Walter J. Carl stated in a 2004 Western Journal of Communication article that “MLM organizations have been described by some as cults (Butterfield, 1985), pyramid schemes (Fitzpatrick & Reynolds, 1997), or organizations rife with misleading, deceptive, and unethical behavior (Carter, 1999), such as the questionable use of evangelical discourse to promote the business (Höpfl & Maddrell, 1996), and the exploitation of personal relationships for financial gain (Fitzpatrick & Reynolds, 1997)”. In China, volunteers working to rescue people from the schemes have been physically attacked.
MLMs also appear to prey on the weak and vulnerable with promises of wealth and an easier life. They are touted as an ‘income opportunity’ and yet, very, very few people DO apparently make any money out of them.
Let’s just suppose that “X” has been reached today in a particular MLM; the number of possible units sold at this price has just been exceeded, and you happen to be a starry-eyed prospect sitting in an MLM meeting listening to the pitch. Now consider: Does anyone in this company know about “X”? Does anyone care? Is the issue being suppressed on purpose for some other motive? Since we are supposing that the market saturation number “X” has been reached, everyone joining the MLM from now on is buying into a false hope. But that is not what the speaker will be saying. He will be telling you, “Now is the time to join. Get in on the ‘ground floor’.” But it is all a lie, even though the speaker may not know it. The total available market “X” has been reached and nobody noticed. All the distributors will lose from here on out. Could this be you? How could you possibly know at what point you will become the liar in an MLM?
Look up CEO’s and other company leaders. Keep the same things in mind as when you investigated companies. Is the company leadership reputable and law-abiding? If company leaders have been accused of carrying out scams or have had legal trouble, you may want to avoid this company.
Fed the fantasy of achieving the all-elusive American dream, many of them are being wooed by multilevel-marketing companies. Known as MLMs (or “direct-sales”), the current US administration is stocked with their cheerleaders: Betsy DeVos, the secretary of education, is married to a cofounder of Amway; Ben Carson is a spokesperson for a vitamin MLM called Mannatech; and president Donald Trump used to have an MLM, Trump Network, and was a spokesperson for another.
Small-town America is built on the concept of community, meaning the psychological guilt games MLMs play are their most effective selling tool. Even Christina Hinks of Mommygyver has started positively reviewing other MLMS again, directing her readers to join consultant Facebook groups and helping MLMs with market research. Like America’s systemic class bias, it’s hard to escape.
“One of the unique facets of this business is that the victims are also perpetrators,” Brooks says, speaking generally of MLMs. “You’re trained to recruit your friends and family and neighbors.” He points out that when you onboard someone underneath you, especially if they live in your town or are in your friendship group, you are essentially creating a competitor. It’s as if you open a Subway sandwich shop and then encourage your neighbor to open a Subway right next door—and everyone is already sick of sandwiches.
Even if you’re not put under any pressure to sell – and some of the MLMs now targeting the female market do reassure you by saying you have no targets to meet – the fact remains you NEED to sell to make money.
The short answer to the above question is “ABSOLUTELY!” However, many people have attempted to get into Network Marketing and haven’t been willing to do the work necessary to see dividends on their investment. They go into it thinking it will be easy, that they can just sit back and start raking in the cash. When they discover it takes work and diligence to make it work, they often are taken aback and simply give up.
“The community I’ve found within Arbonne is unlike any other I’ve encountered,” she says. “I previously worked in science/research/education, where there is a lot of job scarcity, competition and uncertainty. In our community, we all assist each other and lift one another up, as we have a common goal of sharing what we love.”
One of the arguments MLM reps make in defending their ‘business’ is that it’s just the same as any other small business. You need to invest to get started, you need to sell, and some people just aren’t cut out to make it in business, so will fail.
This aspect of the MLM experience should not be underestimated, and the reflective reader would do well to think twice about the value of friends, family, community, and church fellowship before joining or continuing in an MLM.
And this is one of the reasons why most MLMs aren’t ethical – they sell the dream that anyone can be successful with their ‘opportunity’. They don’t make it clear that only a small percentage of people who join them will make a liveable income (or any income at all).
Hyperbole is not limited merely to product claims, however. When MLMers turn to their competitors it can get ugly indeed. Some of the most outlandish rumors of modern history can be traced to MLMs. In recent years, for example, the international rumor that the president of a major real-world corporation was a Satanist, and that the logo of his company contained occult symbols, turned out to have a commercial motive and was traced to specific Amway distributors. These were successfully sued in 1991, but the rumor persists. And how much else of the MLM negative “sales pitch” is fabrication or outright lie? Not all the negative selling claims are as scandalous or widespread as the previous example, but the MLM culture produces so much of this stuff it would be hard to prosecute it all.
