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MLM MythBusters: Direct Sales (MLM) Is Based On Buying From Yourself With Few Customers

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According the DSA’s new web site, Directselling411.com:

half (50%) of
U.S. adults purchase products or services using the direct-selling
retail channel during any given year.
That’s roughly equivalent to 150
million people in the US alone who make at least one purchase from a
direct selling company in a 12-month period. When you consider there
are 15.2 million direct sellers in the US, that leaves a lot of
customers who aren’t also direct sellers. (Source: 2004 General Public Attitudes Toward Direct Selling, Burke, Inc.)

What say you?

 

24 COMMENTS

  1. I say that information is meaningless because it doesn't say how many are repeat/frequent customers. It also doesn't mention what percentage of spending is done on direct selling products. It just says 50%. That means if your wife purchases some Avon or Mary Kay lipstick once to try it that year and decides it is too expensive or not to her liking and never orders again, she is still counted as a direct selling customer. That's 50% of a two person household and she may have only spent $12. It still doesn't sound like a great market opportunity. What percentage of people buy things online? What percentage of people buy things from a local grocery store? What percentage of purchases come from those two avenues is much more telling information.

    Color me skeptical, but I find it very hard to take information fed to me by the DSA at face value. They have an agenda and if you ignore that agenda, then they can tell you whatever they want and you'll believe it.

  2. Renshi_D
    If you are skeptical of the data because of DSA's agenda, then whose data do you not find questionable? I agree, don't accept everything that you see at face value, but until reputable conflicting data is presented or until the presented data is found innacurate, all you can do is look at the data and decide for yourself if it is believable or not.

    As Ty mentioned, everyone has an agenda.

  3. Why is it important for someone to tell you how people feel about direct selling? Why not ask people directly?

    …rather than rely on the DSA who lobbies Congress to pass legislation that would open the door to legalizing MLM abuses. Maybe I'm not remembering things correctly, but wasn't this the same group who tried to make "buy from yourself and teach others to do the same" legal a few years back?

    That is one reason I do not trust the DSA.

    I think the DSA is trying to paint a rosey picture of direct selling so more people will get into direct selling (whether they are suited for it or not). This would allow them to claim more lobbying power.

  4. Renshi_D
    The DSA Blog (directselling411.com/blog) is asking people directly how they feel. What the industry is doing wrong, and what the industry is doing right.

    The Statistics that Ty is quoting are just that, statistics that were posted on the DSA site to provide information for people to digest.

    If you have not already done so, I would encourage you to check out their blog. Sure, most of the posts are Pro-DSA, but they are admitting that they are not perfect and are asking for feedback on what they are doing wrong, and telling consumers how to get out of direct selling if they determine that it is not for them.

  5. If these stats are coming solely from their website feedback, then that is a clear sampling error and doesn't translate to the rest of the population at large.

    That is a HUGELY skewed sample. That is a subset of the population of people who even came to their website. Visitors to a website vs. responders/posters is typically very different. So, what subset of the general population do you think are most likely to visit the DSA website?

  6. I think that you need to read the comments left by Ms. Robinson on Ty's other "mythbuster" post (http://www.mlmblog.net/2008/04/mlm-mythbusters.html#comments. Statistics are not gathered by people visiting the DSA website and taking a survey, they were gathered via phone interviews (and presumably other market research methods like focus groups, mail surveys to consumers etc.).

    The RESULTS of the surveys (the statistics that Ty is referencing) were posted on DSA's website for people to review for themselves and form their own opinion.

  7. If I misread something, then I apologize.

    What I would like to know is how are people "chosen" to participate in the data gathering? Someone like me will never be called by researchers because I am on the national "do not call" registry. The first thing I tell callers I do not know is, "How did you get my number? My number is on the "do not call" registry." Once they hear that they apologize and tell me they will take my number off their list.

