Multi-Level Marketing, also known as MLM, is a scam. Yeah, I said it.
Before I get started, I know this post is likely to ruffle a few feathers. Hopefully if you are involved in MLM though, you can please let your guard down so I can give you some perspective outside of the “bubble”. Often times when you are involved in a group and everyone thinks the same and acts the same, you don’t get any unique perspective.
Also, when you PAY for something you are instantly going to defend your purchase. It is a stupid feeling when you realize that you have been ripped off and in no way would I call anyone stupid or look at anyone that way if they were part of an MLM. It is all part of the journey to success and sometimes we need to find out what doesn’t work before we can find out what works.
In this post, I am going to make some valid points that I think you are going be able to appreciate on both sides of the fence. Those that love or think they love MLM… as well as those that are bitter towards the idea of MLM because of past experiences. Either way, these are undeniable points that I am about to make.
MLM Makes You a Hustler, Whether You Like it or Not.
You are that pimp standing on the corner of the street. You are that energy juice salesperson that solicits your “scheme” to people. You are selling insurance programs that nobody has ever heard of, yet you do so because there is opportunity getting others to do as you are.
Every MLM is based on the hustle. You are told, “get out there and make some cold calls”, “call your friends and family”, “talk about it every day”, “use social media to mention something about it every day”, “check up on your downline”, “boast about how great the product is”.
This is called hustling and unfortunately it puts your reputation on the line. There is nothing more annoying than listening to someone pitch their MLM to you, often times a product they don’t even really use or they are forced to use it because of the continuity aspect of the program.
To make it in MLM, you have to hustle. You have to hustle others.
Unfortunately there is a systemic problem with MLM and that derives in the business model itself. It relies on you getting other people into the program and almost always if your goal is getting actual customers, it is convincing people to spend way too much on products. That leads me to…
Without Overcharging, There Would be NO Compensation.
There would be no feasible way to earn within an MLM if they didn’t overcharge for their products/services. Your best interest automatically has to be you “selling” people on overpriced junk most of the time, and sometimes unsafe, untested and unproven programs.
AND more often than not, it has nothing to do with the actual product. You are selling people into a scheme so they can do the same to others. Most MLM’s have a fee to join. Most MLM’s require you to purchase the product. Most MLM’s have products that are vastly overpriced to support the compensation structure of the very program.
Without overcharging for their products and without having fees or relying on recurring product orders (by the people within the program), an MLM would die out very quickly. Unlike legitimate sales models, they rarely rely on selling quality products at a good price to customers. They rely on selling people on the scheme fees so they can do so to others….and the endless chain continues until people wake up to what is really going on.
It’s a P_R_M_D scheme.
Paying for the Stevie Award, BBB or Other Credentials. They Buy Trust.
One of the most common tactics is for an MLM to work to gain authority for their product by getting “credentials” to put beside their name. There are many “awards” that you can pay money for out there.
Lots of the MLM companies get so many complaints within online platforms that they have entire teams dedicated to clearing their name. This includes paying money to the BBB to get accredited and move up their ratings. Yes, you can pay for ratings within the BBB (even if you are a totally illegitimate company). Same goes for the Stevie awards which are a completely unethical system for “awarding status” to many unethical companies.
There are many companies that have been taken out by the FTC for scamming that have also received awards of this nature. There is no due diligence taken.
Making Money Off Your Friends, That Ain’t Cool.
The most common and sometimes the only way people make money in MLM programs is from recruiting others into the scheme.
I personally know, I have been involved in MLM’s and this was unfortunately the only way I could promote it. I sold my Aunts and Uncles, my Cousins, tried to sell my friends, and of course my parents bought into my products because I thought I was an entrepreneur. I think that they committed to a program they didn’t necessarily believe in just because they felt bad for me.
You get real tired real quick of shameless promoting products/services and the scheme itself to others you know. You get tired of getting “denied” by people. And the unfortunate but natural consequence of promoting MLM and “amazing” opportunity after opportunity is that it gives them a perception of you that you probably don’t like. A schemer and a swindler.
Seriously though, thinking logically how could anyone ever bring themselves to spend $30 on a bottle of Acai juice (Monavie). The same Acai juice, if not better quality, could be bought at Costco for less than $10. Sure, you are paying a Premium…but the only reason you are is because you have to fund the scheme itself and this is done through inflated prices. By the way, Monavie has since gone out of business and was deemed a scam.
You Are NOT Building a REAL Business With MLM.
You don’t own the business. You don’t own the website. You don’t own anything other than “product” that you usually are required to buy from the company (for way more than it is actually worth).
One of the biggest fallacies with an MLM program is that you are actually building a business. Unlike Affiliate Marketing, where you are creating a website, a brand and a following (which is a business), in MLM you are undergoing a constant “hustle” cycle that requires you to always suck in that next person to your downline, shamelessly promoting the products and services to your family and friends, or even worse, have to buy the product yourself in order to remain part of the MLM…which can get very expensive.
You are assigned names like “sponsor”, “distributor”, “presidential level” (and many others) which serve as nothing more than a facade as to what you actually are when you are involved in MLM. A block in the pyramid.
Think about it. A pyramid will always stand high and the top block will always be supported if there is always MORE blocks underneath the upper level. That is why the CEO of the companies tend to make 10’s of millions and the average person within the program will never be able to support the actual fees of getting involved in it.
And if you are like most, when you end up hanging up your MLM boots, you are left with drawers and boxes of “extra” product that you never used. This more than validates that you were part of the program not for the quality of the product, rather the potential opportunity if you got other people involved in the product. A backwards way of trying to do business and fundamentally, with MLM you are not creating a business.
MLM is NOT Affiliate Marketing, Period.
This is an apple vs. oranges comparison. MLM is nothing like Affiliate Marketing. Affiliate Marketing gives you the freedom to promote whatever products/services that you want, within any niche, in fact, it can quite often be the segway for you creating and selling you own products/services.
MLM locks you to ONE program. You by no means have the best interest of your audience in mind because you are always required to sell the same, overpriced, and often times unproven product to people.
Affiliate marketing is the act of promoting products to customers. It it is not the act of promoting an opportunity to others with “products” hidden inside of the scheme somewhere.
It is very easy to determine whether or not you are an affiliate or an MLM’er. If you are promoting products to others, then you are an affiliate. If you are recruiting people into your program in your downline, you are involved in MLM.
Don’t confuse the two because at the core of it, one is an ethical way to promote products in exchange for a commission (affiliate marketing) whereas the other is an unethical way to promote a product in exchange for “recruitment” fees for getting others involved in the very same scheme (MLM).
Some of the Most Epic MLM’s Are Still Alive and Well…for NOW.
There are many MLM”s out there, in fact, 1,000’s of them. There is a reason they will continue to be popular, because “some” people make money with them (mostly the company and a very small handful of people).
Here are some of the most popular MLM programs:
- Herbalife (under huge pressure by authorities)
- NuSkin (under huge pressure by authorities)
- Pampered Chef
- Mary Kay
- Avon
- Young Living Essential Oils
- Beachbody
- Origami Owl
- Stella and Dot
- Isagenix
- Nerium International
- Rodan & Fields
- Karat Bars
- 7 Minute Workout
And then there are the many MLM’s that have succumb to the very fact that they were unethical from the get go. Departures (because of legal issues) are an all too common thing within the MLM world, which sucks as the marketer because when a company goes, so does your entire business.
Recent Multi-level Marketing Schemes Shut Down By Law Enforcement
- Vemma (read post)
- Mona Vie
- Wake Up Now
- ZeekRewards (read post)
- BurnLounge
- Fortune High-Tech Marketing (FHTM)
- Global Information Alliance
- TrekAlliance
- TelexFree
My Conclusion, You Are Not a Bad Person if You Are Involved in MLM
One thing I have learned over the years is that people seeking any form of opportunity have different reasons for doing so. Money is obviously a major motivating factor and that is why it seems OK to promote MLM’s a lot of the time. If your neighbours and friends are doing it, then it must be OK. Unfortunately, there is nobody there to tell you otherwise and it takes something like this post to give you perspective.
If you are involved in an MLM, you are not a bad person. If you have been involved in many, you are not a bad person. We are defined often times in life by what we achieve and what “material” stuff we have, that is why a lot of us have an internal motivation to make money, make it fast, and make it just like the people at the top of these pyramids (whos success stories they are alway sold on).
You are a good person, with motives I respect. I also know that there are opportunities out there for you that can carry you far beyond any MLM program could ever, affiliate marketing being one of them. I encourage you to think outside of the box and think outside of the bubble if you have been wrapped up in one or more MLM’s and are having a tough time getting it off the ground.
There comes a time where the hustle is not worth it and the realization that 95% of people fail with multi-level marketing schemes simply because their motivation is based on recruitment of others (which is a constant and tireless hustle) versus offering a quality product to people that are already interested in that very product (like affiliate marketing).
I would be happy to entertain all comments, questions, and experiences here within my comment thread. I know a lot of you will have some awesome insights to share along with some opinions. I would love to hear them and I promise to get back to you!
I was approached by a co worker who works for Enagic selling Kangen water machines. ..
Now he is telling me in order to be in it he i will have to purchase the machine and other things then I will move up. now the thing is these people are pushy as hell and they ask who ever. They aren’t picky they will find unhappy people and target them. Is maybe legal but its terrible.
I am not familiar with this company, but what I can tell you is that if you have to purchase something in order to sell it, you should be careful about being involve in such a scheme. That immediately sits in the grey area of what a pyramid scheme is in particular if the business is operated in such a way where their are multiple levels.
I would follow your gut instinct though as it sounds as you are sensible and not naive as to what is going on in many of these schemes that are out there. There absolutely are some legitimate MLM’s out there, but they focus on the sell of product to the general public and not of the recruitment of people into the program.
Many try to “mask” the idea of selling to the outside public, with a heavy emphasis (and a big portion of all the revenue generated in the program) the recruitment of others and then them having to purchase products and get others to do the same thing.
There are so many MLM’s out there and they have good reviews, but I am suspicious of the reviews. Those people could have been paid to write the reviews to lure people into joining the MLM. The review says “this small investment made me $1000’s”. That’s getting old. I am cautious of any company that requires an upfront fee, no matter how small it is, to get started. And for you to make your money in an MLM, you basically have to scam other people the same way you got scammed.
Yeah, there are a lot of these they sell the “result”, but they usually avoid talking about what the actual product is. If they do talk about what the product is, it is because by law they are obligated to sell a certain % of product and a certain level of income has to come from product sales outside of the recruitment of others into the program.
Be careful, a lot of these programs get you involved in “auto shipment” and those that state they are making money, are actually spending more on product than they actual are making (so they are losing money).
There are absolutely some legitimate MLM programs out there that focus on the sale of the product, versus recruitment of others. Don’t confuse that with people BUYING the product that are within the scheme because they are naturally obligated to. I am talking about selling product to the general public, people outside of the scheme.
have you heard about tps138?
No, I haven’t heard of this program? Is it an MLM?
Bro great quality write up, am from Nigeria and you know the way our economy is so bad here, every average Nigeria is struggling to make ends meet, i too i most confess to you, i eventually out of need got introduced to a new MLM scheme that just came in to Nigeria by a friend and its called Friends Compensation Plan, i was already at the verge of paying for the first phase nut thank God i went all out to make my reserach till i stumbled on this your article, never will i try any MLM scheme no matter what, thanks for being there for us. i sure need to share this to my friends and families
MLM definitely does cater to folks that are desperate to start something, but don’t know what. Unfortunately almost everyone that gets into MLM invests more than they see in returns and they end up pushing their program to their friends, family and social network (hustling their friends). Often times when they run out of runs, their attempt at making money runs dry as the influx of their downline does.
