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Friday, 17 July 2015
Robert FitzPatrick - offers a new analysis of 'Multi-Level Marketing'.
Robert FitzPatrick offers a new analysis of 'MLM.'
Unregulated, Unexamined And Unchecked, Multi-Level Marketing Has Reached Saturation
Analysts examining "multi-level marketing", e.g., Herbalife, Primerica, Avon, etc., increasingly recognize MLM is a distinct sector and that all MLMs are essentially the same; they inevitably ask about "saturation".
A new 50-page statistical and analytical study of 12 publicly-traded MLMs indicates the saturation stage has arrived. Large MLMs will not "return to growth".
The USA is the ideal market to examine saturation. MLM has operated here longest, generally without regulation; MLM's strongest promotional/recruiting/lobbying resources are here. USA saturation portends global.
After 40 years of expansion, larger MLMs now face a triple threat: demographic saturation, dilution from ever-increasing clone start-ups, and "information saturation" as facts about consumer loss rates spread.
In MLM terms, "growth" is not organic or renewable. Rather, it only means the recruiting exceeded the quitting. The entire MLM sales/customer base turns over every few years.
Over the last few years, I have occupied a singular position for observing Wall Street's recent conflicted encounter with this thing called "multi-level marketing", MLM, and the investor community's gradual awakening to MLM's profound impact on the country.
Seemingly unknown to most on Wall Street, MLM has been roiling Main Street for 35 years, provoking class action lawsuits, consumer petitions to the FTC and SEC for oversight and law enforcement, agony and ecstasy for millions of people, and swamping the internet with faux testimonials, online brawls, rages and rants. A true account of MLM's role in American life today is a tale worthy of a Charles Dickens novel or perhaps a Jonathan Swift satire, in which Gulliver enters a world where calculators and critical thinking don't exist.
Among hundreds of imitators, the most famous MLM players include Amway, Herbalife (NYSE:HLF), Nu Skin (NYSE:NUS), Usana (NYSE:USNA), Tupperware (NYSE:TUP) and Avon (NYSE:AVP). Each of these leading companies suffered recent declines, especially in the USA, and all have promised investors a "return to growth" very soon.
Claims by any MLM of expected return to growth are seldom questioned because they are based on the widely accepted assumption that growth of all MLMs, or more accurately, expansion, is the norm, as indeed it was for so many years. The larger MLMs, it is believed, not only rise with but also lead a perpetual global expansion of the MLM model. Nowhere in the MLM literature is there any discussion of any limit to expansion. Like the income opportunity that MLM promises each new recruit, the aggregate MLM market is presumed to be "unlimited." As for why one MLM rises over others or why some exhibit amazing and rapid increases, followed by even faster declines, no data or expert analyses exist.
As the author of an early book on MLM, an experienced expert witness/consultant in MLM court cases, and as the publisher of a highly visited and interactive consumer website focused on MLM and pyramid schemes, I have been asked to provide dozens of direct consultations to Wall Street investors and analysts. I also professionally participated in several longer term research projects with Wall Street firms and I provided several seminars for groups of investors and analysts.
At the public level, I have been called on to answer in-depth questions about MLM from newly interested print journalists ranging from volunteer editors of military-base newsletters to Pulitzer-prize winners at the Wall Street Journal and Fortune Magazine. I have participated in radio and television interviews by producers from the USA, UK, Russia, Denmark, and other nations. They all confess they don't understand what MLM is. Wall Street's and the media's confusion about MLM is finally catching up to Main Street's.
These professional inquiries and public questions led me to compile a statistical and analytical report on the major MLMs. The report is focused on the fundamental factor of the parameters of MLM's expansion in which, almost like an underground economy, MLM operates unmonitored, free of disclosure requirements, legally undefined, and essentially unregulated, and it is generating hundreds of billions of dollars from tens of millions of people every year. Could it really expand forever, as its promoters claim and, apparently, many Wall Street analysts presume it can?
While Wall Street has recently taken greater interest in MLM, the violent share price swings of some of the MLM players, acrimonious hedge fund wars and the unprecedented possibility of government prosecution of large MLMs here and in China have distracted from the normal block-and-tackle analyses given to other fields, in which the basic factors of competitive advantage, business model, or market scale parameters are researched. Not only has the true nature of MLM business not been objectively examined but its basic business direction remains unstudied.
