I Loathe Multi Level Marketing

by Ron Haynes

Warning

The following post is littered with personal opinion … and experience.

Have you ever fallen for a multi-level marketing pitch? Today it may be called network marketing, direct marketing, direct sales, or some other name to hide what it is.  I fell for a pitch a long time ago but the bitter taste is still there. No matter whether you’re selling juice from some tropical berry, washing detergent, long distance services, cosmetics, vitamins, vacations, or even miracle chocolate, I will always recommend that everyone steer clear of any and all multi-level network marketing companies.

multi-level-marketing-scam Today I’m getting Facebook messages (admittedly some of these are spam messages) and emails from people who want me to “join their network,” and they use everything from our past relationship to our shared faith as a way to sneak in a plug for their favorite scam. Yes. I said scam.

I firmly believe all multi-level marketing companies are scams. If that little tidbit upsets you, just realize that you are not “CEO of your own distribution network” – you are a commission-based salesperson relying on the liquidation of your social capital (i.e. alienating your friends and family) what will inevitably be a failed attempt to make money … and 99% of people in multi-level marketing companies lose money. The only profit you can ever make is by turning what would be called “customers” into “distributors” and then taking the money from the 99.995% that lose money in the organization and giving it to the 0.005% at the top (the people who started the whole “business” in the first place).

invest, investor, investing, lending

If you’re currently “in”, I know, I know, you’re different. You’re hardcore. You “have the dream.”

Randomly select 10,000 of your fellow “independent business operators “ and follow them for five years. Guess what? There will be only a precious few left of the original group. That’s right. Only a few out of of a group of 10,000 will renew after five years. What I’d like to know is how much money the non-renewing 9,900 spend before leaving the business. My educated guess (based on personal experience) would be somewhere in the neighborhood of $4,000 to $8,000  per year when you include their overpriced “tools to build the business”, books, seminars,overpriced products you’re required (or pressured) to buy and use, etc.

Beyond the almost impossibility of anything resembling success. Beyond the scam. Here are a few reasons I loathe multi level marketing:

Everyone is your prospect

Grandma, grandpa, co-workers, friends, neighbors, people you meet in line at Target, the restaurant waiter, your boss (really?), your boss’s boss, people at church. Are you excited yet? You get to be the person everyone wants to avoid.

When everyone you meet is a prospect, you tend to look at people as things you can use for your own purposes.

Their “system” is just a way to get cash from you

There are no secrets to building wealth. Did you catch that? THERE ARE NO SECRETS TO BUILDING WEALTH. Anyone who claims to have a sure-fire system simply has a sure-fire system to scam you out of your cash.

Do you know how much it costs to produce a cassette tape or a CD? Less than 25 cents. So why does your “helpful” upline sell them to you for $7.50 each? Because they make 85% or more of their money from these sales … not from the company or its products and services.

The products aren’t any better and they cost a LOT more

The biggest joke for me was realizing that I was paying $9.99 to buy shampoo “from myself” and that it was no better than the 99 cent bottle of Suave from WalMart. What you’re constantly told is that you should always buy from yourself. “If you owned a gas station, where would you buy gas?”

Multi-level marketing products tend to cost a lot more than the comparable products because the revenue must support the commissions for the downline.  The typical markup for their products is around 8 times the cost to produce it.  So the end consumer pays $24 for a $3 bottle of fruit juice or $48 for a bottle of “natural and organic” vitamins that are really worth about $6. But hey, you’re supporting your own business, right? Right?

You’re given faith healer pitches at every turn

Everywhere I went, when I was “in the business,” I met people who seem genuinely concerned about my financial situation. Actually, they’re only concerned about their own. They will told me about the couple just three levels up that was making $500,000 per month. They’ll tell you that all you need is belief and that if you aren’t becoming successful, it’s all because you don’t believe.

What isn’t a faith healer pitch is usually massive hype

More than a few companies are being sued by the FDA and FTC for their illegal product claims (“this product cures X,Y, and Z”) being made by their distributors.  Even though the multi-level marketing companies can’t exert total control over what all their independent dealers say in one-on-one sales presentations, they’re still responsible. But few, if any, actually offer realistic training to their “distributors.”  Many of the customer testimonials promoting these products are from the distributors themselves who stand to make financial gain.  But this is rarely disclosed. So the multi-level marketing model itself basically encourages deceptive practices and false claims because of the way it’s set up.

The materialism is rampant and encouraged

I was taken on “dream building” sessions where we would visit car dealerships, RV dealerships, homes for sale in the swanky subdivisions, marinas with massive yachts, and even an airport to look at a private jet. At many seminars, merchants were invited to show their most expensive wares, fur coats, diamonds, and other jewelry. I was told that “if my dream was big enough, all this could be yours.”

Hogwash.

The way to build wealth is to provide value. Value that other people desire and are willing to pay for. My beef with multi-level marketing is that it provides very little value, a lot of hype, is sparsely regulated, and winds up “stealing more dreams” than it actually builds.

Multi-level marketing builds expectations in the minds of its recruits, expectations that are rarely, if ever, realized (statistically zero). Life is full of disappointments to be sure, but to intentionally farm cash from recruits that don’t know their chances of success with a multi-level marketing business is just shy of criminal in my opinion.


About the author

Ron Haynes has written 988 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.