If you want to build a business, you have to think like a business and remove yourself from the mindset that MLM’s enforce in their distributors. If your business resides within the online world, the first thing that you should have access to is a website. That is the foundation of your business and without it you have very little sustainability online.
Hello, Kyle!
I’m so glad that I’ve found this blog! I’ve always been googling about this kind of blog/posts to find out if I’m not the only one with the same perspective and also I want to share my feelings of dismay and regret with someone, and now here I am.
I recently joined an MLM called Frontrow. They told me about the opportunities and easily get the life that I am dreaming of. At my first week, I became so active in our group meetings and goal orientations. It made me so eager inviting my friends, but they don’t have the money for the membership fee so I told them to update me if ever they finally want to join.
So I tried to invite from the cold market via facebook friends. after days of doing it, I’ve come to a realization that what I am doing doesn’t quite feel right. I thought that if I was in the shoes of those people who I kept on inviting, I literally sound so desperate and annoying. I asked myself “what have I become? I wasn’t born to do this. what did I get myself into?”
I noticed that this is not how real business works. Trying to earn money by recruiting and passing the same burden to the other person because you will really get forced to recruit otherwise you won’t earn any. I then realized that it affected my morale and dignity. (It’s really embarrassing to invite strangers you know.)
I stopped communicating with the uplines. I also kind of hate my friend who invited me for some sort. You see, we are close friends since elementary but when he joined MLM, he was starting to act pretentious and being overambitious which I strongly disapprove. I can say that he got consumed/obsessed with MLM blinded by the money. But I opened my mind to the reality that MLM is not a business! It’s all about generating money at the expense of others.
I want to stop being a member of Frontrow but I don’t know how or maybe I can’t because It’s a lifetime membership but I just want to forget that this ever happened to me and move on. That there was a purpose and this was one of my lessons in life.
But there is one thing that is keeping me from moving on. It’s our facebook group chat. It keeps popping out from messenger even though I placed it on mute. I kept rereading the conversations of my fellow members every day thus it keeps reminding me that I’m one of them. I am planning to leave the group chat but not right now because I’m just have been recently added and I don’t want to hurt their feelings or make a bad impression of myself. So what should I do?
I honestly need your help. I would really be happy if you reply. Thank you!
There are so many MLM programs out there that behave in the same way. The promote the “lifestyle” of earning large sums of money with very little work. The fact of the matter is that within MLM companies, they are required to have an income disclosure. If you investigate these income disclosures you will more often than not realize very quickly that less than 1% of the people within the program are earning a full time living and it is the 99% that are paying for this living.
I would move on and chalk this up as a lesson learned and remove yourself from the Facebook chat if you no longer want to be involved. Just be careful moving forward, if it smells like a scheme it likely is!
Thanks for sharing your experience! And I hope those still dreaming on making quick bucks to wake up too. There’s no free lunch!
I come across different types of MLM companies. Can you tell about QNET network marketing?
I am not familiar with QNet, but there are literally 1,000’s of MLM’s out there. If the emphasis is on recruitment versus selling of the actual product itself, I would highly recommend that you avoid it.
After reading the comments in this blog about MLMs, I realize how many businesses online are using this structure.
While the ethics of most of them are questionable (such as the ones shut down by the FTC), they are businesses and ALL businesses have one goal, to make money.
How would you define a business in today’s world? Whether it’s ethical or unethical, it’s still a business.
I think that MLM is just a more modern and blanketed term for pyramid. A lot of these online companies are so good at selling people a dream and “financial freedom” because they know so well the vulnerabilities of average people looking for a better way than the 9-5 grind. If they can disguise their operation as an MLM that’s not an MLM, they can definitely convince people to buy into the recruiting model that most are built off of.
Before reading this blog and not knowing anything at all about online marketing, I took one of these programs for a $1 trial run to start training and start learning about how I can be successful online using their system to promote its product. While I learned a few things, not enough to be a guru by any means, but more than I knew before I started, I lost motivation to continue when at the end of the trial, I was told that in order to continue with the program I needed to buy a starter product for an unreasonable amount that I couldn’t afford. And that was just the starter pack, the price of the top of the line product that an affiliate of this business was suppose to work his/her way up to promoting and selling was unreal. I was almost sold and I normally don’t just pick up every shiny piece of metal that I see.
I think MLMs are another form of pyramid . Are they scams? They can be. But that’s like saying all businesses have to be legit to be successful.
As time goes on there will be more and more businesses online that are more crafty in disguising as affiliate marketers when they are really pyramids. Its a vicious cycle but that’s business today.
The problem is not the business model of MLM, it is the fact that people are masking their businesses as being MLM when in fact they are actually running a pyramid scheme operation. Not a year goes by where several so called “legitimate” MLM programs get taken down by the FTC or the SEC and are deemed as either ponzi schemes or pyramid schemes, both illegal in most countries in the world.
There are definitely legitimate ones out there. MLM’s that put emphasis on the sale of their product, versus recruiting others into the scheme itself. That offer their products at a fair market price versus having to inflate them simply to compensate their participants. And ones that don’t rely on shameless promotions through social media like Facebook, Twitter, Instagram, Snapchat and LinkedIn to promote their scheme.
If a product is quality and these business have the best quality products, it should be very easy for someone to sell the actual product outside of selling opportunity. Unfortunately that is rarely the case.
Statistically most people are not going to put in the effort and I’m not talking about just mlm, but in everything. Take for example the amount of people in the world that dream of climbing a mountain in their life time compared to how many people actually go out and do it? More people dream about it and less people actually do it right? This is not because some secret system is designed to stop most people from doing it, it’s because most people will not take action. So it is not deliberate.
Now if you take that example, but deliberately monetize it into a business model where the people that do climb the mountains get paid a commission when others join to start climbing then a whole intention is created behind it that changes the purpose of the business because now it is obvious that the ones that climb to the top will make the most money, not because they’ve done anything special, but because they have exploited the statistic by not being transparent about the fact that they are actually making money from small amounts of cash coming in from large amounts of people that are unaware of this statistic.
In other words the Multi-Level Marketing structure does not encourage this statistic or as some would call it, laziness, but relies on this statistic that most people will not put in the effort even after paying. So this is deliberate.
You could say well that’s just the fault of those that don’t put in the effort. That would be fair to make that comment if we were talking about climbing mountains, but we’re not. We are talking about an income where others gain from the lack of other peoples knowledge. This whole attitude is a denial of the statistic itself.
It would be honorable to present this statistic every time a new comer is thinking of joining, but it wouldn’t be clever from a sales perspective because after all, all you want to do is make money so why reveal that true statistic in the first place right?
I agree on one hand, that the rate in which people succeed in business can be quite low. It is a fact that most people are unwilling to put forth the effort it takes to create a successful business when they attempt to build a business for themselves. When you are a participant in an MLM or relating scheme though, your success rates usually are that much lower because you:
(a) don’t own the business, you are merely recruiting others into
(b) you often times have to do things that are uncomfortable and outside of your normal activities, like recruiting family members and friends into the business
(c) the tools to build an actual stream of income are often times limited and you are “selling an opportunity’ instead of an actual product.
Being within an MLM scheme is much different than being involved and building out another form of business, so the comparisons definitely are not 100% useful.
Hi Kyle,
Thanks for the info about “MLM”s, much appreciated to many people seeking to justify their disdain for “MLM”. I fully agree that a company that allows their reps to make money directly (and only if they want to) from recruiting are definitely suspect and, more pointedly, closely fit the definition of a “pyramid” scheme i.e. people are being compensated by people joining when no goods, products, or services are being sold. Like most people visiting your site, I too am interested in a business of my own that will be great part time income at first and would eventually allow me to do away with a boss for good and control my own time.
I have done a lot of research, I’ve looked into real estate (one of my good friends is a real estate broker) and went to meetings or met with people from several different “MLM” companies, Monavie, ACN, Amway/QuickStar, Scentsy, Melaleuca, Legal Shield, AVON, Beach Body, NuSkin, Primerica, and WFG. Each “MLM” company seems to have their own niche product but I can’t say any of them would be a scam. I would agree that most of them sell products that are overpriced compared to mainstream ways of acquiring a similar product. I would agree that most require a certain number of production every month to be in the company or to be able to make commission and most require purchasing the product to join. You would be correct that most of them are similar to a “pyramid” where recruiters make money from recruiting people.
You would also be correct that in most of these companies the compensation plan is set so the person who recruited them always makes more money. In a binary compensation system it’s impossible for this not to happen. BUT not all of these companies are like this; not all have tangible products where similar ones that can be purchased anywhere, not all of them get paid on recruiting, and not all of them have a binary compensation plan where the person who recruited someone will always make more money than them. Look at Primerica and WFG.
They sell financial products, the same products found at any other financial firm. There is no requirement to own their products to join or stay in the company or monthly production requirement to be commissionable or to stay in the company. Also, in Primerica and WFG the cost to join is $100 (like some of the other companies), but the difference is, that $100 doesn’t go to the recruiter, it goes directly to home office to pay the actual employees that make ~$30,000 a year who are responsible for processing background checks, business applications, licensing applications, etc. So 1000 people who join these companies will not pay the people who recruited them anything, it will only pay the employees that make ~$30,000 a year to process the paperwork. In other words, there is a corporate side and a sales side to both these companies. Primerica and WFG are a lot like real estate (this link does a good job at explaining the costs involved with real estate and how much someone actually makes http://www.city-data.com/forum/real-estate-professionals/1803980-6-real-estate-commission-bubble-3.html), i.e. agents work out of a broker’s office and once they get licensed they can sell and make money. The main difference is that in Primerica and WFG the company pays for new agents’ licenses to do business and they DO NOT have to recruit people to make money, and good money as well, so there are a lot of people who work in those companies just like in real estate. But let’s compare real quick, real estate is very expensive to get into, ~$2,500 between classes, licensing, MLS membership, etc and then you also often will rent a space in your broker’s office and pay monthly for that along with all your other monthly fee. Monthly fees are often around ~$400-$600 per month. In Primerica and WFG there is a $25 per month fee to use their online training and business websites. In real estate you have to complete on average 90 hours of training mandatory to be an agent, and then another 90 hours to become a broker (not to mention all the new fees and licenses associated with becoming a broker). In Primerica and WFG, the hour classroom requirements are far less, often 12-20 hours for life insurance (same class requirements you would have if you worked for New York Life or anyone else).
If you compare the real estate broker to the Primerica or WFG broker it’s also very similar. The broker splits commissions with the agents that sell houses in real estate, so if the split between a new agent and broker is 25%/75% (the split depends on the broker you are with but generally is relative to your experience in real estate), then any commission paid on a house sale is paid out that way (this excludes the portion split with another broker if one broker’s agent listed the house and other broker’s agent sold the house). A real estate broker “overrides” the agents that work out of his/her office, he/she doesn’t sell the house but he/she makes money from its sale. So 5 agents that sell $100,000 house that bring in a 6% commission, each split it with their broker. At 25/75 each agent made $1,500, and the broker made $4,500 x 5 = $22,500. In Primerica and WFG any life insurance sale is paid out by premium over 12 months, so if the premium is $50 per month, that pays out $50 x 12 = $600 in commission which constitutes 100% in this case. A new agent is at 25%/75% commission split on life insurance with their broker. So on that $600 sale, 5 agents would each or $150 and the broker would make $450 x 5 = $2,250. Not as much as a real estate broker but same idea. My friend and any other broker (a little research online will also show you) will tell you that more people are learning to become brokers which is driving money away from existing brokers because they are forced to get more competitive in their commission splits to attract new agents to override.
