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12 Uncomfortable Truths That Make Multi-Level Marketers Squirm

Posted by Jerry De Luca on Wednesday, April 6, 2016

Multi-Level Marketing

Multi-level marketers claim their business is primarily selling their products to their customers. But they deceptively force their customers to recruit more salespeople:

“They deliberately set it up so that if the ‘salespeople’ don’t buy, they don’t earn ‘points’ that add up to override commissions or higher commission rates. They design the pay plan so that if the ‘salespeople’ don’t continue to buy, they lose their ‘qualification’ to ever get commissions. And they always based the promised rewards on what the salespeople and their recruits buy, not what they sell. The people running the business know that their main marketing message is all about getting people to buy and to recruit other to buy and recruit. They know that this buy and recruit plan works.

“Millions join up. Many are fooled. Some want to be fooled. Some fall into the world of deception so deeply, it becomes a kind of religion, a closed society. They practically worship the leaders. They learn to speak only in the logic of the MLM. That logic says they are in the business ‘for the products’ while they are also told to dedicate themselves entirely to recruiting. The deception is contagious. It corrupts those who believe the lie – concocted in the executive suite – to carry it, word for word, into neighborhoods, churches, offices and into their own homes.”  

Once someone has been recruited and spent too much time and money with little return, they realize the only way to salvage their efforts is to focus entirely on recruiting:

“In MLMs, each consumer is solicited to pay fees and to buy into the ‘pay plan’ by purchasing MLM inventory (soap, vitamins, fruit juice, weight loss pills, skin lotion, etc.) at prescribed monthly amounts. Most of the initial investment in the ‘home-based business’ is inventory. Later, it will include seminars, books, CDs, more inventory, travel, lost time and lost friendships. These investments will be paid for from savings or credit card debt.

“But, the inventory, it turns out, is priced far too high to be profitably resold. So, the net value of the business is negative unless… unless new people join the ‘downline.’ Income is based on later investors joining that program. So, more investments are made in the hopes of building that downline. Why would more people join your downline? Because they can make money by getting others to join their downline also. It has no end.”  

Most of the money goes directly to the top 1%:

“The looting by promoters at the top before the collapse occurs at the bottom is standard operating procedure at MLMs. Each year, the MLM pyramids collapse. 99% of investors (salespeople who are also the customers) lose money. 60-80% drop out completely. The money they lose is transferred directly and immediately to the top perpetrators. Schemes like Herbalife and Nuskin transfer as much as 70% of all the “commissions” to the top 1% of recruiters. The company and its shareholders take their cuts, month after month, year after year. The money comes right out the pockets of the latest recruits who are lured on a fool’s mission to ‘get to the top.’ At Amway, all the new recruits are urged to ‘go Diamond’, a level at which big money is said to be paid. The recruits don’t realize that less than 1 in 10,000 are at that level each year.”

MLM companies know 95-99% of recruits will not make money, but that’s okay, because most people will blame themselves:

“Later, when the recruits fail to make money, which 99% eventually do in all MLM companies, the ‘losers’ have a nice, ready-made excuse for their losses. They blame themselves. Many will insist that they lost only because they were mostly interested in the product, not the money. And some will even say they actually profited from the camaraderie and the business lessons they learned, even though the lessons were about recruiting, not business, and they never associate with their old MLM pals any more. This story about products helps also when friends rebuke them for getting them into a scam. They can say, ‘Hey, didn’t we all get the products we wanted?’ This feels a lot better than saying, ‘I failed in the greatest income opportunity in the world, or, I tried to scam my friends, but I couldn’t get any to take the bait and I ended up losing some friends. Or, I wasted six months and wound up with nothing.’”

MLM companies also know it’s all about ego. The majority of recruits to MLM will rationalize their failures and lie to themselves, as well as to others:

“This is not to say there is no benefit to MLM membership. You get certain tax write-offs. You get to buy products, some of which you will be happy with. You get to go to inspirational meetings, some of which will make you feel good. You may meet new friends and you may even make a few bucks. But more than likely you will end up alienating some family and friends. You will probably end up buying more stuff than you sell. And you will learn a lot about deceiving yourself and others. You won't be allowed to tell anyone how you are really doing, for example. You will always have to think positive, even if that means lying. You will have to tell anyone who asks that you are doing great, that business is wonderful, that you've never seen anything go so fast and bring you income so quickly, even if it isn't true.” 

The unfortunate recruits soon realize that even the products they buy for their personal use are often way over-priced: 

“MLM perfected the model in selling bogus ‘home-based businesses’, based on recruiting an endless chain of new distributors. MLM leaders understand that the endless chain allows them to inflate the price of their ‘products’ (ordinary vitamins, fruit juice, pills, and lotions) as much as 500% or more because the income promise is not based on ‘direct selling.’ Consumers are not price shopping and are not even demanding their products. It is understood that the ‘product’ is only the vehicle for the money transfer. The money transfer is driven by the false ‘income’ promise. The ‘profit’ comes out of the inflated margins and from the transfer fees.”

Most MLM require recruits to attend annual motivation rallies costing hundreds of dollars:

“These usually contain nothing but hype, motivation speeches, testimonials, and new improved methods of selling and recruiting. In other words, you don't TECHNICALLY really learn anything new at these required business seminars. Your upline will not tell you this of course. If you ask them what you will learn, they will just say ‘It's a great seminar that will help you succeed in this business! Just come. You'll see! Do you want to be your own boss or not?’ The REAL purpose of these required business seminars is to keep you motivated and inspired with staying in the business, and collect some extra revenue in the process as well. After all, the turnover rate in MLM's is very high, and would be even higher without these large scale rallies and seminars. This is sad though because most people in MLM's (look up statistics for Amway distributors on the internet from independent sources) don't make that much and these fees alone sap up most or all of their profits.”   