Yet some analysts have now begun to wonder about it. I know this because in every consultation that Wall Street analysts have conducted with me they have raised the heretical notion of MLM Saturation.
Investors Guide to Multi-Level Marketing
This essay briefly summarizes and explains how Wall Streets' newfound interest in MLM led me to research and prepare a 50-page, graphically illustrated report, entitled "Investors Guide to Multi-level Marketing." The general conclusions and some of the data to support them are offered in this article. The full report is purposefully not for the general public, but rather technically responds to Wall Street's special interests and point of view and speaks only the language of investors and speculators. The purpose is not to recommend an investment strategy but to aid any Wall Street parties that seriously want to understand MLM and where it is going. To my knowledge it is the first document of its kind, in recognition of the very recent and growing awareness on Wall Street of MLM as a distinct economic sector. Others from other writers and analysts will surely follow.
In examining MLM only for the Wall Street perspective, the report purposefully ignores all factors related to fairness, legality, ethics or social value of MLM, factors that characterize and shape Main Street concerns or those of regulators. The report also reflects the widely held view on Wall Street that, for investor purposes, law enforcement is an irrelevant factor in the broad sweep and direction of MLM. That perspective has held true for 35 years and, from my interactions, prevails today, the FTC's Herbalife investigation notwithstanding.
How Long Has it Got?
The data that I gathered on the main MLMs in recent years and earlier periods, when coupled with an informed understanding of the forces driving MLM, show that "return to growth" by Herbalife and other larger MLMs is a myth. The fates of the larger MLMs such as Herbalife, Nu Skin, Avon and Tupperware, for example, are now controlled by larger factors that are intrinsic to the entire MLM field and the legacy of its history and development.
After 40 years of expanding across the entire world, reaching every country, MLM is now in Saturation stage. There will still be flashes of what appear to be growth by newer MLMs but these are brief and in fact are only the sound and fury of a dominant trend now of MLM piracy wars for high powered recruiters. Piracy now fuels MLM start-ups and is publicly manifested in intra-MLM lawsuits over "trade secrets", aka large sectors of downlines. There will never be another MLM of Amway's scale. And as evidence and insight grow about MLM realities, it is likely that few MLMs will seek publicly-traded status, preferring the darker edges of business where data and inquiry are lessened, and some existing MLM will go private.
If MLM's market were "unlimited", it is surely the only business on earth unaffected by physical and economic laws, limits and forces. Of course, MLM is not exempt from market forces, but which forces? As the report reveals, the forces that shape all other business including brand equity, R&D, distribution efficiency, new technologies, consumer product demand, shifting consumer preference and needs, and even competitive pricing are not relevant to MLM. MLM lives under different economic rules. In the end, the only two factors relevant to MLM's "growth" are availability of new prospective recruits and levels of knowledge among the recruit base of the actual results of the MLM value proposition for a "business opportunity." MLM needs bodies and bodies that have never experienced MLM or don't already know much about it.
I went looking for an answer to the most frequent questions Wall Street quants posed to me: How long does MLM have before it runs out of people to recruit? Has it already reached Saturation? What determines why some MLMs explode, if only briefly, in revenue over others?
The analysts' question about MLM's "time frame" is based on a simple computation of basic MLM business factors that some analysts and investors have identified from preliminary research. The factoring goes something like this:
Relentless recruiting of more participants, aka sales representatives, coaches, consultants, etc.,
Minus extraordinarily high annual rates of quitting, with almost none returning to the companies they abandoned,
Multiplied by "unlimited" rewards offered to all new recruits for more recruiting,
Multiplied again by the absence of market-driven, product-preference or demand for MLM products or evidence of MLM recruits earning profits from retailing MLM goods;
Resulting in the recruits themselves being the sum total of the entire marketing and sales program.
Divided into the global but demonstrably finite market for prospective recruits that is continuously reduced by the aggregate and always growing base of past "losers."
To address this I examined the 12 main MLMs that are listed on major US exchanges, presumably the better capitalized, more professional, older and better managed of the lot. These are also companies whose data may be relied upon due to SEC disclosure requirements, whereas privately-held MLMs are infamous for self-serving hyperbole and disinformation as is the so-called MLM industry data.