    I would bet that a lot of people who are on the "do not call" registry have some negative views about direct selling. How are these people being accounted for in the data? Obviously there is a significant number of them or else the "do not call" registry wouldn't have been created. Are the data gatherers giving any indication of how many people or what percentage REFUSED to give information or continue the call once they found out it was about market research?

    I don't have a lot of faith in market research. Does anyone remember "New Coke?" That arrived because of market research. Where is it now?

    I think many people accept these DSA figures because they want to. I reject them because their results don't jibe with my personal experience AND they really lack some important details.

  8. I don't know how the DSA gathered their list of who to call(as I don't work for DSA and don't want to pay several hundred dollars to purchase their raw data report), but assuming that they used an independent research firm, the firms generally have lists of people who are willing to answer phone survey questions, and they can select certain demographics in their sample to "represent" America (certain number of males/females, certain % from each race & income class etc.).

    I have been involved with several market research studies, and have actually seen some of the issues/problems/suggestions that I made during the study actually make it into the end product once it was introduced to the market…and yes, I remember "New Coke", and I was actually sorry to see it go. I Kinda liked it!

  9. Sure, they can make their sample LOOK representative of America, but that doesn't mean it IS representative.

    Like I said before, people who don't want to answer surveys make up a huge portion of the US and therefore their opinions are unknown. With an unknown of that size/proportion I have a very difficult time believing market surveys like this.

    Lots of people kinda liked new Coke, but many more people preferred Coke Classic or Pepsi. Hence, it was a loser. Coke learned flavor matter, not just sugar.

    Speaking of Coke, the flavor and sweetness differ by region/nationality. The most flavorful Coke I've had was when I vacationed in the Bahamas. It had more flavor and less sugar. It was awesome.

  10. Right, she wouldn't be included ever again…did I give the impression that I thought she would?

    I merely stated she was a one-time customer, but she is obviously not the kind of customer (repeat) that could help sustain a long-term Avon business.

    Yes, there are ways to get in touch with people without violating "do not call" laws, but the odds of a person on a "do not call list" being willing to complete a phone survey are minimal at best. I'm only pointing out the flaws in the design and presentation of the "research."

    I'm sorry if my critical thinking and criticism of direct selling/MLM research is hurting your feelings. However, business decisions should be based on logic, not feelings.

  11. New Coke was disgusting!

    BTW, just because you are on the do not call list doesn't mean that you can't participate in a phone survey, focus group etc. There are plenty of other ways to get in touch with you without violating Do Not Call laws.

    BTW Renshi, that stat is for "any giving year" not just one year. So the wife that buys Avon once and never buys again wouldn't be counted next year.

    Roosevelt Cooper
    http://www.web204mlm.com

  12. And sometimes it is necessary to gather data to base business decisions on logic. As Ms. Robinson stated in the other related post, DSA gathers industry data that their member companies can use to make informed and LOGICAL business decisions. You may not agree with the statistics, and that is fine, but unless someone can produce other data/statistics to couter these they seem reasonable.

    Renshi, You might want to check out directselling411.com/blog. A critic of one MLM in particular has been having a back and forth conversation with the DSA asking some rather pointed questions, and the DSA appears to be addressing the issues head on and admitting that the industry is not perfect and they are looking for input on where "the masses" (or at least the more outspoken critics) feel the problems are to see what they can do about addressing the problems. Personally, I think that this will be a long process, but when an industry comes out and basically says "We are not perfect, and we want your help to make things better", one needs to pay attention, as it is not often that industry listens to the consumer. Only time will tell if they can steer the ship in the right direction.

  13. Why is the DSA looking for input when their research said things were hunky dory in MLM land? That doesn't exactly fill me with confidence in the results of the research.

    OK, I'll have a quick look at their site.

    …I just took a quick look at the DSA site. The first thing I looked at was their myths about direct selling. Something really caught my eye – Myth #5
    "In fact, direct sales have increased 70% over the past decade from $22.2 billion in 1997 to $32 billion in 2006."

