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15. Direct Selling And Its Comparison With MLM
from:There is a lot of confusion prevailing in the world of MLM and the marketing industry about MLM being a form of direct selling. While the promoters of MLM and the lobbying arm ; the Direct Selling Association have put in a lot of effort to convince law makers and tax strategists that MLM is a form of direct selling because they have much to gain. However, people with a lot of experience in the field of marketing beg to differ. They are of the opinion that MLM is nothing but a pyramid scheme and is not a true form of direct selling.
People are mostly arguing that MLM is not selling any product, this one fact that has deemed many MLM programs illegal. The law requires a marketing program to sell some physical product or some service in exchange for legally adequate compensation. If there is no product and people are buying in to a program in the hope of recruiting others and making a profit from their contribution to the kitty, the program is doomed right from the beginning. People who enter the program at the fag end of the deal are only destined to lose their investment. There are, however, people who disagree.
The law makers call MLM ‘recruiting MLM’ which requires a person to recruit many people in his down line in order to generate a reasonable income. They do agree though, that selling is a part of recruiting people in the process of building that much required down line.
Direct sales is being able to take your product out in the market and selling it to people without the need of them to further sell it to others. While MLM requires people to further sell the product in order for the company to continue to make a profit every time someone sells the product. In direct sales once a product is sold the company closes the sale. In MLM once the product is sold, the company waits for the customer to sell it again in order to make another profit. This process continues every time a new customer buys the product.
A legislator once created a commotion with the comment that MLM is no more a process of direct selling than a pig is a horse. He argued that whenever someone approaches you with a product he wants you to buy and in the same breath mentions that it would be a great business opportunity for you to join – that is nothing but MLM, though direct selling is involved too if the prospective customer just buys and never joins the ‘good business opportunity’.
The controversy whether MLM is actually direct selling or a pyramid scheme will continue for eternity. Nevertheless, as long as people are able to make an honest living there should be no interference from vested political interests.
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