Tuesday, October 1, 2013

ELEVEN Rebuttal Mistakes MLM Marketers Must Avoid

8-ball pyramid scheme model.
8-ball pyramid scheme model. (Photo credit: Wikipedia)
When one has been exposed to various MLM "opportunities", many of which are really pseudo-MLM pyramid schemes, one can anticipate the "defense points" the participants parrot from their upline whenever you see some real examinations of the scheme. Some of those do come prepared with facts. Unfortunately, they are the WRONG facts as they are often irrelevant. They generally fall into 3 categories:
  • Money-related (but irrelevant) facts as defense (3)
All sorts of facts about the company's revenue, advertising budget, payout, bonus, etc, followed by "Still think _____ is a scam?"  When it's completely irrelevant.
  • Name-related (but irrelevant) facts as defense (5)
All sorts of names associated with the company... Lawyers, consultants, celebrities, companies that may have done business with the company... Do they prove that the company's legal? No. 
  • Logical Fallacy-related facts (irrelevant appeal) (3)
All sorts of facts that form irrelevant appeal, such as appeal to age, appeal to tradition, and so on. 

Let us examine each in detail:

Money-Related (but irrelevant) facts as defense

When it comes to defending a particular MLM business, one of the FAVORITE excuses was citing how much money was involved, and it proves absolutely NOTHING. Such excuses generally falls into these variants:
  • _____ did _____ million dollars of business in year ____
  • _____ spent _____ dollars in advertising in year ____
  • _____ paid out _____ dollars to its affiliates / distributors / consultants / (whatever) in year _____
Does any of this prove that _____ is not a pyramid scheme, or is not illegal? Of course not. They are NOT RELEVANT.  What did the affiliates do to get paid is the determinant factor on whether the biz is a pyramid scheme or not. The numbers surrounding the business are completely irrelevant.

Think of it this way: If I ask you "Are you a crook?" and you reply "I make 100K a year!"  You did not answer my question.  Your 100K a year income could be legal... or illegal.

So if I ask you "Is _____ a pyramid scheme?" Please don't reply "_____ did _____ amount of business last year." It's just as stupid.

NOTE: One of the modern variants is "paid out" argument is the "car bonus proof", as in "I got this BMW! Still think _____ is a scam?"

So what? FHTM is a pyramid scheme shut down by FTC and multiple state AG's in early 2013... They had a car bonus program too.

banner ad of FHTM's "Platinum Car Program". FHTM was shut down in early 2013 by FTC as a pyramid scheme. 
Turns out "for life" means "for the Life of the company", eh?

Name-Related (but irrelevant) facts as Defense

The next popular defense when it comes to suspect schemes is name dropping, like Celebrity X endorses ___, Dr. Y mentioned ____ on his TV show, Organization Z uses ____ products. What's left unsaid is "if _____ mentioned it, it CANNOT possibly be a scam, because _____ cannot possibly associate him/her/itself with a scam". It is, of course, completely bogus.

Such excuses generally falls into these variants:
  • Celebrity ______ endorses MLM _____  (because MLM paid him/her, doh!)
  • Dr. _____ likes products from MLM _____ (that's the product, not the biz he likes!)
  • MLM _____ president said his MLM _____ is legal (as if he would say anything else!)
  • Lawyer _____ is now working with MLM _____ (hiring a lawyer does not make a business legal!)
  • MLM _____ almost won / won an award from _____! (You really think the award committee do a full audit of the business and review it from head to toe before allowing them to participate? Not!)
Name dropping may be effective if it was done by a real expert in the field, but only within his/her/its own field of expertise. A professor of business law and specialized in pyramid schemes would be an expert on MLM legality, but a MLM president? Not so much!

What's really hilarious is when the company president (and thus, all its affiliates) cited the wrong facts, or facts that later turned out to be lies. It happened quite often in MLM.

1) Vemma head Boreyko was quoted once claiming NBA approve of his company. NBA had to issue a statement refuting such. Vemma doesn't have any link with NBA. It has link with ONE NBA TEAM: Phoenix Suns (there's some citings claiming link with another team, not confirmed).

2) Mannatech head Sam Castor was once quoted citing a study by a doctor at UC Irvine who found that a Mannatech ingredient was good for the body for something. That study turned out to be very problematical, as it had no logs, cannot be duplicated, and no proof that the lab work was actually done. Doctor did not even disclose that he resigned from UC Irvine months before the work was published, and his wife was a Mannatech sales rep.  Mannatech was so embarrassed, it sued this doctor.

These are all variants of "appeal to authority" fallacy, because the "authority" is not actually an authority in the subject being discussed. Well, all except the last two.

The one about lawyer is simply drawing the wrong conclusion. MLM ___ hiring compliance lawyer ___ doesn't mean MLM is legal. It actually means the exact opposite: it is worried that it MAY BE ILLEGAL!

As for winning the award... This is usually some "entrepreneur" award. One of the most frequently mentioned was "Young Entrepreneur" Award sponsored by Ernst & Young. It's a real award, but it's held in so many regions and year to year it means dozens of companies are "finalists" each year that it's rather difficult to determine whether the award actually mean anything. Neither was the judging criteria published. Yet the presenter of the fact clearly imply that "Ernst & Young could NOT possibly chosen a scam to win an award or even be a finalist!" Given that nobody knows what were the judging criteria and how deep the business model was examined, or even E&Y actually had their own people involved at all in the judging, the implication clearly CANNOT be true (not that it's false, but merely undetermined).

In some other cases, such "awards" can be bought and thus means absolutely nothing. TVI Express Indonesia was observed passing off one such useless award as if it somehow validates their business. Months later it was closed by Indonesian government.

Name dropping doesn't validate the business... unless the name is actually an expert in business legitimacy validation.

Logical Fallacy-Related Facts as Defense

Finally, we come to the final category... the irrelevant appeal... And this generally falls into fallacies that are "fact" related. They are true, but they simply have nothing to do whether a company is a pyramid scheme or not.
  • Company has _________ members!  (So what? Bandwagon fallacy, aka Appeal to popularity)
  • Company has been around for ____ years!  (So what? Appeal to age. Old is not always good.)
  • Company had been doing this for _____ years! (So what? Appeal to tradition. The way it's always done is not necessarily right. )
There are plenty of other "appeals" in logical fallacies. Fortunately, they have little to do with "facts".

Next time you see "facts" being offered as defense, check this list. And if you are trying to defense your own particular scheme, check your own speech against this list. You don't want to sound stupid, and it's better that you recognize the problem than someone ripping you a new one online. Remember, the Internet NEVER forgets. Better you not make the mistake in the first place.

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1 comment:

  1. I agree with the points made -- certainly, people need to be trained better so they can make intelligent responses. Most just repeat the nonsense they hear or read, kind of like on Facebook :-)