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Why you should not enter into Chain Marketting

This is an email on chain marketting from my friend Vamshi Shekhar. (Published with his persmission).

Last week I was invited by one of my close associate to a chain marketing company(QuestNet) which as usual claims to be legal, credible and give you a dreams of making easy bucks. I spent the whole evening talking to the executives there. I was surprised to see a lot of educated people(mostly software employees) jumping in to this stuff. I wasn't convinced with the proofs of the credibility, legality or the business plan of the company. So I started researching on these and found some facts, which I think would be helpful for you guys in making further decisions.

Legal Issues
These guys claims to be following referral marketing strategy even though it is very much same as multi level marketing. Multilevel marketing is banned in our country under Prize Chits and Money Circulation Scheme (banning) Act, 1978. Any sort of network marketing is banned. Please have a look at all the paper articles I found on the web which clearly confirms that this process is illegal.

http://www.thehindu.com/2005/01/26/stories/2005012612250800.htm
http://www.hindu.com/2005/01/17/stories/2005011714220300.htm
http://www.hindu.com/2007/08/01/stories/2007080159340400.htm
http://www.thehindu.com/2006/08/15/stories/2006081517700500.htm (see this)
http://www.thehindubusinessline.com/2005/02/03/stories/2005020302090400.htm

I can give u more links if you want.

U might have the idea why this is illegal, but for those who do not understand, i have a few points for them

Financial Issues.
These guys do claim to sell some coins which are supposed to be rare. You might be lucky if the coin is around 10gms, but normally it would be around 5 gms. And you would be paying 5-6 times more value than the actual cost. There is no point in expecting any returns from the sale, in spite of the hype. There are no buyers for this coin. Check out ebay. So they are selling you a coin of worth 5,000 bucks for 27500. They also suggest u an idea of using credit cards and balance transfers so that you will get time till u get the returns. God knows when that returns will come...(I am not sure if even he does) And if u missed the deadline, credit card interests will reach the sky limit.

Does this means, no one will make money??? No.... not true... people who join in the early stages do make money. But at later stages.. people don't... Why??

Market Saturation
Economically, these kind of business do reach market saturation point. And they do reach fast. (Because a person wont buy the product twice.) And at that point of time a large number of people would be losing money.

Lets make a simple mathematical analysis. It starts with one guy A. Until he gets 3 people on his right and 3 on his left, the first person wont get money. So by the time our A get his first cheque of 11,000 company has already made 1,92,500. Mind you company is not even spending for the marketing here. So the profit made by the company is already 1,57,000. Can you believe it?? Now if you see, by the time our A gets his money back, there would be at least 12 people in the loop. And at maximum 3 people got some returns out of which only one got his returns. So rest of the 9 people are in trouble.

Let us assume that the business is prospering like anything. Every guy is able to find his left and right and the people below. So it forms a perfect binary tree. (Mind you this is best case) . Now assume that this tree has reached 100 levels.(this is very less though as our executives claim). Do u know how many people are now in this 1267650600228229401496703205376 .I don't think we have so many people on this earth :) . So it wont even reach 100 levels perfectly .

So just to make it simple, lets take 10 levels for example. So now we have 2047 people in the list. As you know the leaf nodes have just joined and they haven't got any money, so 1024 are in trouble. Does their immediate parents are in profit?? . Nope, even they don't have 3-3 on their loop. So 512 more are in trouble. So at this point of time 1536 are in trouble. 256 have got their first cheque, but haven't made their complete money yet.

So my calculation clearly shows that at any point of time, 75% of the people joined would be in trouble and 12.5% would be getting their first cheque. So almost 87.5% of the people are losing here at any point of time. And u call this a legal business? Mind you this is the best case. You can expect how the worst case could be.

Morality and Ethics
While issues of morality and ethics can be tricky to discuss, materialism and greed are universally condemned by every one. This does not mean people are not materialistic or greedy; in fact, the common ethical call to not be so is strong evidence that we are. Unbridled greed suspends good judgment. When the eyes gloss over in a materialistic glaze, common sense is a stranger.

Ask a few questions yourself before joining in to a MLM

1. Do I want to be involved in encouraging people to be more materialistic?

2. Do I want to sell a product that perhaps couldn't be sold any other way?

3. Do I want to be a part of an enterprise famous for slander,
libel, and rumor?

4. Do I want to be a part of a company that may employ criminals
as marketing experts?

5. Do I want to make money off my ability to convince people that
an unworkable marketing system is viable?

6. Do I want to be known among my friends and family as a person
who tried to con people with a thinly veiled pyramid scheme?

If you can answer these questions "yes," u can join... But remember
that God is watching.

Comments

  1. Hi Chakri,

    You have Posted a very useful information on the Chain Market (Quest.net) which will be an eye opener for many people.. especially the software professionals who already joined are creating hype about this chain market.

    ReplyDelete

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