Chain letters: Who profits and why. How do they work? Who makes the money?

Many people are taken in by chain letters every day. The promise of fast money with moderate effort is too attractive to some people. They are too emotionally involved to consider the impossible requirements for success. The U.S. Postal Service indicates that chain letters don't work.

Chain letters don't work primarily because the numbers don't work out. There are not enough people willing to respond to chain letters to make anyone rich.

How could you make $60,000 in two weeks mailing 600 chain letters? If each person responding to the chain letters sent you $5, you would have to receive mail from 12,000 people. If 1% of the people you sent letters to responded (a very high rate of response), your first generation receipts would look like this:

Next, the 6 people who responded will each send 600 chain letters and obtain that same, high 1% response rate:

But, consider two important things:

• The response rate will not be 1%. It will probably be much closer to 0% unless you buy a list of names from an established and reputable mailing list company. You should expect to pay from $40 to $100 for a thousand names of known "Opportunity Seekers." Without this step you will likely have wasted your time and effort in sending out your 600 letters.
• The time it takes for mail to be delivered and for the average person to acquire 600 addresses (even email address) will make it impossible for this to succeed even to the second level in two weeks. Don't forget there are two sets of mass mailings (that could be email) and two sets of replies (that must be letters).

Chain letters are not a get rich quick option for those that receive them.

Some additional sites that discuss the folly of responding to chain letters include:

What's wrong with chain letters? by Donald Watrous
Computer Incident Advisory Capability (Department of Energy)

But, you must be thinking that chain letters must work or there wouldn't be so many of them.

The fact is, chain letters can work, but only for the person who originates them. Here's why.

When you get a chain letter, you are told to

1. Send (perhaps) $5 cash to each of the five names on the letter. By return mail you will receive (perhaps) 5 one page reports that you will copy and then send to those requesting them from you.
2. Move each name on the list down one position, dropping the fifth name and placing your name in the 1st position.
3. Mail or email the chain letter to hundreds of people.

If this is actually what happens all along the way, the Post Office would be right. There are just not enough people who will respond to chain letters to make it effective.

But, that is NOT the way chain letters really work.

Here is an actual chain letter received via email. Notice it's appeal and see if you can see how this chain letter works.

The person who originates the chain letter is actually listed FIVE times. Perhaps one name is real, and the other names are phony names. The addresses are all owned by the originator of the letter. (How else could chain letters start?)

Anyone who responds to the chain letter is actually sending $25 to the originator, not merely $5. Anyone responding to a second generation letter will be sending the originator $20, and so on.

By using mail forwarding services and phony names, anyone can initiate more successful chain letters. By sending hundreds of thousands of emails, there will be enough people taken in by the good luck story in the chain letter to make the originator some, maybe considerable money.

Some names and addresses you see on chain letters look like:

The Post Office delivers mail from the "BOTTOM" of the address "UP". This means that the delivery point is in the state "YourState" and city "Yourtown". But the next line is another name for PO BOX 1654. It's simply a Post Office box. There is no delivery to 1649 North Miller Road! That's simply a bogus address. The actual delivery point is simply a post office box!

Another popular address is actually a private "post office" box. The business that maintains the site may forward mail arriving at the private box to the final destination.

Addresses send to private "post office" boxes may look like the following:

Here, the street address "1649 North Miller Road" is the actual store front address of the private company. The apartment number, "Apt: 342" is the private "post office" box. The private company may forward mail in that box to the final destination periodically, perhaps weekly. In this case, the private "post office" box looks like a real person's address, but is just like a PO Box.

And, many mail forwarding sites only need your "name" in the address to place it in the right box. The address looks just like a person's home address, but it's not.

Here are some sources for private "post office" boxes that perform mail forwarding services. These services are not intended to foster chain letters or any other illegal activity.

Mail Network
Voyagers Mail Forwarding Service
Mail Boxes Etc.

Mail forwarding sites can also have simple "home" addresses. See the revealing Mail Forwarding Business Opportunity page describing this home-based business opportunity.

How much does it cost to send a chain letter? By email, nothing. But, through the U.S. first class presorted mail, 27 cents, plus the cost of time and materials; let's say about 30 cents.

Purchasing a mailing list of known chain letter responders might cost an additional 40 cents or so per name. Here, we'll consider sending chain letters to targeted communities of people most likely to respond to chain letters.

How much does the originator of the chain letter make?

For every "successful" chain letter in the first generation, the originator makes $25. For every "successful" chain letter in the second generation the originator makes $20. In the third generation, the originator makes $15.

What rate of return would we need to make a profit?

A good chain letter needs a successful response rate of only 3/4% in the first generation and half that rate in generations two and three. With an equal number of letters sent out in each generation, perhaps a thousand, these are the results.