Every Friday I answer a reader question. If you would like to ask a question, please contact me.
A reader’s question:
The reason I’m writing is because I’ve recently been invited to and attended several "parties" for home businesses. I was wondering if you had written a post about this sort of thing. I have several family members who have joined as "consultants" and then get way over their head not realizing this is a type of pyramid scheme. I think there are people who can start one of these businesses and do well, but for the most part, I think people (I hate to say it, but mostly women) end up spending more money than they’re making. Although most of the products are nice, I feel most people end up guilting their friends and family into buying or selling the products. I think people don’t even realize you can buy a lot of the products (such as Tupperware, Longagberger Baskets, and even Mary Kay makeup) on ebay for a much cheaper price. I’ve just been fired up about this lately and thought if you hadn’t done a post you might think about it.
The Danger of Pyramid Schemes
Pyramid schemes are so dangerous for one reason. They were successful in at least a few cases. Each pyramid scheme needs a poster boy or poster girl so the company can say, “Look at Sally. She is making $120,000 working from home.” There is a Sally. She is making $120,000, but she is at the top of the pyramid. Your chance of even making about 1/3 that much is about 1 percent because of how the pyramid is structured. The early comers always win, and the late comers always lose.
The problem is that it is not sustainable. Eventually, the market will dry up and no one else will sign up. Then everything come tumbling down.
Danger signs: Too good to be true, a lot of money up front, a certain number of sales before you get paid.
Before participating in anything like this, do your homework and try to find some people who failed. They are your most valuable resource. Why did they fail and why won’t you?
If you want to learn more about this topic check out Understanding the Difference between Multi-Level Marketing Programs and Pyramid Schemes.
If all this seems intimidating, try a more traditional part time job.
However, there are some great products that offer you sales commissions if you sell a product. Here are some random thoughts on legitimate opportunities.
Remember the power of a personal referral for making a sale.
We are relational beings.
We are, as a result, more likely to be influenced by a friend than a stranger. Don’t think for a moment that marketers have not figured that out. This is why a company like ING Direct will offer me $10 to refer you to their bank (and give you $25.00). They know you are more likely to buy a product if Uncle Joe suggests it rather than some stranger on TV.
I’ve explained that we should be cautious sometimes when we see the name Christian because people automatically trust an organization with the name Christian.
As a person of integrity, I think the ultimate question is – do you believe in the product? It is a good product offered at the best available price? If you do, then hosting these parties is a win-win situation. They get a great experience, a great product, and you get a sale. Everyone goes home happy.
I recently had a similar issue with Sound Mind Investing. I work as an affiliate for them, which means I get a little money when people buy their product through this website. Around Christmas they had a sale that gave a free book to new subscribers. Unfortunately, (and understandably) the bonus was not offered in addition to the affiliate sale bonus. The choice – #1: don’t tell my readers and get a payment knowing they don’t get the best deal possible, or #2: wave my right to an affiliate payment so that my readers could get a free book. In this case, I waved my right to affiliate payments because I would rather promote a product I feel good about that gives my readers the best possible deal.
Remember the power of personal referrals so you can respect its influence, not exploit a friend.
Promote the experience, not the product.
One thing you must keep in mind is that, for many people, shopping is not about the price. It is about quality or experience. It is possible that they could go online and get the product on eBay, but where’s the fun in that? They would rather eat appetizers together, and do other girl stuff, (I don’t know what goes on at a Tupperware party!) and then buy the product. They paid for a fun night out and got something in return. If they go home happy, then that is all that matters.
You give people a fun night and they’ll gladly buy your product.
No pressure sale
Because of the power of personal referrals, I would take a very low key sales pitch. It is not worth making a friend uncomfortable just because they won’t buy. Find people who you know will be happy to buy and the products will sell themselves.
If you have to pressure anyone, you invited the wrong person.
You can set the right environment when you invite them. “Hey, I’m having this thing and I thought you might enjoy it. We’re going to be selling some ______, but I completely understand if you don’t buy anything.”
Any other thoughts? Do you have additional advice for this reader?