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.
^ Jump up to: a b Vander Nat, Peter J.; Keep, William W. (2002). “Marketing Fraud: An Approach for Differentiating Multilevel Marketing from Pyramid Schemes”. Journal of Public Policy & Marketing. 21 (1): 139–15. doi:10.1509/jppm.188.8.131.5203.
MLM presents itself as a “business opportunity,” with products that are ostensibly sold to the general public. However, it doesn’t resemble any other retail business at all, and what it does strongly resemble is a pyramid scheme – the underlying mathematics of the two are identical. MLM has also been described by regulators as a form of gambling or lottery. Some MLMs resemble cults. The MLM industry denies that MLMs are anything other than normal, legitimate businesses, and unlike pyramid schemes, MLMs operate openly and (just this side of) legally in most countries.
Jump up ↑ David Ingram (September 7, 2012). “Medifast unit settles false ad claims for $3.7 million”. Reuters. https://www.reuters.com/article/2012/09/07/us-usa-medifast-settlement-idUSBRE8860X720120907. Retrieved 2012-09-09.
I recommend you consult with a professional before ingesting any essential oils. Consult a Medical Doctor, Naturopath, or clinically trained Aromatherapist who knows you and is aware of your medical history, as well as any medications you are on. With this information, the professional can tailor a regimen that works for your body.
Jump up ↑ Lewis, Truman (September 10, 2012). “Medifast Subsidiary Agrees to $3.7 Million Penalty”. ConsumerAffairs.com. http://www.consumeraffairs.com/news04/2012/09/medifast-subsidiary-agrees-to-37-million-penalty.html. Retrieved July 16, 2015.
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.
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.
In recent months, sellers have claimed that LuLaRoe leggings have a tendency to tear like “wet toilet paper.” The $25 leggings—their most popular item—are manufactured in the US, Vietnam, Guatemala, Indonesia, and China, and are mostly made of a mix of polyester and spandex. Starting in fall 2016, customers started reporting that LuLaRoe’s “buttery soft” leggings were falling apart. Sometimes within just a few hours of wearing them, pinholes would splatter across the fabric, a “blow out” would reveal the wearer’s underwear, or they’d lose all their dye in the wash, leaving them a sad, mottled grey. LuLaRoe has denied that anything was wrong with its leggings, saying that only 1% of its clothing is returned with defects.
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”).
Lastly, if the company is publicly traded, and six of The Top 25… are, we have linked their year in business above, in red, over to MarketWatch for a real-time stock quote and other financial information.
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.
As non-employees, participants are not protected by legal rights of employment law provisions. Instead, salespeople are typically presented by the MLM company as “independent contractors” or “independent business owners”. However, participants do not possess a business in the traditional legal sense, as the participants do not hold any tangible business assets or intangible business goodwill able to be sold or purchased in a sale or acquisition of a business. These are the property of the MLM company.
Network marketing seems like a breeze on the surface. Many people jump in, thinking they just have to pull in a few people and then sit back and watch the money roll in. Those people do not last very long. Take some time and learn these tips and tricks for your new business.
Later the same year, by the way, the founder of FUND AMERICA was arrested for having generated some 90% of revenues selling “distributorships” versus product… making it clear that this particular MLM was little more than a pyramid scheme.
Jump up ↑ News, A. B. C. (December 16, 2017). “Former NXIVM member says she was invited into a secret sorority, then branded”. http://abcnews.go.com/US/nxivm-member-invited-secret-sorority-branded/story?id=51617201. Retrieved February 10, 2018.
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).
Nothing irritates a die-hard MLMer more than the preceding argument. If you point out the absurdity, for example, that if “the pitch” at an Amway meeting were even moderately accurate, in something like 18 months Amway would be larger than the GNP of the entire United States, then listen closely for a major gear-shift: “Well, that is absurd, of course. Not everyone will succeed, and so the market will never saturate.”
More than professional success or flexibility, though, community might be one of MLM’s biggest draws. Like Donald, “a lot of women will join direct selling companies when they become a mom,” Hassay says. “They’re looking for something to do to get out of the house. That one party a week is a significant contributor to mental health, income, a sense that they’re contributing to the family.”
MLMs sell themselves using self-empowerment language and sparkly beauty products. MLMs only sell through a network of consultants, not in online stores or in brick-and-mortar shops. Sellers buy inventory from a parent company and sell it to their friends and family, keeping the profit for themselves like a franchise would. But the real potential to earn money generally isn’t in peddling wares: It’s in building up a team of sellers below you and getting a cut of their commissions. Once a seller has recruited new consultants, she has to push them to buy more inventory each month or to hit consumer-sales targets in order to earn her bonus check and keep the money flowing upstream. This means the further down the recruitment ladder you are, the less opportunity there is to make real money.
While this is the most difficult point to make, it is perhaps the most important. Anyone who has any experience with an MLM has strong feelings, either for or against, and this is the problem. Polarization runs deep.
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.”