Build new leads. In network marketing, leads are potential customers. You’ll need to keep finding new leads if you want to keep making money. There are various ways you can find new leads, and you should use multiple strategies to attract the largest market possible.
The main pitch of most MLMs is passive income – the promise of being able to sit back and relax while someone else does all the work. But if everybody wants to “let someone else sell the products,” who will actually do the selling?
The MLMers of the new millennium are starting to sound a lot like the gangsters of yesteryear. In an era where management science and the law generally condemn MLM, they’ve “got their own experts,” from academia or law, who are “on the payroll.” Confidence, remember, is key.
It is important to distinguish between the MLM company itself versus the so-called “independent businesses” run by the MLM participants. Many MLM companies generate billions of dollars in annual revenue and hundreds of millions of dollars in annual profit, however, an MLM company’s overall profitability does not correlate to the profitability experience of their participants.
In some cases, of course, direct selling does replace full-time, salaried gigs. That was the case for Sarah Millar, a 25-year-old personal trainer from Ottawa who joined Stella & Dot because she wasn’t making a consistent enough income on her fitness biz. Since signing up in January 2016, she’s paid off her student loans, gone on two vacations and started saving for a down payment. (She and her high school sweetheart are aiming to buy a home this spring.)
Thankfully, getting out is easier than it used to be—sort of. Thankfully, getting out is easier than it used to be—sort of. LuLaRoe has started providing free shipping so that consultants who want to leave can return their inventory and get back what they paid, as long as those items are in perfect condition and in their original packaging. This sounds reasonable—except that retailers generally have to unbox, hang, and photograph each item in order to have a shot at selling it, meaning a lot of their unsold inventory isn’t eligible for a refund.
If it turns out that there is a “run” on ReVo products, and they sell out in mid-June, then they have miscalculated demand and will miss out on profits they could have made. The more serious problem, however, is overestimating the saturation point for the product. If they make 10M units, and sell only 2M units, this may be the end of ReVo as a company.
Use of invented jargon and euphemisms, which has led to a predictably hilarious euphemism treadmill (i.e., “network marketing,” “referral marketing”, “affiliate marketing”, “home-based business franchising”, “Independent Business Owner”)
For a portion of independent retailers, LuLaRoe is to economic opportunity as Goop is to wellness: It’s for ladies who already have it all. The ability to throw down $12,000 to start a LuLaRoe business and work 30 hours a week sometimes comes from a place of privilege, not desperation. Some mothers who are just looking for a hobby have husbands whose salaries are already high enough to support their families. “I felt like I was trying to keep up with the Joneses to stay in business against these other consultants who can afford to drop a $500 order every few days,” Ashley says.
A few people do make big money from MLMs. And these people are often trotted out in promotional videos, celebrated at annual events, and very publicly ‘rewarded’ with prizes like prestigious cars (although these ‘prizes’ aren’t as generous as they first appear – you simply get a discount on the lease which you must take out in your own name, and if your sales fall, the discount ends…). You also need to promote the company on the car they ‘give’ you.
The age-old technique of “con men” is to create “confidence” in some otherwise dumb idea by diversion of thought, bait, or force of personality. The victim gets confidence in a bogus plan, and, in exchange, the con man gets your money. MLMers are very high on confidence.
Of course, it could be pointed out that this might have happened anyway. Perhaps the die-hard MLMers would have ruined their friendships anyway in some other non-MLM business failure. Is the MLM really the cause, or just the vehicle?
Not so with the MLM crowd. Pick up any brochure or videotape for an MLM and you are more than likely to see a cheesy, obvious, and blatant appeal to greed and materialism. This is offensive to everyone, even die-hard materialists. Typical is an appeal to “the American dream.” Usually there will be a mood shot of a large new home, a luxury car, a boat, perhaps a beautiful couple boarding a Lear jet, and so on.
Many readers will share the experience of observing MLMs divide families, friends, churches, and civic groups. Lifelong friends are now “prospects.” The neighborhood is now “a market.” Motives change, suspicions rise, divisions form. The question is begged: “Is it worth it?”