Market capitalization of the 12 publicly-traded MLMs approaches $20 billion and these 12 firms represent only about 20% of the estimated USA revenue in the MLM sector. Note: the Direct Selling Industry places annual MLM revenue well over $30 billion but this is based on projected retail sales, of which there is no evidence. The revenue numbers used in this report are based only on actual purchases by the distributors, which is the net revenue figure reported to the SEC by publicly traded MLMs.
The largest player in the field, Amway, with self-reported 2014 global revenue of $10.8 billion, is privately held. Adding in Amway with the publicly-traded companies accounts for nearly 2.5 million households in the USA under contract each year by these companies as their "distributors, coaches, IBO, associates", etc., the legally defined participants in their MLM "income opportunity" proposition.
With one of the top players in this sector, Herbalife, being called out by one of Wall Street's largest hedge funds as a pyramid scheme fraud, and both the FTC and SEC formally investigating Herbalife, suddenly Wall Street needs to know a lot more about this thing called "Multi-Level Marketing."
MLM: Seen One, Seen Them All
As part of my inquiry into MLM Saturation, I noted that a broader realization has already descended upon Wall Street. It is that MLM is an identifiable and distinct economic sector that crosses product lines. For research and understanding, Avon properly belongs with Herbalife, not Revlon. Similarly, Medifast (NYSE:MED) belongs with Nu Skin, not Weight Watchers. Primerica (NYSE:PRI) has little in common with MetLife but everything to do with Amway. The MLM business model and pay plan are the primary identifiers and defining characteristics of all MLM companies, superseding their commodity products.
Once their true identity was recognized as disconnected from the particular products they are hawking - meal replacements, soap, term life insurance, "anti-aging" potions, etc. - yet another realization is comprehended. MLM businesses are essentially all the same. The common and unique financialproduct of the "unlimited income opportunity" based on recruiting a "downline" merges all the MLMs into one interconnected syndicate. MLM belongs in the financial sector, not "direct selling."
Go to any MLM "extravaganza" and you will hear and see identical claims, admonitions, listen to the same motivational speakers say the same words about MLM's special role in the economy. The details of the various consumer products inevitably fade into the background as the financial proposition, exactly the same one for all MLMs, dominates the stage and creates all the evangelical "energy."
That all MLMs are genetic clones is the vexing fact that has prevented many analysts from taking Pershing Square's fraud thesis about Herbalife seriously. If Herbalife is fraudulent, they ask, how is it different from hundreds of other "one-to-one" MLMs that look and operate just like it and produce identical loss rates? How can the FTC see fraud in Herbalife but not in all the others?
Previous to this new era of Wall Street awareness, not only did the fiery sweep of MLM across Main Street, like a new American religion, go unnoticed but even the MLMs traded on Wall Street also went unrecognized, fading into the general fabric of their respective product categories. The words "science" and "health" in some MLMs' names also helped to divert attention from MLMs' actual business in which scientific R&D is barely conducted and all the so called "health" products are "not-FDA-approved."
When MLM operations were noted, they were usually depicted, Norman Rockwell-like, as wholesome direct selling operations, with millions of self-starting, door-to-door canvassers hawking cosmetics, household goods and "health" products for a few extra bucks a month, though no one reported ever seeing a MLM salesperson come to their door. The bizarre MLM model of "infinite" levels of recruiters or their enigma-code pay plans were politely ignored.
Pulling the Curtain on MLM
As a premise of my report on Saturation, MLMs are not analyzed by their respective product sector trends. MLMs don't align on factors of pricing, availability or brand equity with any conventional companies selling similar goods. As for MLM's identity as "direct selling", a so-called "distribution channel" from manufacturer to end-user, even the MLM companies themselves now acknowledge that few MLM salespeople have any customers. "Retail" sales, in any event, would be impossible in the MLM environment of constantly expanding "retailers" (aka, distributors, coaches, IBOs, etc.) and where anyone who breathes can get the MLM "wholesale" price.
Instead, MLMs now say that the contract "distributors" themselves are boththe customers and the salespeople, though exactly who sells to whom and how much each party buys per year are undisclosed. This intra-channel buying and selling under strict contract terms and fueled by intense recruiting promotions and payments is dismayingly portrayed by MLMs as a free market, product- and brand-driven retail environment.
Payments to the various segments of the sales chain are calibrated, not to how much product is sold by each "distributor" but rather to the number of distributor-recruits that are under each distributor-recruiter. Rates of payments are based on volumes of the recruits' and the recruiter's totalpurchases. In most cases, highly specific recruitment configuration are also required for the recruits on the multi-legged chain. MLMs don't bother tracking or reporting bona fide end-users outside the chain. Obviously, this is not your father's Fuller Brush man.