Any real estate broker will also tell you that for that same reason, they really don’t want one of their good agents becoming a broker for two reasons:
1) They loses money because the agent is no longer there for them to override.
2) A new broker is now their competition to sell houses. In Primerica and WFG every person has the opportunity to be a broker and own an office and override people but they DO NOT have to do that. AND when someone becomes a broker, the broker who promoted them only makes a bonus off of their office from now on. So if the new broker outworks the broker who promoted them or their office does more production than the broker who promoted them, the new broker will make more money.
This can be confirmed by asking anyone in one of the two companies to show your their production leaders in the company. You’ll be able to see how much money people are making and how much those who recruited them are making, sometimes the newer person makes quite a bit more. In Primerica this also true below the broker level, if you get started and the person who recruited you slacks off and doesn’t keep working, they cannot just ride your coattails all the way to the top. If you keep producing and recruiting you will “flank” the person who recruited you and they will now be your recruit. I know this because after meeting with the person I did about Primerica, I later went to a group meeting and the person explained this and pointed out someone during the meeting to whom this had happened.
Primerica wants reps who are serious about building a business, and helping people/families financially. They are not interested in people who are just along for the ride and only there to get rich. So in Primerica for sure at all levels, the recruiter does not alway make the most money. The same is true for the broker level and beyond for both Primerica and WFG.
Now, compared to real estate doesn’t Primerica or WFG sound more attractive?
The attrition rate in real estate is over 90% in year one and 80% in year two, the average agent that does stay does 1-2 sales in the first year and an “established agent” does 6 sales per year (https://www.quora.com/Can-real-estate-agents-make-a-living-in-todays-market). I bet everyone knows multiple people who do real estate. Why doesn’t anyone call real estate a scam? This is another place where I agree with you, Kyle. Most people in a “MLM” company heckle (for lack of a better word) everyone they know which is absolutely not professional nor a good business practice. Everyone who goes into business for themselves should definitely gain the support of the people they know whether it be an “MLM” or any other business but in a professional way and there is a professional way to go about business. The problem is that people today have a hard time believing it when someone says they want their support and don’t want to sell them anything unless it makes sense for them. It’s kind of a circular issue but we all know that an experience at one location of a chain restaurant is not indicative of all locations, nor is one server at the restaurant indicative of all servers, right? It should be the same with an “MLM” but unfortunately most people don’t treat it that way which ruins it for the one’s who do and for companies like Primerica or WFG who actually seek to help people financially.
Often times the client ends up paying less than they were previously for all their financial services and/or they end up with an actual light at the end of the tunnel in terms of having a successful financial future versus not having one. I know that WFG has a minimum of $4,000 IRA and $200,000 life insurance where Primerica has a $25 minimum IRA and $50,000 minimum on life insurance so they may be able to help a wider demographic of people than WFG. In summary, not all “MLM” companies are bad and not all require purchasing their stuff to be involved or stay involved, not all have production requirements to stay or be commissionable. Not all make money from recruiting or can make a living from recruiting only. I wouldn’t say that all of them are a “scam”.
Lastly, aside from MLM, if I may take this a step further, my job works just like real estate, Primerica, and WFG. I work in commercial sales for a small company of less than 20 employees and the company does around $15,000,000 in sales a year. The owner makes 50% of every sale that comes in the door and the rest of the office splits the remaining 50%. The owner doesn’t have to sell. New reps are salary, around $45,000 – $60,000 per year, and considered inside sales and still in training for about 4 years until they become an outside salesman. Outside salesman make around $150,000 – $200,000 per year and 100% commission which is a great income, but our owner makes $750,000 to $1,000,000 a year, which is a lot better income. None of us will ever own the company because it will be passed onto family or sold and it cost the owner over $100,000 to get started in the beginning. Slowly new reps were recruited and now the owner overrides them all. He will always make the most money, no matter what.
If we ever try to go out on our own, we’re competing with him and have a lot of risk involved not mention having to front a bunch of money to get going which may happen but not likely. After looking into how traditional business works, most small businesses start that way with a lot of risk but all of them recruit. Looking into chains like McDonalds or ReMax or many of the other finance or insurance companies, they were in fact started the same way, and continue to this day, lots of up front capital, recruiting, and eventually owning a business that pays the owner at the top the most money. It comes down to actually researching what is truth and not just what the masses say on some website because they never made any money and want to hold someone responsible. There are people who do bad business everywhere but that’s definitely not a blanket statement for everyone. You mention on Wealthy Affiliate that it is free and thus truly a good opportunity. A McDonald’s franchise is $1-$2.2 Million per franchise and there is a waiting list to buy one, is that not a good opportunity?
At the end of the day I really have to inquire, though, about the credibility of this blog/blurb. I think you made some valid points and shared some information through your opinions but I think anyone would agree that there is something, shall we say, “off” about this post of yours. You know as well or better than anyone how to create a website that uses a controversial topic that is often researched (in this case MLMs) and the volume of online traffic associated with this topic all as a means to direct people to another website (in this case, your baby, Wealthy Affiliate), this is common practice online.
Your motive seems to only be to blast “MLM” companies in an attempt to unilaterally promote your company. In closing, just a few additional questions come to mind….
1) Do you not make money off of people who join your Wealthy Affiliate community whether directly or indirectly? I don’t see anything anywhere on Wealthy Affiliate about it being a non-profit company so there has to be a benefit to you for someone to join. This leads to our next question…
2) What makes you any different than anyone involved in any MLM? You make money off other people, right? Is it because you (and your partner) are the only people who do? You mean to say that the CEO and founder makes the most money, where have we heard that before?
3) What are your credentials that you feel qualified to make any negative claims about any other company that is a “MLM” company and call them all a scam and then make positive claims about your own company? Could it be because you’ve been around the block and actually made money doing what you do and therefore it has to be legit? How is this different than anyone else who is currently successful in a “MLM” company?
4) If you were involved with some of these “MLM” companies, why not name the ones with which you were involved? You certainly have no issues naming the companies that have went out of business, and if you truly believe you can “confidently say MLM is a scam”, why not name the companies that scammed you?
5) Why do you feel that your so called personal experience with a handful of “MLM” companies (if you even really had any) directly implicates all other “MLM” companies as being a scam as well? Why don’t you mention the companies that are not a scam?
6) Why is the BBB accreditation a scam? The BBB is non-profit and if a business cannot afford to keep up with the $50-$100/month to maintain a good rating, doesn’t that speak to the business’ credibility?
7) Why is promoting a “MLM” company unethical and Affiliate Marketing is not? Sure spamming is illegal regardless but that happens in both types. Are all the adds that pop up on, TV, phone apps, YouTube, websites, etc. ethical? Sure. But not many people love commercials. Not many people love waiting 30 seconds to watch a YouTube video. Not many people like cluttered websites or Facebook pages. I wouldn’t say they are unethical, maybe annoying though same as with some MLM people.
8) Why aren’t MLM businesses real businesses? Just because they don’t have a well priced product doesn’t mean they aren’t still a business. Like i showed already, not all have the same business model or are run the same way.
Thanks for stopping by Mike, it sounds like you have a lot of experience within the MLM world and it is typically those with lots of experience that become unable to have perspective of what they are actually getting themselves involved. Not to say that you are doing anything unethical or have done so in the past, but those I have seen over the years that get involved in scams, seem to seek out naturally other “scams” to involve themselves in…stating that the last program was a scam, but their new one isn’t. It is truly a vicious cycle.
In respect to affiliate marketing and the differences between it and MLM, there are lots. They are completely different models, and affiliate marketing is an actual business model, where is MLM is a scheme (sometimes legit, sometimes not). There is never an instant where affiliate marketing is a “scheme”, you are promoting a product/service in exchange for a commission. Any type of product, any service, and you don’t have to join a scheme in order to promote these and you can promote millions of products/services as an affiliate.
In response to your questions here:
Yes, we are a service. We are platform in which you can create, grow an manage a business online. Wealthy Affiliate is a business. Not sure how this is relevant to the discussion at all, but we provide the most sophisticated platform in the world for building a business at the most cost efficient price. In 11 years we have not raised our prices, because the consumer and providing them with the best experience possible is our focus. Not money.
Huh? A business makes money. It sells a product or service to a consumer. The CEO of a company is not at the top of a scheme, they don’t necessarily make the most, and a CEO can be hired and fired, re-allocated. I think you are heading in the direction of comparing MLM to a job to a pyramid structure. There is no relevance between an MLM and a real job, that comparison has no merits.
They are not all scams, just most of them are. There is a reason that every year, a new batch of MLM”s are deemed pyramids, assets seized, and doors are closed. I can assure you that 2017 is going to be more of the same. The FTC and the SEC only have so much in the way of resources and the MLM you are involved in could be next.
A successful MLM company is not one that is making money. There have been many, many illegal ones over the years that have made the most money. In fact, the most successful MLM’s over the years have been the ones that have been deemed illegal or pyramid schemes.
By all means, there are legitimate Multi-level Marketing schemes out there that focus primarily on the sell of product, not recruitment. There are many more that are not.
I was involved yes, with a company called Xcel. I lasted about 3 weeks. I sold the actual service to 3 people, I couldn’t believe that the focus was on getting other people “underneath” me. My sponsor was annoying, he was constantly pushing me to recruit others, that was enough for me. I see what is going on with the industry these days as the “same” if not worse. Often times these schemes have far inferior products to the one I was told to promote.
It doesn’t implicate anyone. No one program indicates another one is a scheme. But the structure of MLM schemes, the behaviour of those within the schemes, and the criteria I have set out above in my article is a commonality amongst almost ALL MLM’s. That cannot be argued.
Read my article on that. It is well documented out there. BBB is a non profit, but very profitable service that is focused entirely on making money. There are 1,000’s of companies with great ratings that are under hot water. If you want a bit more perspective and to brush up on your research, I highly recommend you read this article.
http://money.cnn.com/2015/09/30/news/better-business-bureau-millions/
You can buy better ratings on BBB. You can also pay to have the BBB logo on your site. You can do this even if you are operating a company that is continually having bad relations with customers. That is a fact.
Anyone doing unethical “sales” is unethical. I don’t care what space you are in, if you are being unethical then you are. The business model behind MLM is unethical at it’s core, that is the issue here. There is really no comparison between MLM and affiliate marketing. Affiliate marketing doesn’t require you to recruit others into a given scheme to make money. It is the ability to promote any product or service to a customer, in exchange for a commission if they buy.
The actual MLM itself is a business (whether it is legal or not). You promoting it is not. You are a participant in someone else’s business, but often times they use wording like you are “licensing” the business or you are an executive of the company.
If you create a business in a given space relating to your MLM and become an authority within that space, sure, that is a business. But simply joining an MLM doesn’t mean you are operating a real business. You are a participant of another one.
It just sounds like Mike is at the top of the food chain in one of those MLM’s. LOL
Pull the information that shows what folks are making with these MLM’s and make it public, and that will deter 99.9% of people from joining. I personally viewed many of these MLM’s financial disclosures and noticed the over 97% (throwing that out there, but seems accurate based on the companies that I viewed) couldn’t live off of the income generated from the biz. The only upline they should be paying anything to is the IRS!
