The dangers of joining an MLM: The Predators of the Business Industry.

No comments

“Are you open minded?” said the distributor. You may have heard the term “multilevel marketing” and other synonymous terms like “network marketing”, “referral marketing”, “network selling” or “pyramid selling” . A friend or a relative may have told you about it and is trying to recruit you and bring you to a seminar, saying that you can become rich and have loads of opportunities if you join them.

MLM companies usually target people who are financially vulnerable. They target the desperate, those who are pregnant or of needing financial help, and those who are desperately looking for a job. They also target people who are naive enough to believe that joining their company would make them rich, especially now that the world is entering a pandemic.

However, do not be fooled. DO NOT JOIN any multilevel marketing company, it is a waste of your time, money and effort and could cause you harm in the long run, in fact 99% of people who join MLMs lose money, instead of recovering

Most distributors or downlines encourage you to join by saying that you will be your own boss, have your own business and that you can afford luxuries. At extremes, they will try guilt-tripping you so that they will make you regret not joining. Do not let your emotions come through and use your critical-thinking skills before being convinced.

MLMs do not actually encourage you to earn money by selling their, usually, low-quality products, but rather by recruiting people into your downline. Some MLMs can be illegal pyramid schemes.

How does a multilevel marketing company work?

A multilevel marketing works like this: a customer would buy a set of products on a tier basis. This can range from the basic plan all the way to the most expensive “platinum” plans. After purchasing, you would be officially part of the company’s distributors, or if someone has recruited you, their downline.

In an MLM, there are two ways to earn money: one is selling the company’s products to another consumer and the other is through recruiting. MLMs usually pay higher through recruiting than through commissions done through selling their products, that’s why they are often “low-quality”.

In fact, a study by Cornell University on the MLM company Hi-Tech Fortune, 85% became distributors and only 9% joined for product discounts, concluding the fact that people are not there for the products but rather for the business model.

If a distributor manages to recruit another person and the other person joins the MLM, then that newly recruited person is part of the recruiter’s downline. This continues into a hierarchy. The Top 1% gets the most money and gets rich while the ones below that, their downline, rarely earns or even worse, lose money.

Credit to: PerfectHangover.com

If you’re looking at it, the shape looks awfully familiar, a pyramid even. Only the top 1% gain money, the one at the very top, their downline might be able to get some, and those below the downline’s downline, just be lucky if you get any payment at all.

With a number of MLMs nowadays, it’s going to be hard to gain some of the commissions back, and the person that have recruited you might as well just be recruited. Not everyone is going to be interested in buying packages that have questionable quality, let alone if they are FDA approved, assuming they are selling food supplements.

A typical MLM Package. Though priced the same when bought, items inside the packages differ

In order to be part of an MLM, you must buy one of the company’s starter packages, as stated earlier. Most of the time, these packages are awfully overpriced, and every item inside these packages are also quite pricey. That is because, most MLMs depend on the recruitment and not on the selling of their products but advertise themselves as such. They will persuade you into recruiting other members to join your downline and hopefully they buy the package themselves. Each distributor must use word-of-mouth to convince them why joining this “opportunity” is a good idea.

Packages/Products

In order for MLM companies not be called a scamming “pyramid scheme”, they make different products and sell them as a package for distributors. However, some MLM companies also sell their products individually

The worst part of these products is not by the price, it’s how they are selling it as if it’s an “instant cure”. Take a look at the claims that the company suggests:

You will always see on supplement products this label “no approved therapeutic claims” that label is required to protect consumers from a false sense of security.

Looking at the functions above, it seems like, by taking and buying this product, you will gain those benefits. However, there is little to no clinical trials to prove it, and the video they provided seems unprofessional, also going to the YouTube channel they have given, the uploader has not uploaded in 10 years and one of the videos promotes networking. We are skeptical of it and looking at it as false advertising. It even says it can prevent cancer and detoxify your body. Detoxification is a pseudoscience, meaning it is based on belief and not on facts. The body can cleanse itself thanks to a number of organs, including the liver, which is the organ in-charge of detoxifying the body.

We also checked the website of this “Doctor Gerald Lewis” the doctor who is presented in the video. He has a website. In the website, his bio says he works for the Centre of Advanced Medicine, and is a licenced cardiologist and Clinical Pharmacologist. According to his LinkedIn, he is an Alumni of Otago Medical School in New Zealand. However, looking at Otago Medical School’s website, there are no class photos in 1967, only 1965 and 1969.