    Am I wrong, or did they really turn a 44% increase into a 70% increase? Maybe it would help me if they could show their work and how they arrived at their answer.

    This error (if it is one) is one I found within 4 minutes of looking over the site. I stopped looking as soon as I found this error because it really supported my doubts about their ability to report anything correctly.

    Maybe it was a coincidence that I could find an error so quickly when I looked over their site. I doubt it, though.

  14. One of the great things about having a new site is letting the public critique it – the best proofreaders are people who've never seen the information before.
    Renshi is right about the mathematical error. This is a great example of the reason we use professional researchers because I'm obviously not great with a calculator – it's also the reason we provide the actual numbers and not just the percentages so readers can see the facts for themselves. I've updated the site to reflect that sales have actually increased 79% in just over a decade (11 years of year-over-year change spanning 1995-2006). When we added the 2006 numbers last fall that percentage should have been recalculated – oops! If you want to stick to the decade, it's 54% from 1996-2006. (The 44% figure Renshi quotes actually takes into account only 9 years of year-over-year change.) I've also included a link to the research page on the DSA site (http://www.dsa.org/pubs/numbers/) to help anyone who wants to delve deeper into the numbers.

    Oh, and why are we looking for input? No one ever claimed everything is perfect. On the other hand, many try to paint a very negative picture of direct selling, and that's just not the case, either. The bottom line is, until 100% of people are happy, then our job isn't done.

    And, even though Renshi is focused on the stats, what we're really concerned about is making sure direct selling is a positive experience for everyone. Increased sales indicate a thriving industry, but high levels of satisfaction mean we're changing lives and making a difference.

  15. Amy,

    You are incorrect about my number based on only 9 years. 1997-2006 is 10 years. Look at it like this 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, and 2006. That is 10 years.

    1996-2006 is actually 11 years.

    See, each mistake you make compounds your loss of credibility. Right now I wouldn't trust you with a calculator, let alone statistical analysis and interpreting statistical analysis.

    You can claim increased sales for the industry, but I know "increased sales" can be manipulated by pricing changes, compensation plan changes, and math errors (purposeful and accidental). I stay focused on the stats because that is quantifiable data. I also focus on stats because I have a certain degree of understanding and expertise with statistics from a research point of view. The fact I keep finding errors in your data does not bode well for you or the DSA…every error I find tends to make me look for more errors.

    You can say great stuff about level of satisfaction, changing lives, and making a difference but that doesn't stop people in DSA associated companies from abusing people and ruining other people's lives for the betterment of their own. There are and have been way too many people posting to groups like MLM survivors and Qblog Forums who have had wretched experiences with MLM/direct sales. As long as you only gather data from current direct sales people, you are dealing with a horribly biased sample that has no relevance to the attitudes about and experiences of direct selling by the general population.

  16. Mmmm, sorry Renshi, I have to disagree that 1997 – 2006 is 10 years when you look at the data.

    1997 is the base number, the year that all data is based upon, effectively, your starting point. That number would reflect the total sales that occurred at the end of that year. December 31, 1997.

    Now when you look at growth beyond 1997, you now need to measure for an additional year:
    Year 1: 1997-1998
    Year 2: 1998-1999
    Year 3: 1999-2000
    Year 4: 2000-2001
    Year 5: 2001-2002
    Year 6: 2002-2003
    Year 7: 2003-2004
    Year 8: 2004-2005
    Year 9: 2005-2006
    Year 10: 2006-2007 (which DSA does not have published numbers for yet)

    You state: "There are and have been way too many people posting to groups like MLM survivors and Qblog Forums who have had wretched experiences with MLM/direct sales. " And you know what, I actually think the DSA agrees with you (http://www.directselling411.com/blog/dont-we-all-have-the-same-goal/) The DSA States in this one article: "I’ll be the first to admit that the direct selling industry is not without its issues – if it were perfect you wouldn’t be reading this blog." "Do the good guys ever err? Of course – that’s one of the reasons the Direct Selling Association’s Code of Ethics…"

