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Network Marketing Ethics, Part One

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You’ll never see these kind of network marketing tips anywhere else.

Those being tips to help you run your business more ethically. Over the next two to three weeks, I’ll be publishing two or three articles to help you not only determine how ethical a particular company is, but also to become a more ethical business person.

MLM company ethics

What’s at the top flows down. If you read the Old Testament in the Bible, there are ample examples of where sons committed either the exact same, or very similar, sins that their fathers did. You can also find examples of godly couples whose children grew up to do great things for God.

Ever heard yourself saying the exact same thing, in the exact same intonation, as one of your parents did? What’s at the top flows down.

And the principle is not excluded to families. It works in every area of leadership, including leaders of companies. In this post, we’re going to cover the important areas to look at when deciding whether a particular network marketing company is following ethical standards. Two huge areas are finances and products, so we’ll start with those.

Financial integrity

If you spend some time lurking on network marketing forums or blogs, you will eventually hear about companies that go bankrupt, companies that shut down almost without warning, companies that decide that they will no longer pay distributors based on multiple levels but only a basic commission. Anyone with an organization that extends at least three levels down hurts when things like that happened.

The first MLM company I belonged to went bankrupt. I had only ever sponsored one person and had been out of the matrix about a year when the bankruptcy went down, but it was a large company, over fifteen years old. Imagine all the people who lost a paycheck in the blink of an eye – even though they had done nothing wrong!

Now, in this case the financial problems were related to other ethical issues going on at both the corporate and distributor level. However, in many other cases where a company that shuts down, the cause has to do strictly with bad financial choices made by the corporate leaders.

So, how do you make sure a company is in good financial standing, and not constantly robbing Peter to pay Paul? The first thing to do is to find out if the company cash-flows everything – paying for websites, product creation and manufacture, renting hotels for conventions, paying out bonuses – or do they use debt to carry them through sticky circumstances? Call the corporate office and ask them, point blank, if the company has any outstanding debt. If they hedge, most likely the answer is yes, and you will be safer to forget the company exists and look for another.

Another way to get an idea of how the company handles its finances is to do an online search, “XYZ Company finances” to see if there are any forums or blogs where distributors are complaining about not receiving checks on time, or talking about rumors of possible financial trouble. Usually such rumors won’t accompany companies that make sure to stay out of debt.

While we’re talking about money, let’s talk about Ponzie schemes. These are companies that supposedly are MLM, but the distributors get nothing for the money they put in…unless they find enough people to pay into the pyramid so they can earn a chunk of the stolen money.

Which is what a Ponzie scheme is, when you come down to it. It’s a bunch of thieves encouraging others to become thieves because they’re too lazy to go flip burgers and Micky D’s. So, guess what?

Ponzie schemes are illegal. Do not ever get involved with a company that is not providing you with a bona fide product or service for your monthly input.

Speaking of that, another way to find out if the company is handling their finances in an ethical manner is to find out what the quick-start bonus is. Many product-based companies require you to purchase some sort of package or other in order to become a distributor. The first thing to look at here is whether what comes in the package is reasonably priced compared to purchasing the products separately on the website.

If a package costs, for example, twice as much as the total cost for the individual products, walk away from the company. The five business opportunity DVD’s and two getting-started audio CD’s that are in the “distributor package” do not even come close to making up the difference in price. The company is jacking up the prices in order to bribe their people to sponsor new distributors. The excess money earned by the package purchase is used to pay a hefty bonus to the sponsoring distributor.

Bribing is a type of manipulation. Manipulation is using people to get what you want.

Manipulation is not ethical.

The product

Most health-and-wellness MLM companies sell products that are not healthy.

That made some of my readers dizzy, so let me give you a minute to regain your bearings and I’ll repeat it. Ready?

Most health-and-wellness companies sell products that are not healthy.

I’m not lying. Read the ingredient labels. Whey protein powders contain artificial flavors and preservatives, as well as dried milk that come from factory-farmed dairy cows. Juices contain sugar. Supplements contain unhealthy fillers in the capsules. Shampoos and other body care products contain sodium lauryl sulfate and other ingredients known to be carcinogenic or otherwise toxic to the body. If they declare not to contain SLS, parabens, and other known synthetic toxins, they nevertheless contain synthetic ingredients whose negative effects are not yet known.

Think about this: a couple of decades ago, nobody realized that SLS and parabens were potentially dangerous to the human body. Who’s to say that many of the other synthetic ingredients will not eventually be discovered to potentially cause health problems, as well?

