is a product unto itself – and it will always compete. And there can only be one “best” opportunity. If one company sells nutritional products, another sells water filters, and another sells long distance service, you should judge each based on fundamental economics. Which has the potential to move the most commissionable sales volume (based on price, quality and market size), and which pay plan will best reward you (based on your income agenda) for creating that sales volume? Also, which company is most likely to remain viable, and which offers the most efficient, proven support system? If graded in all four categories, only ONE company in the portfolio will come out on top. So why bother spending time, effort and money on the inferior opportunities? The standard response (I’ve heard them all) is that one prospect might be more interested in selling long distance service while another might be into health and nutrition. It’s good to have something to offer each of them. But let’s be clear on what these two prospects are really looking for — the opportunity to make money! If you are convinced the best financial opportunity is in tangible, consumable health products, then explain to the long distance guy why he’s looking in the wrong place. In fact, if you honestly believed there was more money in nutritionals than long distance, you would be doing this prospect a disservice by not trying to steer him towards what you believe is the “best” financial opportunity. Nutritionals and long distance are just two arbitrary examples. This would apply to whatever type of MLM program you thought was the one, very best way to earn a living in this business.

The illusion that is exploited in many MLM portfolio schemes is that someday perhaps 1,000 total people join your portfolio and you’ll then end up with 1,000 people in, say, five different MLM programs. Actually, it would likely take 4,000 – 5,000 total people. Sure, a few will join multiple companies, but most will be split between one or two. So, worst case, those 1,000 people will be made up of 200 in each of the five companies. You might be thinking, “So what? If I could make $5,000 from 1,000 people, who cares if it’s 1,000 in one or 200 in five?” Here’s another exploited illusion: The whole is equal to the sum of it’s parts. In reality, each MLM program will have quotas and qualifications, right? The higher the sales volume the greater and deeper the pay out. Plus, there would be substantially less attrition if you pulled all 1,000 into one program since far more people would have a downline. So, five little downlines would very likely NOT earn you the same as one big downline. Depending on the qualifications and type of compensation plan, you could potentially earn over twice the income by concentrating those 1,000 people into one organization.

Some folks suggest that you join multiple MLM programs to purchase their great products. They have a noble “industry first” attitude and don’t mind buying from competitors. This I totally agree with! I routinely buy products from four different MLM companies, but I focus 100% of my attention to building a downline in ONE.

The legal concern lies in the motivation to join an MLM opportunity. As myriad legal precedents would attest, we’re supposed to be joining MLM programs because we love the products and want to make money selling them to others. Commissions and bonuses are only supposed to be derived from product volume that would exist outside of the income opportunity (people would buy the products because they actually want them, not as a token act to meet a quota). Now, you tell me — when people are induced into joining a recruiting system based on enrolling in multiple MLM companies (because they’ll make more money and have more security that way), what is most likely the primary motivation to join? Company A’s great skin lotion? Company D’s mediocre 7.9¢ long distance rate? Come on. Most portfolio deals are heavily focused on recruitment, not product sales, and that’s a major regulatory red flag. There’s little wonder why some MLM companies forbid their inclusion in MLM portfolio schemes. Think about that. Why would they not want to be included? Wouldn’t it be better to share distributors with other companies than to not have them at all? The reason is legal, not financial.

If, hypothetically, the portfolio participants really are getting involved in all the companies to really market the products, then they now have to study and understand four, fix, six, maybe even ten different compensation plans and product lines! Think about the challenge most distributors go through just getting to fully comprehend the features and benefits of one plan and product line. Again, though, we’re optimistically assuming in this case that the participants actually care about the comp plan and products offered by the various companies.

Okay, so what if the one company you built in goes out of business? First of all, you only have to avoid start ups (those less than two years old) and your chances of picking a long term company skyrocket (ironically, most MLM portfolios I’ve seen over the years are made up of mostly start ups). Secondly, even if your company does go under, well, you’ll have to try to move them into another company. In other words, you’ll do the exact same thing the portfolio manager is going to try to do. Isn’t the one downline you focused on building just like your portfolio of one company? A portfolio manager would likely counter by suggesting it’s far easier to move the entire group in a portfolio system. With a well constructed portfolio deal the manager will have a database of the same downline that the failed company had, so he’ll attempt to automatically move the entire downline into the new replacement company in the portfolio. So, in that case, there’s absolutely no question that the products were secondary (if not completely irrelevant) to those people’s participation in the replacement company. If the group doesn’t follow the leader into the new company, then the “security” aspect was bogus; and if they do, the big red legal flag just got bigger and redder.

Of course, we really don’t have to theorize when it comes to MLM portfolio schemes. They are as old as MLM (over half a century). They proliferated in the late 80’s and literally dozens upon dozens came and went during the 90’s. In fact, the failure rate of MLM portfolio schemes is even greater than that of start up MLM companies (96% within two years). Today, I know of only one still in operation. It claims to be thriving, yet the majority of income appears to be coming from one, primary nutritional company.

Let’s just look at this logically. If pursuing multiple MLM companies is the way to go, then why, out of hundreds of portfolio deals over the years, with thousands of participants, not one person has ever maintained even a modest $5,000 monthly income? Sure, a few rare exceptions exist where someone is earning over $5,000 who is involved in more than one company. But it works somewhat the same way as the all time Major League home run record by a brother combo (767). Tommy Aaron hit 12, his brother Hank hit 755. So, if you earned $4,700 from one company, and $100 from three others, you could rightfully claim, “Len Clements is wrong! I’m working four MLM companies at the same time and I’m making $5,000 per month — so there!” Then I’d say, show me a $5,000 income from a portfolio of more than two companies with no more than half coming from any one company. Then there would be silence.

MLM is a 65 year-old industry, folks. Everything has been tried.

Everything you see today is just a variation of what’s already been done over and over. Portfolio schemes are one of the oldest, most tried concepts in MLM history. History doesn’t lie. Nor does the graveyard full of dead portfolio deals. If it works so well, if there are so many advantages to doing it this way, then why isn’t everyone doing it? In fact, pursuing multiple MLM programs is a concept that is almost unanimously discredited by the most successful MLM professionals working today (the ones whose methods you’d think would make the most sense to duplicate). The richest, most successful distributors all focused like a laser beam on building ONE downline.

It’s true, there’s a very high failure rate among MLM distributors. Perhaps one reason might be that 45% of them think they can give 100% to more than one opportunity.

Ask a fourth-grader to do the math.

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Network Marketing Products Claims

January 5, 2013 Leave a Comment

By Len Clements © 2000

Network marketing doesn’t have the greatest reputation. Indeed, it’s considered by many to be ripe with pyramid schemes and snake oil salesmen. Yes, I actually said that, right here in the pages of a popular network marketing magazine. Why? Well, because it is, God forbid, the truth! And when the MLM media tries to pull the wool over everyone’s eyes by hiding such dirty little secrets and presenting a glorified, Polyannish, everything-wonderful facade, nothing gets fixed. Like a drug addict in denial – we have to first accept that there is a problem before we can take action to cure it. So enough of this “everything’s wonderful” propaganda.

We have a problem. 

We’ll deal with the pyramid issue in a future issue (and, oh, we will), but since we’re on the subject of “cures” let’s tackle this challenge first. You see, we have an industry bursting at the seams with wonderful, healthy, effective, high quality products that we should be so proud of. The goods that we sell should, for the most part, be our very claim to legitimacy, respect, and acceptance. However, due to a very high profile minority, we are often looked upon the same way as those dusty ol’ pushers of “Doctor Jack’s Cure All Elixir.” Indeed, the claims being made by some today are even more outrageous than those that were attributed to snake oil itself! 

I held a contest in my newsletter recently where I described the basic pitch behind several MLM products. All but one was real, the other I completely made up. The readers were to then guess which was the bogus product. Among the possibilities was a topical gel that helped the body heal by emitted inaudible sound waves; a supplement that contained water with oxygen in it (so you could consume more oxygen that you breath); some capsules that, when consumed, align your body’s electrical matrix; another that introduces glowing phosphates into the bloodstream causing viruses to go dormant (their growth is inhibited by light); an antibody trainer that teaches your good bugs to recognize virtually all viral infections; a perfume made from sour milk; a product that boosts “longevity signals” to the brain causing a 50 year old man to turn 34 within 6 months; shoe insoles with strategically placed bumps that can heal numerous ailments by massaging specific parts of the foot; and even a breast enlargement pill that doubled as a treatment for PMS and hot flashes. Also on the list was some amazing little water crystals that; increased your car’s mileage and power, made water freeze at room temperature, made skin care products work 85% better, and cleaned your clothes for seven years without laundry detergent. Incredible! 

There’s yet another amazing product sold via several MLM companies today that allegedly treats practically every ailment imaginable. It comes from a common tropical fruit and has been used for over 2,000 years for it’s miracle properties, yet has only just now been discovered by modern scientists (yes, this one’s real). I’m picking on this particular product not only because of it’s current popularity, but because, well, it’s just so darn easy. After reviewing several distributor web sites, numerous display ads, informational cassettes, and listening in on a couple of live, national opportunity calls, it does indeed appear as if this not-so-pleasent tasting juice will not only fix any ailment, it will grow hair, increase your IQ, lower your golf score and make you lose all memory of the 70’s! Okay, I made up the part after “fix any ailment,” but sheesh, give it time… 

The testimonials for this product, like many others, seem to always fit whatever the prospect want’s to relieve – even if they are in direct contradiction. In one recent live call, a testimony was given claiming the juice helped with the subject’s insomnia. The moderator then called upon another user who gave this, verbatim, testimonial: “I’ve been on the juice for 2 weeks. Energy! That’s definitely the number one thing you notice. I mean, there’s no sleeping – if you want you could go 24 hours a day, but the main thing is there’s so much energy. I was having sleeping problems through the night too – you sleep like a baby.” No, I didn’t make that up. 

Yet another popular product was marketed for most of last year with the catch phrase “Stop Sickness and Disease Forever!” That was the antibody trainer listed above. According to the numerous testimonials and fax-spam I received, no matter what you had, this product fixed it. Tired? It gave you energy. In pain? It stopped it. Cancer? No problem. AIDS? Piece o’ cake. Common cold? Gone. 

Folks, think about it. Let’s use some common sense, logic and rational thinking here. If the water crystals, the antibody trainer, or the juice, or any products making similar claims really produced the results claimed, it would literally be the single greatest scientific breakthrough in the history of the human race. It would be the lead story of every newspaper and television station in the world, the inventor of the substance would by honored with a ticker tape parade on the way to picking up his Nobel Prize, it would be on the store shelves of every supermarket with lines extending out the front door to buy it, and the pharmaceutical industry would be spending billions to have it regulated as a drug! Not to mention the average human life span would double, with all that that entails. And, quite frankly, the product would not be introduced by a small, start up network marketing company, but rather by the major mainstream corporation that won the multi-billion dollar bidding war for the rights to it! 

You don’t always have to be a nutritionist or doctor to see what’s wrong with the picture either. Again, it just takes a little logic and common sense. Case in point: A marketer of a spray vitamin product claimed that a liquid vitamin dropped into the mouth would result in 80% adsorption. If introduced into the mouth as a spray, 90% absorption. Okay. So, isn’t the spray only a spray while it travels through the air? Once it hits the surface of your mouth doesn’t it become – a liquid? Or, what about this Human Growth Hormone craze? When the marketer begins to describe results similar to the swimming pool in the movie Cocoon, where 75 year old men become biologically 50 again, it only takes ten minutes on the net to discover that these results are related to controlled test subjects who were injected with pure HGH (at $300 per dose) – not from any over-the-counter HGH product that contains no HGH. No, they don’t have “Bovine derived” or “plant derived” Human Growth Hormone. Cows and plants don’t have human hormones in them. What’s being sold is a “precursor,” not the real stuff. To market a product in this manner is tantamount to selling a Hugo based on the performance data of a Porsche. And didn’t ya’ just know that an MLM company would suddenly discover an “Herbal Viagra?” I mean, with three billion guys on this planet, and millions of years of searching, I’m pretty sure that if a common plant could do the same thing as Viagra we would have discovered it by now. And the Earth would either be completely depleted of it, or completely covered with it.

And here’s the real disturbing part – even if the product really does do what they say it does, you can’t say it does it! The FDA and FTC have very strict rules about this. The FTC is concerned with “substantiation” of the claims. They’ll want you to prove the claims are true, and a study by a doctor or two, or a gazillion testimonials, is not scientific substantiation. What’s more, even if there was substantial scientific data to prove the claim (and again, if there was, see two paragraphs up) and the FTC was satisfied, then the FDA steps in and says, What you’ve just substantiated is that you’re selling an unapproved new drug! The FDA cares about how the product is classified, and to be classified as a drug, thus allowing for the miracle claims, requires many years of research, double blind studies, and millions of dollars. So, if one doesn’t getcha’ the other one will. 

Many multilevel marketers have tried to be sly with their language, thinking if they make the claim without really saying it, they can fly under the radar. For example, “Cardiologists use our product” instead of “our product treats heart disease,” or “Stick your tongue out at the Flu” rather than “prevents the flu” or “Bolsters the body’s own defense” rather than “antiviral.” However, both federal agencies go by the “net impression” of the claim. In fact, all examples above are those used by these agencies in their published marketing guidelines (see “Dietary Supplements: An Advertising Guide for Industry” at www.ftc.gov, or the list of Warning Letters atwww.fda.gov). Also, you’ll find that personal testimonials are not safe haven. The company is fully responsible for the claims made by their independent distributors. 

So… which was the fake product? It wasn’t the antibody trainer, water crystals, or soundwave gel (the top three vote getters), alas, it was one of those that received zero votes… the luminescent blood product. But then, one reader has since informed me that she has heard of such a product! Wouldn’t surprise me a bit. 