But the rest of the business world didn’t always take her seriously: “I took my company public on my own, raised millions on my own,” she says. But “it’s very challenging being a woman in the financial industry trying to raise money for a kid’s clothing company. Investors would ask, ‘Do you sew the clothes?’ Or say, ‘You have a home party business.’ All I do, all day long is prove myself.”
The upper echelons of LuLaRoe’s consultant community have a reputation for being vicious to their downline. “It’s like the policy police,” Ashley says. “‘We’re going to find you, stalk you, tell on you. How dare you guys say a single word bad. We’re going to shame you.’”
Interestingly, the issue of supply and demand is what brought the USSR to its knees. By design, the Soviet government tried to macro-manage supply, where bureaucrats would decide how many potatoes were needed, how much toilet paper, etc. Assuming these bureaucrats did the best they could, unfortunately their efforts to deliberately manipulate the control “knob” of supply and demand was not good enough. Notwithstanding their good intentions, they were usually wrong, which created huge shortages and surpluses, and led to a massive economic collapse.
“I was urged to stop paying my bills to invest in more inventory. I was urged to get rid of television. I was urged to pawn my vehicle. I just had to get on anxiety meds over all of it because I’ve started having panic attacks.”
When it comes to selling product, MLM sales reps are probably no more aggressive or obnoxious than ordinary salespeople. Since most are not salespeople by nature, and it is characteristic that MLMs attract few people with any experience selling this particular product or service, they usually sell through pre-fab “parties” or home “demos.” Thus, sales pressure is exerted by situation, if at all.
In short, we wanted you to know the exact criteria we used in order to select, and then to rank, “The Top 25…” You may agree with our findings, or you may not; we welcome your thoughts and opinions either way. Here’s the Nexera Five-Factor Formula we used to make our selections:
Independent distributors develop their organizations by either building an active consumer network, who buy direct from the company, or by recruiting a downline of independent distributors who also build a consumer network base, thereby expanding the overall organization.
Well, I’ve been an MLM rep for a number of different companies, including YL and doTERRA (DT), so here are my thoughts about MLMs–mainly regarding the oils companies, but some of my thoughts extend to other MLMs as well. I did some research into BeYoung but chose not to become a rep of their company.
The combined number of recruits from these cycles are the sales force which is referred to as the salesperson’s “downline”. This “downline” is the pyramid in MLM’s multiple level structure of compensation.
Jump up ↑ “Attorney General Abbott Shuts Down Pyramid Scheme That Marketed Bogus Fuel Pill”. April 2, 2007. https://web.archive.org/web/20070402211346/http://www.oag.state.tx.us/oagNews/release.php?id=1906.
For most people, thankfully, the MLM experience usually ends in very quick financial failure and is then sidelined. Two possible responses are: 1) being embarrassed about participation, or 2) becoming even more intractable when the MLM has failed. You will find the latter chasing after the latest “get rich quick” scheme with similar results. “If we could have just sponsored so and so–they have so many friends–we would have made it.”
After earning $3,000 to $5,000 a month for a few consecutive months, Kayla quit her job in late 2016 to sell LuLaRoe full time. “The next month my profits took a dip. And the next month my profits took a dip,” she says. “I’ve not been able to recoup anything since I quit my job.” After trying to sell off as much inventory as she could, she resigned from the company last month and is awaiting her refund check—which, at the time of writing, still hasn’t arrived.
So, MLMs profit by conning recruits up-front with a “distributorship fee,” and then make further illicit money by “confidencing” these hapless victims as they fail via the “sale” of collateral material.
Arbonne and other multi-level marketing (MLM) companies, like Stella & Dot, Isagenix, doTERRA and Scentsy, are big business in Canada. For the uninitiated, these companies operate through a pyramid-shaped commission model. Sellers — self-employed “distributors” or “consultants” as they’re commonly known — are usually required to pay a start-up fee or purchase a start-up kit, which usually rings up at $100 to $200 and contains a complete product catalogue, business manual and training materials, then buy their merchandise at wholesale prices. They earn money either through commissions based on sales they’ve made, or commissions based on salespeople they have recruited (known as “downlines” in MLM parlance) have made.
MLM companies have been trying to find ways around China’s prohibitions, or have been developing other methods, such as direct sales, to take their products to China through retail operations. The Direct Sales Regulations limit direct selling to cosmetics, health food, sanitary products, bodybuilding equipment and kitchen utensils. And the Regulations require Chinese or foreign companies (“FIEs”) who intend to engage into direct sale business in mainland China to apply for and obtain direct selling license from the Ministry of Commerce (“MOFCOM”). In 2016, there are 73 companies, including domestic and foreign companies, have obtained the direct selling license. Some multi-level marketing sellers have circumvented this ban by establishing addresses and bank accounts in Hong Kong, where the practice is legal, while selling and recruiting on the mainland.