    To me, it does not sound like an organization that is trying to paint a "Picture perfect" image, they realize that they have flaws, they seem to think they know what some of the flaws are, but are asking for input from a wider variety of people. I think that the following line sums it up with people telling their sad stories on MLM Survivors and Qblog "Complain to your friend or neighbor if you choose, but to get a resolution, file a Code complaint. DSA member companies are required to resolve all issues to the satisfaction of the Code Administrator – their membership depends on it."

  17. Renshi, to show change, you need 2 numbers. That's why the years you state only account for 9 years of change. Take a look: 1997-1998 is change one, 1998-1999 is change two, 1999-2000 is change three, 2000-2001 is change four, 2001-2002 is change five, 2002-2003 is change six, 2003-2004 is change seven, 2004-2005 is change eight, 2005-2006 is change nine. It might be 10 calendar years, but to show 10 years of change you need numbers from 11 years, so one would start with 1996-1997 as change one, resulting in the 54% increase over 10 years. It's kind of like when my son tries to figure out how many hours have passed between 1pm and 4pm by counting 1-2-3-4. That's four numbers, but three hours. Regardless of how you count the years, though, the hard numbers remain the same and they are posted for all to see and evaluate. Come to whatever conclusions you want, they are what they are.

    Renshi, you can continue to focus on what constitutes 10 years if you'd like, but what I truly believe you want to do is address what you see as problems in the direct selling industry. I'm not clear on your background with direct selling, but you obviously had some very pointed experiences that shape your views. It's unfortunate that your experience didn't meet your expectations and I understand why you don't want others to have the same experience. DSA shares that goal, which is why we are working to educate the public about direct selling – the good, the bad and the misunderstood. It's your choice to focus only on the bad, or to criticize an organization that spends a significant amount of its resources on consumer education and protection initiatives to address and prevent exactly the same abuses that concern you. Hopefully at some point you'll recognize that at the core, I think we share the same goal.

  18. 1997-2006 is 10 years. It is 10 data points. Within 10 data points you can only show growth or decline 9 times. That is a "DUH!" The fact you guys argue over that is crazy. The fact you guys want to have data from 11 years and call it 10 is goofy, too.

    Use whatever years you like. I chose the ones I did because YOUR DSA picked them and reported related growth inaccurately – is that a mistake or a lie? Either way the DSA is stupid (not knowing how to do math and then publishing it on a web page to help their image counts as stupid twice) or a pack of liars trying to push an agenda. I presented accurate data over the same time length they chose.

    The fact remains, network marketing or direct selling is only showing annual growth of about 5% a year. Which is roughly the same rate as the US GDP. If you guys can show significantly better growth than the GDP, that might be something to take note or pride in, but you haven't.

    http://www.bea.gov/national/index.htm#gdp
    Here's a link so you can look at how GDP has increased from year to year. Look at stats based on current dollars (far left column), not inflation adjusted.

  19. As one who studied stats, I would want to know the chi square for this data! And what or what is the p-value? Bottom line what I know for sure numbers are always being cooked.

    They are right, I Consult with a number of direct sales people…I know that many buy into and buy hoards of their product to stay i n the game and appear to be successful! So…the proof is in the pudding!

  20. Patricia,

    I thought p-value and chi square were only used for inferential statistics. Since this is a descriptive statistic can those values even be applied?

  21. This is really way above my head, all this stats talk surely as long as a company is turning a profit and a proportion of that profit is being passed down to the people most active within that organisations structure, then who cares.
    The people who are at the bottom of a MLM compensation plan are, its probably fair to say, inactive in promoting the company, and therefore rightly at the bottom when it comes to paid commissions.

  22. Direct selling is old school, these days you need to take advantage of what the internet has to offer and establish your streams of income this way.

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