As an industry, network marketing can take a giant step up in respectability by toning down the outrageous claims being made about some of our products by some of our more over-zealous participants. We don’t need to do this to sell our goods. They’re good goods! So many of our products can easily sell on their own merits. Rather than making ridiculous claims, let’s just use the same method alkaseltzer successfully used in the 70’s… 

Try it, you’ll like it!

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How Toxic is Your Spaghetti Sauce?

January 5, 2013 1 Comment

A Case Against the “Harmful Ingredients” Hogwash

By Len Clements © 2000

There are two ways to sell a product: Explain to your potential customer why they should by yours, or why they shouldn’t buy someone else’s. The tough part is trying to find something wrong with every competing product. In the case of cosmetics and personal care products the task has been simplified by the commonalities of the various formulations. Make a case for avoiding Sodium Lauryl Sulfate (SLS), Propylene Glycol, Glycerin, Alcohol, or Mineral Oil and you’ve eliminated about 95% of your competition. That’s exactly what a growing number of MLM companies are now attempting to do, and with success. However, there’s a problem – there’s no case.

This torrent of “Harmful Ingredients” propaganda is a phenomenon virtually exclusive to network marketing with the bulk of it traceable to one particular company, although several others have recently joined the battle to save us from the perils that lurk in our bathroom cabinet.1 The list of “dangerous” ingredients vary little from company to company. The primary targets are the aforementioned Propylene Glycol, Glycerin, Mineral Oil, Alcohol, SLS, and it’s close cousin Sodium Laureth Sulfate (SLES).

Sodium Lauryl Sulfate suffers a guilt by association with “engine degreasers” as does Propylene Glycol with “industrial antifreeze,” and other dirty, disgusting sounding applications. Yes, it’s true that the antifreeze in your car’s radiator is mostly Propylene Glycol, and the stuff the car wash uses to clean the grime from it contains SLS. But here’s a question that needs to be asked that no one seems to be asking – so what? Why is the fact that a certain substance is used for some other totally non-human application make it harmful to humans? When someone first discovered that baking soda can also reduce unpleasant odors, did cakes baked with this substance suddenly become harmful? After all, those cakes were now being baked with a “litter box deodorizer.” When you’re at the movies and you buy your obligatory cola and popcorn are you not eating “industrial packaging material” flavored with a “compost catalyst” and washing it down with a “battery corrosion remover?” After all, those are alternative uses for popcorn, the primary substance in butter flavoring, and cola respectively.

What’s more, most antifreezes used to be made with Ethylene Glycol. According to an article in the LA Times (1995), Ethylene Glycol that dripped from cars was found in the ground water below the streets of LA and was making the water toxic. A safer, non-toxic substitute needed to be found and that was Propylene Glycol. So, were shampoos that contained Propylene Glycol somehow more harmful right after some antifreeze manufacturers made the switch? Come on. Truth be told, the whole “industrial antifreeze” angle is nothing more that a psychological ploy. Think about it. Why is the word “industrial” even used here? Antifreeze is antifreeze whether you use it in a steamroller or your family car. Clearly, it’s to make it sound dirtier. The propagandists want you to associate moisturizing your skin with a Propylene Glycol laced lotion with rubbing dirty, grimy, green antifreeze on your face. It’s an illusion. It’s a mind game designed to create the perception of danger and disgust – and people are buying into it by the thousands.

Let’s follow this logic a bit further. Antifreeze isn’t entirely made up of Propylene Glycol, nor is engine degreasers all SLS. There’s certainly a lot of it in there, but not all. In fact, some antifreezes are about 99% Propylene Glycol. But, does that really make Propylene Glycol an “industrial antifreeze?” If you say Yes, then be aware the next time you take a shower that you’re bathing in blood! After all, blood is 99% water. Right? (Sorry if that was a gross analogy – hey, I could have used urine!). I’m not debating whether Propylene Glycol “is” antifreeze so much as I’m trying to point out that just because a vile substance that you’d never put on or in your body is mostly made up of another substance, that doesn’t necessarily mean that other substance would be bad for you. In fact, no where is there even a shred of evidence that these other uses for SLS or Propylene Glycol make them any more harmful to humans. It’s a scheme designed by the propagandists to make them seem more harmful. That’s all.

Another common substance found in numerous personal care products that has received surprisingly little attention considering it’s rap sheet is dihydrogen monoxide. Admittedly, this substance does seem to pose a legitimate danger. It’s gas is a by-product in the creation of nuclear power, it can cause excessive sweating and vomiting, it is abundant in tumors of terminal cancer patients, it’s also found in the tissues of vital organs of over 90% of all stroke victims, can kill an adult human in less than six minutes if inhaled, and is the primary component of acid rain. In fact, this substance is so lethal that it once killed over 900 people on a small island off the southern coast of Japan in less than 20 minutes! Should we be avoiding dihydrogen monoxide? That’d be pretty hard to do. It’s only the most abundant substance on the face of the Earth. Yes, dihydrogen monoxide is (how many of you saw this coming?)… water.

You see, anything can be made to sound like the most deadly substance ever discovered.

Let’s take a giant step back and look at the big picture. There are over six billion people on Earth, so let’s be pessimists and assume five billion wash there hair at least once a day. Most of the “harmful” ingredients in shampoo have been common components for over half a century. Do the math, folks. That’s over 100,000,000,000,000 (100 quadrillion) applications of these substances to human skin, yet not one bit of evidence exists that they have caused any harmful effect on even one single human being. Of all the maladies these “harmful” substances allegedly cause, you would think some doctor somewhere in the world would have directly linked just one to any of these substances by now.

Instead, the propagandists have had to resort to circumstantial evidence, and even this case is a flimsy one. One very common method used to convince prospective buyers that certain substances are “harmful” is to site the results of animal testing. For example, when SLS, Alcohol, Propylene Glycol, and various other common substances are applied to the skin of lab rats, their skin does become irritated. So, why should we not be concerned about putting these substances on our skin? Well, because you’re probably not going to go to a chemical supply company and buy raw, pure, SLS or Propylene Glycol, then shave a bald spot on your head, rub the stuff into the bald spot and leave it sit there all day, day after day, for a week or two! What happens to lab animals who are exposed to the raw substance over a prolonged period of time is not the same as what happens when a human applies a shampoo containing SLS that’s diluted as much as 100-to-one with other ingredients that is washed off in a matter of seconds (cinnamon oil will burn the skin in its undiluted form, so should we avoid Hot Tamales candy, too?). Besides, how many times do we hear about promising results in cancer or AIDS research based on positive results in animal studies that never end up benefiting humans? In fact, the vast majority of positive animal studies don’t transfer to humans, so why, at least according to some personal care product marketers, should we assume that any, if not all, negative results will transfer to humans? I’m not saying it won’t, but the fact a rat got a rash certainly offers no proof a human will. Nor would it even if the rat were to experience cancer, blindness, birth defects, brain damage or any of the other ominous, alleged risks associated with these “harmful” substances.

One marketer of “safe” products sited the exceptionally high rate of illness among salon workers. The implication being, they have their hands immersed in lotions and shampoos laced with so many harmful ingredients. However, again there is no scientific evidence that these substances cause illness in humans, but the prolonged exposure to the fumes from finger nail polish and polish remover have been found to cause numerous ill effects. What’s the first thing you smell when you walk into a salon? It’s not the SLS in the shampoo their using.

Another common scare tactic is to site the alleged increase in cancer rates over the past few years. According to one well traveled piece of e-mail propaganda, 1 in 8000 contracted cancer in the 80’s, and 1 in 3 in the 90’s. Even if this were true, to suggest toxins in our air, water and soul are somehow less responsible that an ingredient in our shampoo is ridiculous in itself. However, the cancer stats aren’t even true. According to both the American Cancer Society2 and National Cancer Institute3 the combined occurrence rates for all forms of cancer has dropped by an average of almost 1% per year every year of the 90’s.4 And that’s in spite of a dramatic increase in the over-50 population and significantly better detection techniques. A related, an even more desperate piece of propaganda states that over twice as many people get cancer today that 100 years ago. While this is likely true, I suspect it has more to do with the fact that cancer rates increase dramatically after age 40, and that we live twice as long today, than it does with the introduction of “harmful” substances in our shampoo.

Propagandists also love to quote a speech given by Senator Edward Kennedy5where he states that a study done by the General Accounting Office (GAO) “reported that more than 125 ingredients used in cosmetics are suspected of causing cancer.” First, “cosmetics” is only a subset of all personal care products. Second, “suspected” does not necessarily mean they cause cancer, or that there is even evidence that they may cause cancer. Third, not only could I not locate such a study (I visited one of the largest government depositories of archived GAO reports dating back to 1976)6, but three different staff members of the GAO, including the Associate Director of the Health Education and Human Services Division (the division of the GAO which would have performed such a study) have no memory of any such study. This isn’t the only example of Kennedy’s words from this speech being misused by propagandists. They’ve also used an example given by Kennedy where he describes how a six year old girl’s neck and ears received second degree burns after her mother applied a common hair care product. As I recall this news report7, the mother applied a hot curling iron to the girl’s hair after the flammable hair product had been applied. The hair product didn’t cause the burns, fire did! Kennedy also allegedly described how a woman “had her cornea destroyed” by a mascara product. That’s not what Kennedy said (I have the transcript of the speech). He said her cornea was destroyed by a “mascara wand.”

Sodium Lauryl Sulfate 

Dr. Keith Green, PhD, DSc, of the Medical College of Georgia is another individual the propagandists love to quote. Allegedly, Dr. Green’s studies on SLS found that by dropping small amounts into the eyes of rabbits the SLS entered the tissues of the heart, brain and lungs within a matter of minutes. According to several e-mail messages and on-line statements, Dr. Green’s research has also linked SLS with cancer and eye damage in humans, specifically children. Not only is none of this so, Dr. Green has responded publicly to denounce the rumors about SLS, going so far as to call them “absolutely ridiculous.” 8 He goes on to say, “Like any other chemical, it is the manner of usage that is important. As long as you don’t rub it all over your body and reapply it every hour for 24 hours, it’s perfectly safe.” Dr. Green did confirm that he studied the effects of SLS on lab rabbits and that the substance did enter the tissues of vital organs, “but in very minute amounts (and) all of it washed out in 96 hours.” Furthermore, he stated, “the eye stayed pristine. There was no redness and no irritation. There were no toxic effects.” He has also vehemently denied that his studies ever involved children.

Not only are there few credible authorities who support the “harmful ingredients” claims (virtually all have a financial interest in “safe, non-toxic” alternative products), but the list of doctors and scientists who scoff at the propaganda is quite lengthy. Dr. Andrew Weil, author, speaker, and noted authority on wellness and anti-aging, stated “I’ve been getting a lot of questions about sodium laurel sulfate and, frankly, I’m at a loss to know where this concern comes from… I found repeated instances of unsubstantiated, alarmist claims coming mostly from the purveyors of natural shampoos.” Dr. Peter Panagotacos, MD, a board certified dermatologist, stated he “saw no problem” with SLS. Dr. Ed Friedlander, MD, states “You may use your shampoo and toothpaste without worrying about sodium lauryl sulfate.” Dr. Ronald DiSalvo, the designer of the Paul Mitchell line of salon products and past head of the R&D department of Redkin, states “The unethical marketer picks on the most popularly used surfactants like SLS and SLES. They’ll damn these materials, erroneously extrapolating bits and pieces of information from a study or two that really has little if anything to do with rational cosmetic ingredient usage, and then misstate such information for their own devious purposes. According to the Cosmetic, Toiletry, and Fragrance Association (CTFA), SLS is “safe as presently used in cosmetic products.”9 Even the American Cancer Society has went to the defense of SLS. They created a section on their web site titled “Debunking the Myth”10 in which they disavow any known link between SLS and cancer going so far as to label such claims “radical… misleading… propaganda.” According to Health Canada, SLS has a “history of safe use in Canada… Health Canada considers SLS safe for use in cosmetics… you can continue to use (products) containing SLS without worry.”11 The Occupational Safety and Health Administration (OSHA)12, the National Toxicology Program (NTP)13 and the International Agency for Research on Cancer (IARC)14 have all declared SLS and SLES as being non-carcinogenic (doesn’t cause cancer). And yes, even our own FDA has classified SLS and “GRAS” (Generally Regarded as Safe).15

The “SLS causes cancer” myth likely developed as a mutation of another somewhat flimsy claim. According to some, SLS can react with Diethanolamine (DEA) and other related substances commonly found in shampoo and form nitrosamine. Some nitrosamines are animal carcinogens. However, according to Dr. Jerry McEwen, Vice President of Science for the Cosmetic, Toiletry and Fragrance Association, “DEA does not react with SLS or SLES to create nitrosamines.” More on this issue in the upcoming discussion of DEA.

According to Dr. Ed Friedlander MD16, board certified in both anatomic and clinical pathology, another possible catalyst to the SLS/Cancer myth might be the fact that SLS is routinely used to solubilize chemicals used in cancer experiments before injecting them into animals. Perhaps someone read the list of substances being injected and mistook the innocent solubilizer for the active ingredient being tested.

SLS has also been accused of causing cataract formation in the lens of the eye. Technically, this is true. Dr. Friedlander states that SLS is indeed used in cataract experiments. They take the transparent lens from lab animals and dunk it in concentrated detergent. Not surprisingly, the lens proteins were rendered translucent. However, the lens is deep within the eye and wouldn’t be exposed even if you were to splash pure SLS into it. “Either somebody misunderstood the work, or somebody is willfully deceiving the public,” states Dr. Friedlander.