That is very true and that is the case with almost all of them. In some cases it is much more slanted, the 1% is earning everything because they are the highest up in the food chain. They will use excuses like “all jobs are pyramids”, but the reality is, with a job you get paid for performing a task. In an MLM, you are paying for the idea of potentially making money one day and are often times required to recruit others into the same scheme to recoup your costs. That creates the vicious “churn and burn” style cycle.
Please investigate Zukul.com? They do launch $50 dollar de month funnel last year they sell “guaranteed sign-ups” for $50 per 3 signed up. People be buying dozens signup packs. Then the bring Karatbars “guaranteed sign-ups” an call it zukul.gold.
Then they launched a scheme called Zukul Ad Network, then the charity accounts to help poor Filipinos be earn money clicking all day be “good cause account managers” to be lazy Zukul Ad Network members. Now they launched a paid to post scheme trying to advertise on Facebook. They will get thousand members to spam FB groups and pay each person a few cents for it. all of these are being run concurrently and last week they launched a $10 funnel because not enough people were signing up to the 50 funnel.
There are many expressing concern over the business practices and owner Jeremy Rush, but he is adamant that he the most transparent owner in the world with 3 weekly live hangout and a whole line of “leaders”. My boyfriend used to be a part of this for sake of growing his karatbars business with guaranteed sign-ups but got his account frozen by karatbars along with dozens of other zukul members. He has since left the company in April and passed, but far too many of our friends continue to drink the koolaid.
I regret his decision to join. But other than people grumbling, there is no professional review out there to expose this farce. Are you able to take this please? No refund, money gone. Thanks Shan.
Thanks for bringing this to my attention Shan and I am sorry to hear about your family and friends experiences with this program. I will definitely look into this program and do some thorough research when I get a chance. If it is truly in the business of “scheming” people out of money as you say it is, then it would be important to let others know so they don’t lose their money.
Hi Kyle. Thank you for your article which is very informative. May I ask if have you heard of Unicity? The sell Nutraceutical products that they claim are in the Physicians Desk Reference. Would appreciate you input when you have time, thank you.
I haven’t heard of this program specifically, but I will investigate it when I get a chance. There are MANY schemes within this space out there that are quite similar though and if there is a large emphasis on recruitment of others into the program (building your downline) versus selling the product to customers at a fair price, then I would be very wary.
I was with a company called It Works Global for almost two years before I stumbled upon Wealthy Affiliate. I would never say that MLMs are complete “scams” because it is very possible to make money, and a substancial amount of money in well structured MLMs that offer great products.
Personally I went up quite a few ranks in my company relatively quickly, but I was doing so with sleezy marketing tactics. I was told to work my instagram and facebook, post at least 3 business related posts a day and message anyone and everyone that liked/commented on my post. This worked well for me in the beginning. I was making a pretty penny from home and honestly thought I would be a top leader in my company in no time.
Then slowly but surely I realized how annoying and awful I must have been to my friends and family and those who I networked with online. I started to lose passion because I wanted a BETTER way to market the products. I tried everything else and stuck with it way longer than I should of. Then there came a time where I wasn’t even making enough to cover my website fees or the monthly autoshipment I was required to buy in order to recieve my commissions. All off my teammembers slowly dropped off and I was seriosuly struggling in “my business”.
Now I am a part of Wealthy Affiliate, and even though I haven’t made a dime yet, I am sure that this is something that I can continue to be passionate about. I am determined to make my living online because I want to be able to have that laptop lifestyle if you know what I mean. I am loving the training and resources available and I am sure that if I just stick with it, I will start seeing some incredible results from my efforts.
I love using your website for reference Kyle, and thank you for this post. Although I don’t agree with the word “scam” you make some very valid points and I can definitely back those up with my own personal experience. Thanks for sharing!
The first thing I want to clarify is that because a program can make someone money, doesn’t mean it’s legitimacy. The Bernie Madoff ponzi scheme made a lot of people a lot of money and so have all the epic schemes of our time. I am by no means indicating that this particular program you were involved with was, but basing a programs legitimacy on people making money is not a good litmus test.
I can definitely see folks promoting MLM’s in my various social media feeds, from the daily updates (usually 3 times per day on Facebook) boasting about products they are overpaying for or trying to get you to join the “opportunity”, to constant before and afters. The problem with this is that when you become part of a program or MLM that encourages you to behave in this way, it is a good way to get blocked by your long time friends and it is definitely very annoying as it sounds like you were able to observe before it was too late. lol
I would agree that not every multi-level structured program is a scam, many are though and it is the only industry where you see such a high rate of programs getting shut down by the FTC or SEC for being illegal, with MANY that just haven’t been the focal point of the FTC yet (but will be taken out). As a participant in these programs it is a little scary because you are vicariously responsible when you are promoting these programs as you are selling others into the program.
Thanks for your feedback and insights Sabrina.
Everything made in china is overpriced junk. Think about that expensive restaurant where you paid $15 for a salad or $4 for a coke? Scam? Starbucks $8 coffee? $100 for a pair of jeans or tennis shoes? Scam? I guess scam only applies to MLM to the author.
This is a weak argument at best. It reminds me of the argument that “every” job is part of a pyramid scheme, something that is debunked very easily by ay reasonable human. Employees get paid wages, people in MLM rely on commissions and more often than not, recruiting people into their downline to recoup costs. Not only that, they cannot sell products/services at a price that is good value simply because they need to compensate for the often times very complex and lucrative commission structure.
What happens though, when you join the program you are required to “drink the koolaid”, you cannot speak negatively of the products/services you are promoting and you definitely cannot argue that a much lower cost product is better than your overpriced product, simply because you have to sell these overpriced products.
Sure, a company can charge whatever they want. If they overcharge though, they aren’t in business long. If a restaurant charges more than the market will bear, it won’t have customers and will go out of business. An MLM operates under a different premise because they can overcharge and still work, because they have all of their representatives hustling on their behalf convincing people of this amazing opportunity to earn money.
i think the mistake people make is that there are good MLMs and bad MLMs, and it takes us into a place of trying to walk a line of opaque legal issues and definitions of common sense terms like ‘retail sale’. the fact is that no one makes any real money from selling the product. thats the lie of MLM. you get a hot shot distributor who might look successful and tell you anyone can do it, but the fact is that his/her income comes from recruiting…. from selling people on the idea that they can be rich, and getting you to sell others on that same idea. google any wealthy distributor and see for yourself how they pitch.
while there are some distributors that might use the product and ethically sell some product, in their spare time for a few hundred dollars a month, they are outliers. this is a very small subset of the company revenue. those who fill this category are simply unwitting shills in a larger con game and end up being used as a veil of legitimacy.
If MLM were legit , the companies would simply prove they have retail sales and make the black cloud go away. but they choose to deceive and play this con game with meaningless words like ‘member’, discount buyer, yada yada.
Great review Kyle. I may post a blog on this also. This is what Ive learned about MLMs. For the person new to business mlms will teach you the bare basics such as time management, basic budgeting, and marketing. But as far as the products and ownership, youre just a cog in a big wheel of someone else’s success. The products are over priced because they have to pay all those levels of commissions. I was with advocare. I learned alot. So much that I went to the local herb store and bought the same ingredients that Advocare used and they worked just as well or better at more than half the price. If i wanted I could brand my own products…Ive thought about it
I definitely don’t doubt that people learn a lot about themselves and business by being part of an MLM (good or bad) and often times it is a stepping stone to people creating real businesses for themselves. This is something that I can appreciate about any opportunity that people try, even it is unethical sometimes people get a taste of doing something themselves and then they go off to do bigger and better things within the business world.
And yes, the MLM model relies on overcharging people for information, for products and for services. That is how they can fund the inner workings of their compensation model and how they can make it appealing for people to actually promote the product. As a result, the big loser is the consumer.
I wouldn’t say that MLM and pyramid are the same. People often believe MLM to be a scam but it depends. MLM is a business, the business is legal, so it is definitely not a scam, although one must be careful of who they deal with, and be sure this industry is for you.
No, they are not the same. A pyramid is a pyramid and an MLM is an MLM. Unfortunately many companies that deem themselves as MLM are actually a pyramid scheme. That is the issue here.
Sure there are some legitimate MLM’s out there, the problem is that far too many of them are operating on the premise of “recruitment” of others in the program rather than the selling of the actual product or service (which is nothing more than a facade). The people at the top and the early entrants earn all the money, the lower level individuals or the late entrants feed the head of the monster.
I am glad you have found one that works well for you. I hope you are operating it on the premise of selling quality products to consumers, rather relying on the recruitment of others for the bulk of your income.
Very simple. Do they have a product that they sell? I cannot believe the ignorance demonstrated in this article. You DONT have to ask you friends and family to join, there are many other ways…You call a $178+ BILLION industry a scam? And the governments around the world happily allow their citizens to be scammed in this way? Whether you like it or it it is a legitimate business. And like any other business if you don’t work it it don’t work for you. Simple.
Just because something makes money means it is not a scam? That is untrue. Most scams make an incredible amount of money, because well, they are scamming people.
Are they all scams. No. Just a good deal of them are shaped eerily like a pyramid in terms of their structure and many of them are slowly being defined by the FTC and SEC as pyramid schemes. To name just a few programs in the MLM industry that have either been banished by authorities or are currently under heavy scrutiny:
*Fortune High Tech Marketing
*Herbalife
*WakeUpNow
*Vemma
*Burn Lounge
*Zeek Rewards
*Global Information Network
*Telex Free
*Trek Alliance
*Banners Broker
*MonaVie
And this is just to name a few. Many of the folks that were either behind these or were representatives selling the products/services within these programs are now in jail as well, so it is actually quite a serious thing. Most of these companies were/are making an incredible amount of money, billion dollar companies and those involved in these companies had the same argument as you.
Next time you boast the idea of “legitimacy” based on the fact a company makes money, perhaps you should reconsider. There is no correlation between the two.
Wow!! this has really opened my eyes! I’ve recently started a free month a Commission miner co op which is like MLM, have you heard of it? thinking i should get out before my free month ends and save my money. Not sure if it’s legit after reading this what do you think? it only really encourages people to sign up new members which in turn gets you monthly commissions. Really thinking its not worth it!
Good post man!
Kyle.
I have never heard about that program, but there are these types of programs popping up just about everywhere. There has been a real cross over of MLM schemes trying to appear as though they are “affiliate marketing”, which is just a facade for what they are often times running. A pretty blatant pyramid scheme.
If a program is based on you promoting that program and getting others to do the same thing, you need to be very careful as this will quickly be deemed a pyramid scheme and you can be held responsible for income the others lose as a result of you recruiting them into the platform.
Hi Kyle
Have you heard of LifeVantage, and if so what are your thoughts.
Thanks
I have not heard of them, but if there focus is on recruitment of people into the scheme versus the selling of the actual product within the scheme, I would be very skeptical.
Hi Kyle,
Thank you for sharing your experience and view point on MLM. I’m a new mother to a 5 month old baby boy who means the world to me. Like most mother’s the hardest thing to do is leave your child in someone else’s care because we have to go back to work. So, I decided to look into opportunities that allowed me to work from home. I was introduce to MLM a few months back from a friend who has made a lot of money since joining a year ago, she does focus mainly on recruiting, and thats an area I really don’t have time for at the moment. As far as my friends and family their a little skeptically from all the negative things they heard about MLM. However, they did try the products and liked it, I can honestly say the products are pretty good but like you mentioned they can be pretty pricey. They also have a good composition plan but then again this is my first time joining a MLM.
I was curious if you ever heard of a Health and Wellness company called TLC (Total Life Changes)? And what is your opinion on them?
