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.
Investigate companies. Choosing the right company is key to your success. Quick and easy internet searches can usually answer many of the questions you may have. Do some research to determine which company is best for you personally. Some questions you should ask yourself when researching companies are:
While participants’ movement up the pyramid of an MLM can be accomplished in theory, and indeed this is one of the distinguishing factors between MLMs and traditional pyramid schemes (besides featuring actual sales of products or services), said upward movement is so extremely improbable as to render it practically impossible, despite all efforts and investments of time and money by a participant.
Indeed, one of the biggest complaints we’ve heard about MLMs is that once someone joins one, they see every social interaction as an opportunity to make their sales, or add to their downline. Friendships have ended and relationships have broken up through this.
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.
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.
And bigger companies are feeling the heat, too. Last year, Herbalife narrowly avoided being branded a pyramid scheme (the U.S. Federal Trade Commission instead opted to cite the company with a less-serious “unfairness” charge). But, it did have to pay a $200 million fine to the FTC and was required to restructure its operations so that it “tracked and rewarded sales that ended in purchases by consumers” — as opposed to rewarding employees for bringing in new recruits. And of course, there’s an oft-cited report by consumer advocate Jon Taylor, which claims that 99 percent of people who participate in MLM actually lose money on their businesses.
Whichever oils company you decide on, one of the best decisions I made was to take oils with me wherever (almost) I go. This carrying case is the perfect size to take while on the go or traveling so you always have your oils with you should the need arise.
“Retailers can generate a sense of excitement among consumers because the garments they purchase are unique to them,” says a LuLaRoe spokesperson. “Many retailers report that they use the unexpected nature of the shipment to build excitement among existing and new consumers for their new inventory. This also fosters a sense of cooperation among retailers as retailers will often refer consumers to other retailers to help consumers find the patterns that they seek.”
Herbalife was able to show its revenues were based more on the sale of its products than through recruitment, and it offered numerous protections, such as a money-back guarantee, so members would not be stuck with products they could not sell. According to Herbalife, 80% of its members do not recruit other members.
On the seller side of things, it’s also somewhat demeaning to imply that women who join MLM companies are doing so blindly. Jamie Clarkson, a 28-year-old Arbonne executive regional vice president from Winnipeg who joined the company as a 22-year-old university student, says she didn’t sign anything until she’d done her research. “It was really important to me to do my due diligence on the business and the industry before starting this opportunity,” she says. “What really drew me to Arbonne was the fact that they are a member of the DSA, which has a strong code of ethics and high standards for business practices.”
Multi-level marketing is a legitimate business strategy, though it is controversial. One problem is pyramid schemes, which use money from new recruits to pay the people at the top, often take advantage of people by pretending to be engaged in legitimate multi-level marketing. Pyramid schemes can sometimes be spotted by their greater focus on recruitment than on product sales.
Jump up ^ Pratt, Michael G.; Rosa, José Antonio (2003). “Transforming work-family conflict into commitment in network marketing organizations”. The Academy of Management Journal. 46 (4): 395–418. doi:10.2307/30040635.
Jump up ↑ Salinger (Editor), Lawrence M. (2005). Encyclopedia of White-Collar & Corporate Crime. 2. Sage Publishing. p. 880. ISBN 0-7619-3004-3. Archived from the original on February 24, 2017. https://books.google.com/books?id=0f7yTNb_V3QC&lpg=PP1&dq=isbn%3A0761930043&pg=PA880#v=onepage&q&f=false. Retrieved 13 June 2016.
^ Jump up to: a b c d Salinger (Editor), Lawrence M. (2005). Encyclopedia of White-Collar & Corporate Crime. 2. Sage Publishing. p. 880. ISBN 0-7619-3004-3. Archived from the original on February 24, 2017. Retrieved June 13, 2016.
These sales go against company policy. While a LuLaRoe spokesperson says sellers are “free to set their own sales prices for the LuLaRoe products they sell,” they don’t allow you to actually advertise those prices: “Out of fairness to all retailers, they are not allowed to advertise prices below MAP (Minimum Advertised Prices). LuLaRoe encourages retailers not sell product below MAP as MAP ensure that the LuLaRoe brand maintains a consistent level of value and fairness that benefits all Retailers. Advertising prices below MAP violates the agreement between retailers and LuLaRoe.” If caught, sellers are ostracized by the consultant community for diminishing the LuLaRoe brand, and some have claimed to be locked out of their point-of-sale systems.
Though emphasis is always made on the potential of success and the positive life change that “might” or “could” (not “will” or “can”) result, it is only in otherwise difficult to find disclosure statements (or at the very least, difficult to read and interpret disclosure statements), that MLM participants are given fine print disclaimers that they as participants should not rely on the earning results of other participants in the highest levels of the MLM participant pyramid as an indication of what they should expect to earn. MLMs very rarely emphasize the extreme likelihood of failure, or the extreme likelihood of financial loss, from participation in MLM. MLMs are also seldom forthcoming about the fact that any significant success of the few individuals at the top of the MLM participant pyramid is in fact dependant on the continued financial loss and failure of all other participants below them in the MLM pyramid.