An even more ridiculous example of the lengths the propagandist will go to generate fear in consumers is this statement: “Almost all toothpastes uses SLS as a major ingredient, and not coincidentally warns it should be kept out of reach of children. ‘In case of accidental ingestion…contact a poison control center immediately,’ reads a toothpaste warning. In fact, it’s been reported that accidental toothpaste ingestion by children results in 11,000 calls to poison centers – the leading cause of all their calls.” Read this propagandist warning again, carefully. Notice, no where do they actually say SLS has poisoned anyone, or is even poisonous. The anonymous author of this internet tripe is a master at linguistic slight of hand. Yes, SLS is in many toothpastes, and yes, the toothpaste company’s attorneys have advised them to place an overly protective warning on the label. And yes, many kids love the taste of flavored toothpastes, so some will attempt to eat it right from the tube. And yes, I’m sure 11,000 parents called poison centers (most because junior accidentally swallowed a little of it, and were probably told to give him a glass of milk), but that certainly doesn’t mean 11,000 kids were poisoned by SLS! Clearly, the intent of the author is to make you think they were.

I’m focusing on SLS more than any other allegedly harmful substance because that’s the one that seems to take the most heat (ironically, it’s the one with the weakest case against it). But what about all those other dreaded ingredients? 

Propylene Glycol 

Propylene Glycol is probably a close second in the “harmful ingredients” hit parade. Propylene Glycol is used in personal care products as a binder to prevent freezing in low temperatures (that’s why it makes a good antifreeze!), and to assist in keeping the product blended. Some claim Propylene Glycol is a humectant (attracts moisture) while others claim it’s primarily a preservative – so, actually, there seems to be quite a few benefits to this substance. It is not only found in cosmetics and personal care products, it’s in many food items and is even used in many medications.

Most propagandists will cite the Material Safety Data Sheet on Propylene Glycol which advises “causes irritation – avoid contact with eyes, skin.” I’ve seen several references to the MSDS allegedly warning that Propylene Glycol can damage the liver and kidneys. The fact is, the only MSDS I reviewed that even mentioned this only cautioned that accidental ingestion of pure Propylene Glycol can aggravate existing kidney conditions. What’s more, some of these Data Sheets employ a rating system to show relative hazard levels. A “4” is an “Extreme Hazard,” where as a “0” means “No Hazard.” Propylene Glycol’s hazard rating for skin contact is a “2” (Moderate), again meaning direct, prolonged contact with pure Propylene Glycol. It’s “health” hazard rating was ZERO 17.

This is an appropriate time to briefly discuss Material Safety Data Sheets. The assumption by some consumers is that these are documents produced by some federal agency, and one data sheet is produced for each substance. Not true. MSD Sheets are prepared by chemical manufacturers in an effort to educate users as to safe method of use, toxicity, proper disposal, chemical and physical properties, and other potential hazards, if any. These Data Sheets are reviewed by the company’s legal department and, like toothpaste warnings, they are usually written in a very conservative, overly protective manner. In other words, the hazards described in MSD Sheets are generally overstated by design.
The desperation that some marketers of “safe” products exhibit in maligning this substance is evident in this quote: “Year after year these ‘beautifying’ creams assault the hair and skin with Propylene Glycol, and the end result is always the same – wrinkles and dull, dry, putty like skin.” Um, I believe that’s the end result of getting old! I hope they’re not blaming that on Propylene Glycol, too.

Here’s another blatant and grossly misleading scare tactic: “The recommended method of storage for undiluted Propylene Glycol is in an explosion-proof refrigerator!” So, what’s the point here? If we use facial cleansers with Propylene Glycol our face might blow up? According to the MSDS not only is Propylene Glycol not explosive, it’s barely flammable! (Flammability is rated a 1).

Not all attacks come from internet authors selling “safe” alternatives. Even Forbes Magazine has become a willing propagandist tool. In an article titled “Alcohol-free,”18 author Stephan Herrera tells the story of “crusader” Mark Wilson, who in 1995 successfully lobbied for child-resistant caps on mouthwash containing more than 3% alcohol (and rightfully so since some brands are as much as 54 proof!). However, Wilson didn’t stop there. He’s now trying to get Propylene Glycol banned outright. According to Herrera, Propylene Glycol is “really nothing more than alcohol… similar enough to the alcohol in booze that it can cause many of the same problems… inebriation, liver damage, cardiorespiratory arrest and violent nausea.” He also mentions the fact that the FDA “curiously” banned the use of Propylene Glycol in cat food, yet allows it in children’s medicine with concentrations four times higher. Herrera goes on to state “If Propylene Glycol appears high on the list of ingredients, that tells you there is a lot of it in the product.” It also tells us Mr. Herrera didn’t do his homework. Ingredients in over-the-counter medicines and personal care products are listed in order of prevalence only. The first ingredient listed (usually water in many cases) can make up as much as two-thirds of the bottle’s content. The third or fourth ingredient on the list (of usually over a dozen) could be less than 5% of the contents. What’s more, any chemistry student could tell you that “alcohols” are a broad class of organic compounds that occur naturally in plants and animals in addition to being synthetically produced. In fact, Glucose, Fructose, and table sugar could be chemically classified as alcohols19. Not only that, if Propylene Glycol was really the same thing as Ethanol (the kind of alcohol in booze) would we be allowed to fill our car radiators with it!? I mean, jeez – let’s use our heads here. Also, some chemical compounds are metabolized differently in animals than in humans. Dogs can’t eat chocolate. Acetaminophen (Tylenol) is poisonous to cats. Propylene Glycol can cause damage to red blood cells in felines (it can not in humans)20. That’s the only reason the FDA banned it in cat food.

It should also be noted (as Herrera did in his Forbes article), that the article’s subject, Mr. Wilson, is the sole owner of a company that makes a product called “Zeffr.” Guess what Zeffr is? That’s right. According to Mr. Wilson, it’s a “safe” alternative to Propylene Glycol.
Paula Begoun, author and publisher of several best-selling books on the cosmetics industry states, “I have seen several studies indicating that Propylene Glycol is not a problem as it is used in cosmetics, while I have seen no studies indicating the opposite.”21

Some of the attacks on Propylene Glycol have been based on unique situations where individuals suffered allergic reactions. Of course, people can be allergic to literally anything. According to two independent researchers, J.O. Funk and H. I. Maibach, “True allergic reactions to Propylene Glycol are uncommon and the clinical significance has probably been overstated”22 ( I wonder who they were referring to?). There were additional studies on allergic reactions to Propylene Glycol. In two separate tests of 104 individuals (human individuals), only one person had an “irritation response.”23

The Agency for Toxic Substances states “Propylene Glycol is generally considered to be a safe chemical.” The FDA has classified Propylene Glycol as GRAS (Generally Regarded as Safe). The Cosmetic Ingredient Review board (CIR)24, a group of independent scientists and doctors who are top authorities in various industry specialties, reviewed Propylene Glycol and published their findings in the American Journal of Toxicology (1994). Their conclusion? “Safe for use in cosmetics in concentration of up to 50%.” PG typically makes up 1-5% of a product’s formulation. This expert panel found that it would still be safe if half the bottle were pure Propylene Glycol! They also found that Propylene Glycol was not carcinogenic.

The American Chemistry Council, a trade organization serving chemical manufacturers, perhaps best sums up the issue of Propylene Glycol safety with this comment: “Propylene Glycol has been used since 1920 in a variety of consumer product applications. Due to its wide use, it has been extensively studied for many different health effects, but from a toxicology and regulatory viewpoint, Propylene Glycol continues to have wide recognition as a product of low concern. The battery of toxicology testing performed on Propylene Glycol includes acute, subchronic, and lifetime exposures of laboratory animals to Propylene Glycol. In addition, specific tests to identify potential effects on genetic material, reproductive capacity and developing organisms have all been conducted on Propylene Glycol. The overall evaluation of the test results suggests that Propylene Glycol is safe for human use.” 

Glycerin 

Here’s a common substance that’s used as a humectant to not only keep the skin moist, but is primarily used in some personal care products to keep the product moist.

Since the propagandists can’t seem to find anything to base an adverse medical condition on, they’ve instead went this rout: “The truth is, sometimes glycerin can help to moisturize the skin and hair – but it often does so by drawing moisture from the deeper skin layers to rehydrate the surface. Obviously, this is like drying the skin from the inside out!” Obviously? Really? Not only is this not obvious, it ridiculous. Think about it. Glycerin accounts for a small potion of the moisturizing ingredients you’re applying to your skin. Are they actually claiming that little amount of Glycerin is going to pull more moisture from the skin than that gob of lanolin, aloe, jojoba butter, and numerous other moisturizing substances are going to put in it? What’s more, in most parts of the world the air is rich with moisture. So, are they suggesting that this small amount of Glycerin is pulling moisture from the air and pulling moisture from the skin and creating, what?, a layer of water on the surface of your dry skin? I’m confused.

Dr. McEwen agrees. “This type of statement is absurd. It shows a substantial lack of sophistication and understanding.” Although he agreed that Glycerin has the potential to draw moisture from the skin, “The product would have to be pure Glycerin to draw more from the skin than to it.” He further states, “Glycerin has been used in cosmetics for ages. The reason it’s so popular is that consumers need and want the characteristics it provides.” 

Alcohol 

The argument against alcohol in skin care products is probably the most irrational of all. The knock on alcohol is that it’s a drying agent, so what is it doing in skin moisturizing products? Actually, most alcohols are drying agents. However, alcohol is not installed into moisturizing formulations as an active, beneficial ingredient, it’s only in there, in minute amounts, as a blending agent so the ingredients don’t separate in the bottle. And those ingredients it keeps blended are primarily moisturizers! In other words, claiming that using a skin cream that contains alcohol will dry the skin is tantamount to saying if you put a pinch of sugar into a pound of salt it will make the salt taste sweet! Doesn’t this not make sense?

The above point is also assuming that the type of alcohol in cosmetic products is ethanol, the type that can be used as a drying agent. It’s not! The type of alcohol used in the vast majority of skin care products is called “fatty alcohol” which has moisturizing properties!

If you have any doubt about the foolishness of this bit of propaganda, try this simple test: Take any skin cream that contains alcohol and mix it with an equal amount of pure alcohol. Then, take this solution that now consist of slightly more than 50% pure alcohol and spread a little of it on your arm. Wait a few minutes (it’s okay, alcohol doesn’t cause skin cancer – at least, not yet) and what you will find is a spot on your arm that’s still moist!

If you’re still not convinced, then better stop letting your kids drink root beer. There’s trace amounts of alcohol in most brands (minute, residual amounts left over from the manufacturing process). Based on the propagandist’s logic, you’re nine year old could be sited for SUI (Skateboarding Under the Influence). 

Mineral Oil (Petrolatum) 

The basis for avoiding products with mineral oil in them is based on a single premise: Skin needs to absorb oxygen and mineral oil can “suffocate” the skin by coating it with an oil barrier.

First of all, most human skin is already oily. In fact, it’s loaded with natural oils. Saying that putting mineral oil on your skin will cause an oily film to cover it is kind of like saying putting snow on an ice cube will make it cold. Even if the mineral oil did temporarily block air from reaching the skin, how long do you think that effect will last before the oil barrier begins to break down? Minutes? A swim in the family pool or a leisurely soak in the tub will block oxygen from reaching much more skin surface for a longer period of time. I guess a bubble bath would be downright deadly – you’re suffocating most of your skin and soaking in Sodium Lauryl Sulfate! Also, again, keep in mind that the mineral oil is usually only a part of the entire substance you apply to your skin, so the opportunity for it to be thick enough to completely block oxygen from reaching the skin is remote.

One internet (where else) based argument against Mineral Oil went so far as to invoke the urban legend about the actress who was painted gold in the James Bond movie Goldfinger. During filming the actress died of asphyxiation, you see, because the gold paint that covered over 90% of her body suffocated her skin. That actress, Shirley Eaton, went on to appear in several more movies. She didn’t really die. She didn’t even get sick.

Another alleged unhealthy side effect of mineral oil sealing the skin surface is that it can cause a “flooding” of the skin by holding in large amounts of moisture. Okay. So, what about products that contain mineral oil and alcohol and Glycerin? Will it flood the skin, or dry the skin? I’m confused again.

When questioned about this claim, Dr. McEwen commented “Some of these claims are hard to refute only because they are so ludicrous. Every system in your body operates on a fluid medium. You can’t ‘flood’ the body’s biology.” He goes on to explain that Mineral Oil will hold water beneath the skin surface, but the result is a slight plumping of the skin cells. “That’s a good thing” he says. After all, that is the objective of most moisturizing creams. They don’t really eliminate wrinkles, but the “appearance” of wrinkles by plumping up the cells within the epidermis (outer layer of the skin). 

Alpha Hydroxy Acid 

Alpha Hydroxy, glycolic, lactic, and other acids are generally referred to as AHAs. They are used to exfoliate the dead, dry or damages outer layer of skin and expose the younger skin cells. The result is a smoother skin surface and a reduction in fine wrinkles and minor blemishes.

The propagandists will tell you that this outer layer of skin protects the under layer from “harsh, damaging environmental agents.” They claim, “Use of AHAs could make you age much faster. You could look better today but it may not be such a pretty sight in ten years. Your outer layer of skin is your first line of defense. Everything should be done to make it healthy and keep it, not lose it!”

First let’s look at this logically. If the young, second layer of skin will be exposed to “harsh, damaging agents” by removing the top layer, isn’t the top layer also being exposed to these same damaging agents? So, are we to maintain this damaged outer layer of skin to protect the newer second layer from becoming – the damaged outer layer? If we should try to keep the outer layer healthy rather than lose it, well, why can’t we remove it then apply the same health maintaining regimen to the new, fresh second layer? Once again, I’m confused.

Author Paula Begoun states “Revealing new skin and improving cell turnover rates can absolutely improve the appearance of skin. That is the whole purpose behind facial peels and laser resurfacing. It is not dangerous; if anything, it removes potential cancerous skin growths.” The bottom line, she says, is that “Sun damage causes thickened, uneven skin, and getting that stuff off the face is good, not bad.”

AHA have been scrutinized by the FDA 25. They’ve just completed two studies to assess the safety of AHA and the conclusion was, put in laymen’s terms, your skin is more susceptible to sun damage if you remove the old, outer layer. In other words, if you’re using an Alpha Hydroxy Acid based product you might get sunburned a little sooner. The FDA’s recommendation? Protect your skin. The CIR also reviewed AHA. Their concern was the same as was their recommendation: Use sun protection.