Also, I recently joined WA. I’m looking forward to the education and connecting with people. So, Thank you for creating that space to help us with online marketing.
I haven’t heard of that program specifically, but it is always a red flag when the focus of an MLM is the recruitment of others into the MLM versus the sale of the actual product. Many of these companies are getting much more “crafty” with the way the portray their companies, they force their distributors to spend 50% of their efforts selling product and 50% recruiting. This way they will avoid being deemed as a pyramid scheme, which many MLM’s are having issues with (and have in the past, dating back to Amway in the 70’s).
I would say, if the products are good that is great. If they are vastly overpriced for what they are and there are better and more economical options out there, than the product is priced so high just to support the compensation plan. That is going to make it very difficult to SELL the product to people, which then forces people within the scheme to recruit to recoup (their costs).
I know you are going to love WA and I really do look forward to working with you Rena.
Wow Kyle, great article and I totally agree! I was in MLM for around three months and I felt really bad selling mediocre products to people I know. And the revenue (actually I had only losses) is so not worth the time and money.
I am very happy working in affiliate marketing though! It is fun, you’re free, in total control and are actually helping other people out. And last but not least, you can make a real business and good income out of it!
Take care and keep up the good work!
-Rosy
If you are earning nominal revenue within an MLM it is usually sucked up pretty quickly by the fees associated with taking part in the program or the automatic enrolment in their product purchasing programs that you are required to take part of.
Even worse, there are MLM’s that are completely based on digital products and people are required to buy into the products just to sell the products to their friends/family to recoup the costs. That is becoming more and more normal within the industry and unfortunately, more accepted.
Affiliate marketing is absolutely a far more ethical business model. You can promote products/services that benefit your audience the “most” versus pushing products/services that benefit you the most.
Kyle, thank you for the thoughtful post. I have been fighting this battle for about 3 decades, and it amazes me that MLM has not been shut down permanently by now. For me it has always been an ethical question.
I can show (and have shown), using a simple spreadsheet and the company compensation plan, that it is mathematically impossible to sustain positive net revenue in any MLM without significant down-line losses. Even selling strictly retail (with no down-line recruiting) in most MLMs one cannot yield enough revenue to offset the costs of remaining in the program. When many MLMers tell you what they “make”, they tell you their gross, not net, revenue. There are many studies available now, including from the IRS, that show MLM is a terrible business model (for the sales force).
But back to the ethical question. Once you show an MLMer that sustained net profits DEPEND on sustained net losses below, how can anyone continue in such a business once it is clear they are, by definition, a huckster and a cheat? Even a minimum wage part-time job yields positive net income for the worker. Not so for 99%+ of “reps” involved in MLM.
I am not a big fan of heavy market regulation, but in this case, given all the people getting ripped off on a daily basis, I’d say more is definitely needed in this area.
It would definitely be interesting to check out the spreadsheet that you have Eric, I imagine it is very revealing as to how the MLM operates and how few people within industry actually benefit from the compensation model. The company itself is usually vastly successful because of the very idea they have people “paying” to become distributors of their products. Then in most typical MLM’s, their products are vastly overpriced and unproven when compared to other companies within the industry.
I know many people that are involved in the MLM industry and they are constantly leaning on their friends, family and social networks to try to solicit their product, but also solicit the very same HOPE that they have been sold on. When they realize that nobody wants to buy their latest magic potion, then their dream fizzles and the churn rate continues.
The odd person will hustle and manage to sell enough people into the scheme to make an OK wage, but as you said this is very odd. The 99% get screwed out of any opportunity to earn money because of the way these compensation models are set-up (I think I have seen some of the same studies that you have).
Thanks for your feedback here Eric, I am definitely on board with the idea that there needs to be much more regulation in this space. Unfortunately many of these companies, and often times the shadiest so-called MLM’s fly under the radar until they have reached a point where they have ripped off an incredible number of people.
I have experienced a new scam with the LeVel company. An unauthorized $800 charge was made to my American Express card. Two days later, I received a carton of something from the company. Didn’t open it; just refused it to Fed Ex. Charge is now in dispute with American Express. How did someone at LeVel get my credit card number? What kind of scam actually sends you the merchandise? I am baffled!
Sorry to hear about this, the autobill/autoship programs are something that many MLM’s rely on to make their money and the bank on people forgetting about these or being too lazy to cancel their autobilling. In some cases they make it so incredibly hard to cancel your billing that it would take a rocket scientist to figure out how to cancel.
I hope you can get your issue sorted as it sounds like you are experience fraud through this program.
Kyle, while I appreciate you and respect your right to have your opinions, I’d take issue with your absolutes. This article reads like “ALL MLMS ARE SCAMS” which couldn’t be further from the truth. You say that taking advantage of your friends and family isn’t cool. I represent an MLM and I’m very proud of that MLM. In fact, I’d use the product every single day whether I got paid to do it or not.
If I’m excited and passionate about the product, telling my friends and family about it only makes sense to me. If they don’t like it, it doesn’t dissuade me and I still love them and they still love me. You also talk about it has to be overpriced in order for the compensation to happen. That, also, is a generalization and not accurate. Our product sells for less than retail and we still have a very healthy compensation plan.
The article is written from a very sensationalized point of view and I just don’t think it’s fair to paint with such a broad brush over the whole industry. I tell everyone that a reputable MLM company is NOT a scam and if you love the product and are passionate about the product, telling the world about it isn’t “hustling on a street corner.” It’s no different than going to a movie, enjoying the movie, and telling your friends they need to go see the movie. If they do, maybe they’ll tell their friends and they’ll go see the movie as well. If they don’t, it doesn’t change the fact I enjoyed the movie.
However, if you’re pushing product you don’t believe in then I could get behind your position in the article. I would just encourage you to not use gross generalizations.
Not all MLM companies are scams, I would agree with that. A large percentage of them are though. Here are some instant clues that you are involved in one that is either a scam or sitting within the grey area of being a scam.
(1) Focus on recruiting others into the program. If you are constantly promoting the program and the “opportunity” that exists within your MLM versus an emphasis on the actual products.
(2) If you could go a year without talking about your MLM and still use the products. If you love the products within your program so much and they are the most cost efficient, highest quality solution out there, then you might be working within a sustainable and noteworthy platform (if you love the products that much). If you wouldn’t continue using them if you were not part of the scheme, then chances are you are working within a scam.
(3) If the products are overpriced compared to industry competitors. Many MLM’s products are no better in quality, yet WAY more expensive than other products in the industry. The reason being is that they have to inflate their prices in order to support the compensation model.
(4) If the products focus is promoting the same product to others.
(5) If you get people to join your MLM without being clear and upfront to them about what it is. That is, if you have to register to some opt-in on a website in order to “get more information” and see this amazing break through opportunity. Typical scam.
As for your comparison to watching a move, that is word of mouth advertising. You are NOT paid or compensated to recommend movies to your friends, so there is actually not validity or correlation between that comparison and an MLM. Not sure where you were heading with that one. The fact of the matter is that with most MLM”s you would recommend an inferior movie so that you could make a commission versus recommending the best movie that would offer you no compensation.
Steve Bailey,
You’re right. It is exactly like the movies. Pay for the hype, refer others and off you go. But just remember, did the movies pay you a salary? Nope – you bought into them and that’s all.
Dear Steve Bailey.. If you think that MLMs are not scam, can you please justify that at any given time, 50% of partners/recruits/members has not earned a single Dollar. Moreover the number of these people keep on increasing day-by-day (keeping % same)… and if growth continues as shown in so called business plan.. half of world population looses all the money invested in couple of years…
any thoughts!!!
So If you belong to a MLM but don’t want to build a team but still sell their products because you believe in them….can you advertise this way instead?
Some MLM’s do focus on the actual sell of the product and yes, if this is the case then you should be able to promote the products because you believe in them and they are high quality products.
The problem is that this is rarely the case. The reason most people “believe” in the products of their respective MLM is because in order to make money within their respective MLM they have to be a believer (sometime are required to).
Kyle, again, you use some generalizations. It’s not “rarely” the case at all. I think if you did some serious research into the profession, you’d see we’ve evolved a lot — especially since the Vemma fiasco. Many legitimate MLM companies have tightened their belts and been thoroughly vetted by the FTC.
Step 1: Completely understand the MLM business model
Step 2: Find a product you believe in and would use regardless of whether you get paid or not.
Step 3: Share it with people you know and educate them. Don’t force them to do anything but explain to them the product and how it can benefit them and how they can make money sharing it with people THEY know if they believe in it.
Step 4: Let the prospect decide how/if they want to get involved.
Tell me how that’s a scam?
Why work within an industry where companies are having to constantly “tighten their belts” because they are working on the fringes of the law. And in Step 3, you mean “heavily promote the idea” to people. You don’t need to mention something every day or multiple times per day within all of your social channels if the product is so great, that is quite unnatural and annoying to your friends. This is what happens with MLM though.
Selling things is not a scam. Recommending things is not a scam. Loving a product is not a scam.
Promoting something that is not the best product and portraying it as the best is though…in particular if it is overpriced and the only reason you are doing that is to earn compensation. Getting others involved and drinking the same kool-aid as you so they can do the same to others and so on, is also shady business.
All businesses you should heavily promote. if i owned a a store, or a cleaning service, or was a real estate agent I would also heavily promote myself. So what do you have against promoting yourself for success? Most business opportunities mlm or not will require promoting in order to achieve success.
I don’t feel that a program should be promoted based first and foremost on “success claims”, rather it should be promoted based on the substance of its products or services. If you are promoting an MLM scheme to people based on the idea of success and it is a pure play for recruiting others versus selling the products themselves, be forewarned. You might be involved in something that will at some point be deemed illegal by the FTC, SEC or appropriate government entities.
VEMMA was shut down a few months ago, so, how have you evolved so rapidly? You are hooked and are a big part of the MLM problem
Hi Kyle, thank you for sharing this very thorough and in depth article on multi level marketing. I totally agree that MLM is is a scam on so many levels. I have been involved with affiliate marketing for several years now and although I have not been involved directly with MLM, the two do sometimes get confused. Some people think that affiliate marketing is similar to MLM and as you rightly point out, it’s totally worlds apart.
I found what you said about the “hustle” very interesting. I was recently contacted by a friend of mine who invited me to a so called “business meeting” but would not tell me what it was all about. I accepted his invitation and on arrival to this meeting I was greeted by several of his other friends and members of his family. Turns out, my friend had gotten himself involved with a company very similar to Herbalife. Trying to pressure your friends and family just to make a sales is a sure way to alienate yourself and put your reputation on the line as you said.
MLM certainly isn’t for me, I’m going to stick with affiliate marketing!
Thanks again Kyle!
That is exactly how it usually pans out. I was involved in an MLM prior to being online and I just couldn’t bring myself to sell stuff to my family/friends that I knew wasn’t (a) an actual business (b) was based on recruiting people into the program, not selling it.
I lasted a whole month. Not because I couldn’t succeed within it, it was shameful what I had to do in order to succeed. Inviting people to “surprise” meetings and catching them off guard isn’t a nice way to do business, in particular when you are talking about friends.
There is a much better path to creating a real business online and that is what I am a proponent of. Affiliate marketing and building authority websites online is the absolutely best approach.
Hi Kyle im interested to know what MLM company you were linked with. I am currently looking into a business opportunity and would be interested to know if it is the same one?
Ps im currently going through the training with Wealthy Affiliate, and so far im so interested and its awesome! Im so excited to continue to learn.
The one I was involved with for a short stint of time was called Excel Communications, it was later defined as a pyramid scheme by authorities. I never sold anyone into the program, rather I sold a few long distance plans.