What if all the ingredients on the label sound fine? Chew on this for a minute: did you know that the FDA allows manufacturers to place substances in processed foods without putting the substances on the label if they are under a certain percentage of the whole product?

We’ve been told that these chemical substances can’t do any harm in such small amounts. No? Then how come this present generation of people have a higher variety and higher amounts of toxins in our blood than the generations who lived before the 1950s? Toxins build up. The liver cannot handle it all, so it sends them into fat cells. And these toxins toxify those cells and the blood, leading to all manner of degenerative diseases.

I once joined an MLM not to try to make money, but because someone I trusted (badly placed trust; he was the local businessman I mentioned in the introduction) was a distributor and told me that the liquid supplement they sold was terrific for the body. Well, it made me break out in hives! When I called the guy and told him, he told me to sip it slowly over an hour. I began doing so, and the hives stopped. But a red flag went up inside. Any supplemental juice that is really good for you is not going to make you break out in hives if you drink the whole thing down (and it was only some powder mixed in a couple ounces of water).

Later I found out that the owners of the company were on purposely adding a stimulating ingredient that was not on the label, in order to make customers think that all the nutrients were energizing them. Of course, the ingredient was not on the label.

(By the way, health food stores sell nutrient juices like that. Not all, but some. Buyer beware.)

Then there was the company that I belonged to for a few months a couple of years ago. For ease of understanding, let’s call it SuperGenes. It was about ten years old when I joined, and was pretty big. It also had a huge line of products, some that were truly healthy, others that were borderline, and still others that were not much healthier than a candy bar.

For example, the cleansing juice was a great formula. The whey protein powder ingredients were acceptable – not as obviously bad as what some companies sell, but not as healthy as possible. The snack bars were a travesty. If you know anything about muscle testing, then I can give you this hint: my muscles instantly unlocked when testing these quasi-foods. This means that they were not healthy. They were loaded with sweeteners – agave nectar being the top offender (contrary to what you may have heard, agave nectar is not healthy) – and semi-healthy filler ingredients. The products in their personal body care line contained many synthetic ingredients.

Moving away from SuperGenes, I’ve noticed that carrying “healthy coffee” is a growing MLM trend. Coffee is not healthy. Never has been, never will be. I don’t care how “organic” or “fair trade” it is. The roasting process the coffee beans go through change the molecular structure of its naturally-occurring caffeine such that the body has trouble metabolizing it. This makes it number one, a potential burden to your liver, and number two, a very real hindrance to any fat-burning goals you may have.

If you like your coffee, go ahead and drink it. No condemnation. My point is that a company claiming to care about people’s health, and then putting coffee in their product line, really doesn’t. They care about making money. If they would just go ahead and admit that, “Hey, we know coffee isn’t a health drink, but we also know a lot of people might buy it if we sell it,” I wouldn’t have as much of a problem with it.

What if the “product” is a service? My husband and I were actually customers in an energy MLM for a time. We did it to support a friend, but I wouldn’t have if the cost of the electricity had been more than other non-MLM electric companies. The price per kilowatt was actually right in the middle.

On the other hand, there’s a web hosting MLM out there that charges $10 a month per website. With regular webhosting, you would pay less than $7 per month for as many websites as you wanted, paying an additional $14 or so a year per domain name (that’s slightly over a dollar a month). So for this MLM company you would pay $40 a month for four websites. With a web host such as Hostgator or Green Geeks, you would pay around $10 a month – six dollars for the hosting, and another four dollars a month for three domain names. Your first domain name would be included in the webhosting contract.

In such a case I would say that the service is not worth the price, and the ethics of charging such a service for such a price is dubitable.

Do your due diligence before signing up with any particular company. Are the products of a wellness company truly healthy? Do non-food products adhere to high standards of quality? Is the price of the service reasonable? This will take some legwork, but you do not want to find yourself representing a network marketing company whose product is below par.


Company training

The area of training might be called The Great Sin Of Network Marketing, because many companies encourage manipulation and deception. In addition, some companies’ “training” does nothing to help a new distributor learn the nuts and bolts of business building.

Warm-fuzzy motivational training

Let’s park there for a minute. You are probably aware that you can only earn bonuses and commissions from your downline if you make a minimum purchase from the company product line every month. However, some companies will not pay out commissions unless you also purchase the monthly “training” CD or book or whatever – removing another twenty to thirty dollars from your bottom line. This would not be objectionable if the training actually helped you to build your business. But it does not. Rather, it provides you with a lot of feel-good motivational fluff that gives you warm fuzzies for about a day but does nothing more helpful than that.