The origin of multi-level marketing is often disputed; but multi-level marketing style businesses existed in the 1920s, 1930s California Vitamin Company, (later named Nutrilite) or California Perfume Company (renamed as “Avon Products”).
FLARE spoke to a handful of young Canadian women, most of whom said they make money on their businesses. For some, this additional income covers “extras” they might not have been able to afford on the paycheque from their day jobs. Take Stella & Dot stylist Elyse Berendson, a 29-year-old preschool teacher who joined the company to supplement her income.
Stern jumped in during the heyday phase of a MLM when the people at the top grew rich, and quick. By the start of 2017, nine months after Stern joined, LuLaRoe was pushing 80,000 independent retailers. According to interviews with several consultants, this is also the time when sales suddenly became tougher: The hundreds of thousands of ravenous customers who once clamored to buy leggings from 10,000 consultants flipped in less than a year to eight times that amount selling to just a fraction of the clients. The scales began to tip.
Direct selling does not necessarily incorporate the endless chain of recruiting that makes MLM so controversial, and is not necessarily unethical. However, the modern direct selling industry is utterly dominated by MLMs. According to the Deceptive Direct Selling Association (DSA), the industry’s trade association and lobbying arm, 97% of its members are MLMs as of 2017. The distinction between direct selling and network marketing, which many MLMs hide behind to maintain their legitimacy, is therefore essentially meaningless.
To put these statistics into context, John compared them with the failure rates for traditional small businesses using the Small Business Administration’s statistics for 2008. And he discovered that 44% of small businesses survive at least four years, 31% at least seven years, and 39% are profitable over the life of their business. In 10 years only 64% of small businesses fail.
With MLMs, the situation is much worse. Nobody is home. Even the Soviets had someone thinking about how much was enough! If the bureaucrat in Russia was having a hard time trying to play Adam Smith’s “invisible hand” in setting the supply level in the Soviet Union, then an MLM “executive” is in a truly unfortunate position. Not only is there no one assigned to make the decision of how much is enough, the MLM is set up by design to blindly go past the saturation point and keep on going. It will grow till it collapses under its own weight, without even a bureaucrat noticing.
MLMs aren’t a new business model—they’ve just done a little rebranding. A lot of the old guard such as Avon and Mary Kay are still around, but nowadays, some of the most popular MLMs include Herbalife and Plexus (nutrition and weight loss), Young Living and DoTerra (essential oils), Pampered Chef (kitchen tools), Rodan + Fields (skincare), and Jamberry (nail stickers).
The most cult-like thing about MLM is that it manipulates members’ existing beliefs and desires, and tricks them into believing they are exercising free will. MLMs are able to coerce people into willful and compliant self-destruction on a staggering scale: we’re talking quitting or getting fired from a six-figure full-time job due to an MLM, alienating everyone you know due to your constant sales pitches, investing your own or someone else’s life’s savings into an MLM, ruining your credit or losing collateral by borrowing heavily to fund an MLM, and even theft to support an MLM habit. Suicides related to MLM have been reported.
^ Jump up to: a b Merrilees, Bill; Miller, Dale (1999). “Direct Selling in the West and East: The Relative Roles of Product and Relationship (Guanxi) Drivers”. Journal of Business Research. 45 (3): 267–273.
Multi-level marketing, abbreviated as MLM, also called pyramid selling, network marketing and referral marketing, is a controversial marketing strategy for the sale of products and/or services where the revenue of the MLM company is derived from a non-salaried workforce (also called participants, and variously known as “salespeople”, “distributors”, “consultants”, “promoters”, “independent business owners”, etc) selling the company’s products/services, while the earnings of the participants is derived from a pyramid-shaped commission system.
I started checking out various oils companies because I didn’t want to recommend any company without fairly checking out the competitors. I felt it would be a disservice to my family and to my readers.
* Why 10 years? Because that amount of time really seems to matter. For example, according to research, since 1956 thousands of different MLM, Multi Level, or Network Marketing companies have opened their doors; and to date only +/- 50 MLM companies have found a way to celebrate their 10th anniversary and still remain in business today. Now, to be completely fair, we should also point out that each and every company on our list was at one time a start-up company too.