Navigating the red flags of MLMs can be tricky. We know they are notorious for for using “buzz” words to attract new members. “Work from Home” “Be your own boss” “Sack your boss” coupled with glossy photos of luxury yachts and fast cars are all part of a MLMs strategy. As well, supporting charities is nearly always on their list of “good deeds,” but there are other red flags that should get your spidery senses active.
The idea of working from home and setting your own hours holds obvious attraction during economic downturns when many people are out of work or have had their paid work hours reduced.
The contradiction in this well used MLM phrase “Work from home and be your own boss” followed by “Be part of a team with full company training and support,” should be enough to alert your spidery senses that what is being said is not really true.
Surely if you are your own boss you are not joining a “team.” You would be hiring your own team!
Let the fun begin…
Legal Stuff:- This article contains affiliate links. If you purchase something from a link I may receive a small payment at no cost to you. I am not an employee of any company mentioned and All opinions expressed here are mine and are not representative of any company.
What is an MLM.
Just quickly, here is a sanitised version of what an MLM is.
Typically the idea behind MLMs is that people pay to become distributors of a product. These can be physical products or services.
The company is structured so that the people above (the person who recruited or signed up the new distributor, get a percentage of whatever the distributor sells.
The new distributor is encouraged not only to sell the product, but to sign up other people below them so that they can make even more money.
The Problem with MLMs Structure.
This is a hypothetical scenario, but it does compute.
You recruit 5 then get those 5 people to recruit 5 each. That is 25, then those 25 get 5 each and so on.
The problem though is, you can only do that for 13 or 14 cycles and you then run out of people. Everyone on earth would be selling what you have. Infographic here.
The Tactics MLMs use.
The three most common ones are:
- Psychology. Probably gaslighting is a better word.
- Exploiting vulnerable people suffering trauma, self esteem issues.
- Specific demographics. Military, religious people, single mums.
1. Psychology: The Cult mind games.
The product uses a hotel ballroom for the launch and pays “special guests” to give an illusion of support for the “thing” and tons of confidence boosting statements to help sell it.
This MLM is a classic example of how far they will go.
If everyone in the room is euphoric and clapping, and your sitting there looking around wondering whether you should join in or not, remember most in the room are plants:-they are already indoctrinated, so try and retain your objectivity.
2. Exploiting Vulnerable People Suffering Trauma, or Self-Esteem Issues.
Hun: People who shill products/services for an MLM. The sellers have a tendency to frequently use the word “hun” when initiating a sales pitch.
Ex: “Hey hun ❤️❤️ I see your aunt is dying ?? anyway hun ??♀️ wanna buy my oils it’s good for stress ???” credit:– Redditt
All of us have negative thoughts running through our mind every day, things like…
- “I never have enough money left over until the end of the month.”
- “Sometimes I just hate myself”
- “I am useless”
- “I an fat”
- “I am ugly”
- “I can never afford the things I want”
The list could go on and on and on… credit@Shad Helmstetter – THE GIFT.
You have approximately 50,000 thoughts per day.
95% of those thoughts are repeated, ones that you have day-after-day-after day.
These thoughts are ALL typically in the past or the future, hardly ever in the present moment, e.g. “what if”, “if only I had”, etc.
70-80% of those thoughts are NEGATIVE. ie:-35,000 -40,000 of your everyday thoughts are negative.
Experienced MLM’ers know this, and will initially butter you up with all the positive opposites of those negative thoughts.
A lot of MLM training videos and booklets are snippets of Psychology 101.
They perfect getting you to sign up and part with as much money as they can squeeze from you.
The do this to keep you motivated in the early stages, as your family and friends slam their doors in your face, or turn their phones off when your number shows up.
This tactic is to have you believe that you are part of a special group, you are one of them.
A part of their family, giving you a sense of belonging. Your sponsor is now your bestie.
THEN…if after about a week (maybe 3), and you have no one signed up, the love bombing stops and the gaslighting starts.
- “It is your fault”
- “You need to put more effort in”
- ” You should have bought the bigger sample”
Sort of like “Your success is our success. Your failure is all yours.”
OR… If you do have a few signed up, then you will be getting pressured from above to get them signing up more and selling more.
As your time investment increases, your inclination to back out decreases.