MLMs also don't respond the same way as other companies do to broad economic conditions. Some MLM "sales" of ordinary goods, even commodity weight loss products, spiked to new heights when the overall economy nose-dived. MLMs clearly live in a world apart, and thus the requirement to group them all together, to separate them from the rest of the economy and to look at their revenue and recruiting data in full light of their hallmark value proposition of a "business opportunity."
In studying or even searching for those economic forces that would govern MLM, a problem arises for analysts who raise any questions about MLM's continued growth potential: They never get a reply from any MLM or industry spokespeople. A limit on growth is the one issue that the MLM model does not allow to be acknowledged. A public assertion that MLM's income promise of perpetual growth might be an illegal or deceptive marketing practice is treated as "defamatory," deserving of libel suits against critics, apostates, publishers or whistle-blowers. Consequently, many intimidated journalists avoid the question, report unverified industry figures on "retail" sales, and safely skip over the entire subject of the complex pay plan's objectives or consequences.
Despite MLM's resistance to questioning the "unlimited growth" premise, if decline is mathematically and demographically pre-ordained or is already known to be occurring - whether or not the government ever weighs in on "unfair and deceptive" or even criminal fraud questions - investment strategies must be adapted accordingly.
The factor of basing each recruit's profit - no matter where or when he/she joins the genealogical chain - on cash derived from later recruits should require calculations from actuarial math of the kind normally reserved for insurance and derivatives. MLM's income promise depends upon the new revenue from later recruits always staying ahead of reward paymentstransferred to earlier recruits. Increased income for the top level requires enlarging the bottom levels. And each recruiter added to the chain must produce a corresponding new batch of recruits in order to be profitable. These requirements are structural, inherent and unchanging.
Yet, MLM does not employ the math to calculate the costs and rewards to its recruited contractors based on their position or timing, as would be done in derivatives and insurance. MLM makes no calculation at all of the state of the "opportunity" for new recruits in market areas that must inevitably saturate. That calculation is said to be unnecessary since the opportunitynever diminishes. As the CEO at Herbalife famously says, "There has never been a better time to join Herbalife." (even after 35 years of expansion).
No MLMs, not just Herbalife, ever calibrate what they charge new recruits for joining the opportunity chain to diminishing future returns. There is no equivalent to "last year's model" or "overstock" pricing. There is no discount for joining 35 years after the chain was established and had already covered 100 countries. Every recruit is promised exactly the same income potential and charged exactly the same price for joining,with exactly the same recruiting and volume purchase quotas imposed on them based upon undiminishedexpansion potential. Most MLMs, including stalwarts like Avon and Tupperware, do not even inform the new recruits where they are on the chain, how many others in their area are on it, or the historical success and failure rates. Such data are said to be irrelevant anyway if the market never shrinks. Similarly, the price charged for the MLM product is irrelevant if the income opportunity tied to the purchase is "unlimited." Price comparisons are impossible with such a "value" attached to the MLM product.
Focus on USA
To see recruiting and revenue trends for evidence of Saturation, I focused on the largest and oldest of the MLM marketplaces, the USA. Here is where MLM was invented and where it got its free ticket out of jail in 1979 by an FTC Administrative Law Judge. That legal baptism was followed by a long era of "de-regulation", unleashing MLM's storied promise of "unlimited income" first upon America at large and then the world. If demographic Saturation is a governing force for MLMs, America is where to look for it. Not only has MLM been here longer than anywhere else, but its political protection and its message machine are far stronger here than anywhere else. It is here where the MLM recruiting machinery is designed and continuously fine tuned and this is where the vast majority of rewards ultimately flow. If Saturation is a marketing factor in the USA, it cannot be argued that it disappears by expanding to new areas. MLM is already in every country on earth.
To examine the Saturation factor, I studied the 12 companies performance in the USA over a four-year period between 2010 and 2014, with some references to earlier data or to the first quarter of 2015 where relevant, as well as to global data. I also factored the unverifiable, self-reported revenue figures of Amway, the largest of all MLMs, which has shown phoenix-like growth in China until last year, when it plummeted without a plausible company explanation given.
