You see, there are lots of other people who need to sell the same products as you to make money too. And quite possibly living in the same area, with the same pool of potential customers as you. So if you have the misfortune to sign up to an MLM that’s already popular in your area or social circle, you’ll probably find it hard to recruit customers.
And these sales aren’t just to customers. You see, in order to join an MLM you usually need to buy products to sell (often referred to as a starter kit, or similar). And then in order to remain a seller, stylist, supervisor, or whatever term the company uses, you often need to make a minimum number of sales in a given time period (though not always).
Health insurance premiums never seem to stop going up. The 2015 Employer Health Benefits Survey conducted by the Kaiser Family Foundation found that annual premiums for employer-sponsored family health insurance increased by 4% over the last year, … Read more
If you’ve been thinking about, or already are using, essential oils, at one time or another you’ve likely wondered if you should be part of Young Living, doTERRA, or some other multi-level marketing (MLM) company to get “the best essential oils” at a discount.
Water.org is an international nonprofit organization that has positively transformed millions of lives around the world through access to safe water and sanitation. Founded by Gary White and Matt Damon, Water.org pioneers innovative, market-driven solutions to the global water crisis — breaking down barriers to give families hope, health and the opportunity to break the cycle of poverty.
“A statistical analysis of income disclosures made by 10 major multi-level marketing (MLM) companies… reveals that, on average, 99% of all participants received less than $10 a week in commissions, before all expenses.”
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.
Once you are ‘in’ you can start making money by selling merchandise or services directly, and will also start making commissions on the sales of those you recruit. So, to succeed, you need not only to dedicate to selling the product or service of the company but should also be ready to sign up and train others to sell these products and services.
Given the above, the ‘business opportunity’ promised by MLMs can often look like a gift from heaven to mums. We’re told that, with a tiny investment (compared with starting your own business from scratch) you can join an established business that promises a comfortable, easy income – and even great wealth.
Whether they realize it or not, consultant leaders often use time-honored cult tactics of denial and blame to keep women within their sorority. A famous series of experiments from the 1950s conducted by Soloman Asch in England showed that three out of four people will deny evidence right in front of them if the majority says it’s not true. In the study, individuals were placed in groups where they were constantly contradicted by other members. When this happened over a length of time, they would start to agree with the majority—even though it was clear that the opposite was true. In MLMs, “you’re trained to avoid people who question whether this is a viable business or not,” Brooks says. “Which is exactly the same technique that cults use—they try to isolate you from people who question your belief system. I’ve been contacted by a number of people who deal with cult survivors, and some of their clients are former MLM people.”
MLM salespeople are not employees of the MLM company. Participants do not derive a salary/wage, nor do participants receive remuneration from the MLM company for their invested labor and expenses in their MLM “independent business”. The income of participants, if any income is made at all, is derived only from commissions on their personal sales or their share of the commissions on the personal sales of their downlines (the MLM compensation structure).
So why are MLM promoters obscuring this? Who is in control of the supply “knob,” carefully and skillfully managing the size of the distribution channels, number of salespeople, inventory, etc., to insure the success of all involved in the business? The truth is chilling: nobody.
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.
They will claim to have made “new friends,” most of which are MLMers or new acquaintances who could be considered “future prospects.” The shallowness of these “new friends,” the stilted conversations among the “old friends,” and the embarrassment, in general, for what seems clear to everyone but the MLMer go unnoticed. Callousness sets in; standards are lowered.
The legal distinction between MLMs and traditional pyramid schemes has been characterized by many authorities as a legal fiction. Jurisdictions that retain a legal distinction between MLM pyramid businesses versus illegal pyramid schemes retain said distinction on two key distinguishing features: 1) that MLMs always encompass the sale of actual products/services, while traditional illegal pyramid schemes ordinarily do not (though sometimes they do), and 2) that climbing an MLM pyramid is overwhelmingly statistically improbable (especially to its highest participant levels) but not theoretically impossible, whereas climbing a traditional illegal pyramid scheme is both statistically and theoretically impossible.