They were convoluted to use (had to call a number before you called long distance), but they were definitely a little bit cheaper than the local long distance companies. So the product wasn’t that bad, but I instantly realized the emphasis on selling people into the scheme versus actually trying to sell the product (which is all I was interested in). My “sponsor” was annoying the heck out of me so I didn’t last long. Definitely didn’t feel like a business, rather a bunch of emphasis on shameless recruiting.
I see SO MANY similarities between this program and many of the others that are online and this program. In fact, they are ALL very much the same. They have a compensation model that is based on recruitment of other people in the program versus selling the product itself. Honestly, without this structure, these programs wouldn’t survive because if you had to compete directly with people promoting the latest “energy drink” or “insurance scheme”, you wouldn’t recruit anyone…thus the MLM model quickly breaks down.
I have a feeling we are going to be hearing about MANY more of these schemes being taken out by the SEC/FTC, but the focus usually is on the bigger ones where a larger number of people are being ripped off. There are a few of these illegal scams being taken out every year. Who’s next?
Andrew, how you can you say with such confidence that MLM is a scam if you’ve never been involved? I’ve been in the profession for 5+ years now and I can say, as confidently as you about affiliate marketing, that it is NOT a scam.
If you’re not excited about the product or service you’re promoting, you’re in the wrong company. You wouldn’t be an affiliate for a product you didn’t believe in, would you? So why the heck would you join an MLM that had a product you didn’t believe in?
Affiliate marketing is the promotion of other people’s products/services in exchange for a commission. MLM is the promotion of only YOUR products within the particular scheme you have bought into.
You don’t have to pay to join affiliate programs and they rarely are multiple tier. Almost all MLM’s require you to pay to become a distributor or part of their program and/or set you on a recurring purchasing program to buy into their products/services.
The biggest brands in the world use affiliate marketing as their marketing model within the online world. MLM brands are created solely because people involved in the MLM are selling it. If they compensation model and the MLM scheme were to stop, so would the company in most cases.
There are millions of products you can promote as an affiliate, you choose the ones that are the best fit for your audience, instead of taking your MLM product and trying to make your audience want to buy it.
Hi Kyle:
Great Post! I agree with you MLM is not a business, it is only profitable for those who are at the top of the pyramid, MLM is a SCAM, in this scheme the lie is the main argument to convince people. I think there are honest ways to generate income.
Thanks Kyle for this post.
There are definitely some legitimate opportunities within the space, but generally speaking many of them rely solely on the recruitment of others within the program or lock all of their “salespeople” into monthly payments or product purchases in order to drive sales of, what is typically very much overpriced products and/or services.
There are many honest ways to earn an income in this day and age in a high percentage of MLM opportunities, folks are lying on the fringes between ethical sales and frankly, ripping people off to recoup their fees within the scheme.
I agree Kyle that MLM is a scam and a very social damaging one at that. Many friendships and family ties have been destroyed due to people using people to fill their signup quota. I have had friends that I haven’t seen in years show up out of the blue and try to rekindle a friendship just so they can recruit me for their MLM but once they find out I am not interested I never hear from them again. Folks need to understand that if you are at the bottom of a pyramid you have a lot of dead weight to support. You have a lot of great info here Kyle. Thanks!
Generally speaking, it most definitely is. In particular when the schemes are based strictly on recruiting others into the program with either an overpriced, unproven product or a blanket of “facades” as the product portraying the MLM as a real, legitimate business.
It amazes me how many people I see these days that get involved in the latest and greatest MLM and all of a sudden their only goal is to recruit people they care about into the scheme….treating them as some sort of financial vehicle to THEM making more money.
Thanks for your feedback and sharing your opinions Jason, all very valid ones.
Hey Kyle,
This is a very interesting subject for me. I have been and still am involved in MLM. I have been using products from them since I was a child as my parents used them. Cleaning products, protein drinks, vitamins and all of that. This is one of those few really good companies out there. Most other MLM’S I’ve seen had poor product lines, and just a money squeeze.
We are also using an online marketing system with them and it works very well if you work it! No chasing anyone. But you do have to make dials and work it.
That being said because of that experience is what led me to seek out affiliate marketing. I have to say it is much more my type of business and I am very fortunate to find Wealthy Affiliate. Thanks for putting together such an excellent program here! I am sure to be here for many years to come!!
Yeah, I would never argue that there are not any legitimate MLM opportunities out there with REAL products. The problem is that most of them put so much emphasis, even the ones with great products, on recruiting others into the program that it makes your question the overall scheme.
Unlike MLM, affiliate marketing is purely based on helping people, selling the best product with the best value to the consumer. This differs from MLM where the goal is to sell your product at any cost, regardless of whether or not there are better, more cost efficient and well support products in the industry.
It is funny how MLM is more about recruiting people than selling the product. My dad fell prey to a few of these programs; it was very stressful for him trying to recruit people all the time. He eventually gave up on them when he realized they were no good. I learned from his mistake and now I have chosen affiliate marketting instead ( less stressful). Great post!
Yeah, it is very common that you see this. I see it all the time, if an MLM’s given products were so good then there would never be a need to have an upline/downline and “buy in” to the MLM. And if that was the case, it would simply be a company that is selling their product to customers, with perhaps “affiliates” promoting it like every other affiliate marketing set-up in the world.
I have been involved in an MLM (far before I found affiliate marketing) and I didn’t get very far because I couldn’t bring myself to selling my family the low grade products (was a long distance phone service) nor did I feel good about selling my friends on the opportunity. The whole thing felt like one big scam.
This is a really great assessment of the MLM business. You really tell it like it is. I am always skeptical about MLM programs because they ultimately force you to sell to family and friends. That warm market is no longer warm after sevral failed attempts. Affiliate marketing is definitely the way to go.
Very true Jared and what I see that is very commonplace is when someone goes through one MLM program and it doesn’t work out for them, they move on directly to the next “latest and greatest” MLM. Your friends and family are only going to put off with being solicited for so long before they remove you altogether from their friends list on social media.
Affiliate marketing is a far more stable and ethical way of doing business. You are selling people stuff they actually want, household names/brands, and you can do so within any niche/vertical without having to sell or recruit anyone into your scheme.
Hey I agree with everything you have to say here. There’s just something really sleazy about MLM programs. Part of it is the products themselves, which usually are completely unnecessary and the fact you have to involve your friends and family. It kind of makes me cringe thinking of using them that way.
I agree that affiliate marketing is much different too. You can actually build a devoted audience who follow you based on trust and not because you tricked them. What are some niches you have been successful with in the past and what’s made you successful with them?
Thanks for this post. There needs to be more people exposing MLM’s for what they are. Nice review on Wealthy Affiliate too, a lot people speak highly of it.
I have been involved in many niches over the years, from weight loss, to hosting, to voice over ip, to even at one point (prior to some updates in Google), the online pharmacy industry. That is the great thing about affiliate marketing, you can be involved in whatever space that you like and if you ever get bored of one thing, you can move onto the next.
These days there is far more emphasis on becoming an authority within a given space and that is the best approach for anyone looking to create a successful and long term business online. Focus on ONE niche and become an expert within that space. That is the quickest path to longevity.
Hi Kyle! Thank you very much for this article! You’ve clarified me in many ways! 🙂
My teenager son has recetly decided to earn some money online. I find the idea good generally – this way he would not waste his time by playing computer games after classes. I’ve asked him about his actual plans and he told me he wants to get started with MLM.
So I thought I should chek it up. Fortunately I found your article. i would like to advise something else for him to do, instead of this one which I can’t rely anymore.
Could you give me some pieces of advice which would help my son? What should he start with if he want to make money online?
Thanks for your answer in advance! 🙂
Adam
It is one of those things that draws people in naturally because there are usually other people “aggressively” promoting their MLM to their friends and family or through their social media profiles.
I think your son would be best off knowing exactly how to create a real, sustainable online business like is taught at Wealthy Affiliate and is done through other mediums online. He sounds like he is very connect and the fact that he is “online” lots, will cater to his ability to work on his business. He will be able to follow his passion and interest and carve out his own brand/authority within this space in the online world.
The starting point of every successful business is a website and I would recommend that that be the first site, initially he could leverage the free websites at WA to get his feet wet and get off the ground.
Hey Kyle,
This is a really good write-up on why MLM is ultimately a scam. It really does make you a hustler and you hit the nail right on the head when you said making money from your friends isn’t cool because that is what will ultimately happen!
As you stated, it’s impossible to ever build a business with MLM. It gives you the illusion that you’re an entrepreneur when in fact you’re just a money making pawn in their game!
Thanks for all the great insight. Keep up the quality writing!!
That is part of the problem with most of these MLM schemes, the first thing that your sponsor will tell you (if you get any help at all) is to exhaust all of your social channels and friends and see if you can get them to join. This is typically followed by constant, I mean CONSTANT, pitches on Facebook, Twitter and other social mediums.
As an onlooker, it is very frustrating and annoying to see. As someone promoting one of the 1,000’s of MLM schemes out there, you get so caught up in the bubble that you don’t realize the harm you are doing to your friendships.
Some people absolutely do earn money through MLM, but it is almost always through recruitment of others into the program versus selling of the actual product itself. Worse yet, some of the new MLM schemes starting up the product is RECRUITING people into the scheme itself. Fortunately lots of these pyramids are getting shut down.
Pampered Chef doesn’t work like many of these others. You are actually a sales person. There is no purchase of product, except for a minor kit so you can do cooking shows. You don’t buy product to hope you sell it later. People order straight from the company and you earn a commission for what you sell. Plus the products are first class, and they stand behind their products. I’m no longer a Pampered Chef associate. But from personal experience, they are a good company. You don’t buy your own business, you grow it.
Yeah, it sounds like their model is much closer to affiliate marketing. If you didn’t have to pay to become a pampered chef (pay to become a distributor) then it would be totally legitimate….but chances are there is that model and the recruitment model as well to get others under you as distributors. That is my main argument.
I definitely think that there are some MLM’s that totally have a legitimate product and it sounds like pampered chef is one of this. It is the architecture and the business model of many of these types of programs that I don’t agree with.
Hi Kyle
I’ve just started with WA this year and loving it. Quick question, Amway, I didn’t see you mention it, what are your views about Amway?
I have never used Amway, but I have heard lots about it. The focus within MLM’s of this nature are always about “getting to the events” and working to recruit distributors below you. Unfortunately if you are not at the top of the pile at this point, it is very difficult to make a presence because the program is so established and in many cases, has a bad rep. in the industry.
I do favor this sort of MLM over many others though because at least they have a front end product that customers (outside the program itself) are buying. Many of the so called MLM’s are a pure recruitment play, meaning people are buying into the program just to promote the same program to others. Many of these types of companies are getting shut down and I have strong feeling many more are going to be getting shut down in the years to come.
I have lots of friends on Facebook trying to get me involved in one MLM or another. I think it’s a shame as it is ruining the friendships. You invite them for coffee then they start telling you about their business and how they think you would be great at it. There’s no way I would get involved as I hate the idea of pestering my friends to buy products or join a business. Plus the focus on any business should be the product and not recruiting others.
That is the first sign someone is involved with a scheme, if they have to “pitch it” to you at every opportunity they can. I know first hand that the only time I was in this situation was when I was involved in an MLM (way back in 2000 before I discovered the Internet and the affiliate marketing business model), I felt like I was a constant hustler. You should never have to do this, you not only will lose friends, you seem slimy to those around you.
