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).

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 1001 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.


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{ 12 comments }

Casey

I just have to laugh when someone approaches me with one of these MLM schemes. I have never seen one of these folks become the wealthy entrepreneur they were shouting about when they got sucked into “the business”. It’s a shame after all this time, with all the evidence to prove it’s a sham, folks get pulled in. I guess, as human beings, we’re all trying to find that “magic job” that will put us on Easy St. It’s just like dieting, there’s no easy way to do it. You just have to do the WORK! Great post, really enjoyed it.

Ron

Thanks Casey. I think one of the things that REALLY ticks me off is when people try to interject their faith into it. At that point, I don’t want to tell them that NO God didn’t lead you to this scam, but I’m sorely tempted!

Michael @ aapfi.com

People rarely win financially from these. Usually they just make other people richer. You only win from multilevel marketing by successfully recruiting others to sell for you not you selling for others.

Ron

You got that right. You have to recruit recruiters to recruit recruiters who will recruit more recruiters. Then You have to convince them to buy into your seminars and CDs/DVDs, your full retail price books, and your overpriced weekend getaways. Then convince them that it wasn’t the 1,500% profit you made from those items that made you rich, it was the overpriced products from the MLM that did it.

The Biz of Life

Amen. The people who win are at the top of the pyramid. Everyone else loses.

Jeremy F. Stalboumer

…and where are you in your corporation structure? On the top… or you are losing like thousands of others.

Ron

Near the top after climbing from the bottom. Your point? Plus I have been able to take my experience and parlay that into better positions at different companies. Can I go from being a diamond in one MLM to being a double diamond in another just by switching companies? You already know that answer.

Ken

I’ve told those who were selling MLM products that there’s no reason to market to their friends and family. It’s not just that it’s very annoying. If they have any hope of making decent money, they are going to have to sell to a lot more people than just their friends and family. If they can’t sell to strangers, than they should forget about MLM.

Chana

Thanks for sharing so honestly. It’s such a frustrating situation to be involved with, and one many people avoid talking about. But you really shed some light on it here. I’m very leery of anything that even is faintly scented of MLM… I avoid as much advertising as I can, just on principle, but I especially go way out of my way to avoid pressure pitches, manipulation, “miracles” and other BS. My daddy always told me that there’s no such thing as a free lunch, and I guess I took it to heart. My only direct experience with MLM was with the fiance of a college friend of mine… he tried to sell to me within ten minutes of meeting me. Lord have mercy!

Ron

“he tried to sell to me within ten minutes of meeting me”

That’s extremely common with MLMers. Everyone is a potential source of personal income to be used or manipulated. Everyone is a prospect. Everyone. Whether you know them or not!

Great comment! Thanks for sharing!

Jeremy F. Stalboumer

Quote” Ron… He has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations” end of quote.
Thanks Ron, you’re doing a pretty good job for them, trying to destroy only one REAL WAY for average person to become financially independent and stop being one of those corp/banks-pyramids slaves. Tel me, what average employee can earn by working for those corp/banks-pyramids? So far as I know this so called ‘income’ or salary is just what the top executives of the corp/banks-pyramids are willing to drop to the floor from their dinner tables. For your information we are NOT corporation’s pets. People don’t have to be broke and to be broke is not the ‘normal way of life’, We don’t need theirs loans and credit cards when we have cash. Direct selling is the ONLY WAY for average person to become independent financially and have the lifestyle we all deserve. MLM industry is growing, more and more people are joining every day and more and more are becoming successful. Corp/banks-pyramids are losing a big way.

Ron

Now that’s really funny. The ONLY way? LOL! Check back in 5 years. You have a better chance of winning the lottery than being in the same MLM after 5 years. When Crown Ambassadors in MLMs actually sell their “business” or have to reveal their true income in divorce settlements and you get to see those numbers, you’ll change your tune.

Slaves? Slaves don’t have the option to quit. Employees do.
This is one of the funnier of the droll little catch phrases taught to new recruits in the MLM industry. If you don’t like what you’re paid, you can always quit and start your own business. In my company with 1,000 employees, over 10% make six figures + benefits + retirement. I’ll put that up against any MLM.

And you might check the facts on how many people actually succeed wildly at MLM. There are FAR more corporate employees making a lot more money than the minions caught up “in the dream” of MLMs. The fact is that most MLM promises and bluster is a lie. It isn’t at all what it’s cracked up to be. But most of the MLM minions cannot be convinced … only time will be able to do that.

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