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Beware network marketing
Dear Dollar Diva,
What is network marketing?
Network marketing is another name for multi-level
marketing. It is a system of marketing that relies on people selling
a product and recruiting other salespeople. Each person gets a cut
of the profits from his "downline" -- the network of recruits and
sub-recruits he has generated.
Who succeeds at network marketing? Almost no one.
Then why do so many folks get sucked into trying? The operative
word here is marketing -- these are marketing people, and they know
how to package their plans to make them irresistible to the unwary.
Like lottery officials, multilevel marketers sell
a dream -- only they call it an opportunity. Unfortunately, as a
loser, you can end up with inventory that you paid for and can't
unload, and bad feelings from friends and relatives who feel that
you tried to exploit them.
Network marketing plans are not the same thing as
illegal pyramid schemes. In an illegal pyramid scheme the product
is irrelevant -- you make your money recruiting new distributors.
In a legal network marketing plan, the emphasis is supposed to be
on the product. Can you see the possibility of some gray area here?
The Diva urges you to stay away from all network marketing
plans -- the risk is just too high and the success rate too low.
To avoid getting sucked into an illegal pyramid scheme,
the Federal Trade Commission urges you to stay away from plans that:
- Include commissions for recruiting additional
distributors
- Ask new distributors to purchase expensive
inventory
- Talk up the profits to be made from your
downline rather than the profits to be made from the sales you
make yourself
- Make claims and promises about the product
and your earnings potential that sound too good to be true
- Present successful distributors whose success
looks too good to be true
- Pressure you to pay money or sign a contract
at an "opportunity" meeting
 DOROTHY
ROSEN has a master's degree in finance, with a specialization in
accounting, from the Kellogg Graduate School at Northwestern University
in Evanston, Ill. Rosen has more than 15 years of experience in
the financial arena, serving in Illinois and Florida as a certified
public accountant, financial consultant, expert witness and educator.
She is owner of Dorothy Rosen, CPA, a public accounting firm that
serves individuals and small businesses.
-- Posted: Feb. 2, 2000 |