In a normal sales business, you are hired and promoted based on a holistic assessment of a variety of factors: one’s character, temperament, and contribution to the company and its profitability. In an MLM, there are no qualifications to join and you advance based on one factor alone: recruitment. The problem is that as the market saturates at an exponential rate, the pool of potential new recruits rapidly dries up, and new distributors must sink lower and lower and engage in steadily shadier and more desperate practices to build their downline. Far from being the behavior of “just a few bad apples,” as the MLM industry would have you believe, this practice is encouraged and rewarded by a system that prioritizes raw recruitment numbers above all else. This virtually guarantees that the ones who make the most money in MLM are the ones with the fewest scruples – which is unsurprising, given point #6…
Jump up ↑ Taylor, Jon (2011). /00017-57317.pdf “The Case (For and) Against Multilevel Marketing” (PDF). Consumer Awareness Institute. https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00017 /00017-57317.pdf. Retrieved 2018-04-08.
Eric Scheibeler, a high level “Emerald” Amway member: “UK Justice Norris found in 2008 that out of an IBO [Independent Business Owners] population of 33,000, ‘only about 90 made sufficient incomes to cover the costs of actively building their business.’ That’s a 99.7 percent loss rate for investors.”
Here’s what we know for sure: Popularity is definitely one of the best ways to determine what’s going on in the marketplace. It plays a part in the movies we see, the music we download, and sometimes even where we invest our money.
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.
Consumers of an MLM company’s products/services can, in theory, be merely end-user retail consumers. End-user retail consumers are non-participants of the MLM company, with their relationship to the MLM company being nothing more than in a capacity of consumers. In actual practice, however, the overwhelmingly majority of consumers of MLM products/services are the participants. They are the very “salespeople” within the MLM who had been recruited by a fellow participant positioned above them in the MLM pyramid structure.
Buying products from a network marketing company isn’t cheaper, faster, or more pleasant than buying them on the open market, and it’s often considerably worse in all three of these categories. That’s because unlike normal retail business, where the supply chain is direct and logical (from manufacturer, to wholesaler, to retailer, to customer), in MLMs the supply chain follows the customer’s upline, accumulating markups and compounding inefficiencies at each level of the pyramid. The result is higher prices, frequent unexplained delays, and products that are constantly “on back-order.” MLMs will often try to artificially suppress competition by claiming their product is unique or superior to all others – even claiming that their competitors’ products are poisonous or even Satanic – but equivalent products are always available from normal retail outlets, often at a fraction of the cost.
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.
How long would it take a seller to earn back their initial $5,000? Let’s say she sells 30 leggings in an online party. They cost $10.50 each wholesale, and the manufacturer’s advertised price is $25, so she would make a $435 profit. After that, consultants often tell other sellers to replace their inventory and build up more in order to be successful. “The question of inventory levels is determined by each retailer in the conduct of the retailer’s own independent business,” says a LuLaRoe spokesperson. “If the retailer believes greater inventory would help, they are encouraged to order.”
Although each MLM company dictates its own specific “compensation plan” for the payout of any earnings to their respective participants, the common feature which is found across all MLMs is that the compensation plans theoretically pay out to participants only from the two potential revenue streams. The first stream of compensation can be paid out from commissions of sales made by the participants directly to their own retail customers. The second stream of compensation can be paid out from commissions based on the sales made by other distributors below the participant who had recruited those other participants into the MLM; in the organizational hierarchy of MLMs, these participants are referred to as one’s “down line” distributors.
Some modern incarnations of MLMs attempt to address this particular problem by limiting the number of people you can sponsor, say, to four. But the same geometric expansion problems exist; the failure mechanism has just been slowed down a bit. And now there is the added problem of even more unnecessary layers in the organization.
Marketing innovations are not rare in the modern world, as evidenced by the success of Wal-Mart, which found a more efficient and profitable way to distribute goods and services than the status quo, providing lasting value to stockholders, employees, distributors, and consumers. But this is not the case with any MLM to date, and after 25 years of failed attempts, it is time to point out the reasons why.
Many LuLaRoe Facebook groups have the word “addiction” or “addicts” in their titles: Christine’s LuLaRoe Addicts Anonymous, LuLaRoe Addicts, LuLaRoe Addiction VIP Boutique. It’s supposed to be a joke, but it’s truer than many women realize.