Why We Stay Far Away From Multi-Level Marketing
Hey boss babe! Are you ready to take back control of your time, work from anywhere and make more money than ever before?
Did you cringe? Did that give you flashbacks of every dm from that girl you knew in high school that you haven’t spoken to in 15 years?
While people joke about the multi-level marketing (MLM) pitch, it’s a kinda serious thing. People in personal finance are staunchly anti-MLM/ network marketing and for good reason.
Multi-Level Marketing, Pyramid Schemes, and Network Marketing are all the same things with one slight difference. Here’s how they break down.
Pyramid schemes are straight-up illegal. Like federal level illegal. These types of companies are structured so that the main way people make money is by recruiting new people to join the company, usually with a big buy-in price while the initial person makes a commission each time they get a person to join. It might not sound THAT bad, but consider the money-making opportunities for the lowest person on the roster compared to the one at the top. Hence the name “pyramid scheme” because only those at a certain level and above really see any kind of monetary return.
Multi-Level Marketing is a pyramid scheme in sheep’s clothing. Also sometimes called network marketing, direct sales, or referral sales, the ONLY difference is that these put selling a product as the main money maker ALONG WITH recruitment. These are the ones you’ve probably heard about the most. Things like Herbalife, YoungLiving, DoTerra, BeachBody, LulaRoe, World Financial Group, or Monat. MLM’s put a product upfront with the incentive to become a “distributor” to make more money.
Now if you like some of these products, cool! Buy them! However, be VERY careful about the sales pitch to join someone's team. Usually, this entails a high buy-in price, buying tons of products to keep inventory in case someone buys from you, and very little if any recourse to return the product to the company if you decide to stop selling.
The main reason why personal finance spaces are so against MLM’s is that very few people make money with them. A large percent end up in the hole and with inventory, they can’t sell. You can read some of those findings here and here
While the money side of it is upsetting, my issues are the mental ones. MLM’s use extremely similar tactics to cults which entails extreme narcissistic tendencies. Here are some correlations between the two.
They prey on stay-at-home moms, students, military personnel, and women in general. I’m gonna be real upfront about this one. These are the groups most likely to join MLM for a few reasons. These are groups that tend to make less money or are more apt to seek out ways to make additional money, they tend to have schedule flexibility and they have access to similar people which gives them a pool of people to easily recruit from.
The use of narcissistic behavior to recruit and keep people in the company. Things like love bombing, which is going overboard with praise and appreciation one minute and silence or feigned disappointment the next. Recruits to MLM’s are usually welcomed into a “family” like atmosphere with trunk shows, small parties, and freebies. However, if you end up joining and don’t make sales or hit sales goals, your recruiter is suddenly on your ass about doing better or letting the team down. Gaslighting is another big issue. If you come to your recruiter to let them know you aren’t making money like they promised you would (which was probably a lie anyway), you might be met with things like, “Well maybe you don’t want it enough. Maybe if you cared more about yourself you’d want to do better.”
Excessive groupthink. This is a tactic used to keep those in the group from being persuaded from the outside. It reinforces that the only people who understand you are those within the group. It’s emotional manipulation. For example, I made a friend while living in Hawaii that sold Young Living essential oils. She was a stay-at-home mom of two and wanted to do something to bring in money for her family. Although she wasn’t pushy about sales, she definitely bought into all the Young Living hype. So much so that she regularly attended their yearly conference. The images and videos she posted were...interesting. The speakers, guests, and promo videos looked exactly like a cult. People talking about how the company had saved their lives, how it brought them out of financial ruin, how the products cured their child of autism (I know.), and testimonials of how the company was literally doing God’s work. Yes, Young Living is heavily Christian-based. All this to say, these parties, conferences, and meetings are there to reinforce belonging to the group, which makes it hard for people on the outside to convince those that bought in they’re being scammed.