And believe me, feeling warm and confident for twenty-four hours will not bring new people into your downline. The very first MLM company I joined required a monthly “training” purchase. A later one did, as well. The rationale the company presidents gave was that if you’re really serious about building a business, you’ll be really serious about improving yourself.

I have two comments to make about that. First, if you have to read a book or listen to a CD to get motivated to meet your goals, your goals aren’t really your own and you need to regroup and figure out what it is you really want to do when you grow up. Network marketing might not be for you. (Yes, I just said that. More on that in the next chapter.) Second, you improve yourself by patience, practice, and persistence. No CD or book can give you any of that.

Step back and question when a company won’t give you your hard-earned money unless you participate in a bogus training program.

Business presentation training

How companies train their distributors to “share the opportunity” is one of the most unethical things they do. You can’t just say to a friend, “Hey, I just found a way to make a little extra money. Mind if I show you what I’m doing?”

No. Instead, you start by giving them positive strokes. “We’ve been friends for a long time…maybe you can help me…” Or, you ask leading questions: “Do you know anyone who could use an extra income/wants to retire in two to five years/etc.?”

Or, you deliberately deceive. Instead of asking someone to watch the video of the business you just started, you tell them something like, “I have come across something that I really need your opinion on. Do you have some time tonight…?”

Such statements are not necessary. If the person is a relative or friend who really cares about you and wants to support you, they will look at your deal without you playing games with them. If someone is really interested in making extra money, they’ll look at the opportunity without asking you a hundred skeptical questions.

HINT: If someone is skeptical right out of the gate, they’re likely not going to do anything more than sap your energy and momentum away.

Product training

A network marketing company that cares about its product and believes that it makes a difference in people’s lives will provide in-depth information about it. They may have a blog, or archived conference calls or webinars within easy reach of new distributors.

Even better, they will offer local training events in areas where there are concentrations of distributors.

Network marketing training from the company should be hype-free, deception-free, and focused on one, helping their distributors communicate with others in genuine conversation, and two, teaching about the product line.

Paid replicated websites and other rip-offs

Remember that energy MLM I mentioned earlier? At one point I came this close to signing up with the opportunity. One of the two things that gave me pause was the fact that in order for a “customer service rep” to have her own replicated website, she had to pay twenty or twenty-five dollars a month for it.

What is that about? That is about the company wanting to make extra money. It is baloney. Most MLM companies provide a replicated website for free. Maybe it was a costly endeavor back in 2000, but the Internet and programming have both come a long way since then. Providing a free replicated website (YourName.YourCompany.com) is not a huge expense.

What if a company makes distributors pay to share the opportunity video? First of all, keep in mind that you don’t need an video to share the business opportunity with a prospect. Ask any of the bigshots in Amway or Mary Kaye who started out decades ago. Even as recent as ten years ago, some people who are making big money today started out by drawing out the matrix on a napkin in a coffeeshop to explain the business to a prospect.

In addition, most opportunity videos are full of hype and implied promises. They make network marketing look and sound easy, and if you’ve been in the business for longer than a week you know that it’s as easy as picking up an angry cobra. Okay, maybe not that bad, but you know what I mean.

That said, being able to show prospects a professionally-made video is great for two reasons. First, you don’t have to do much work. Second, the person watching the video sees that if they decide to do it, they won’t have to do much work, either.

At the very least, the company should provide online webinars that explain various aspects of the company – the compensation plan and the products being the biggies. If a company does not let its distributors have free access to at least some of such materials – you have to pay so much per prospect to show the opportunity video – keep on looking.

A perfectly ethical company?

I couldn’t possibly list all of the unethical behaviors committed by some network marketing companies. I would hazard a guess that many companies do something that is on the border of, if not obviously on the side of, unethical – without intending it. Why would I say that? Companies consist of imperfect human beings. Even if you examine corporations like Wal-Mart, Sears, and American Airlines you’re going to find some kind of unethical behavior, however small.

Also, there are a lot, and I mean a lot, of MLM companies out there. That large number will add up to more unethical practices than what I can come up with.

So when you’re searching for the most ethical company, don’t look for perfection. You won’t find it. Instead, look for companies run by people who really care, and that seem to be more ethical than not.

Improve your ethics by signing up in the form at the top right hand of this page to get your FREE e-book to help you learn to build your biz through Social Media the RIGHT way! (And stay tuned for the next post in this series in about a week.)

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