Although not with AHA specifically, I have had personal experience with similar exfoliating products. From the age of 12 to 18 I was prescribed a topical vitamin E product for acne that would literally cause thin sheets of skin surface to roll off my face. Almost six straight years of treatments (most of them spent on a baseball diamond under the blazing sun), and today, at age 42, I not only have nary a wrinkle (in fact, I’ve been carded for wine purchases twice this year), but the horrible case of acne I had during those years has left virtually no scaring. 

DEA 

Diethanolamine (DEA), Triethanolamine (TEA), and Monoethanolamine (MEA) are amino alcohols used in cosmetics as emulsifiers, thickeners, and detergents. The nitrosation of the ethanolamines may result in the formation of N-nitrosodiethanolamine (NDELA), which has been shown to be carcinogenic in lab animals.

In English, these substances can react with other ingredients in shampoo or cosmetic products and form nitrosamines. And yes, high doses of nitrosamines ingested over prolonged periods have been shown to cause cancer in rats and mice. Not only that, but according to some propagandists SLS and SLES are two common ingredients that ethanolamines can react with to form nitrosamines. What’s more, a study by The National Toxicology Program (NTP) in 1998 found that repeated applications of pure DEA to mouse skin caused liver and kidney cancer.

According to the web site of a well known propagandist, in a recent edition of “CBS This Morning” Dr. Samuel Epstein, professor of environmental health at the University of Illinois claimed “Repeated skin applications of DEA-based detergents resulted in a major increase in the incidence of two cancers.” According to Dr. Epstein, the NTP report stated that “The mainstream U.S. industry has been unresponsive, even to the extent of ignoring an explicit warning by the Cosmetic, Toiletry and Fragrance Association (CTFA) to discontinue uses of DEA.”

Sounds like DEA may be guilty as charged. Or, maybe not. Before reaching a verdict, let’s hear from the defense.

First, MEA will not react with nitrosamines and create nitrates 26. This is only true for DEA and TEA. Furthermore, according to the CTFA and Dr. McEwen, “amines” must react with a “nitrocating agent” to form potentially carcinogenic nitrosamines, and although DEA and TEA are both amines, SLS and SLES are not nitrocating agents and can not react with DEA or TEA to form nitrosamines. Even the nitrates (a nitrocating agent) used as a preservative in bacon are not carcinogenic unless it reacts with “amines” which are generally not found in bacon products (in other words, as long as you don’t mix your bacon and shampoo together, you’re okay). What’s more, Dr. McEwen states, “Absorbic Acid would block the effect.” Absorbic Acid is a common ingredient in cosmetic products. Also, once again, we’re talking about a study done on mice. After reviewing the NTP study, the FDA stated “The NTP study did not establish a link between DEA and the risk of cancer in humans. The Agency (FDA) believes that at the present time there is no reason for consumers to be alarmed based on the use of these substances in cosmetics.”27
There’s more…

According to the CTFA, the NTP study was suspect.28 DEA was applied to the shaved backs of both rats and mice. Rats can’t lick their backs. Mice can. The rats never got cancer. The mice, who were able to eat the DEA, did. What’s more, the mice were obese, the rats weren’t. Also, mice from different strains were tested and only one particular strain contracted cancer. However, just to be safe, don’t go to a chemical supply company and buy pure DEA and eat it.

Every other test for toxicity conducted by the CIR found that “DEA was not a hazard as used in cosmetics.” Contrary to Dr. Epsteins claim regarding the NTP report, the CTFA explicitly denies ever warning against the use of DEA. The Cosmetic Ingredient Review board found “DEA to be safe when used as directed. Since no evidence that products containing DEA have been unsafe for consumers, it would be unnecessarily alarming for the news media to suggest there is a health risk.”

The well known propagandist’s version of the CBS interview with Dr. Epstein is based on comments taken totally out of context. Although Dr. Epstein did take an anti-DEA stance during this interview, his comments regarding “two forms of cancer” were related to the NTP study on mice, not humans. Reread the quote above and note how the propagandist left that part out creating the impression that the doctor was talking about people.
Finally, the International Agency for Research on Cancer found “no evidence of cancer risk in humans.”

It should also be noted that the DEA/cancer scare originated in the 1970’s. This is not a recent discovery based on the NTP research. It’s old news.

Miscellaneous Internet Rumors

If I were to attempt to debunk every piece of internet propaganda relating to “harmful” personal care products, this would be a very long article (and it’s already too long). Here are just a couple of the most recent internet myths orbiting cyberspace:
Sunscreens can cause temporary blindness.29

According to the CTFA, this is “typical of internet rumors notorious for inaccurate and false information. There is no evidence, scientific or otherwise, that any such harmful effects have ever resulted from using sunscreens.” The American Academy of Ophthalmology defined the e-mail as “erroneous and alarmist.” Neither the Poison Control Center or the FDA have ever heard of anyone being blinded by sunscreen. When asked what someone should do if sunscreen does get into the eyes, the American Academy of Dermatology responded, “Wash it out.”

Antiperspirants are the “leading cause” of breast cancer.30 The CTFA responds: “This anonymous e-mail is nothing else but an unsubstantiated internet rumor that has no factual basis.” The American Cancer Society stated, “There have been many extremely thorough epidemiological studies of breast cancer risk and they have not found antiperspirant use to be a risk factor for breast cancer, much less the ‘leading cause’ of the disease.” Scientists at the National Cancer Institute “are not aware of any research to support a link between the use of underarm antiperspirants or deodorants and the subsequent development of breast cancer.” The FDA also does not have any evidence or research to support the rumor.

Inaccuracy and Hypocrisy 

Making bogus attacks on cosmetic ingredients in an effort to sell “safe” alternatives in not a new marketing invention. Indeed, it’s existed for as long as there’s been cosmetics. For exmaple, about 30 years ago a major hair care product company ran ads touting the fact their hair spray contained none of an allegedly toxic substance called PVP. Thing is, PVP was originally invented as a blood plasma extender and had been pumped through the veins of hundreds of thousands of people for many years without any ill effect. How then could there possibly be any danger in applying it to one’s hair? What’s even more ironic is that it was eventually revealed that the company’s products did, in fact, contain PVP and they just didn’t list it on the label.

What those companies who are hawking “safe alternative” products today really need to do is get together and coordinate their propaganda. As I visited the web sites of the various marketers of these products, I was amazed at how they stepped all over each other in their efforts to expose their competitor’s “harmful” ingredients.

By far the most common “safe alternative” to SLS is Ammonium Lauryl Sulfate. But according to one propagandist, “Ammonium Lauryl Sulfate is significantly more irritating that SLS and cannot be complexed (blended with other ingredients) to reduce its irritation potential. It should definitely be avoided.” 31Yet another lists “America’s Most Unwanted: Cosmetic Ingredients You Should Avoid!” Within that list are “harsh cleansers like Ammonium Lauryl Sulfate.”32

Dr. Doris Rapp, during her cassette tape presentation “How Toxic is Your Shampoo,”33 claims that different kinds of parabens can cause an estrogenic (feminizing) effect in men and can cause liver damage. Ironically, Dr. Rapp is a hired gun for a major MLM company who is in direct competition with the MLM company that initiated the “harmful ingredients” campaign – which also touts two forms of common parabens in several of their personal care products.

Companies who like to promote the “all natural” angle will claim Ammonium Lauryl Sulfate is a natural substance derived from coconut oil. However, as Paula Begoun explains, “Ammonium Lauryl Sulfate is the salt of a sulfuric acid compound… Associating it with coconut oil, a far-removed organic source, just makes for better, though misleading, marketing lingo.” Many of the sellers of “alternative” products claim to have “all natural ingredients” as if to suggest that makes their products better, or safer. Of course, opium and poison ivy are also natural substances. Also, plant oils decompose faster than mineral oils thus require a higher concentration of preservatives and fragrance. The fatty (saturated) acids that are often contained in “natural” plant extracts and oils can, in fact, clog the pores and cause acne. What’s more, according to Begoun, many plant derived substances can cause skin irritation, allergic reactions, skin and/or sun sensitivity, such as geranium oil, grapefruit, lavender oil, papaya, and sage. All of which are found in the formulations of many “alternative” products (including the MLM company most responsible for the “harmful ingredient” propaganda).

A front runner for the “most ridiculous” approach to attacking non-natural, allegedly harmful chemicals in cosmetics are the laughable comments such as: “I can’t even pronounce most of the ingredients in my shampoo. It’s scary!” As I listen to seemingly intelligent, rational folks make exclamations such as this, I wonder, do they actually believe that the number of syllables in an ingredient’s name somehow correlate to it’s level of toxicity? Ironically, these same people are distributors for a company who’s “safe” products contain Methylehloroisothiazolinone and Cocamidopropyl Hydroxysultaine. I certainly hope these folks don’t take their “long name” paranoia too far and attempt to rid their bodies of Olygomer Proanthocyanin (Picnogenol) or Dehidroespiandrosterone (DHEA, a life sustaining hormone).

The aforementioned Dr. Rapp34, a doctor of pediatrics and board certified in allergy and environmental medicine, is a well respected authority in her field. Her efforts are quite noble in every other area, however I think she diminishes herself by trying to hock products for an MLM company. To that end, during her live presentation she invokes most of the propaganda already discussed in this article. However, she goes even further. Dr. Rapp suggests that the cosmetic industry today is the tobacco industry of tomorrow. She suggests the manufacturers and marketers of these harmful products are knowingly putting their customers at risk, but refuse to switch to safer alternative ingredients. She believes that many years from now we’ll look back on the damage done by these products in much the same way as we look at tobacco products today. Of course, her mental bridge to the future has a huge gap in it. Namely, there is no substitute for tobacco (no legal substitute anyway).

Every “alternative to tobacco” gimmick has failed. However, there are several effective, comparably priced substitutes for SLS, Propylene Glycol, and the rest. So, this begs the question, If these ingredients are so harmful to human health, and will inevitably destroy so many cosmetic companies in the years to come, why don’t all the cosmetic companies just switch now? Well, because, unlike tobacco 50 years ago, there are numerous studies being done today that have shown these substances to be safe. It’s not at all like the tobacco industry!

Dr. Rapp also does a great slight-of-word routine with this observation: “SLS stays in the body at least seven days.” (Remember, Dr. Green’s studies showed SLS completely left the tissue within 96 hours). “If the body can’t get rid of (SLS) it will tend to store it in fat places, such as the breast… That’s where the body stores chemicals and that’s why women who have breast cancer, some of them have four times more pesticides in their breast tissue than other women who didn’t.” How did we get from SLS to pesticides? As has already been discussed, adnauseam, SLS does not cause cancer. But, if one were to listen to Dr. Rapp’s presentation one could easily surmise she was suggesting otherwise.
She also states that mineral oil has been linked to “numerous forms of cancer” according to Rawlin’s School of Public Health. I contacted this institution and after much searching did finally locate the author of the report. Her report analyzed “formulations” that included various type of oils, including mineral oil. However, mineral oil found in cosmetic formulations was not part of the study. When specifically asked if the mineral oil found in cosmetics could cause cancer, as Dr. Rapp claims the report suggests, the author responded, “It’s a complex area – mineral oil formulations have changed through time and there are varying levels of evidence for different cancer sites for different formulations

I don’t intend to slather us in the subject of mineral oil again, but it does seem appropriate at this juncture to address an example of the “varying levels of evidence” that mineral oil of any kind might cause cancer. At the same time I can provide yet another demonstration of how the propagandists fold, spindle and mutilate the facts to fit their own personal agenda. According to a comment found in (guess where) an internet chat room, a “Canadian study” revealed that mineral oil in skin lotions increased the risk of contracting non-Hodgkin’s lymphoma (NHL). Well, I located that study (emphasis mine)… I can’t comment specifically on the mineral oils used in cosmetics.” In the actual report, the author specifically states that the study was limited to “substantial dermal and inhalational exposure” to pure mineral oil of the type used in machine lubrication. The report goes on to specifically and clearly state that mineral oils in “end-use” products, such as cosmetics, can be derived from a different source, have a different method of refinement, and a variety of additives, thus making an analysis of it’s toxicity “inappropriate.”35 (it was a shock to discover it even existed) and here’s the rest of the story: The study assessed the risk of occupational exposure to “benzidine, mineral, cutting, or lubricating oil, pesticides, and herbicides.” Seventeen different chemicals were studied. Mailed questionnaires were used to obtain data from 1469 individuals who were newly diagnosed with NHL to determine what amount, if any, exposure they had to these 17 chemicals. The study found there was a 1.3% increase among men in the chances of getting NHL among those who were exposed to “mineral, cutting, or lubricating oils.” Since men are far less likely to be using skin care products, it would be reasonable to assume the exposures related to long term industrial applications (i.e. motor oil, axle grease, etc.). Additional evidence exists that mineral oil in cosmetic products suffers only a guilt-by-association by the fact that this same study found no significant increase in the rate of NHL among women exposed to the same group of oils (which would have been primarily mineral oils in cosmetics).

Virtually all of the “harmful ingredient” propaganda can be traced back to one particular MLM company. Ironically, this same company once sold (as recently as 1994) a thigh cream based on Aminophylline. This substance is used to treat asthma, but was also found to reduce the circumference of the thigh when applied topically. However, after prolonged, repeated applications it also caused mild to severe skin irritation. They now use the milder, safer, Theophylline.

This same company, during the height of their anti-harmful ingredient campaign, had one of their popular diet products recalled by the FDA. It contained a full medical dose of the drug furosemide, a potent diuretic.36

Here’s a brief run down of some of the other “safe” alternative ingredients this company uses in their skin and hair care products:

Ammonium Lauryl Sulfate: The Cosmetic Ingredient Review has found that ALS can “produce eye and/or skin irritation.” Dr. DeSalvo observes that while some companies vehemently warn consumers away from SLS and SLES “they’re turn around and use virtually the same material, made of the same cut of coconut oil or palm oil, sulfated in the same manner, but using ammonia rather than sodium as the salt, and claim that their surfactant (ALS or ALES) is safer, when the truth is that the ammonia ion can be much more irritating than the sodium ion.”

