MLM Schemes: May The Odds Be Ever In Your Favour

We all know at least one person who’s relentlessly tried to pitch us their multi-level marketing (MLM) “opportunity”.  You may have even attended a pitch party or two (even if it was just to be a supportive friend).

Whether it’s Avon, Mary Kay, Herbalife or Amway, the pitch usually sounds something like this: “Do you want to take control of your life and be your own boss?  To empower yourself and earn extra income?  I decided to transform my life, and you can too.”

It sounds too good to be true… And that’s probably because it is.

While the products these companies pedal may vary from cosmetics and health supplements to vacation packages, the business strategy is always the same: sell the dream.  In fact, the products are actually irrelevant, because what you are really selling (if you really want to see a profit) is their pyramid shaped recruitment-based business model.  Yes, we said pyramid.

Shall we break it down?

Let’s say your friend is selling lipstick. For every lipstick she sells, she might earn 20% commission. She would have to sell quite a lot of lipstick to break even and justify those recurring membership fees (and to pay for her own discounted lipstick of course).  But… if she can convince you to become a sales associate as well, then not only does she earn a commission for signing you up (and residual commission on your membership fees for as long as you’re enrolled), she also now earns a residual commission for every one of YOUR future sales.

Then, just imagine what happens when you recruit a sales minion of your own?  You guessed it… she earns a commission from that person too, and the incentives begin to trickle in.  This is called a ‘downline.’ Naturally, the more people you can rope in beneath you, the bigger your pyramid grows, and the less it becomes about that incredible botanical/vegan/god-sent lipstick that is supposedly just too lucrative and exclusive for retail.  Instead you focus on the lure of that Benz or that free trip to Vegas, once you hit your (often elusive) targets.

Aside from the broken-record pitch being annoying as hell, here are a few (less-than-desirable) trends we’ve picked up on:

– Many ‘network marketers’ switch companies frequently.  Today it may be beauty products, tomorrow it’s diet shakes, and next month it’s luxury accessories.  So, why the frequent turn-around?

– Well, most MLM associates don’t earn a thing… According to Bare Naked Scam, 95% of MLM associates quit within the first year, and of the 5% that stick it out, only 1.5% are earning a comfortable income, and only 1% are actually ‘living the dream.’  Many blame the product, so they fish around for the one that will stick. But the problem is never the product, it’s that most people aren’t built for the nitty gritty cut-throat arena of aggressive sales tactics, and once your ‘warm market’ dries up (and you’ve pitched everyone you know), many tend to lose steam and jump ship.

– Direct sales associates operate in a dangerous (unregulated) zone of expertise, with no credentials necessary to sell whatever product they’re pushing (most of which do not require approval from the FDA).  Suddenly, you are endorsing a “proven” solution, without the educational background or applicable authority of your own.  And by the way, in the lengthy contract that these associates sign (and likely don’t read in entirety), they often waive all liability and indemnity from their umbrella company.  What does that mean in lay-mans terms?  Well, if you sell your friend a product, and they suffer an adverse reaction, they can sue you personally for damages, and your company could turn a blind eye and hang you out to dry.

– Businesses based solely on recruiting (aka pyramid schemes) are actually illegal according to the Federal Trade Commission, which is why they are masked with the facade of selling some incredible/new/must-have (and usually over-priced) product. Remove the product from the equation, and you will start to notice the parallels time and time again.

The bottom line?

There’s always a bottom line.  We’re not saying it can’t work.  Some people do make money… roughly less than 5%.  So, as the saying goes – May the odds be ever in your favour.  If it was as easy or profitable as they want you to believe, then everyone (and their mamas) would be doing it.  So don’t fall for the pipe dream.

You’ve officially been warned.