MLM companies foster almost cult-like thinking where the only true friends are the ones in the MLM group:

“If you're willing to accept all of these consequences and have no problem with it, then perhaps you are the right person for this type of business. Personally though, I don't admire people who live and breathe only one thing and are obsessed with it. People like that are not interesting and don't have much diversity, and plus it's not mentally healthy to be obsessed with just one thing, no matter how good it is. (I don't deny though, that being obsessed with something to the point of living and breathing it greatly increases your chances at succeeding at it.) I also don't like people who only like you if you're part of their MLM. It demeans a true friendship and is so wrong. A true friend likes you for you, not for how you can benefit their business or not. I thought that the person who recruited me for an MLM was a real friend, but he turned out to lose interest in me as soon as he realized that I wasn't going to be a serious part of his MLM operation. That was a real disappointer and a lesson to choose your friends wisely.”

The basic difference between Bernie Madoff and MLM:

“Well, we're talking millions of people. Madoff conned a relatively small number of people with investment money. Multilevel marketing is using a different system. Instead of taking a million dollars from 10 people, you take $10 from a million people. That's the way the system works. I'm just using that analogously. But the numbers add up to be staggering amounts, year upon year upon year.”  

http://www.cnbc.com/id/100366687   (also watch the 2 minute video)

The facts on Amway:

---- “Wittlich says he worked day and night on his Amway business and never made a profit. Active Amway distributors earn an average of just $115 a month, according to Amway's latest disclosure statement. Just a quarter of 1% (0.26%) make more than $40,000 a year, which Amway attributes to the fact many work part time. Active distributors, which describes about 60% of Amway's 600,000 North American distributors, get at least one bonus check, attempt to make one sale or attend one meeting a year. ‘You'd be hard-pressed to find anyone making over $1.50 an hour,’ Whitsell says of multilevel marketing. ‘The primary product is opportunity. The strongest, most powerful motivational force today is false hope.’”

---- “When it comes to detergent, Consumer Reports program manager Pat Slaven agrees. She did blind testing of detergents last year and ranked versions of Amway's Legacy of Clean detergents ninth and 18th of 20 detergents tested. She recommends against buying them because consumers can ‘go to the grocery store and get something that performs a whole lot better for a whole lot less money.’ The highly concentrated Amway brands cost 23 cents and 28 cents a load, respectively. Five of the eight recommended brands cost less.”

Products must always be moved, and moved, and moved…:

“The biggest LIE they will all tell you is that ‘You don't have to be a good at selling to succeed in this business.’ which is usually in response to the common objection ‘What if I can't sell?’ Nothing could be further from the truth. Obviously, money does not grow on trees and it does not come from nowhere. In order for profits to come in, someone MUST BUY the products! Anyone with the slightest amount of common sense knows this. One way or another, you have to get people to buy the product, or you have to find someone who is very good at it to be your downline.

“And this is not a one-time sell either, you and your downline must find people who are willing to buy your minimum product volume on a REGULAR BASIS! Even if you're a great recruiter and recruit a hundred people, no one will make any money unless the products of the MLM are sold on a regular basis. That is an indisputable hard core FACT, and the MLM's will hold this fact from you as long as possible, because this alone discourages most people from getting involved.”   

The numbers just don’t add up:

“As we discussed above, in our example of the layout of the basic MLM system, you recruit two downline partners to sell a certain product volume and recruit two partners of their own as well, doubling the distributors at each downline level. However, since there is not an infinite number of people in this world, the levels cannot continue geometrically doubling forever, and at some point there won't be enough people in the world to double to the next level. If we assign numbers to the downline levels, then in this case at level 31, there wouldn't be enough left in the world to double to level 32 without re-recruiting the people above. If you did that, then the population of level 32 (not including the population of the levels above it) will be 4,294,967,296. That's about 4.3 billion people not counting the levels above, with some recruited twice! Since there are approximately 7 billion people in this world, there aren't enough people left on Earth for the 8.6 billion needed to double to level 33! There aren't enough people left on Earth! This is what the structure would look like.”

How to Spot a Pyramid Scheme

ABC News Investigates Controversial Diet Shake Company Herbalife

Herbalife Unmasked: An Insider Admits that the “Business Opportunity is a Fraud”

The American Dream Denied: Herbalife Victims Speak Out


The Federal Trade Commission’s pyramid scheme detector  https://www.ftc.gov/tips-advice/business-center/guidance/multilevel-marketing

Do the math yourself with a free online MLM calculator      http://www.free-online-calculator-use.com/mlm-income-calculator.html

Twelve Tests for Evaluating a Network Marketing (MLM) “Opportunity”    http://pyramidschemealert.org/PSAMain/resources/12tests1.pdf

The Skeptical Guide to Multilevel Marketing    http://www.mlmwatch.org/

Photo: http://www.forex-lawyer.com/practice-areas/multilevel-marketing/     CC 

Jerry De Luca is a Christian freelance writer who loves perusing dozens of interesting and informative publications. When he finds any useful info he summarizes it, taking the main points, and creates a (hopefully) helpful blog post.


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