Plain and simple, help people don’t sell people. That is the best way to build a business you can feel good about.
After reading your post, I want to thank you for the extremely good content! I have heard of multi-level marketing many times before, but didn’t know too much about what it was. After reading your article, I can now make the connection that it is practically the same thing as a pyramid scheme if I’m understanding correctly. Thanks for the good read, write on!
Many of them are pyramid schemes and many that have deemed themselves as being legitimate MLM’s over the years have been shut down by the SEC/FTC for being pyramid or ponzi schemes. This is just getting started, there are many more out there that have spun out of these schemes that are very similar in terms of how they are run and unfortunately they are sucking more and more people into them (and ultimately taking their money with them).
If the program is focused on recruiting others into the same program to recoup your costs versus selling actual tangible products to consumers, chances are the company is sitting in a big gray area or is operating a pyramid type scheme.
From my understanding, the law says that in order for an MLM to be considered legitimate, 70 percent of the sales revenue needs to come from non-participants.
I would guess that most of the current MLM’s out there – like Mary Kay, Rodan+Fields, Level, etc. do NOT fall into this category. The problem is that the FTC can’t spare enough people to properly investigate. Even Ponzi’s scheme went on for around 30 years before it was shut down – longevity definitely does NOT make a MLM legit.
These companies are preying on people who probably don’t have that much money to begin with, selling them on a pipe dream. Even if the product is fantastic – you can’t make any REAL money (and certainly not the fantastic claims of executive salaries) just by selling product. You need to recruit. And unless you got in early, you will find it next to impossible to get a large enough “downline” to see real $$$.
I had a woman try to sign me up for Rodan + Fields recently. She actually bragged about how they were “going global” and “opening the market in Australia”, which are just signs that their bubble has already burst here in the US and now they need to “repyramid” in a virgin market.
Yeah, the FTC/SEC don’t have enough resources to offer full coverage of an industry that can behave in a very illusive and complex way.
I do think that companies with tangible products are definitely a lot better than the programs that are operating MLM’s type schemes using digital products (as a facade for their actual ponzi schemes). There are so many of these types of programs popping up, at a faster rate than ever.
One of the only legitimate MLM programs I have seen out there these days is epicure. The reason is that people are always selling the product, using it, and it is actually great product. They are selling to customers, they are not focused solely on “recruiting” others into the scheme, like most programs and the ones you have mentioned above.
I know that just in recent days, ViSalius is being looked into and some of the top sponsors I have read are taking legal action against the company. They went from having plans of going public, to quickly declining sales…to perhaps now going completely out of business through litigation and lawsuits.
Kyle, I recently was introduced to an MLM’s that allows their independent distributors to do retail sales only if they wish without “building their team”. I thought that was refreshing.
Most MLM’s still use the old school kind of marketing where you have to hassle to make it as opposed to where you set yourself apart as a solution to a problem people want to solve desperately. That is one of the problems I have found in my country. Just look at how they do internet marketing and you will see they are not keeping up with the trends.
I have to wonder if there are any MLM companies that have good products, fairly priced and legally ok. It seems that there are no good eggs in this basket, according to your write up which, by the way, is very good.
Yeah, that definitely is refreshing when you see an actual product being promoted versus the scheme itself. Unfortunately this doesn’t work for 99% of MLM”s because they rely so much on the scheme itself (uplines, downlines, etc), otherwise they would be working within the retail world and selling their products there if they truly deid feel as though they had a competitive advantage.
Thee problem is very few products that are promoted within MLM are fairly priced, they are over-inflated to support the compensation plan.
I have to disagree with you on this. You do bring up some good points. The products are expensive, so that everyone can get their cut. Not very many people succeed in network marketing.
Although, I’d say that MLM is not a scam. If it were a scam, no one would succeed.
If you read my blog, you will find that I am one of MLMs harshest critics.
I don’t like the fact that so many people don’t make money and I like it even less because most of those actually lose money. The companies keep making money off of the distributors. The people who do manage to make it to the top levels turn around and sell their methods to the rank and file members. Don’t they make enough money from their business?
I do believe that it is a legitimate business model. It’s simple, but it isn’t easy.
I admit that it does seem like a racket!
The problem with your argument is that you are saying that anything that people are successful with is automatically safe from being the scam. Unfortunately “making money” and “scam” are exclusive of one another and the most famous of schemes and scams out there were very lucrative for many people within them.
In fact, some of the most recent FTC and SEC shakedowns were on companies where there was a good deal of folks involved that were making good money. ZeekRewards, Vemma, and WakeUpNow are just to name a few that have been deemed a scam by the government, with many more naturally going to follow suit.
I agree it CAN be a legitimate business model though if it is based on selling a good product at a good price…and the focus of the distributors within the program is selling the product, not selling people into the scheme. Unfortunately that is not the case with 99% of the MLM’s out there. People make their money by sucking other people into the scheme rather than selling the product itself. The reason. The product is usually “unproven” and vastly overpriced to support the commission structure.
There is nothing about that that constitutes the idea of creating a business. You are involved in a scheme if your only goal is to promote others into that same scheme.
I do agree with you that if an MLM does nothing more than make its money by recruiting new people into the business, then it is a scam, a scheme or a pyramid and should be shut down. My question would be if they are all or if most are scams then why hasn’t the FTC shut them all down?
Because some are actually legitimate and follow the rules. Those are the honest, fair and ethical ones (which are few and far between). As for the others, the FTC just hasn’t had the time or the resources. They tend to go after the biggest fish, this way they can maximize their effect and minimize the number of people whom fall for the scheme/scam.
If the FTC and SEC had infinite resources, far more of these so called “MLM’s” wouldn’t exist as we know it today.
Kyle,
I appreciate your blog on this subject and I believe you are right on all of your points.
Desperation and money problems get us to do things we normally would not do.
I got involved with the Empower Network for nearly 2 years and it cost me close to $14, 000. What was my pay off? Around $300 in income. When I asked for help no one was around.
Let me share I come from the corporate technology world and have 4 decades of experience. I know what it takes to prospect and to meet a client’s needs but got reeled into the online world of business and thought it was fantastic. Well, with all of my experience I should have known that it was all too good to be true. Turns out it was and it cost me dearly.
Here is the key. If one does not believe in the products or services they represent how in the world do they think they can sell it to others? I know it is done in many companies but it is sleazy and wrong.
My goals is simple. I want to build a business, not depend on others and create Reoccurring revenue each and every month. If I can teach those that are interested in doing the same – great but I will not do it at any cost.
Learned my lesson – Michael
So sorry to hear about your $14,000+ in losses to Empower Network. You are not the first to be ripped off by this company and unfortunately not going to be the last.
The problem I see these days is companies within the “make money” world are spinning out what they believe to be MLM companies but they actually have no products. The product is promoting the product, in the true sense of the word, these are pyramid schemes and they are being shut down left and right. BannersBroker, ZeekRewards, WakeUpNow to name just some of the most recent ones.
If you want to build a sustainable, long term business I would venture away from MLM and move to an affiliate marketing based website. The key is having a website as this will serve as your foundation and your brand that you will be able to leverage in a number of ways to generate income online…affiliate marketing is just one of these. This goes for any niche. No experience required and in many cases, the cost to entry with your own business is completely free.
Hi Kyle.
Great article on MLM. In the U.K. it is more widely knowing as ‘Pyramid Selling’ (just as the picture of the pyramid in your article infers!)
The only people who make money out of these schemes are the people who ‘get in’ very early and ‘get out’ while it is still possible.
If each person sells 10 units which they order from the person above them in the hierarchy and that person on the higher level has 10 people who each feed orders through to them, then they have a form of exponential growth that cannot be sustained.
At the lowest level:-
10 customers
Next level, 10 x 10 or 100 customers
Third level, 10 x 10 x 10 or 1,000 customers
Fourth level, 10 x 10 x 10 x 10 or 10,000
Fifth level, 10 x 10 x 10 x 10 x 10 or 100,000
This suggests that every person, every man, woman and child in a town with a population of 100,000 is buying the product…
Even if this x10 progression is not realistic, it can be seen that any participant will soon run out of potential customers because they will already have purchased the product from someone else.
Ian Campbell
And that is exactly the point when the pyramid flops. They all eventually do and what happens is that people will get fed up or the FTC will shut down one of these pyramids, then the herd will move onto the “next best thing”. The churn rate on those that try an MLM and fail is 95%+ and I am yet to meet someone that has been successful within MLM’s for a sustained period of time without having to jump into the next thing (or worse yet, rip people off like is happening within the “make money” MLM’s).
I tried selling Avon after High School, but all I did was lose money. At the time I thought it was a lot of fun to do and I was so sure that eventually I would start to make money. Thankfully I got out after a couple of years, but unfortunately I did lose about a hundred dollars.
I have worked with a few people personally that are working within avon or have been in the past and they have said that it is nothing more than hype…and they tout that to succeed within the program you need to ‘get to the next conference’. These are rah rah sessions that keep people churning along and spending money on the products and the scheme itself, nothing more.
This is not building a business, it is being part of a scheme and it always comes to an end when you get fed up with trying to constantly hustle others.
Kyle,
Thank you for the great write up on MLM scams. I have been lucky enough to avoid them to this point. You are absolutely right they are nothing but hustle and go with shameless promotion of your product.
I am glad you went over the difference of MLM and Affiliate Marketing. Many people think they are the same thing. Some, unethical, people treat them the same way.
I believe that you can build a great business online without selling your soul. Does it take work? Well of course it does. But over time you can move onto a new project while the one you worked so hard to establish still brings in the money. This of course is if you truly help your readers and don’t just try to take them for a ride for some quick cash.
Thank you again Kyle for the great write-up.
How long do you think it takes the average person to earn their first dollar online with Affiliate Marketing vs MLM?
Marc
Absolutely building a business will take hard work and unfortunately a lot of MLM’s sell nothing more than the opportunity and when it comes to the work part, they fail miserably (and many offer very weak marketing education/platforms).
The first $ through affiliate marketing happens as a result of building a foundation for your business and often times by the time you make your first dollar you have a very successful platform geared for long term success in place. The first dollar through MLM is achieved usually when you can suck someone else into the program and you don’t have any foundation for your business.
Well, that is surely an interesting post. Over my search on the internet I ran into these mlm products, and I definitely agree that the worst thing of all is the feeling you fool your friends and family. Even if u succeed in that area I guess I would rather work alone and offer people a valuable product/service they actually want…not force something upon someone.
Exactly right, you don’t have to force anything upon anyone with affiliate marketing. You are simply recommending products/services to folks from MILLIONS of items, often times they are already in a state in which they are ready to buy.
MLM on the other hand is a form of interrupt marketing and you are going to be forced into selling people on an opportunity where they likely have no interest in the products/services, and if they do, you are going to come across as trying to “profit” from your friendship.
Hi Kyle,
I think one of the main highlights of MLM which they strongly instill into the minds (and desire) of participants, especially new ones, is the reward of living a passive income. The glittering lifestyle of the rich and famous and getting the 5 figure income into your pocket every month without working. Who doesn’t want that, right?
So anyone coming from a 9-5 employment background, that offer looks like a good trade off. After a few more talks, it almost felt like you can touch that 5 figure income anytime. But obviously before you do that, there’s the recruitment fee, the workshop and the product brochures that you have to familiarize yourself with.
If you are not a ‘natural’ hustler, becoming one is extremely challenging. Your upline will pat on your shoulder and say ‘I’ve been through this before, you can do it too.’ Friends and family start noticing the change in the way you converse with them, as if you are cornering them to somewhere mysterious that they are not willing to go. And it makes you feel very bad when you are just trying to sell something that is good for their health.