Ammonium Chloride: The Material Safety Data Sheet warns users to “prevent skin contact” (it’s in their skin cleanser, shampoo, and shave gel).37

Chitosan: The MSDS warns this substance can cause eye, skin and lung irritation.38 According to the National Council for Reliable Health Information (NCRHI), Chitosan can cause illness to those with shellfish allergies39 (this is the primary ingredient in one of their weight loss products).

Calcium Sulfate: The MSDS warns of irritation to eyes, skin and respiratory system… Can cause nose bleeds… used to make plaster of Paris (it’s also in their arthritis product).40
Methylchloroisothiazolinone: According to The National Library of Medicine, this substance can cause contact dermatitis and is used in house paint.41 According to the American Journal of Contact Dermatitis, this substance can cause “chemical burns”42 (it’s in their shampoo and skin cleanser).

Methyllisothiazolinone: Same as Methylehloroisothiazolinone (also in their shampoo).

Phenoxyethanol: The MSDS on this substance warns that it can cause severe irritation or burns to the skin and eyes and suggests it should only be handled while wearing gloves and goggles43 (it’s in their hair conditioner and shave gel). This substance usually replaces Propylene Glycol. However, according to Gary Neudahl, the Technical Services Manager at Costec, Inc. (a leading manufacturer of cosmetic products), he advises clients to use Propylene Glycol because it is “less toxic and safer than Phenoxyethanol.” (Costec supplies both substances).

Of course, if this company were to respond to this rather scathing information, I’m sure they would plead that many of the dangers listed above involve applications unrelated to personal care use, or that the harmful effects were only on lab animals and only after repeated, prolonged exposure of the raw material, and that these substances are safe when diluted and applied momentarily to the skin, and that most of this information is coming from overly protective MSD sheets, and so on and so on.

And my response would be… EXACTLY!

In fact, every one of these counter arguments would be valid. In fact, every one of the above listed substances are perfectly safe as used in their personal care products. In fact, they could use the very same defense I am presenting here to defend their choice of ingredients. And they’d be right!

Again, if you work hard enough you can dig up data to make anything sound harmful.

A great resource is the National Institute of Occupational Safety and Health (NIOSH).44 Here you will find a list of potentially harmful chemicals found in the work place. According to Dr. Rapp there are 884 “toxic” chemicals on this list found in common skin and hair care products (in spite of the fact there are only 670 chemicals on the list in total). After a careful review of this list (which, by the way, did not include SLS, SLES, Propylene Glycol, or Mineral Oil), I found some interesting inclusions. For example, Acetoxybenzoic acid was there. That’s Aspirin. Isopentyl Acetate was there. That’s banana oil. The dust from oats, wheat and barley and the mist from vegetable oil all made the list (irritating when inhaled – like, no kidding). Such vile substances as sugar, table salt, and corn starch made the list, as did Propenyl Propyl Disulfide. Now, PPD is some nasty stuff. This can cause irritation of the eyes, nose, and respiratory system. It can also cause lacrimation! Would you want to eat Propenyl Propyl Disulfide? If not, you’re missing out on a lot of great food. It’s onion oil. Lacrimation means it makes your eyes water.

Considering sugar, salt and onion oil are all classified as “chemical hazards,” as well as the aforementioned horrors of dihydrogen monoxide (water), it’s got to make you wonder…

How toxic is your spaghetti sauce?

 
 
1. To protect the interest of innocent distributors, no network marketing companies are named in this article.
2. www.cancer.org 
3. www.cancer.gov 
4. National Institutes of Health; Annual Report to the Nation on the Status of Cancer (May, 2000) 
5. http://kennedy.senate.gov/statements/970905fdacosmetics.html 
6. Dickenson Library, UNLV 
7. San Francisco Chronicle (approx. 1994) 
8. American Cancer Society web site (www.cancer.org) 
9. www.ctfa.org 
10. www2.cancer.org/zine/dsp_StoryIndex.cfm?sc=004&fn=004_09231998_1 
11. www.hc-sc.gc.ca/ 
12. www.osha.gov 
13. http://ntp-server.niehs.nih.gov/ 
14. www.iarc.fr/ 
15. www.fda.gov 
16. www.pathguy.com/lectures.htm 
17. www.theskinsource.com/Document/Propolyne_Glycol.htm 
18. www.forbes.com/forbes/98/0921/6206260a.htm 
19. www.hplc1.com/shodex/english/dc030403.htm 
20. www.nexusmagazine.com//Petfood.html 
21. www.paulaschoice.com/skinfacts/mythbusting.htm 
22. Funk, J. O. % Maibach, H. I. Propylene Glycol Dermatitis: Re-evaluation of an Old Problem. Contact Dermatitis 31:2, 36-41 (1994). 
23. Final Report on the Safety Assessment of Propylene Glycol, Cosmetic Ingredient Review, J. Am. Coll. Toxicol. 13(16), 473-91 (1994). 
24. www.cir-safety.org 
25. www.fda.gov/opacom/backgrounders/alphabg.html 
26. 2000 CIR Compendium, p. 236 
27. http://vm.cfsan.fda.gov/~dms/cos-dea.html 
28. Telephone interview with Dr. McEwen 
29. CTFA Response Statement; July 29, 1999 (PRST 99-19) 
30. CTFA Response Statement; May 19, 2000 (PRST 00-16) 
31. Cosmetic chemist Will Evans in PURE magazine 
32. www.mastey.com/avoid1.asp 
33. Can be obtained via numerous web sites 
34. www.drrapp.com/index.html 
35. Health Canada Cancer Bureau; 1997 
36. San Jose Mercury News; p. 20A; November 13, 1993 
37. http://pc65.frontier.osrhe.edu/hs/science/msds/chloriam.htm 
38. http://www.vanson.com/pages/msds/MSDSHD.html 
39. NCAHF Newsletter; V.21/N3 (May-June, 1998) 
40. www.cdc.gov/niosh/npg/npgd0095.html 
41. www.ncbi.nlm.nih.gov/htbin-post/Entrez/query?uid=0010750849&form=6&db=m&Dopt=r 
42. www.wbsaunders.com/cgi-bin/AT-ajcd_twosearch.cgi 
43. www.jtbaker.com/msds/p2136.htm 
44. www.cdc.gov/niosh/homepage.html
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An In-Depth Analysis of Compressed Pay Plans

January 4, 2013 Leave a Comment

By Len Clements © 2000

Before we begin this discussion of compressed pay plans, a couple of caveats.First, I want to make it clear that I am NOT addressing any particular company’s plan, but only compressed plans in general. 

Secondly, I am not saying, nor have I ever said, that compressed plans are wrong or bad. They are not. In fact, the intent behind them is actually quite noble. The argument I’m presenting here is that they are not as good as they are usually presented to be. Many of the benefits associated with such plans are usually exaggerated, and in some cases wholly fictitious. 

I’m just trying to explain the parts that you won’t hear at the opportunity meeting. 

Myth #1 – You Can Earn (big number) Dollars With Just (little number) People In Your Downline! 

Usually, the pitch goes something like this: if you just get four people who also get four, who all do a $100 monthly product purchase (and you are paid 15% on level one and 45% on level two) you’ll make $800 with just 20 people! Many promoters will even go so far as to call this scenario “Realistic” and “Conservative.” In fact, it’s ridiculous. It’s what my statistics instructor once referred to as “garbage math” (math that’s technically accurate, but extremely misleading). Aren’t we assuming here that there is a 100% activity rate, a zero percent attrition rate, and every single person that you enroll enrolls four others who buy $100 in product every month? What percent of all those you enroll do you think will enroll four others? Let’s be optimistic and say 10%. So, you’d have to actually enroll forty people to find four who’ll enroll four. Will those 16 on level two stay with no downline? Sure, a very few might stay just for the products, but certainly not most – unless you have more people under them? Right? Downlines are not pyramid shaped, they’re diamond shaped. The widest point tends to be in the middle, not the base. So, where is the bottom half of the diamond in this scenario?

Bottom line: In “real life” you’ll need a LOT more people that 20 to achieve this $800 income on a regular basis.

Myth #2 – If you can make $1,000 with just 25 people, then you can make $10,000 with just 250 people. 

Many compressed plan promoters love to show us pay out examples where 80% of your downline volume falls on the big 40-50% second level. A ratio of over $40 per distributor can be earned. But then they’ll imply (and sometimes directly state) that this huge ratio will continue in proportion to your downline growth (as in the hypothetical example above). This is naive at best, and fraudulent at worst. Sure you’ll earn $40 per distributor when the vast majority of your 15-30 active distributors are on the 40-50% level (usually the second level). But what happens when you have 200 distributors and maybe 20% of them are on the big level, and some are now out of your pay range and earning you nothing? What happens when you have 1,000 distributors and about 5% are on the big pay out level and 80% of your downline is below the third level? Now you’d likely be earning less than $5.00 per distributor. 

The larger your downline gets, the less you’ll get paid on each person – and the rate your earnings ratio decreases will be far greater than in a non-compressed plan. It will be very exciting at first if your checks rockets up to a couple hundred dollars. But, soon (much sooner than in a deeper paying plan) the rate of increase will drop to a snail’s pace. Your group could double and your check might go up only 5% because your downline growth is now primarily out of the pay range of the plan. The real unfortunate part is, most compressed plans cause you to hit this “income wall” well before you reach the income level that you could comfortably live off of. 

Bottom line: You will not maintain the large earnings per distributor ratio that’s displayed in many compressed plan income scenarios. 

Myth #3 – You have a better opportunity to earn $5,000 to $10,000 per month in a compressed plan. 

Notice how compressed plan promoters always focus on scenarios that will create a few hundred dollars per month. Why do they usually show pay out comparisons with other MLM pay plans based on only three level scenarios? Why do almost all of the income testimonials deal with how quickly people made money, but almost always amounts less than $1,000 per month? Because that’s what they’re best at – generating a few hundred dollars faster than their competition. It’s the only comparison they can win at. However, 86% of all MLMers want to earn a living at this business*. We want to sleep in in the morning, not have to commute, take a day off whenever we want to, travel more, spend more time with our families – and $800 per month ain’t gonna’ do it! In fact, those 86% want, on average, about $6,000 to $10,000 per month*. So, why don’t compressed plan proponents ever show us what our downline would have to look like to make the amount of money we actually want! 

Because you’d have to have an absurd number of people across your first and second level to fit enough sales volume on those levels to achieve these kinds of incomes, that’s why. 

What 86% of MLMers are really looking for (although most don’t know it) is a middle weighted compensation plan. One where, yes, it takes a little longer to get into profit in the beginning and makes it a lot tougher to become a millionaire, but optimized the opportunity to earn a few thousand dollars per month. 

Bottom line: In a compressed plan it’s easier to make a car payment, but it’s harder to make a living! 

Myth #4 – Compressed pay plans are plans for the “little guy,” not for “heavy hitters.” 

The “Little guy” has just as big a dream as the “Heavy Hitter.” The vast majority of “part timers” also want to become financially independent (make a comfortable living) with their MLM opportunity. Unfortunately, to earn even a modest $6,000 to $10,000 per month (that’s not even in the “heavy hitter” ball park), you’ll have to be a mega-recruiter! Do the math yourself. Create $10,000 income earning scenarios and look at the monumental width that must occur in your first two levels to achieve it. “Little guys” (part timers, average folk, what ever term you wish to use) are people who recruit one, two, maybe three people, right? Okay, just to be fair, let’s go ahead and assume everyone does recruit four. So, you have 4, 16, 64, 256, 1,024… and you’d be paid on the 4 and the 16 – that’s it. No, no “infinity” bonus because you’re a “little guy,” remember? In most plans you’ll need to sponsor around 6 to 15 people to really take full advantage of that. Now, create scenarios where everyone recruits 1 to 4 people and make it pay even $2,160 per month (the average U.S. income). It’s impossible! 

One popular compressed plan program claims you can make “$5,000 with just 120 people!” They used to pay 15% on level one, 45% on two, and a 15% “infinity” bonus starting on level three (they’ve recently changed their plan to add more depth to the pay out). Well, let’s assume you sponsor ten who sponsor ten and throw in ten more on level three. That’s 10 people on level one, 100 on the jackpot level, and ten on level three. Let’s continue this level of absurdity and assume a 100% activity rate (everyone does $100) and zero attrition. Not only would you have to be a mega-recruiter yourself, but you’ll have to recruit ten others who can recruit ten, and… you still wouldn’t make $5,000! 

Bottom line: It’s not a plan for the little guy, it’s a plan for those with little goals.

*MarketWave survey, 1990-2000.

Myth #5 – There are people making over $20,000 per month. 

I only know of three people who are working a compressed pay plan who have publicized earnings of over even $10,000 per month. One, however, routinely photocopied his checks and when his income allegedly went from $10,000 one month to over $20,000 the next, the check number only increased by 12. There are a myriad explanations for this – not of them are good. The other guy is actually buying product each month to qualify multiple positions and is citing his combined income from all of those positions. I asked the third to recalculate her income to see how much more money she could have earned if the plan was more middle weighted. She refused. 

Actually, the strategy of qualifying multiple positions makes perfect sense considering it’s the only way to access enough sales volume to make this amount of money. Of course, for every extra position you create, you screw your upline by building subsequent volume one level further away from them. The income increase you receive from the extra positions does not come from the company, it comes out of your upline’s pocket. So, if you can take money away from your upline by “double dipping” what’s stopping your downline from doing the same thing to you? They only way you can benefit from the ability to qualify multiple positions is if you do it but no one in your downline does. The option of you, or your spouse, qualifying extra positions is a feature common to compressed pay plans. The benefit is illusionary. It’s smoke and mirrors. 