The study had to devote some special attention to China, MLM's final frontier and also the one country that has, recently and definitively, outlawed the MLM recruiting model and pay plan, making the specter of arbitrary or politically-influenced enforcement an ever-present threat. China has been a salvation for Amway, a quagmire for Avon, and a recent rebirth for Usana. It could be a trap for other MLMs who stake their futures on it.
Saturation and Startups
The study also examined another strange factor unique to MLM, the role of an ever-expanding number of new MLM companies. MLM may be the only sector of commerce in which declines of large, mature companies only spawn many new ones that operate exactly as the older ones do, offering the very same types of goods under the same terms. The MLM message to all recruits that failure is always personal, never market or business-model based, is macro-replicated industry-wide in which company failure can never indicate market Saturation, only mismanagement. As MLMs decline due to Saturation, they spawn ever more startups, each hungrily seeking to grab off disaffected recruits as they abandon the older MLMs. New MLMs argue they are a better opportunity because they are "new." Thus, mature MLMs face not only demographic Saturation but also aggressive dilution from new players that ignore larger market conditions.
Finally, there is one other factor that the report had to address and acknowledge in order to consider Saturation. It could be called "informationSaturation." It is now statistically documented, at least for the larger MLMs, and from analyses by others as well, that less than one in a hundred MLM participants ever earns any net profit at all. The top earners who crow from the stage that "anyone can do it" represent a small fraction of one percent of the total "active" participants or "leaders." They typically have thousands in their "downlines". This fact of historical failure rates among MLM participants being higher than those suffered at the tables in Las Vegas may or may not cause the massive quitting rates in MLM, ranging from 50-80% a year, but it clearly has an after-effect of dispersing the cold realities of the MLM value proposition among those still being recruited.
The older, publicly traded MLMs face the triple threat of (1) Declining Demographics, (finding fewer new recruits than the number quitting), (2) Dilution (having to compete for recruits with an ever-growing number of startups and others always in need of geographic expansion) and (3) Information Saturation (needing to find populations that know little about the history of MLM or the financial experience of past participants.) The report shows how these factors have conspired to bring MLM to its end point for growth.
The Mammoth Scale of MLM Recruiting
In consultations and interviews I have observed that few people fully grasp the mammoth scale of MLM recruiting, quitting and churning that is occurring in America and worldwide. When the data is grasped, it literally boggles the mind, particularly since it receives virtually no mention in the news, the arts or by the government. It is a silent, rolling and desperate search for a better life by tens of millions of people that have accepted the government's official position that MLM is perfectly legal and have invested time and money in MLM's hyper-promoted income promise.
MLM is, arguably, the most widespread response of Americans to outsourcing, ageism, sex or race discrimination, lack of education, high education costs and debt, exorbitant healthcare costs, foreclosure, low wages, technological obsolescence, downsizing, government indifference or even looming deportation, that no one is talking about.
I and others have chronicled this mass movement and its consumer costs of billion of dollars, immense time and immeasurable exploitation of hopes and dreams. The $20+ billion in purchases of MLM goods each year in America is only the tip of far greater aggregate investments in sales leads, nutrition clubs, motivations seminars, conferences, DVDs, travel and internet expenses related to MLM pursuits and uncountable opportunity costs from displacing gainful employment and real education.
Consider the global data that is routinely reported by MLMs such as Nature's Sunshine (NASDAQ:NATR). In 2014, 650,600 are listed in total as under contract and having made a purchase during the year, but only 292,600 made a purchase in the last 3 months of the year. Of the total reported, 271,800 joined during the year. The company says a 55% annual quitting rate is normal.
MLMs have developed specialized language for investors that disguises the enormous challenge they face each year for the recruiting to outpace or at least keep up with rate of defections. Any "growth" that is reported is actually just a record of more new recruits being enrolled than those that quit. Here's how insurance MLM Primerica describes the process to shareholders in its SEC filing:
"Due to the large size of our sales force, attrition and our active recruiting of new sales representatives, our sales force is constantly renewing itself by adding new members… As new sales representatives are successful in recruiting other sales representatives, they begin to build their own organization of sales representatives who become their downline sales representatives."
The do-or-die necessity for Primerica to mobilize the recruiting, including ads for "jobs" and "interviews", the rallies and pressure and all the financial incentives for proselytizing are made to appear free and effortless in the 10K as the sales force is said to "renew itself." 700,000 were recruited by Primerica to become licensed agents in six years, yielding less than 100,000, whose mean average gross income in 2014 was under $6,000.