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.
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.
I chose the oils company that I will recommend next week because I believe it’s a solid oils company with unwavering commitment to quality and purity. As with everything on my blog, if I can make money appropriately from my recommendations, I will do it. This is standard blogging practice.
For more, see the Frequently Asked Questions, Additional Points and Rebuttals section at http://www.vandruff.com/mlm_FAQ.html E-Mail the author of this article, Dean Van Druff, at end of this section.
“Hmmm… To ask for a refund, then, is to admit defeat. Others appear to be doing O.K. at this. I’m no failure! Perhaps I should go to another motivational seminar or strong-arm and alienate one more friend to join. I wasn’t fooled! I’m no failure!”
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.”
With all this, not to mention numerous high-profile failures and legal troubles, it’s no wonder MLMs have a poor reputation with consumers. Nevertheless, in the USA alone, MLMs had a combined total of more than 20 million suckers members and swindled generated more than $36 billion in revenue in 2015. The situation is worse in emerging economies in regions like Latin America, Africa and Asia.
Quartz agreed to Kayla’s request not to use her last name to protect her anonymity, and gave pseudonyms to others. Several of LuLaRoe’s sellers declined to go on the record with Quartz using their full names, citing concerns about possible reprisals from the company due to a non-disparagement clause in their contracts, and concerns about being harassed by other sellers. This fear only perpetuates the cycle as it pulls more women into its spiral.
During “the pitch,” anyone can make it work. “It’s the opportunity of a lifetime.” “Just look at the math!” But mention the inevitable saturation and the losses this is going to cause for everyone, and then you’ll hear, “Of course it would never really work like that.” “Most will fail,” you will be told, “but not you, Mr. Recruit. You are a winner. I can just see it in your eyes.”
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.
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.
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.
Try more than once to turn a lead into a customer. Just because someone wasn’t interested once doesn’t mean they will never be interested. Be careful not to overdo it, though- you could easily get a reputation as a spammer, which can hurt your business.
Often the only way to make these sales is to recruit people under you (making commission off their starter kits) or to buy products yourself. Otherwise you’re left trying to sell your products to friends, family, mums at the school gates, and anyone you come into contact with (one of the reasons why some of the more pushy/desperate MLM reps get a bad reputation).
Imagine that Wendy’s became suddenly possessed by the idea that “everyone needs to eat,” and opened four Wendy’s franchises on the four corners of an intersection in your neighborhood. Who would benefit from this folly? The consumer? Certainly not the franchises; they would all lose. Wendy’s corporate? Perhaps temporarily, by speculative inventory sales while the unfortunate franchises were under the delusion that they could all make money. But in the end, the negative image of four outlets dying a slow death would likely offset the temporary inventory sales bubble. Even the most unreflective of the hapless franchisees would think twice about doing business in such a manner again. This is why real-world distributorships and franchises are contractually protected by territory and/or market.
And it’s working. In 2015, MLM companies generated $2.55 billion in sales, a 10 percent increase from a decade before, says Linda Herron, the interim president of the Direct Sellers Association of Canada (DSA). These businesses are overwhelmingly female: 83 percent of the direct sellers in Canada are women, something you’ve likely noticed if your Facebook feed looks anything like mine.
Dr. Jon Taylor’s website includes surveys of MLM tax preparers (do they really make money?), answers the question of “odds of success” at MLM vs. gambling (hint: you are way better off in Las Vegas,) and provides a history of MLM at http://www.mlm-thetruth.com
“You see, if you can convince ten people that everyone needs this product or service, even though they aren’t buying similar products available in the market, and they can convince ten people, and so on, that’s how you make the real money. And as long as you sell to a few people along the way, it is all legal.” Maybe…
– BeYoung : “E.O.B.B.D.” This certification appears to have roots in Europe, but some claims about it on the internet are not accurate and/or aren’t that meaningful. After reading the details of E.O.B.B.D., I believe that any good oils company should be doing all of this. And the “smart guys” in the industry can fool these GC/MS tests. Yes, that’s true. They know what the tests are looking for and they know how to get around it. Just like the athletes can fool the doping tests.
The problem is that in a recruiting-driven MLM, there is no upper bound save the market population itself, and the bottom rung of distributors makes no money at all except from sales. This ensures a fierce scramble among distributors to sign up their own downline (Amway in particular is notoriously aggressive about this) so they can move up the ladder, often to the exclusion of product sales, and also ensuring market saturation—most distributors wind up selling only to themselves and perhaps a few friends, with only the most driven (and often least principled) making any money at all.
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.
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.
There is an undeniable camaraderie among MLMers. But for everyone else, “there goes the neighborhood.” It is saddening to see people being encouraged against all instinct and common sense to chase after an illusory “pot of gold,” but what can be done?
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.
Business failure of any type is traumatic on the relationships involved, but in most small businesses there is at least the chance of success. And this is never the case in an MLM, unless “success” can be defined as profiting off of the failures of others.