Also, in his website, upon searching his website, he promotes USANA health supplements. USANA is another MLM company, making this particular doctor more skeptical to believe. We are not here to bring anyone down, but rather, keep everyone safe from joining shady MLM companies. His testimonials are reviews are good, but testimonials are just opinions so they cannot be used as evidence

Word-of-mouth from the distributors:

Like we discussed earlier, MLM distributors need to use word-of-mouth in order to get commissions paid from selling the products they bought from them, or to recruit. Below are some of the phrases a distributor would usually say:

  • Are you open-minded?
  • Are you ready to be rich?
  • How do you want to join me in this amazing opportunity?
  • Would you like to join me in an exciting meeting?
  • Hey hun
  • Anyone want to join me in my exclusive fitness program?
  • I am looking for x-number of participants that are willing to try my products
  • Be your own boss
  • Hey friend, would you come with me at (specify date)? It would be nice for you to see why I’m earning this much per month
  • Do you want to know the secret of success? Join my meeting and you will know
  • Learn to become rich just by working at home

And other varieties. There are more than these lines, but they all lead and mean the same thing. One way to spot a distributor is a stranger, or even an old friend or a relative, suddenly messaging you with a suspiciously enthusiastic tone, asking you to try their products. If the message has lines similar to above, start to be wary, as the person you’re talking to might be pulling you to join an MLM. If you’re not sure, this website is very helpful in identifying possible MLMs. The website updates frequently, so if the potential MLM you typed is not listed, then it’s probably not in the website yet.

A distributor could be anyone in your social circles, whether a friend, or a family member, anyone can rope you into these MLM companies.

These distributors refer to themselves to many names, including “Business owner”, “Boss Babe” “Hun/honey” “Independent Business Owner” “CEO of my own company” and so on.

As MLMs encourage recruiting instead of directly selling their products (Direct Selling companies are related to MLMs but they push into selling their products instead), distributors are also expected to recruit different people to get paid higher.

So, how are they predatory?

In many cases, MLMs are predatory, targeting people who are financially desperate, people who are looking for jobs for the first time, single parents, people who wanted to work at home, or people who wanted to own a business, but have no capabilities to make products of their own.

They also make it appear that you can earn much much more than your average 9-5 job, and give you theoretical benefits like a luxurious life, 6-figure salary, and being your own boss, as recalled earlier.

As we said earlier, testaments and stories are not concrete evidence. However, seeing the FDA report that 99% of people who join MLMs don’t actually get rich, and multiple sources saying you should stay out of it, make them worth saying that they are not worth joining in.

Distributors will pull you in for a pitch, asking if you’re free, or if you want to try out their products. Then after that, they will robe you in on a business presentation, usually along the lines of “you don’t have to do anything, just watch the presentation”. Let’s assume you actually went to the presentation, now you are asked to buy one of their products, even the cheapest ones, to get you “started on this great opportunity”. Buying one of the MLM’s packages is one way to become a member.

Let’s go for Scenario A, where you rejected the offer. They will try harder to persuade you into buying it and start the “hustle” the same way they did, and they will say it’s like “franchising” where you sell the MLMs product (no it is not, you don’t have to recruit people to franchise). If you say “no” again, they will start getting irritated and may guilt trip you into joining, with some fine classic examples: “Don’t you want to help your family?”, “you are missing out on a once-in-a-lifetime opportunity”, “You are thinking negatively”, “We are giving you the chance to be rich and wealthy, don’t reject it now”. Don’t let your emotions get to you, and get out of there as quickly as you can.

Now let’s go for Scenario B where you got persuaded and buy their products. Of course, as a first timer, you will think that just by selling their products, you get paid. While you do get paid, MLM distributors will more likely ask you to let your friends and family members know about the company. In short, they care more about recruiting more than actually selling the product. It is now up to you how are you going to make them join your downline, as you get paid higher this way. With the presenters and distributors telling you that you should invite others because you are paid higher, you are now “forced” to invite other people as well, and before you knew it, you wasted an expensive amount of money and it’s too late for you to get back, as products purchased are non-refundable.

Aren’t pyramid schemes illegal? Why are MLMs still around?

Yes, pyramid schemes are illegal, but MLMs technically aren’t. Pyramid schemes have no product to show you and promise to get rich quick, MLMs, while having a similar structure, actually have products and don’t promise of getting rich quick (although, indirectly, they will say that you can). While you can get wealthy off MLMs, as reported earlier, 99% of people who join MLMs lose money, and in some cases, their nature is very cult-like. Asking you to be loyal to the company and let others be a victim of it too. The MLM business model is profitable in the eyes of an entrepreneur, but very dangerous to a common individual.

According to the FTC, here’s how you spot a pyramid scheme:

  • Promoters make extravagant promises about your earning potential. Stop. Such promises are false.
  • Promoters emphasize recruiting new distributors for your sales network as the real way to make money. Walk away. In a legitimate MLM program, you should be able to make money just by selling the product.
  • Promoters play on your emotions or use high-pressure sales tactics, maybe saying you’ll lose the opportunity if you don’t act now and discouraging you from taking time to study the company. Leave by the nearest exit. Any company that tries to pressure you to join is one to avoid.
  • Distributors buy more products than they want to use or can resell, just to stay active in the company or to qualify for bonuses or other rewards. If you see this happening, keep your money.

This is for illegal pyramid schemes, however, many legitimate MLM companies use the same tactic. It’s better for you to experiment your own products and sell them at your own pace.

Because of the questionable and shady business practice, MLMs have been banned in several countries like China and Vietnam.

If you would like to know more about MLM stories, check this subreddit out: r/antimlm

If this does not convince you why joining an MLM is a bad thing, read our sources below.

Sources:

Tagged with , , ,