However, MLMs are nearly never the get-rich-quick plots their advocates promise. “The number of people who actually succeed at that is very small,” says Douglas M. Brooks, an attorney who represents victims of pyramid schemes. “And some do—people will get up on stage and wave checks around, but they represent a fraction of 1%.”
It should be noted that when selling product, the only distinction from a real-world business is the possibility for deception due to the “looseness” of the MLM and the incentive to exaggerate claims without any accountability. Other than this, selling product in an MLM is fairly similar to selling any product in the real world.
The basic question that needs to be asked is this: If this product or service is so great, then why isn’t it being sold through the customary marketing system that has served human society for thousands of years? Why does it need to resort to a “special marketing” scheme like an MLM? Why does everyone need to be so inexperienced at marketing this! Is the product just a thin cover for what is really a pyramid scheme of exploiting others? But more on that later.
Thus the MLM organization becomes exploitative, and many high-level MLM promoters have been shut down, the “executives” incarcerated, for selling the fraud of impossible success to others. Other, larger MLMs have survived by hiring large batteries of attorneys to ward off federal prosecutors, even bragging about the funds they have in reserve for this purpose.
Promoting products or pseudo-products of dubious or very low intrinsic worth (supplements, cosmetics, financial products, Bitcoin, videos/seminars, software, subscriptions, coupons/discounts) at very large markups, with low profit margins (often less than 1%) for the “distributor”
“I wouldn’t be where I am today without the knowledge I gained from [Michael’s] live events and training CDs. Two MUST-HAVE [programs] in your CD library should be ‘The Total Success Pack‘ and ‘Building a Better Life.’ I’ve listened so many times I’ve lost count. PRICELESS information for your journey to success in business and in life… ‘Easy to do. Easy not to do’ The choice is yours.”
“Retailers should absolutely never put their personal financial situation at unreasonable risk to establish or operate their retailer business. Period,” Lyon says. “If any retailer is encouraged to do that, we do not support it.”
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.
Watch for red flags. According to the Federal Trade Commission, some businesses posing as MLM companies are actually illegal pyramid schemes. Pyramid schemes scam recruits into buying into a company and almost always result in a loss to the recruit. Some things to look out for are:
I am not up on the practices of Be Young, but I know YL and doTERRA both have a heavy emphasis on internal use of essential oils. I wasn’t too concerned about this at first, but as I’ve learned more I have gotten more worried about this.
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.
So now, I’m making $500/month without doing anything. That’s only half my previous income, so I still need to sell widgets to maintain the same income as before. But I no longer have my old leads, since I just created my own competitor. Let’s make another EXTREMELY generous assumption that my new distributor has found some new customers and increased sales by 10%. Total sales are now $12,000, but the money is now split between two people, so each of us sells $6,000 in widgets and pockets $600, and the upline (me) pockets an additional $300 as commission (5%). So I now make $900 per month.
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?”
Targeting vulnerable or disadvantaged groups (ethnic minorities, recent immigrants, non-English speakers, ex-cons, recovering addicts, poor communities, high school/college students, women), often accompanied by love bombing
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.”
Business Students Focus on Ethics: “In the USA, the average annual income from MLM for 90% MLM members is no more than US $5,000, which is far from being a sufficient means of making a living (San Lian Life Weekly 1998)”
This article will analyze four problem areas with MLM. Specifically, it will focus on problems of I) Market Saturation, II) Pyramid Structure, III) Morality and Ethics, and IV) Relationship Issues associated with MLMs. Thus, you can properly assess your “instincts.”
As a means of moving capital from the bottom of the pyramid to the top, MLMs are very effective; their chief promoters and high-level members aren’t lying when they boast of the money they’ve made from the scheme. However, as a business model (i.e., a means of creating and capturing capital), MLMs are hilariously ineffective – like a toddler imagining what it’s like to start a business. Here are just a few of the reasons why.
After that package, consultants can start choosing styles and sizes for their next orders, but they never get to choose the patterns they’re delivered. This means they can wind up with a box of clothes that is less “chic young mom” and more Pee Wee’s Playhouse. There are 400 new prints apparently designed every day, and LuLaRoe says most patterns are limited to around 5,000 pieces each. When a consultant opens a box, they hope to find a few “unicorns”—the styles everyone wants—among armfuls of duds, like the infamous Dorito pattern.
LuLaRoe merchandise boxes are like Lycra slot machines. LuLaRoe merchandise boxes are like Lycra slot machines. In the onboarding package, new recruits don’t get to choose the size or style of their items. For example, Sophie knew plus sizes would sell best for her, but her initial package contained five XXS dresses and several long-sleeved shirts that were a tough sell for a Texas retailer in June.
This is a list of companies which use multi-level marketing (also known as network marketing, direct selling, referral marketing, and pyramid selling) for most of their sales.
an endless chain of new distributors: a standard franchising model is protected and franchisees buy into a specific segment of the market with the understanding that they will not be directly competing with other franchisees within the same brand – MLM imposes no such limits and actually encourages exponential growth