Commonly known as the “Sunken cost fallacy”
So much for “Being your own Boss!” The boss at your day job (if you still have it), is probably looking more like a saint.
3. Targeting Specific Demographics.
There is probably no limit as to the demographics MLMs target, and not all recruitment is a big production hard sell.
Normally they target military wives, religious people, but health and wellness MLMs like to target gyms, and often it might be you who approaches them, with an innocent comment like “Your looking good.”
Before you know it the MLM’er has your phone number, and you are on your way to being “groomed” into trying to flog some expensive potion.
Online groups is another popular way. They will either start a group or infiltrate a group and send private messages beginning with “Hey Hun…”
Often there is no mention of the company name or product.
Is Every MLM a Pyramid Scheme?
They are all pyramid schemes. Although one (icoinpro) I reviewed makes me wonder why it even bothered becoming an MLM.
If you bought it to learn how to trade crypto why would you bother worrying about the MLM side of it?
I need to review that article, it bothers me.
The only thing an MLM adds into the mix is a product.
Which allows revenue coming in from outside the system thereby making it legal.
However in practice, it only makes the system self repeating through obligatory and pressured in-system purchases with the excuse of “keeping up inventory.”
Inventory:= “Our product is perfectly safe and does cause cancer.” “that burning feeling means it is working” credit:- waywardhero@Redditt
This leads to repetitive small opt-ins that make the very few people who would make money in a classic pyramid scheme, pour it back into the system, and the rest to keep pouring money in over time.
Are There any Legitimate MLMs?
They are pyramid schemes with huge lobbying power, and with a twist that makes them worse than what they try to differentiate themself from.
How Can you Tell if Someone is in MLM?
Unfailingly polite (“Hun”), and desperately trying to help you.
huns really be like: miss 4yo just came up to me and said ‘mummy, I don’t want a princess party this year! i want a Tupperware party so I can show my friends how to have fun while making mealtimes stress free’ so please join us for Queigh-Li’s extra special birthday discount sale.
There are literally hundreds of ways to know if someone is in an MLM. Here are a few.
- “Be your own boss/join my team.”
- “Support local small businesses!.. my company was featured in Forbes!” ?wtf
- “You can do it on your own time and work as many or as few hours as you like!”
- This classic: “Joining my team allows you to work from home and spend more time with your kids, look at how I’m working near the pool while we’re on our family holiday.”?
- This one is timeless:- “I have my own business. – I love the company I work for”
What Percentage of MLMs fail?
Companies like Amway, Tupperware, Avon and MaryK have been around forever. They have a good slice of legitimacy about them because of their product sales.
Never confuse the lifespan of an MLM corporation with the lifespan of being a distributor. In fact, the longer a corporation is in business, the more refined becomes their sales pitch. The corporate entity feeds off the failure rates of the rep force. By design, the business model is very profitable for those at the top.Quora.
It is not so much the percentage of MLMs that fail, as the percentage of MLM participants.
For most MLMs it is hard to give an estimate because accurate data is hard to find.
Often companies are taken over by others and the products and members are absorbed into the new company.
Skinny Body Care is one example of a company being absorbed into a larger company, then the former owner(s) of Skinny Body Care, formed a new company called Livegood… Another MLM.
Just for the record Skinny Body Care was around for nearly 10 years. While never reaching the heights of Amway or Herbalife, it does indicate that the company was not a scam. Legally anyway.
Do People Actually Make Money from MLMs?
The FTC has figures of 99.6% of participants lose money. While many of those 99.6% may be members, many are most likely customers who are not involved in recruiting.
Other sources have it between 40-50%. although they include direct selling of which MLMs are a large part.
Jeunesse has an income disclosure that seems typical of MLM companies.
About 83% of people made some money, between $245 and $4,350.
This is where it gets messy. Was the money made from recruiting and product sales or just product sales?
If you were to conclude that those people were following the training, arranging meetings, visiting people, recruiting and generally running around like a blue ar$ed fly.
Then it is easy to assume they lost money, because the majority of that money is likely just product purchases from their downline who had no interest in creating their own downline.
Like, they had an understanding of the “Sunk Cost Fallacy” and were happy to just buy the product and stay at their usual employment.
Thanks for reading. Feel free to add your thoughts in the comments below.