Bottom line: I publicly challenged anyone working a compressed plan to show me downline data proving income of more than $20,000 per month from a single qualified position. Many claimed they did (or knew of someone who did), but not a single one has ever provided easily obtainable verification. 

Myth #6 – Retention rates are exceptionally high (or, attrition rates are exceptionally low).

    When anyone gives you an exact number here, they are flat out guessing. To me, the “retention” of a distributor means he/she is still actively working the business to some extent. When a distributor stops working the business, or realizes they are going to have a tougher time earning a good living with a compressed plan and they change their building efforts to another opportunity, then they would not be “retained,” agreed? But wait. If they knew they could keep making a token $100 purchase and continue to earn a $150 check, why would they not? It’s essentially free money. So, even though they are totally focused on building another program, they would still be counting towards “retention” figures. I know someone personally who earns about $300 per month in a compressed pay plan – and is using that money to build a downline in a competing (non-compressed) MLM company.
    Also, notice how much key information is usually missing from these claims. Is a “two percent attrition rate“ good?  Well, is it 2% over the life of the company – or 2% yesterday?  If a distributor claims they have a 60% retention rate, is that good?  If they’ve been working the business for more than a year and someone is considered inactive after just one month of inactivity, then yes it is.  If they’ve only been working for four months and inactive people are dropped after three months of no activity, then no, it’s actually quite poor. Heck, if you’re not considered inactive until you don’t renew your distributorship a year later, the first eleven months you are in such a program you could rightfully claim a 100% downline retention – even if every single distributor has quit!

    Bottom line: If you torture the data long enough, you can make it say anything.

Myth #7 –  The higher than average retention rate will increase your income.

    Although there is no solid evidence that there actually is any less attrition in compressed plans, common sense would dictate that there certainly would be some. If more people get into profit quicker, then more people will be “locked in“ and continue to make a token product order to maintain that small income. While this is true, we must again revisit the issue of where that volume is in your downline. In other words, does it really make any difference if the sales volume goes away because the person quit, or they don’t quit and the sales volume occurs outside of the limited pay range of the plan? In a deeper paying plan you may have higher attrition, but you’ll eventually get paid on far more of the people who do stay.
    There’s also a legal consideration here. To suggest that more people will stick because their quota is smaller than their commission check is tantamount to saying they don’t really want the product, they’re just buying it as a formality. Such practice has been the catalyst to numerous legal actions by state and federal regulators (as it could be indicative of an illegal pyramid). If the compressed plan promoter were to then suggest that, in fact, that’s not the reason for the reduced attrition, but rather it’s due to some other more legitimate reason, such as an affinity towards their great products, then that’s fine. But then, that would mean that their reduced attrition had nothing to do with the compressed plan. They can’t have it both ways.

    Bottom line: The reduced attrition (if any) vs. the limited range of the pay plan is usually, at best, a wash.

Myth #8 – You can still earn in great depth due to “Infinity” and “generational” bonuses.

    Infinity bonuses pay down to the first level where there’s a distributor who is also qualified for the bonus. At that point it is totally or partially blocked. When someone in your downline reaches the equivalent infinity bonus rank as you, your infinity bonus stops with the person directly above them.
    Mr. Webster and I have a very different definition of “infinity.“
    While infinity bonuses are not wrong or bad, and they do enhance a pay plan to some degree, it is wholly illusionary that it pays even close to infinite. In fact, it is quite simple to prove mathematically that most infinity bonuses are designed to add, on average, only one, maybe two levels to the plan – that’s all!  Think about it. Most MLM companies are paying out about 40-50% on wholesale (not BVs or CVs). To pay more than 60% is risky, and more than 70% is a death wish (unless, of course, you have obscenely overpriced products or an extremely low BV to wholesale ratio). Well, most compressed plans are already paying out 50-65% on the first two levels. Let’s factor in some breakage and say it’s 50%. Now, add a third level of 10% and the company is paying 60%. Add a fourth level of 10% and you’re probably looking at a Chapter 7 bankruptcy. Some promoters of these plans will tell you that the 10% on the third level pays all the way down to infinity, thus creating the illusion that the pay out is 10%, 45%, 10%, 10%, 10%, 10%… and so on. It does not. This is classic smoke and mirrors.
    By the way, this is not theory. I’ve seen hard data that shows that over 80% of the total “infinity“ bonus is derived from just the first one or two levels the bonus is paid on.
    Ask the next compressed plan promoter if you can get paid on someone 200 levels deep. When they say Yes (because they have an “infinity“ bonus), ask them what the odds are that the person all the way at the top of that leg would not also be qualified for the maximum infinity bonus with a 199 level deep downline! Or, that no one among those 199 people would also be qualified and block the bonus.
    The reality is, the larger and deeper your downline grows, the more people you are going to have on your first few levels who are also going to have larger, deeper downlines. Doesn’t that make sense? So, as you’re downline gets bigger so does the layer of people right below you who are also getting the infinity bonus and blocking it. The more you need the infinity bonus, the less of it you quality for. When you fully qualify for all of it is in the early stages when you least need it!
    I’ve heard several compressed plan promoters claim that, in fact, they are paid “twenty levels deep“ or “I’m earning on my 30th level.“ Notice, they never tell us what they are earning on those levels. One honest gentleman who was making such a claim admitted to me that his 18th (bottom) level income was .03% (that’s three one hundredths of one percent) of his 18th level volume – which earned him 70 cents.  So, in fact, his claim that he was “getting paid“ 18 levels deep in a compressed plan was a true statement.
    Unfortunately, I don’t have the space to write a primer on“generational“ bonuses. But those who are familiar with this concept will understand (I hope) that the same blocking phenomenon will occur here as well. The larger your downline grows, the more likely you will develop “Directors“ or “Executives“ in the levels closer to you. Eventually, as your downline becomes larger and you really need to get paid deeper, the three or four “generations“ you are paid this usually small percentage on (1-4%) will also compress up to where, someday, they could simply become three to four levels.

    Bottom line:  Again, infinity and generational bonuses are good.  I’m not saying they are not. They just don’t add nearly as many levels to the pay out in reality as they do in theory.

Myth #9 – Compressed pay plans are a new, or “revolutionary” concept.

    The first pay plan I know of where the majority of the pay out fell within the first three levels was called Personal Wealth Systems. It paid three levels (about 6%, 6%, and 47%). It also launched in 1985. They eventually switched to a six level plan.
    The next one I’m aware of was called Legacy Lifeline. They launched in 1991. It took them less than three months to change to a six level plan.
    Next was Outback Secrets. They switched to a five level plan with infinity bonus after about a year.
    I was involved as a distributor for a company called Beverly Hills International. They started out paying 40% on level three. They ended by cutting that in half and spreading the balance in depth.
    Yes, this has been tried before. And in every case one of two things MUST happen – the company has strong growth, or they don’t.  If they don’t, that’s not good. I know for a fact that in three of the above examples the challenge was specifically stated as a lack of ability to “attract leaders“ (why would those who feel they can build large, deep downlines want to build one in a compressed plan?). Now, if there is prolonged, strong growth, then inevitably leaders develop with large downlines. And, what do you think those leaders do when they look at their huge downline and realize that they’d be earning two or three times as much if it were in a deeper paying plan? That’s right. They either demand a restructuring of the plan, or they leave. And that’s exactly what history has shown us. It’s not just my theory, folks. Those few companies employing a compressed plan who have achieved sizable organizations are all struggling today to maintain their organizations. There are no exceptions.

    Bottom line: The past can tell the future.

Myth #10 – Compressed pay plans are “Wave 4” plans.

    The term “Wave 4“ was coined by Richard Poe in his best selling book of the same name (published by Prima). In an interview that appeared in the May 1994 edition if Upline Poe was quoted as saying “I think the next frontier of network marketing involves the compensation plans, where everyone can realize that comp plans can evolve… that there can be more money available to rank-and-file distributors who are doing a moderate amount of work.“  Many assumed Poe was referring to compressed plans and began touting such plans as “Wave 4“ as advocated by the famous MLM author Richard Poe. In fact, Poe was not talking about compressed plans, but was discussing the shifting of pay outs from the back end more towards the middle!
    One page 135 of Wave 4 Poe specifically addressed his feelings about compressed plans. Here he discussed the benefits of more money up front, but also addressed the “equally obvious“disadvantages.
    At the bottom of page 135 Poe goes right to “The Wave 4 Myth.“That being, that his earlier comments in Upline were referring to compressed plans.
    One page 136, under the section titled “A Delicate Balance“ he clearly describes “Wave 4“ plans as providing “a delicate balance between front-end and back-end commissions.“

    Bottom line: A “Wave 4“ plan is a middle weighted plan, not a compressed (front-weighted) plan.

In conclusion: When you create a plan that essentially says “If you can’t build a big downline, then here’s a plan for you,“ you create a downline full of people who can’t build big downlines (or, at least think they can’t). In my opinion, it’s MLM welfare. It rewards mediocrity and penalizes excellence. Rather than lowering the bar, maybe we should all get back to teaching our people to jump higher.

[The following contains excerpt from the book Inside Network Marketing (also published by Prima) and an article that appeared in issue #6 of the MarketWave Alert Letter]

COMPRESSED COMPENSATION PLAN DEBATE RAGES ON.

    In September of 1998 I proposed an idea to Corey Augenstein, publisher of Network Marketing Today magazine (previously MLM Insider). I suggested that he publish a series of debate articles with two industry authorities taking opposing sides to an MLM related controversial issue. While there were myriad topics to choose from, we decided to take on the issue of compressed comp plans (those that pay the bulk of their pay out on the first two levels, usually 10-15% and 30-45% respectively). I nominated what I thought would be a worthy opponent primarily based on his success in such a plan, and his professional demeanor, at least up to that point. I took the “con” side, my opponent took the “pro” side. We each wrote a 2,400 word article presenting our case, then we each were allotted 1,200 words to rebut the other’s presentation. I wrote an opening article which dealt mainly on the manner in which many were promoting the plan, rather than attacking the plan itself. Unfortunately, rather than debate the merits of the compressed plan, my opponent instead chose to debate the merits of me.
    I have made several attempts to publicly debate the issues I raised in the article, including three hours of air time on my radio show, and every time I was met with the same frustrating challenge – my opponent seldom addressed any of the specific information in my article but instead always attempted to diminish the credibility of the source of the information (a common debate tactic usually employed when one’s argument is weak).
    To that end, what some compressed plan proponents have done recently is take my “con” article completely out of context and have disseminated it (mainly via the internet) as a stand alone article.  Then, they will attack the article as a biased propaganda piece allegedly written with malicious intent. As a result, I’ve been attacked for “focusing only on the negative” and for not presenting a “fair and balanced” presentation. Most seem to appreciate the fact that I dealt mainly with the hype that surrounds this plan, but then they often ask why I just picked on compressed plans when such hype is rampant in all types of plans. Of course, these folks are not being told that they are reading the con side of a debate article specifically focusing on this particular type of plan.
    For the record, I do not believe, nor have I ever stated, that compressed plans are wrong or bad, or should be avoided. Yes, they absolutely do offer certain advantages that other plans don’t. There are pros and cons to every type of plan. My only challenge with this type of plan always boils down to one single issue. That being…
    Based on a survey I’ve taken of over 6,000 active MLMers (from 1990 to present) the vast majority of distributors want to eventually quit their jobs and earn enough from their MLM business to comfortably live off of. The survey question read “What is the minimum you would have to earn on a monthly basis for you to consider yourself successful?” Six percent checked $86,000 (one million per year). Which means 6% misunderstood the question (I suspect most would still consider themselves successful if they only made $25,000 per month). Another 8% said they only wanted a “supplemental income” of $200-$300 per month. The remaining 86% were just looking to make a nice living, which they quantified as $6,000 to $10,000 per month (the mean response).
    So, clearly, the vast majority of MLMers are looking for a more balanced, middle weighted plan (although most of them may not know it). A compressed plan would be most advantageous to the 8% looking to make a few extra hundred bucks. However, to suggest, as almost every compressed plan promoter I’ve ever seen has done in some form or another, that you not only have a greater opportunity to get into profit (more money up front), but you have an equal or better chance at $6,000-$10,000, and “without penalizing the heavy hitter” who seeks wealth, is simply not a true statement.  If you add to the front end of a comp plan, you absolutely must take something away from the rest of the plan. That’s just common sense.
    Imagine you have a pitcher that contains 100 ounces of water (representing one dollar). You also have three cups in front of you that represent the front, middle, and back end of the compensation plan. The company can afford to pay out, let’s say, 60%. So imagine levels one and two are the front cup, levels three and four are the middle cup, and five and six are the back cup, and each level pays 10%.  So, you pour 60 ounces of water from the pitcher into the three cups. Let’s say you pour 20 ounces into each cup (so you’re essentially paying 10% down six levels). Now, tell me how you are going to add more water to the front cup without removing some from one or both of the other two cups?  Most compressed plans pour about 40 ounces of water into the front cup (about two-thirds of the pay out falls on the first two levels).
The point being, a plan cannot be all things to all people. If you add to the first two levels (heavily weighting the front of the plan), you absolutely must make it harder (I never said impossible) to earn a middle range income or create wealth. Sure, some have succeeded in earning 10K monthly incomes in compressed plans – and it took more work, more recruitment, and more sales volume to achieve their 10K monthly income by working a compressed plan as opposed to a middle weighted plan.
    The standard rebuttal (when, God forbid, someone actually focuses on the point) is that there is increased sales volume due to a lower attrition rate, which is due to more people getting into profit quicker.  While the argument has substance, no verifiable data has ever been produced to substantiate the claim. I’ll concede that there is certainly some amount of reduced attrition, however, at the point in your downline’s progression where you would first begin to earn a living in a middle weighted plan, the amount of sales volume you’re losing in a compressed plan (because it’s falling out of the pay range of the plan) would more than outweigh any reasonable estimate of increased volume due to lower attrition.  Furthermore, to suggest there are a significant number of people who are making token purchases simply to qualify for an even greater income opens up some serious pyramid issues.  If they are staying active because they love the products, that’s great. But it also means the reduced attrition has nothing to do with the compressed plan.
    As I predicted, virtually every company using a compressed plan has adjusting it to shift more of the pay out towards the middle and back of the plan. I believe we will continue to see a migration back to a more balanced, middle weighted approach.
    In the mean time, I will continue to challenge not the compressed plan structure itself, but those who present it as being advantageous to the 86% of us who want to earn $6,000 to $10,000 or more a month.  Yes, some are.  Again, I didn’t say it was impossible, just harder. If there’s any water in the middle and back cup, then there will be exceptional situations where such, or even greater incomes will be earned.  However, I challenge anyone in a compressed plan earning $10,000 or more per month to calculate their income if the pay out were evenly spread down seven levels and not come out thousands of dollars ahead.
    Compressed plans are fine, and even advantageous for certain people. But, like any type of plan, it can’t serve every income goal. One size does not fit all.
    For so many years we’ve had to deal with plans that made a few people obscenely rich at the expense of everyone else. Yes, that it true. The compressed plan is an overreaction to the mega-quota-laden, back-end heavy break away plan. It’s an extreme over-compensation. Eventually, as I said, I predict we’ll see an adjustment back towards the middle. Pay plan designers will start shifting a portion of that huge second level back down to the lower levels. Still not the best plan for the “heavy hitter,“ nor as good as it was for the “little guy“ who only wants to make a car payment. But, the man or woman who wants to make a nice, comfortable $10,000 per month will be SO glad they did!

