Determination! Determination! Determination! Sound familiar? Can you guess which business model this is?
Hello, it’s The Fool again, with endless knowledge to share and learn from everyone. These past few days, Nguyễn Thái Luyện (Chairman of Alibaba Real Estate Joint Stock Company — and, well, not the “40 thieves” version, just Alibaba) has been heating up the internet and the press, hasn’t he?
Alright, back to where we started. Most people, hearing slogans like that, immediately think of a model that both young and old tend to react to with allergy-like distaste: “multi-level marketing.”
So what is multi-level marketing? Is it illegal? How should it be applied correctly? Let’s share a perspective and learn more with The Fool about this fundamentally clever model that’s been corrupted over time!
What is multi-level marketing?
According to Wikipedia, Multi-Level Marketing (MLM), also called Network Marketing, is a controversial marketing strategy for selling products and/or services. A multi-level marketing company’s revenue is derived not from labor…
Under this model, the founder tries to find people below them, train them to sell, and then collects a share of commission from those below them.
The strengths of multi-level marketing
This model has one huge strength: leveraging word-of-mouth marketing (a form of marketing that brings tremendous benefit to a business, even in the 4.0 era or before). However, to achieve that, the supplier’s product has to genuinely be good…
A classic example: Amway staff always hold seminars to recruit new downline members, always demonstrating the product’s features right in front of the person they’ve invited to that seminar. If the attendee doesn’t become a salesperson for Amway…
Another advantage of this marketing model is that a business spends very little but earns very high profit from staff split across tiers. Just imagine how much Closeup and Colgate spend every year on their TVCs, while Amway’s Glister…
The weaknesses of multi-level marketing
We’ve talked a lot about the strengths — so what are the weaknesses of the multi-level business model?
The first weakness of this business model comes from its very own strength. Let The Fool break it down. What do you do to find someone below you to sell on your behalf? If done with integrity, following what legitimate multi-level companies actually do, you’d organize training for them…
However, due to loose oversight, some multi-level companies find every way to lure and drag prey into their system by exploiting the loopholes in this very model. They preach a dream life, doing nothing, just spending some money to buy product…
What’s more, with the growth of the 4.0 era and the Internet, the Ponzi model has evolved on its own into various forms, such as high-yield investment schemes, multi-level virtual currencies, and more.
Another poor aspect of MLM is how they communicate. They tend to draw examples from self-help books to preach and lull their prey, enchanting them with a future of “getting paid for doing nothing.” As someone who doesn’t read a huge amount, but has some experience…
How multi-level marketing and business have morphed, before and during the 4.0 era
The Ponzi model (fraudulent multi-level marketing) before the 4.0 era
People said to have been scammed by MLM are usually lured in by this classic model.
The nature of the Ponzi scheme is exploiting the loopholes in multi-level marketing to entice people into investing in a business model that doesn’t actually exist (or is made to appear as if it does). Since it isn’t real, revenue and profit from this model come from building a multi-level network…
3 well-known companies in Vietnam that applied the Ponzi model:
Using the same tricks as Allen Stanford and Charles Ponzi, these companies also lured customers into buying or investing in products that “seemed real and lucrative,” promising very high interest rates (11-30%/year for cosmetics and functional foods, and 30-40%/year for…
The way to avoid these morphed forms of multi-level marketing and business is to be wary of any investment or business invitation with an extremely high profit rate (11 to over 40%/year). Remember to ask this question before investing: where are they getting the money to pay you that interest?
The Ponzi model applied to the 4.0 era
You’d think that after the classic scams of Charles Ponzi or Allen Stanford, this model would have withered away.
But the power of the 4.0 revolution has given this model even more forms and variations, harder to control than ever.
Blockchain, a technology still considered a leap forward for humanity in linking data networks together, helps people find and reapply old data combined with new data to develop a large dataset for some purpose. Because of that…
That’s the benefit — but blockchain is also something tycoons exploit to create “virtual” crypto exchanges, combining it with the legendary Ponzi model. From here, Vietnam has become fertile ground where, not only have we failed to catch up on understanding the Ponzi model, we’ve also been lured by…
Evidence of blockchain combined with Ponzi schemes in Vietnam: search “blockchain investment scam” on Google, and you’ll find no shortage of information on this.
You should invest in reputable channels approved by the state, and only once you truly understand them well — such as stocks, forex, and crypto (once you’re sure the exchange is reputable, and especially for crypto, the best form is buying mining equipment).
Beyond blockchain, HYIP funds (High Yield Investment Programs) are also a fairly ideal luring channel, targeting people with no investment knowledge or who want to make quick money. Simply put, these tycoons…
Only invest in HYIPs in the early stage of the project — if the project has been running for more than 6 months, avoid joining, or withdraw all your money once you’ve joined and earned a certain profit. These projects usually organize large-scale seminars to lure people in (including online…