Pink Truth: Massive Failure Rates in MLM

Pink Truth Facts, opinions, and the real story behind Mary Kay Cosmetics.

Massive Failure Rates in MLM Mar 26th 2012, 11:00 Robert FitzPatrick of Pyramid Scheme Alert has conducted extensive research on multi-level marketing companies (MLMs). The research can be difficult with companies like Mary Kay, which are privately owned and therefore don't release hardly any information about the dismal earnings of the sales force. On the other hand, certain companies using MLM models that are [...]

I didn't have to read any further than the first paragraph of the introduction to this "massive research" to confirm that the old adage, "Figures don't lie, but liars do figure" is true of this gentleman too. His opening paragraph: A statistical analysis of income disclosures made by 10 major multi-level marketing (MLM) companies and the largest of all MLMs, Amway/Quixtar, reveals that, on average, 99% of all participants received less than $10 a week in commissions, before all expenses. Additionally, the report shows that on average no net income is earned by MLM distributors from door to door "retail" sales. Total losses of the participants exceed $5 billion each year, if only the entry fees, basic business expenses, marketing "tool" purchases and the pyramid commission portion of their product purchases (about 40% of their purchase price) are totalled. First, he says that on "average" and "99%" = <$10.  So, first he probably through out the top 1% (we all hate them anyway, right, so they don't count for anything) and then he used all the people who only sign up as distributors for these companies to get the discount (why not exclude them?  Because it wouldn't make as shocking a statistic.) and tells us that the AVERAGE of all these people is less then $10/week.   When he switches track to losses, he ADDS them all up and uses a /year figure. His report cost $50 or $100 (not sure what makes the difference, but that smells pretty fishy in and of itself) so I am not going to download it.  A quick skimming of his introduction shows that he uses a 9 million figure for how many people are involved.  Let's use this number and look at his claim. $10/week X 52 weeks = $520/year X 9 million people = $4.68 Billion $5 billion/year (divided by) 9 million people = $555/year (divided by) 52 weeks = $10.68 Now keep in mind that this is his 99% figure.  I don't honestly know which 99% he if referring to, or why he didn't just use 100% of participants.  As noted above, I suspect it was to make his figures look more shocking and compelling so that he could sell more reports. So, rewriting his statement, using HIS figures presented the other way around: A statistical analysis of income disclosures... reveals that, on average, 99% of all participants lost $10.68/week.  Total earnings of the participants were just under $5 billion each year! I feel like I am teaching a "truth in marketing" class to high school freshman.  "Now, which one of these figures sounds better?"