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MLM Ignorance

January 4, 2013 Leave a Comment

By Len Clements © 2002

Ignorant does not mean dumb or stupid. Ignore – ant. That is, to ignore readily available facts, thus resulting in a lack of knowledge, not a lack of intelligence. Let’s be clear on that right away lest I offend anyone who finds themselves guilty of the acts and practices described in this article. For this article is going to delve into what is surely one of the most common factors resulting in not only failure, but in many cases utter devastation, both financially and emotionally. I’m going to attempt to defy human nature (a result of millions of years of evolution – I’m not saying it’s going to be easy) and cause you to reevaluate your MLM choices from a logical, rational, educated perspective.

The now cliche’ definition of insanity is doing the same thing over and over and expecting different results. It astounds me as to how many folks I see fail at building an MLM business, then go right on to do the exact same things in their next business. Or, worse yet, join a quasi-MLM opportunity with more red flags sticking out of it than the Russian Consulate (out of ignorance as to what defines and illegal pyramid), then when it crashes and burns – they jump to another deal that is almost identical!

Why? Well, here’s where the human nature part comes in. We are, as a species, drawn towards the opportunity to get something for nothing. We don’t want to go to the gym and work out, or eat less fatty (thus delicious) foods, we want to take a pill to lose the weight. We don’t want to work for our money, we want to win the lottery. We, not all, but millions of us, believe in psychic healers, fortune tellers, and yes, pyramid schemes. All in spite of the Everest size mountain of evidence that they don’t really work. Yet, we still believe. Because we want to believe, so badly. The idea of ridding someone of all known disease by a touch on the forehead, or of someone telling you what your future holds (for $3.95 per minute), or – that you can be a millionaire in 90 days by buying some tapes for $1,000, is just so compelling, so awesome. Don’t confuse me with the facts because I have to believe this!

You would think that a little common sense, logic, and rational thinking would make the evidence pile unnecessary. Yet both appear to be powerless against that allure of “something for nothing.” If a pill or potion really cured literally everything (as some marketers will attest, and no, I’m not exaggerating), then wouldn’t this product be front page news all over the world? Wouldn’t the inventor of the product be at the head of a ticker tape parade on his/her way to receiving their Noble Prize? Wouldn’t this mean that the average lifespan of a human would now double, with all that that entails? Yet, what would appear to be the single greatest scientific breakthrough in human history is not only not being marketed by the pharmaceutical company that won the multi-billion dollar bidding war for the rights to it, it’s being marketed, with little fan fair, via only medium to small multilevel marketing companies. And thousands of what appear to be intelligent, rational people are buying these products. Or, more specifically, buying into the pitch.

Same goes for money games. If you could really get rich by buying $1,000 worth of, whatever, why aren’t we all rich? If it was really that easy, that simple, that quick, why aren’t we all doing it?

What we can and can’t say about our products, and what defines an illegal pyramid scheme, is knowledge that every network marketer should have, yet few possess – in spite of the the numerous, easily accessible, totally free sources of this information. A company with over 50,000 reps was recently shut down for alleged illegal pyramid activities (among other things). Yet, over the months or years that these good folks were putting their heart and sole into this business, the information that would have revealed the legal vulnerability of this company was less than 5 minutes away the entire time. A few clicks of a mouse is all it would have taken to avoid possible financial and emotional ruin.

But they had to believe.

Where is this information? All around you. Want to know what limitations the FDA and FTC place on our product claims? Why not ask the FTC and FDA? It’s that simple. Always has been. The FTC will tell you at http://www.ftc.gov/bcp/conline/pubs/buspubs/dietsupp.htm. The FDA will tell you what they’ve told others athttp://www.fda.gov/foi/warning.htm. Read, then reconsider your company’s product presentation. Are they (you) vulnerable? Now you will absolutely know. No more questions. Ever.

Want to know what defines a pyramid scheme? You don’t need to be an MLM expert, or lawyer, or Attorney General to figure it out. The qualification is so utterly simple. Just ask the same question that the FTC asked of Amway in 1979. Can the last person still make money? Not only is it that simple, I’m not even paraphrasing legalese. That’s literally the question the court asked (obviously, in the case of Amway, they said Yes). The ignorant position holds that you can’t be a pyramid scheme as long as you have a legitimate product. Yet, every single company that has been attacked by a state of federal regulator for pyramid violations has had some kind of product. Some, like Equinox and Jewelway, had great products. The trick is, it’s not the presence of a product that matters, it’s the motivation for buying them that regulators look at. In other words, if only distributors are buying the products and few, if any, can realistically mark up the products and retail them to non-distributors, then the last person in can’t make money. If recruits are the only one’s buying the product, then you have to keep recruiting to make money. If the distributors are buying the products because they actually want the products, that’s fine too. Ask yourself, would most (not just a few, but the vast majority) of these people still buy these products if there were no income opportunity involved? If the answer is NO, don’t touch. And just because a company pays on legitimate, retailable products, doesn’t mean they can pay on distributor training or enrollment fees as well. Just because all the commissionable products are retailable doesn’t mean you can buy $5,000 worth just to qualify for the Platinum-With-Diamonds-In-It Presidential Executive position in the compensation plan, or that the primary motive for joining might still be the hype attached to their compensation plan or recruiting system. And just because other companies have been getting away with it doesn’t mean yours will.

Sure, there is the occasional shade of gray which requires a little research and studying to interpret. But like I said, the resources are everywhere, and they are easy to understand. Check out www.mlmlaw.com or www.mlmatty.com for everything you ever wanted, or could know about what defines an illegal pyramid. My own site at www.marketwaveinc.com has an abundance of such information.

There is also an abundance of good, qualify, legally sound network marketing opportunities to choose from. They’re not hard to find either. They’re the one’s that don’t make ridiculous claims about their products, which people are actually buying because they like them. They have merit based compensation plans, and they’re training and support systems involve, God forbid, doing some of the work yourself. That has been the formula for long lasting financial success in this industry for over 65 years. Nothing will ever change it.

If every network marketing distributor were to spend no more than two hours, total, doing nothing more than perusing the five web sites listing in this article, pyramid schemes could be wiped off the face of the Earth forever, and not one person would ever again see their family’s livelihood crumble into a pile of regulatory rubble. But, alas, at least half would read it all, then ignore it. It wouldn’t support what they want to believe.

It’s just human nature.

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The Binary & The Law: A Guilt by Association

January 4, 2013 1 Comment

By Len Clements © 2004

Every type of compensation plan, be it binary, matrix, unilevel, breakaway, Australian or Venusian, has it’s advantages and disadvantages. Each provides it’s own unique income generating benefits, and each has it’s own unique challenges. There is no perfect compensation plan. The binary plan is no exception. Having said that, one of the challenges specific to the binary is NOT it’s legality, in spite of the rampant rumors and prognostications that pervade the industry (mostly via internet message boards – now there’s a reliable source of information!).

Personally, I have no great affinity towards the binary plan itself. However, I loathe the mudslinging competitor who unjustly maligns the plan with claims of imminent regulatory action, even going so far as to suggest a pending federal action to outlaw the plan all together. Yet another example of the rise in scare-tactic recruiting that has been increasing since the early-90’s.

The argument goes that since so many state and federal attacks on MLM companies the last several years (which, overall, have been few and far between) have been on companies employing a binary-type compensation plan, clearly there must be something legally suspect with this type of plan. After all, look at the hit list: Destiny Telecom, Tele-Sales, Inc., Jewelway, Gold Unlimited, The Tax People, SkyBiz, and the list goes on. The first regulatory attack on a company using a binary plan was on the very first company that ever popularized the binary plan American Gold Eagle. This company was founded by the recognized creator of the plan, David Crowe, who latter (after AGE was closed down) started the aforementioned Gold Unlimited and who was eventually indicted on eleven federal counts, sentenced to prison, fled prosecution, and was featured on the TV program America’s Most Wanted (resulting in his eventual capture). Granted, this doesn’t bode well for the binary. But then, every accused would look guilty if we only heard from the prosecution. Let’s hear from the defense…

In each and every case in which a company using a binary plan suffered a regulatory attack, the legality of the compensation plan was NOT the target. It was what these companies were DOING with the plan that caused their legal grief, and what they were doing is the same thing that EVERY legally scrutinized MLM company in history was doing, regardless of the type of plan they used. That being, they were selling something that had no significant value beyond qualifying in the compensation plan.

In a typical binary plan distributors receive multiple “business centers” with which they may build a downline sales organization below. The more positions you “activate” the greater the potential income. In too many cases, the result was large up front purchases of products not to consume or resell, but rather to acquire multiple positions to build under. The more you buy, the more centers you activated. Therefore, you were essentially being paid for recruiting since only new recruits would make such purchases. Thus, the operation was deemed an illegal pyramid scheme (legal network marketing companies only pay commissions on retailable products that people would buy based on the actual value of the products in other words, they’d have bought them even if there were no income opportunity associated with the purchase). However, such token purchases primarily for income qualification purposes exists with every type of compensation plan. Whether you buy $5,000 worth of widgets to qualify for the Universal Master rank, or $100 worth just to meet your monthly quota, if no one is buying other than reps, and even they are, for the most part, only buying because they have to to get paid, you are equally vulnerable even if your company doesn’t use a binary plan.

State and federal regulators don’t just swoop in and permanently close down such companies. They issue injunctions or restraining orders that temporarily limit or cease operations while the company and the agency, and eventually the courts if either side chooses to take it that far, decide the eventual fate of the operation. Usually the company makes rapid and significant changes to the program in an effort to satisfy the authorities so they may resume business as usual. Historically, with rare exception, MLM companies in this situation will quickly agree to any and all revisions demanded of them, else their national sales organization quickly resembles a Road Runner cartoon a big cloud of dust with the word “POOF” in the middle of it. In fact, every company using a binary plan that was attacked was given this opportunity at some point. In fact, several companies eventually satisfied the attacking agency and were allowed to resume business. And, in fact, when all demanded changes were agreed to and the new, revised program was introduced to the field every single one of these companies STILL HAD A BINARY COMPENSATION PLAN! Clearly, the type of compensation plan they used was not the issue.

In fact, many MLM companies that have been legally attacked, or even shut down, have had perfectly legitimate products of value and a legally sound compensation plan, at least in it’s design. What many distributors today fail to understand is that regulators don’t simply ask “Is there a product or not?” or “Do people get paid for recruiting?” They watch how distributors actually use the products, and how they promote the compensation plan. In other words, they don’t take action based on what the program is designed to do, they take action based on what distributors are actually doing with it. A baseball bat is designed for the safe, innocuous task of hitting a baseball, but it can also be used as a weapon. Same with some MLM programs. They may be fine in their construct, but can cause great harm if abused.

Companies today that employ binary or binary-hybrid plans, such as Usana, Synergy, Longevity Network, Mannatech and Market America, are all considered safe, legal companies and, over a combined history of almost 30 years, have had no legal challenges to their manner of compensation. Yet, the binary aspect of these plans vary little from that used by Jewelway and Gold Unlimited. The difference is that these latter companies either sold products that had no real value to anyone (such as Destiny’s 55 per minute prepaid calling cards), or had quality products which were still only purchased primarily to qualify for a higher paying position in the plan, a la Jewelway. I once knew someone who shamefully confessed they had purchased over $35,000 worth of fine jewelry when they joined Jewelway. No, it wasn’t Mr. T or Deion Sanders. It was simply someone who was convinced by their less reputable (or legally ignorant) upline that it would financially behoove them to occupy 30 positions in the hierarchy. The more reputable companies mentioned above have products that are routinely purchased by folks who have no interest in an “income opportunity,” they just like the products. Furthermore, most of their distributors buy because they actually WANT the products, not just to meet a quota. Another vitally important difference in the design of the compensation system, or more specifically the qualifications, is that in legally sound binary companies there is no facility to purchase massive inventory loads to qualify more positions. Three’s the limit (more positions can be earned, but no additional products need be purchased to qualify them).

Viva la differance!

The legality of a network marketing opportunity has little to do with the design of their compensation structure and everything to do with the motivation for buying their products. History has shown us, over and over, that this applies to companies that use a binary plan as well.

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The ‘Duplicatable System’ Myth

January 4, 2013 Leave a Comment

By Len Clements © 2000

The “system” is just so simple. You say the same thing, send the same stuff, and get the same enthusiastic response, every time. Your downline builds smoothly, swiftly, and effortlessly, because the “system” is so effective, and easily duplicatable.

