BioPerformance was an MLM that sold “gas pills” claimed to improve fuel economy when added to an automobile’s gas tank; the product was found to have no effect whatsoever on car fuel economy and in 2006 Texas’ Attorney General shut down BioPerformance for being an illegal pyramid scheme.
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).
Perhaps the successful consultants are right: It’s all about enthusiasm. Perhaps some people don’t succeed because they don’t drink the Kool-Aid. Perhaps it’s about believing that leggings printed like hotel carpets are beautiful to someone. Perhaps you think that a thin polyester dress you could get for $15 in a chain store is worth $60 if you buy it from a friend. Perhaps it’s about having no qualms hawking clothes to people who struggle to afford them, or signing women up underneath you while you struggle yourself.
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.
In most MLMs you will have no choice. You are going to have to sit through meeting after meeting after meeting after meeting. You are going to be “motivated” to coerce your friends and family to hear “the pitch.” This is the way the “dream” is planted and fertilized. Get used to it.
Yes, some people do make money from MLMs. But most appear to just learn a very expensive lesson. This is why billionaire investor, founder of Pershing Square hedge fund management company and philanthropist Bill Ackman has put a short bet of US$1 billion on Herbalife, as featured in Betting on Zero.
Where is the “switch” that can be flipped in an MLM when enough sales people are hired? In a normal company a manager says, “We have enough, let’s stop hiring people at this point.” But in an MLM, there is no way to do this. An MLM is a human “churning” machine with no “off button.” Out of control by design, its gears will grind up the money, time, credibility, and entrepreneurial energy of well-meaning people who joined merely to supplement their income. Better to just steer clear of this monster to begin with.
Mannatech, a dietary supplement MLM notable for featuring future US Presidential Candidate Ben Carson as a spokesperson, later accumulated more than $15 million in fines and settlements for falsely claming their products could cure cancer, diabetes, autism, AIDS, and other diseases.
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.
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.
Multi-level marketing is a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits’ sales; the recruits are known as a distributor’s “downline.” All distributors also make money through direct sales of products to customers. Amway is an example of a well-known direct-sales company that uses multi-level marketing.
Consult professionals about your business. Remember, you are responsible for everything associated with running a business- taxes, laws, etc. It helps to have an accountant and lawyer on hand to help you manage your business in the most effective way possible.
There are more than a few MLM “executives” like this who will pop up tomorrow in the MLM du jour. MLM exploitation can be very profitable and the jail sentences light. Let the MLM “dream” buyer beware.
Jump up ↑ Danny Robbins (September 10, 2006). “Nobel Prize winners say sites falsely cite research”. Fort Worth Star-Telegram. Archived from the original on 2006-12-06. https://web.archive.org/web/20061206191858/http://www.dfw.com/mld/dfw/news/nation/15486298.htm.
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 can’t promise I’ll always be right, but I can promise you that I will do my best, within reason (I do have a family with health conditions, and we homeschool and eat all whole foods) to get the best information to you and correct myself whenever I’m wrong.
Jen Donald first heard about Arbonne a few years ago. A dental hygienist in Oakville, Ont., she was in the middle of scaling a patient’s teeth when she noticed her amazing skin. When Jen asked about her beauty regimen, her patient raved about products from Arbonne, a health and beauty direct sales company that claims to use a botanically based formula and premium ingredients. (Though not everyone agrees — nutritionist Meghan Telpner believes Arbonne’s marketing materials count as “healthwashing.”) Donald began buying Arbonne products, which range in price from $44 for cleansers and $88 for night cream to $364 for the company’s complete suite of anti-aging products, from a friend who had recently joined the company, but never really considered signing up as a salesperson herself.
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.
Speak to your lead in a way that gives them what they’re seeking in life. Are they looking for financial freedom? Or do they just want to take control of their business life? Are they in this to help others? Take them from their idea of success and show them how they can reach that with your help.
Jump up ↑ Mitchell, LaTonya M (22 September 2014). “Warning letter to dōTERRA International, LLC”. US Food and Drug Administration, Public Health Service. http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/2014/ucm415809.htm. Retrieved 8 November 2014.
Metabolife was an MLM founded by convicted meth cooks that sold primarily supplements containing ephedra, which can cause serious adverse cardiac effects. Ephedra was banned in 2004 after several high-profile deaths, and the company folded; its founder was later found guilty of tax evasion and lying to the public and the FDA regarding ephedra’s safety.
“Success as a retailer results only from successful sales efforts, which require hard work, dedication, diligence, leadership and perseverance,” says a LuLaRoe spokesperson. “Success will depend upon how effectively these qualities are exercised. As with any business, results will vary. In addition to the factors above, retailer success is influenced by the individual capacity, business experience, expertise, and motivation of the retailer.”
It may help to read books successful businessmen for ideas an inspiration. Do remember, however, that just because something worked for one person doesn’t mean it will work for you. Read these books for ideas, but take advice with a grain of salt.
In 2016, the US Census Bureau stated the median rural household income is 4% lower than it is for urban families, and income inequality is also higher. The US government tried to help people understand the risks before joining these kinds of companies, but MLMs had their way. In 2012, federal legislation passed requiring all franchise companies to provide a disclosure document with information on weighing the benefits and risks of signing up. However, MLMs poured money into lobbying and flooded the FTC with more than 17,000 comments from consultants saying the disclosure would be a burden, and asked to be excluded. The FTC complied, and now MLMs aren’t required to disclose information on risks to interested consultants.