Running head: THE CONTROVESIAL BUSINESS OF NETWORK

MARKETING

The Controversial Business of Network Marketing

Arturo Fuentes Alfaro
Rowan-Cabarrus Community College

Running head: THE CONTROVESIAL BUSINESS OF NETWORK

MARKETING

The Controversial Business of Network Marketing

Network marketing is a controversial subject on the direct selling world of today. Many
people go into this business opportunity seeking to improve their current economic situation and
their lifestyle. They are promised fortune and success with the business plan that is presented to
them which must be followed for success to be assured. Network marketing has a fine line which
separates it from being a pyramid scheme. People are encountered with the challenge of
differentiation between a network marketing plan and a pyramid scheme plan which can lead to
losses and this is the controversy that has been sparked in recent years. Many people believe that
network marketing should be illegal because all companies end up deviating from their original
mission statement and turn into a recruitment based company.

The multi-level marketing enthusiast believes in the infinite amount of money that can be
made with the business plan the company provides. The key to succeeding in the MLM business
is self motivation. If the entusiast stays true to the business plan they can even benefit from item
such as many tax benefits since they are self-employed. Some of the benefits are tax deductions
according to Fontinelle (2014), and they can range from traveling expenses, home office
expenses, and taking classes related to your business at any accredited school near you.

Running head: THE CONTROVESIAL BUSINESS OF NETWORK

MARKETING

MLM businesses also stimulate the economy with their motivation to help people start
their own business and to venture out and become motivate citizens. Another reward that MLMs
offer are business incentive trips for their top performing sales individuals. These trips provide
people the opportunity to travel to places they possibly could not travel with their own money or
their busy schedules. These trips can be to annual conventions or just leisure weekends to reward
the sales force for the hard work put in for the entire year. The trips also help the sales force to
become even more motivated to work harder the upcoming months and future years. Motivation
is a driving force that MLM companies use to attract more sales force in the business. This
motivation is contagious to the salespeople also and it leads to more sales which means that the
salesperson makes more money. Business trips are an opportunity for a company to thank the
sales force in a fun, relaxing way which in turn raises up sales numbers the following months
because all salespeople are happy and motivated.

The psychological rewards that MLM companies provide their salespeople are invisible
to the human eye but not to the heart. Most MLM involved individuals become confident and
self motivated individuals because of the opportunity they are given to make weekly what they
wish. Most the people that join MLM companies have been salary employees at a point in time
and the fact that they are now given an opportunity to make infinite income is very enlightening.
Also the MLM enthusiast becomes a walking billboard in the streets for their company which in
return helps the salesperson with their people skills. There will be instances where the
salesperson is told by someone that they are not interested in the product and this is where self
motivation kicks in. The individual with time learns to be numb to the word no because they
are psychologically strong enough already to accept rejection. The salepersop motivates

Running head: THE CONTROVESIAL BUSINESS OF NETWORK

MARKETING

themselves and keeps going forward no matter how many rejections they encounter because they
believe in the MLM business plan. Being in a direct sales company demands a person to be able
to communicate in a friendly yet direct way to convince consumers to purchase the products
even if it means rejection at times. Having to talk to strangers for many people is not an easy task
but MLM companies train their personnel to become confident and self motivated and this is
another reward of joint an MLM company.

The opposing side of MLM companies is that they provide false promises to the
salespeople and in return friends and family relationships are ruined in the process. Joining an
MLM company sometimes requires a person to recruit to get a recruitment bonus. The new
salespersons desire to succeed drives them to go recruit and sale products to their closest friends
and family and if they products is not effective or the business plan fails tempers flare. The
salesperson at the time of the sale or recruitment process does not analyze the repercussions there
can be for involving close friends and family members. Most salespeople that fail at the MLM
business plan end up with broken friendships and hurt family bonds because they are so engulfed
by the ambition to succeed in the leadership titles that the company offers if they recruit and sell
to anyone that comes in contact with them even if it ruins relationships and this is why people
argue these business cross the lien and become pyramid schemes.

MLM businesses sometimes are hidden pyramid schemes who's mission is to recruit as
many people as possible. Salespeople are sold the idea that they must recruit people to make a
profit and most of these people recruit on a daily basis. The controversy is that most of the
people on the bottom line do not see as much money as the people at the top do. This is a red flag

Running head: THE CONTROVESIAL BUSINESS OF NETWORK

MARKETING

that the business is a pyramid scheme and most MLM companies in todays world have some
kind of recruitment bonus. Salespeople who are eager to make money always go to recruits
friends and family first and then move on and go to strangers next. Whenever the people start to
see no money is being made they quit the business and resort to go after the recruiter for lying to
them and by this time it is too late for them to get their money back or their inventory bought
back from them and this is another reason people want MLM companies to be shut down
because they all are pyramid schemes dressed disguised.

Inventory purchasing and startup costs cause controversy in MLM businesses. Many
companies have high startup costs which to many people is ridiculous that they have to invest to
start making money. Also many people that have quit companies that require these high start up
costs also are forced to purchase inventory and once they stop being involved they are stuck with
inventory. Also some people are forced to buy expensive sales training material which is not
bought back one the person quits working for the MLM company. The pressure that people are
given to purchase inventory and sales training material are some of the negative forces that
demotivate salespeople into quitting and end up with a loss instead of profit form starting their
own business.

In conclusion, any type of MLM business can be good or bad but individuals must be
able to identify what are the ethics and background of the company they plan to enter into. Many
people do have success stories from being in MLM companies but also there are negative failure
stories. It all comes down to how bad the individual wants the money and what sacrifices they
are willing to go through to travel up a latter of success or fall off that latter.

Running head: THE CONTROVESIAL BUSINESS OF NETWORK

MARKETING

Running head: THE CONTROVERSIAL BUSINESS OF NETWORK

MARKETING

References

Albaum, G., & Peterson, R. A. (2011). Multilevel (network) marketing: An objective view.
Marketing Review, 11(4), 347-361.

Fontinelle, A. (n.d.). 10 Tax Benefits For The Self-Employed. Investopedia. Retrieved October
20, 2014, from http://www.investopedia.com/articles/tax/09/self-employed-taxdeductions.asp

Koehn, D. (2001). Ethical Issues Connected with Multi-Level Marketing Schemes. Journal Of
Business Ethics, 29(1/2), 153-160.