In a perfect world such a system may work. Clearly, this is not a perfect world.

I’ve found there are six common challenges to many of the “systems” that are in place today.

First, many are designed more to sell tapes, tools, training or lead generation services than to build downlines. Certainly there is a value to these types of products and services, to an extent. I’m by no means anti-tools or anti-training, and I’m certainly not opposed to good lead generation sources. I’m talking about uplines who design systems as for-profit businesses. I think the system should be a break-even venture at best. The idea should be to make it as accessible (affordable) to as many people as possible, for as long as possible, with the reward coming from the resulting increase in downline sales volume.

I’ve also found many situations where uplines were not using, nor had they ever used, the very system they were pitching to their downline. Often times this would involve the promotion of massive tape or postcard mailings, or cold calling “opportunity seeker” lists. It’s no skin of the back of the upline “leader” if his downline were to waste valuable funds on these recruiting methods. Yes, tapes and postcards worked well several years ago for some. That was before the US Postal System became saturated with tapes and postcards as others attempted to duplicate their success. Such systems are based on the “numbers game” theory. Take enough shots and you’re bound to hit the target occasionally. However, imagine you’re standing in the end zone of a football field and there’s an archery target positioned at the other end of the field – and you have to shoot with your eyes closed. Now imagine it costs you a buck an arrow. 

Many systems are given the responsibility for huge, fast growth in a leader’s organization. They’ll claim to have made $10,000 their first month, thanks to their “revolutionary” and of course “duplicatable” system. The income claim may even be true (although still legally suspect, but that’s another article). But rarely, if ever, is the “duplicatable” part. What’s typically missing from the story is that the person had a substantial downline in a previous company and moved a chunk of it over. Understand, I’m not suggesting there’s anything wrong with this, as long as there’s full disclosure. If the upline were to openly admit that he made so much so soon because he moved a group over, no problem. Certainly what he did to build that original group may have been honest and duplicatable, but the SPEED and EXTENT to which his downline grew in the new company was absolutely not the responsibility of any system, nor was it duplicatable.

Still others tout the success of their system in generating faster, larger incomes when much, if not most, of that income came from a deal they cut with corporate. Several years ago, while I and a few of my friends were shopping around for a company to join, we were offered a “front line” position to one company and “double the compensation.” Every percentage in the plan double it. Yet another offered us a front line position and a gift of almost 2,000 distributors (we eventually joined a company that made no deal). While not rampant, this practice of deal making is certainly not rare. Frankly, I’m not sure I even have a problem with it as long as, again, there is full disclosure. I suppose we all have the right to make the best deal the market will allow for our services, just like any other industry as long as you don’t promote your success as being duplicatable, or based on any recruiting or sales system.

Another challenge I find with many systems in use today is that they are based on theory rather than real world experience. They’re based on how we WISH things would happen rather than what really happens. For example, the 50 line phone script where you call your friend Bob and ask him if he’d be interested in hearing about an “exciting, ground floor opportunity” or an “revolutionary new product” and Bob, according to the script, enthusiastically responds, “Sure! Tell me about it.” As anyone with even a week of practical experience has learned, Bob rarely responds with such unquestioning acceptance of your offer thus making the next 49 lines of the script useless. Or, there are systems where we are suppose to send information packages to folks that include lengthy books, or other elaborate, relatively expensive materials, as if even a few of our prospects are actually going to devour it all before we follow up with them in a few days. Then there’s the fantasy land internet recruiting systems where we, allegedly, are going to recruit massive numbers of serious, committed, hard working professional networkers based solely on some enticing verbiage and a few pretty pictures.

Finally, in the vast majority of “duplicatable systems” I’ve seen (and I’ve seen many over the last decade of full time research and practice) there’s simply no aiming at the target. Like the not-so-exaggerated example I gave to open this article, we are suppose to generate leads from the same sources, say the same scripted pitch when we contact them, then send the same information package in the mail, or direct them to the same internet site or canned phone presentation. Then, when following up, we are programmed, almost robotically, to respond to various common questions and concerns with the same pat, even cliche’ answers. Indeed, this very aspect of the system is what makes it so “duplicatable.” Yet, one of the most basic, fundamental tenants of sales, at least in every other industry, is to “target” your prospect. Learn a little about therm. Find out what there issues are their wants and needs and address them individually. Such cookie cutter systems fail in this, utterly. Yes, it’s true that opening your eyes and aiming at the target does take a little more work, and it is a skill that does improve with experience, but practicing it will cause you to hit the target ten times more often! 

Let’s dwell on this final point for a moment. Here’s a simple, no brainer, qualifying question that we teach as part of our system: “Have you ever been involved in network marketing before?” Since there are only three possible responses to this question, and an obvious follow up question, there is no need for a script here. Your prospect must answer with either: A) No I’ve never been involved, or; B) Yes, I was once but not anymore, or; C) Yes, I am right now. The follow up to each would be: A) What got you interested now?, or; B) What happened with your last experience?, or; C) Why are you looking for another opportunity? Now you simply sit back, take notes, and listen. Capture sound bites that reveal what the particular issues, concerns, fears, and desires are for this specific prospect. If they answer with B and you discover their previous company was shut down by legal authorities, or simply went bankrupt, rather than giving a predesigned speech about your “highest paying plan” or “life changing products” you might want to focus a little more on company stability. If they answer with C and say they’re dissatisfied with their current MLM program due to lack of support, you might want to emphasize your great support system. You will certainly find folks who answer with A only to discover they didn’t understand this was network marketing, and they may have some concerns about that. Best you define and defend the MLM concept first before even saying a word about your specific opportunity. You can glean so much valuable information about a prospect from this one simple qualifying question. Yet many systems are completely void of any such information gathering mechanism. They’re based on the proverbial “throw the mud against the wall and see what sticks” method. Even when it sticks, it’s still mud.

When evaluating a system, ask these questions:

How much profit is build into your training and support tools? There should be very little, and preferable none.

Did those who designed this system use the same system to build their downline? If so, when? What worked just five years ago may not be as effective today.

Did you move a group over from another company? If so, how much does that group account for your current touted income?

Did you make any kind of deal with corporate? Are you receiving any income outside what is normally paid to all other distributors? Also, ask them what level they are to the company. If they are first level, they are either a founding distributor or they cut a deal.

Did ANYONE ever actually use this system to build a substantial, sustained downline? Or, is it based on Pollyannish theory? Note: “Sustained” is a key qualifier to this question. There are many recruitment focused systems that effectively build large downlines but generate little recurrent sales volume, thus are volatile and short lived.

Are any fundamental, time proven sales methods built into the system? Specifically, does it allow for any variance in the presentation or information package? It should.

Please understand, there are many effective, proven systems being taught and practiced throughout network marketing today. As usual, I’m dwelling on the negative because, well, it’s my job. I’m here to tell you what you won’t hear at a typical opportunity meeting. Bad, or just impotent systems are not the norm, but they are all too common, and you should be aware of not only what to look for, but look out for.

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The A-B-C Technique

January 4, 2013 Leave a Comment

By Len Clements © 1994

Would you ever try to pour hot coffee into a thermos with the lid still on? Could you put a video cassette into your VCR if it already had a cartridge in it? Of course not. Unfortunately, the way that most people prospect for MLM partners makes about as much sense.

For many years, we’ve all been taught to call up our friends and try to get them to come to an opportunity meeting, or at least read some information or watch a video about our MLM opportunity. To do anything different would be going against the number one commandment of our industry – duplicate what works. In other words, “Thou shalt not try to reinvent the wheel”. I’m certainly not about to suggest otherwise. However, I do believe there are very effective ways of making the wheel roll a little smoother and a little faster.

First and foremost, we must remember that when you propose your opportunity, you are offering a business opportunity. A chance at being a true entrepreneur. Secondly, you are proposing your prospect get involved with multi-level marketing. In other words, you have at least one, and probably two, major challenges here. Challenges you must overcome before you can even think about proposing your specific opportunity. Challenges that, nine times out of ten, are the main reason why your prospect won’t even look at your opportunity.

Surveys indicate that about 85% of all working Americans would like to own their own businesses, if they could. In other words, if all obstacles were removed, they would prefer to be their own boss rather than work for someone else. This amounts to approximately 160 million people! These are your MLM prospects. Now, when 160 million people want to do something and don’t do it, there must be a good reason. When they are asked, they usually come up with these four.

It takes too much money. I don’t have thousands of dollars to invest in a business.

It takes too much time. I don’t want to work 80 hours a week to get my business going.

Too risky. Over 80% of all businesses fail in the first two years.

I don’t know how. I’ve never taken any business courses. I don’t know anything about taxes, accounting, marketing, etc.

I can assure you, if your prospect is not currently operating their own business, they have considered the possibility at some time in their lives. They have also determined all the reasons why they can’t (probably all four reasons). Therefore, before you even start to offer your MLM opportunity, you might want to dispel, at least slightly, these beliefs about why they can’t go into business for themselves.

Let’s say you are having lunch with your friend and you casually mention the fact that you are thinking about starting your own business. Then you ask if they have ever considered it. Sure, they have considered it at some time or another. Well, why didn’t you, you ask. They will inevitably respond with one or more of the previous four reasons.

Now comes the fun part. You ask them if they would ever consider going into business for themselves if; the total start up costs were under $500 and the income potential was higher than the earnings of some CEO’s of fortune 500 companies; the total time investment could be as little as 10-20 hours a week; they could continue to work in their present job until the income from their business was sufficient to earn them at least an equal income, so there is little risk; and best of all, there were numerous consultants available to them who are experts at running this business, who would train and advise them personally, for an unlimited number of hours, for the life of their business, absolutely free! Not only that, you say, but there is another company that will take care of all your research and development, shipping, payroll, payroll and sales taxes, legal problems, and so on. And, this company will do this for them every month, for the life of their business, for around $20.00 a year.

Of course, your friend won’t believe any of this. Ask them if they would consider it if all this were true. Most likely they’ll say something like, “Well, sure. But there’s got to be a catch”. Is there? Is this not an exact description of your basic MLM business opportunity? Is any of this even an exaggeration? No. You’ve just completed step “A” of the “ABC” technique.

Now, for the first time during this conversation, you will suggest that this type of business involves “network” or “multi-level” marketing. But don’t get into your specific opportunity yet. There still may be a major hurdle yet to overcome. You still have step “B” to take care of.

There are basically three types of people you are going to come across during your recruiting efforts. First, the cynic or skeptic. They believe MLM’s are all scams, get-rich-quick schemes, illegal pyramids, involve door-to-door and home party sales, and so on. One person I know even referred to them as “cults”. For whatever reason, these people have a low opinion of MLM in general. The second type are those that don’t know anything about MLM. Perhaps only that it’s “something” like a pyramid, or that they’ve at least heard of AMWAY or Mary Kay. The third, unfortunately smallest, group are those that are naturally intrigued by the concept. Usually these are people who were originally in the second group who heard about someone who made a lot of money doing MLM. By the way, if you find someone in this group, skip step “B”. This step is presenting the MLM concept as a viable, honest form of business. This usually involves explaining what MLM is not, not what it is.

“You must open your prospect’s mind
before you can pour anything into it”

Step “B” could be an entire column unto itself. Basically, you may want to mention that there are well over five-million people in the U.S. that are pursuing this form of business. Also, throw out names like Rexall, MCI and US Sprint, which all involve MLM as a means of obtaining new customers. Briefly explain the obvious difference between an illegal pyramid and a legitimate MLM company. When I pursued this business (before I was forced to be “objective”) I would always include favorable articles about the MLM industry in general. You may want to lead in with a generic video or audio cassette, that serves to only legitimize the industry, not promote any particular opportunity. Whatever you can do to give the industry more credibility, do it now.

Once these first two “preparation” steps are completed, you should then hand your prospect the video or literature about your opportunity. Challenge them to find the catch. Tell them you can’t, even though you thought it was too good to be true too. Instead of trying to get them to find out what all the good things there are about your program, encourage them to find all the bad things! Challenge them to debunk it. Let’s face it. Someone would be much more likely to watch a video if it were for the purpose of justifying their negative beliefs, than to contradict them. It’s human nature.

The bottom line is this. The real trick to successful recruiting in any MLM organization is not convincing someone who has looked at your opportunity to get involved with you, it’s getting them to just look at the opportunity. Don’t you agree? Let’s face it, once someone seriously looks at a good MLM opportunity, it’s pretty hard to not be at least a little intrigued. Unfortunately, 9 out of 10 won’t seriously look. Actually, I’d guess 5 of 10 won’t look at all! You’ve got to get them to just look. If you’ve got a good opportunity, the rest will take care of itself.

A good analogy here would be the thermos and the VCR. Like the thermos, you must open your prospects mind before you can pour anything into it. And like the VCR, there may already be something in there that you might have to remove first. To borrow an analogy from Anthony Robbins (Robbins Research), it’s as if your beliefs have legs like a chair. Only these legs are usually solid steel instead of wood. Believe me, people’s beliefs as to why they can’t go into business for themselves, and sometimes what they believe MLM to be, are solid beliefs. If you don’t do something to at least weaken those legs before you come in with your new belief, forget it. It will bounce right off.

I’m certainly not suggesting that this “ABC” technique is going to knock down those legs (although it could). But if you can at least instill some doubt in the mind of your prospect, some spark of interest, or at least pessimistic curiosity, you’ve made a major gain.

I also realize this technique lends itself to certain situations better than others. For example, this technique might be a little more difficult to pull off if you do a lot of long distance sponsoring. But it’s still not impossible. Put it in writing, or better yet do your own audio tape.

For the last 30 or so years, in almost every MLM organization, we’ve all been taught to go straight to step “C”. Contact your prospect and propose your MLM business opportunity. “MLM” and “business” may be scary propositions, and needlessly so. Steps “A” and “B” are designed to reduce or eliminate this stigma, so you can bring more prospects to step “C”. Get them to look!

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