Financial manipulation. The selling tactics are aggressive. There’s a big emphasis on having a “sense of urgency” to rush and get you to buy in without thinking it through. If you hesitate, it’s an attack on your character for not caring enough about your family’s wellbeing, your financial future, or lack of belief in yourself. I mean, why wouldn’t you want to be financially independent and provide for your family? Especially for people that were recruited under the guise of making extra money for family bills or paying off debt, fear tactics around money become the spot they attack. It’s framed that if you aren’t making money the way they said you would, it’s because you failed to work hard.
They aren’t upfront about how money is being made. Whoever recruited you made money off your initial buy-in. They also make money off of every order you sell and recruit that you get too. So there is an incentive for those above you in the sales funnel to be pushy with your performance. If you aren’t selling or recruiting enough, you may be “encouraged” to spend more on marketing classes, buy more inventory to host more parties, etc. The more money YOU put in, the more those ABOVE you make. You do not make much off the actual product sales. You make money by recruiting more people.
Okay, so now you get why MLM’s are so bad. How do you know when you’re being recruited then?
You get a cold pitch. If someone you’ve never spoken to or met before drops in your dm’s about a business opportunity that allows you to work from home and make more money than you do from your 9-5...run.
There’s no clarity on the company from the get-go. I recently had a DM on Instagram from a woman who looked like just another financial educator. She explained how she was expanding her team and wanted to talk about an opportunity for me to become a financial educator. Sneaky right? So I checked her out. Her IG page had 1,600 followers, her posts looked professional, she was posting relevant financial info. However, every post had a slide about contacting her to get started but didn’t say to start what. Even in her original pitch in the DM’s, there was no mention of her company name. I had to dig through a few layers to find out she “works” for a company under the umbrella of World Financial Group. It’s a financial-focused MLM that sells shit insurance policies under the ruse of caring about “financial literacy.” She was trying to recruit me without giving me any information to verify her company or who she worked for, what service they provided, or any details about what the opportunity entailed.
You’re being told that you can be your own boss, run your own business and make money from home and that it’s easy. Any true business owner will tell you that you don’t make money right away and you are going to put in a lot of unpaid time to get something up and running. What an MLM is having you do is the leg work for them but on your own dime. You are not only going to have to pay to join but pay for inventory, pay for those parties to sell the products or recruit new members, spend time on social media to promote it, and constantly create new downlines of potential buyers. Not to mention some have monthly purchase requirements for you to keep your distributor title. You are not your own boss here. You don’t even own the right to use the company logo. You’re doing the bitch work for someone else.
You’re invited to a party, trunk show, or other group activity with the promise of freebies. My boyfriend and I ended up at a “dinner party” that was actually an MLM recruitment demo. Though we enjoyed the free dinner, we did not enjoy the sales pitch at the end to buy multiple pieces of cookware that were hundred of dollars EACH. These recruitment parties put you on the spot to buy. I understand there’s a pull to be polite to your host. Especially if it’s someone you know. It’s very easy to just say, “Yea I’ll try one of those.” However, you’re not just being put on the spot to buy from the host. You’re also being put on the spot in front of other friends or people you don’t know well if at all. They are counting on the embarrassment factor to keep you from saying no. No, I can’t afford it. No, I don’t believe in this company. No, I don’t want to contribute to you being scammed. It’s banking on a social construct to get us to say, “Yes, sign me up.” to save face. That, in my opinion, is more disrespectful than saying, “No, thank you.”
Have I purchased a product from an MLM before? Yea. I think we all have a DoTerra bottle hiding somewhere in our homes. There’s nothing wrong with trying a product to try out or purchasing if you genuinely like the results. You just need to be prepared for the moments they try to rope you in for more than you want.
Are there people who do make money with MLM’s? Totally. It’s just not many and those that do are probably have enough recruits under them to turn a profit, which isn’t exactly a good thing. Statistically speaking, your chances are slim to be one of those few that do.
Don’t take that chance with your money. There are so many other ways to make a little extra cash that don’t involve emotional and financial manipulation.
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