Or at least that’s what I felt.
You see, I encountered MLM when I was at the crossroad of my career in mid of 2013. A good friend of mine is in it (it always starts with a friend). He felt my trouble, invited me to a talk and that exposed me to the ‘business opportunities’ of the company. I desperately wanted a change and at that point, it felt like the company was the answer that I was looking for. So I did what everyone was doing, but deep inside, I know something didn’t click.
After a month or so, with zero progress and a lot of rejection, I really thought I have hit rock bottom and there was nothing I can do about it. So I was back onto the internet, clicking on things that didn’t matter and in the least expected places (while I was traveling), I discovered Wealthy Affiliate.
My curiosity took over and although I didn’t know that it was the right thing for me then, I have stayed on 1 ½ years later, building my website and even got myself learning a few codes. If you asked me about WordPress back in 2014, I wouldn’t know what you are talking about. And yet today, I am talking SEO language with the people in the community like we are in some kind of serious discussion.
The main difference here between the MLM and WA is that I get to set my goals from the very beginning according to my capability. I get to learn at my own pace, not listening to motivational talks. I learnt web business skills, not just selling skills. And I learnt that good products are not just limited to one brand or one company, they can come from various places, in all shape and sizes and still offer good business opportunities.
Having said that, I don’t dislike the MLM company that I join. It was from them that I learn the importance of creating a second income and summed the courage to break free from my own career bubble. I still use some of their products because I trust them to some extend and my friend is really a nice person, by the way.
I just don’t flow with the hustling and tapping the mind of the cold audience. That’s the one that didn’t click from the very beginning. I am a lot more comfortable doing affiliate blogging and living a simple life, really. I think the glamorous lifestyle portrayed by the top achievers is a bit far fetched for me. I rather spend my money on other worthy causes and pursuing my own time freedom.
It’s great to be back on your blog again, Kyle and thanks for allowing us to share our different views about this topic.
Your story is the same as many, I definitely do not think all MLM companies are a scam but when you see the most prolific ones like herbalife and nuskin being investigate and likely to be taken down by the FTC/SEC for being a pyramid scheme, I believe the industry as a whole carries a huge problem.
An MLM in my opinion is NOT a scam when the people within it are promoting the product themselves because it is (a) good value (b) high quality. It is when people are inclined to force others into the same scheme because of the commission structure or they end up using the product because they feel guilty about promoting something they don’t use (and that being the only reason), then it is just like every other MLM scam out there.
For a lot of people it takes them a few MLM schemes before they find their bearings and they find what works online…and that is just part of the natural discovery process and that is completely ok.
Hey Kyle,
I did lots of research on internet marketing businesses and also on MLM and decided to not trust it in the end. I recently found WA through this website and I am happy to got over the scams you are writing about. I know a friend, who tried this site and decided to drop it in the end, due to your review !! I sent him the link..
Cheers!!
Great Review!
Keep going with this site!
David
Thanks for the share David. Sometimes it does take an “alternate” view outside of the MLM circle to realize some of the facts about what you are doing and whether or not it is sometimes ethical or actually a REAL business.
I am all for people making money and build success, but I am for people doing it in a way that is ethical, above the board and people that put the customer first, not themselves. It is a beautiful thing when you can build a business through helping people and that can be accomplished through the affiliate marketing world.
Hey Kyle,
I did tons of research on MLM and “network” marketing programs and I couldn’t really put a finger on whether or not I could trust these programs. One of my friends is actually an Amway seller and he tried to get me involved as well. At first he made it sound incredible, genius, and bullet proof. But now that I’ve done a bit more research I think I’ll step back from the whole concept all together. This isn’t business building, it’s building a whole scheme of people under yourself in the pyramid. And I really don’t see the earning potential at all. You were right about Affiliate marketing though. I love affiliate marketing and I encourage everyone to build a site and try it. It’s tons of fun and you have the potential to make huge income in the process.
Great Review!
I have worked with many folks that have been involved in the Amway program and one of the common threads is that they are making little to no money (like most within the program) and there is a lot of emphasis on “getting to the events”.
The costs of travel, hospitality and time to attend these events is a significant amount of money alone and it is my belief that if you are selling a quality product, you should need to attend an event that is nothing more than a rah rah session.
Really glad you did discover affiliate marketing when you did Bradyn, you have a bright future ahead of you.
Hey Kyle, you did mean that you should NOT have a need to attend events, correct?? LOL! I agree, wholeheartedly. Honestly, it’s mostly a brainwashing session. It gets people pumped up to see maybe 10 real money-makers on stage, with hopes of being one themselves.
I participated in a 100-day challenge over at MLSP, loved the training, excelled with 5 others, 3 of which made it to the stage and are hustling their tales off to stay there. The whole time during the 100 days it was about getting to the annual event. They do this at least 2x a year actually.
Great for them. But when I see what it takes for them to sustain…sheesh. Talk about more work than it’s worth.
But doesn’t the affiliate marketing crowd have some of their own networking “events” that are pretty good to make it to? One that comes to mind is the group that JVZoo puts together? Or are these affiliate marketers on a different track than those that just sell mainstream products?
I know I don’t like it when I get on a marketer’s list and all I get is email after email trying to sell me the next greatest piece of software on the market, supposedly made just for affiliate marketers.
Yeah, you should NOT need to attend these sorts of events. If they are not brainwashing like you say (most are), they are overpriced and the meat of the content will tend to be based around “rah rah” motivation. There is no real meat to the information and your money would be much better off buying yourself a $15 motivational book from Barnes and Noble and putting the rest towards your actual business.
The industry style conferences can be good for networking and learning about new products and if you were to attend one in the affiliate marketing industry, the affiliate summit would be about the only one that is decent as you can interact with the given “merchants” in the industry and get some insight into what their program. I would stay away from anything relating to JVZoo, you don’t have to look further than the quality of the scams they allow on their network to determine the quality of the conference that they would be putting on.
Hey there Kyle!
This page on MLM pretty much says it all. There are those who call it Network Marketing, but it comes down to the same thing. I was involved with Vitamark/Mentoring for Free which seemed good until Vitamark was sold to ItWorks and stopped trading in NZ. I won’t pay them no never mind ever again.
The products are good, but the scheme still is bad and I wholly concur with your remarks about the recruiting hustle. People really shy away from you too. They don’t like being sold. Mentoring For Free is very indirect but word gets around, and experienced people can spot it and just tell you politely they are not interested.
I formed the view that Affiliate Marketing was the way to go then but there are some bad guys there too, with whom I got involved briefly. BTF – Bring The Fresh – All talk and no substance. If you look at their home page it displays big commission$ after big commission$ and is money money money, with a vid at the top that does the same. Its become smarter looking and more upmarket than when I belonged but how could I have been attracted to that even for five minutes?
I recently decided to look into AM again and If I hadn’t found WA I am sure I would still be out there floundering and wasting my time.
I’m sure you will see me in the bootcamp once my site is earning.
An excellent review which I am sure is attracting a lot of people to WA.
I would never argue that some of the products are quality within MLM, albeit that more often than not they will be vastly overpriced to support the compensation plans for those involved (which is a win/lose for the MLM’er/customer).
People shy away from programs like this when you recruit them is because you are creating a total interrupt in their lifestyle. The MLM likely isn’t within a niche they are passionate about, they don’t want to have to do the same hustle/bustle selling others into a given scheme, and they don’t feel like the daily/weekly calls pushing you to “get more people in”.
I know personally from my MLM experience I really hated pushing the scheme on others…I got shutdown all the time, people hadn’t even heard of the crap I was selling and the same went for actually trying to sell the service (it was a phone service), people didn’t trust it. It ended up ruining my reputation to some of my family as a schemer which was by no means a good feeling.
Hi Kyle,
Awesome article! Before signing to WA I was looking for a good and reliable online marketing to build a nice business and I found the MLM , but had bad feeling about it and hopefully my instinct drove me on the right path ! Today I am really happy I subscribed to WA. I really don’t regret it at all. The support , training, Jay’s video and the community are wonderful.
Thank you for this helpful blog
Really glad you found Wealthy Affiliate (WA) Daneilla. You are going to be able to create a presence, brand and business within any niche…and promote products that people actually want, that solve problems and that more often times than not they are ready to buy before they even make it to your site.
Affiliate marketing truly offers you way to create a business through helping others.
I am so glad that I stumbled on this article. I have struggled with the idea of MLM. I have tried 2 different companies that offer MLM and can honestly say I didn’t enjoy either of them. I will admit I know people that are doing really well financially but I also know that these people are trying to sell there product every single time they interact with people. That was the part I hated the most. I tried getting my friends hooked but they all quit due to the absurd monthly commitment.
I am currently a member of one MLM company but do not try and sell their product. I feel that forcing others to try something for my benefit is not a good way to make or keep friends. I am only their because I love the products I receive. I am glad that you refer to them as scams even though many of them have a decent product. I don’t understand why these companies can’t sell there product by promoting it themselves. You will never see the current company I am with advertise. They leave it up to the customers. Thanks for a fabulous and eye opening review of MLM.
To be honest, you are like many folks that are involved in MLM’s. You chose a program because you saw the opportunity and the quality of products, and you stayed for the products (as the opportunity faded when you realized what was involved).
At the end of the day it comes down to offering a quality product at a fair price. That is the opportunity that affiliate marketing can represent, unfortunately there are too many people hustling others with a decent to low quality product at a high price just to earn a buck off of others. Not to mention the fees to join a lot of these schemes, some of them being in the $1,000’s and that being the sole focus of the program…versus selling the product.
It is a crazy world out there and unfortunately the MLM structure combined with the evolution of the Internet has lead to a whole new class of scams.
I have tried 2 MLM companies before and do not agree with the way my upline is doing the selling. Yes no doubt the products are good, but the way they sell is really unacceptable to me. They kept on asking their downline to buy up a lot of stocks in order to move up the commission ladder. This is really stressful. I am the one who prefer to sell with a heart. That’s why I choose affiliate marketing and only sell products that can bring value to my clients. Kyle, thanks for sharing such wonderful post about MLM.
Yeah, that is completely unethical behaviour. Asking you to purchase “more” so they can make a bigger commission is a common thing…same with moving up tiers within the company by giving the company more money.
Sell products, not schemes. Your journey will be a much more gratifying one for you, your customers, and at the end of the day, will lead to much more longevity.
Isn’t that reflective of the individual “upline” rather than the company? Like if I have a friend who is fanatical about iphone (which i hate) and pushing me to get one when i have an android, does that make apple bad? I don’t think this is a good line of reasoning.
No, that makes that person an Apple lover. There isn’t incentive for them to push you to buy an Apple. That is the big difference here, so you are comparing two things that are completely different. In MLM you are getting your friends and family to join, because well, you have financial motive to get them to join. That is the reason why and this is the reason why so many people wear thin with their friends in the MLM space (often times hurting relationships).
Hello Kyle!
Thank you for this educating and eye opening post. I never really knew what MLMs are even though I am familiar with some of these companies you mention here.
It seems that you can only win with this type of business if you are the creator of it!
It really doesn’t sound cool at all to be making money of your friends while other struggle but make nearly nothing.
So yes, I have to agree with you MLMs are scams!
Great post!
Often times that is the case with MLM. If you are not the creator or within one of the initial levels (which are usually partnerships created before the MLM even starts), then you don’t really stand a chance. You are going to run out of friends, family and people to “convince” to join the scheme very quickly which leaves you with little to no opportunity.