The 12 companies of my study, plus Amway, have USA contractors numbering 2.5 million, leaving only 46 other households in the country for each rep to recruit. Globally, just two of the oldest MLMs, Avon and Tupperware, for example, now have one salesperson for every 200 households on the planet earth. All MLMs forbid their recruits from operating multiple MLM "distributorships" or recruiting their downlines into other MLMs, no matter the disparity of products. According to the Direct Selling Association, there are 1,400 MLMs operating in the USA!
The data, when examined in the light of MLM's unique value proposition of a non-diminishing "income opportunity" and its existential requirements for ongoing recruiting in order to remain solvent, show the following:
"Mature" MLMs such as Herbalife, Avon and Amway have taken the "income opportunity " to every significant corner of the world and are now atSaturation.
What has been viewed as MLM "growth" of MLM in recent years, has actually been due to explosive expansion in China, the last frontier for MLMs, outpacing declines elsewhere.
In coming years, the entire MLM sector will be mostly characterized, as it increasingly is already, by internal warfare among MLMs for existingnational and international recruiting chains controlled by top level recruiters.
Unique to MLM, consolidation and Saturation actually increase start-up activity rather than discourage it, leading to more rapid dilution.
Due to the factors of demographics, continuous startups claiming to deliver the promised income opportunity that the mature MLMs did not, and because of the informational spread of disastrous financial realities about the MLM proposition, the future of the larger MLMs will be found only in information-poor countries and population sectors that are economically and informationally deprived. There are fewer of these remaining for MLM to exploit.
The Meaning of Growth and Saturation in MLM
The last part of my report is as important as the data-based conclusions, but requires more insight and understanding than it does number-crunching skills. It addresses the critical reality that the factors of "growth" and "Saturation" have very different meaning in MLM than in conventional business. Understanding MLM involves grasping these basic principles:
MLM "Saturation" Must be Distinguished between the Interests of MLM Recruits and those of the MLM Enterprise… The last consumer recruits to join MLMs have faced Saturation for decades and their "odds for success" are now and have been nil; their capacity to build thousand-member downlines like the promoters on the recruiting stage passed long ago. Yet, the MLM enterprise itself and its tiny cadre of top recruiters can appear to remain in a robust, non-saturated "growth" mode, as long as they can successfully replace the victims of recruiter-Saturation faster than they quit.
Geographic Expansion, Including a Billion-plus Population in China, Does not Deter MLM Saturation… When a market as vast as the USA's, where MLM was invented and where most MLMs are based, can saturate for large MLMs, it is inevitable that other markets, including China in which some of the largest MLMs have already shown declines, will follow. There are no longer any new frontiers for MLM.
MLM Growth is not Organic… In MLM, what is called "growth" occurs when the existing customer base is replaced. Every two to three years, virtually the entire MLM base consisting of distributor-contractors and small personal circles of relationships of some of the contractors are "turned over."
Demographics Require Constant Geographic Expansion to Achieve MLM Growth… With 50-80% attrition rates, the MLM can never exist in stasis. There is no "stability." Additionally, the base of consumer prospects is not renewable. Once they quit an MLM, some might migrate to another but they almost never go back to earlier ones.
MLM Growth Always Depends upon Future Growth… The funding of the MLM recruitment program is not from corporate debt or from corporate investment capital, as was the case with the "Dotcoms". The acquisition of the new customer base is funded, every year, by the investments of that newly acquired base, the latest recruits. To recoup their investments the new recruits must immediately also recruit. The process is unending. Expansion one year only increases the requirement for more expansion the following year of decline is certain.
Saturation for MLM Is Not Related to Overall Markets for Its Products… Analysts who attempt to measure an MLM's expansion prospects by relating it to data on overall consumption trends of the types of goods sold by the MLM are barking up the wrong tree. MLM's market is based on an intangible need for income, unrelated to consumer need for its consumer products. MLM's true product is financial in nature.
Growth in MLM Is Not Related to Delivery of Value… The primary value proposition of MLM is the promise of an income opportunity, not thesatisfaction of the need for income. Because MLMs do not fulfill the need for income to more than 99% of those who invest in it, MLM's market approaches Saturation on the variable factor of available prospects that still believe in the promise or can be persuaded to believe.