A lot of questions about the legitimacy of multi level marketing concept has been asked at different point by people who at one point or the other were presented with the opportunity. Here we tried to provide answers to this salient question, is multi level marketing a scam.
“MLM is a complete scam, the people that are involved in it are nothing but cheap scammers”, these were the words of an aggrieved former distributor of a Famous MLM company that has its headquarters in Fremont, California. Interestingly, this happens to be the first company I had my first MLM experience with.
What An MLM Is
According to Wikipedia, MLM is a marketing strategy in which the sales force is compensated not only for sales they generate but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant’s “downline”, and can provide multiple levels of compensation.
By the way, MLM is also called, referral marketing, friendship marketing, words of mouth marketing, some people still called it pyramid marketing.
Looking at the definition above, four vital points can be deduced from it.
1. An MLM company must provide products to be sold and used by both those coming into the company and outside consumers. Products are what differentiate an MLM from a pyramid though some people are still of the opinion that MLM and Pyramid system are one and same.
Products are actually the fulcrum of an MLM company. A company that claims to be running an MLM system without products on offer to me is a pyramid and should be treated as a scam.
2. There must be sales. Those coming into the company must sell these products. A lot of these companies have what they called “products training meetings” where distributors are exposed to new products and also some companies provide marketing kits to enable their representatives to make easy sales.
3. There must be the recruitment of new members. Every distributor that comes in must also go get others. Actually, this is where the benefits of leverage and the passive income aspect of it come from. A distributor earns money from his own effort and also from the effort of those they recruit into the organization.
4. The process must repeat itself. The process of coming into the organization, selling products and also recruiting must continue for a distributor to have any chance of earning high figures in the industry. Without the process repeating, growth will be stunted.
In summary, you will discover that, for you to make any money at all in an MLM setting, you will have to sell products as well as recruit people, and this, you have to do it extensively at least for one year before you start making anything worthwhile.
And this is usually the beginning of the end of an MLM dream for many people. I remember during my time with the first company, having combed my entire neighborhood for prospects for an upcoming seminar with some leaders of the company, and having been assured by not less than 25 people to attend the seminar, only for me to wait on the D-day all day long without as much as a single soul turning up. To say I was devastated would be an understatement. I still hung on with the company for a period of three years without any recorded success, during which period I lost a lot of friends.
On a daily basis, top MLM companies keeping recording high increase in new recruits all over the word, what could be responsible for this feat?
Perhaps, a closer look at some of the advantages of an MLM opportunity might answer this puzzle.
1. Low entry level- It is on record that MLM business is the only big business that does not require a fortune to start with. With as little as $50-100, you are in business, unlike many secular and regular businesses out there. Many other MLM companies don’t require a token for their entry, just buy the products and they will hand you the training kits and you start your business.
2. Equal opportunity for all- everybody that choose MLM as a means of generating income has an equal opportunity to success irrespective of they educational qualification. This is in contrast to secular jobs where they put much premium on paper qualification. In MLM, you don’t need to have gone to Harvard or Cambridge before you become a top leader in the industry.
Also, your race, religion, and sex are not factors when it comes to success within the industry, it all boils down to your ability and willingness to success.
3. There is no limit on how much you earn. Of a truth, your income as an MLM player has no limit. Distributors actually determine how much money they want to earn for a particular month in time. The more products you and your downlines sell, and the more people you recruit that also sells products, the more you earn.
There are no two ways about that, in a true MLM settings, you earn money only when products are sold, either by yourself or those down your network (downlines).
4. Leverage. This is perhaps the most important angle that attracts a lot of people to MLM industry. MLM allow someone to earn money on the effort of others either directly or indirectly.
Also in MLM, you leverage on other people`s time, potential as well as effort to build for yourself a financial advantage.
Not many industries have a system that warrants individuals to harness the power of leverage, in most cases, big corporations do that to the advantage of the company owners only.
5. Passive income. In MLM industry, as one’s downlines size grows and sales volume increases, passive income is been gradually developed, this will grow and get to a point that, you`ll never necessarily have to go out and make sales by yourself before you earn money, the organization does the work while you earn the money.
This income comes regularly, and usually, just a little effort is required on your side to maintain it. It is a concept that is possible within MLM though it requires you to put in what I termed, “ Extraordinary effort`
6. You will work in an environment that is filled with positive people. This is one thing you just have to give it to MLMers, they are always beaming with Positivity. Everyone believes it is possible to achieve one’s Entire dreams with an MLM opportunity. They make you believe all of your dreams are already achieved, they teach you how to believe in yourself, how to go all out for your goals. No one talks down to you. They care less how many academic degrees you have or you don’t have, all they know and make you believe is, It Is Possible
There are so many other attractions that I can go on and on listing, like an opportunity to choose the hours you work, choosing who to work with, no employee to hire, quality products, etc.
In spite of the amazing benefits listed above, why then do we still have people dumping MLM opportunities by thousands?
It is also on record that about 97% of people who get into an MLM business don’t get to make any financial breakthrough. Only 3% of people record any changes in their financial status, and, of course, the owners of the MLM Company.
What really are the downside of MLM
1. One of the major disadvantages of MLM, on a personal note, having previously been part of the setup is, OVER HYPED. Yes, the entire system of MLM is overrated, the figures of earnings been thrown about and the possibilities all are over-hyped.
Most of the MLM new recruits aren’t told the truth. They paint the picture and make it look as if as soon as you come in, all your financial worries are over. Often times, they bring stories of how X was broke, homeless and depressed, but after joining the company within few months, they became millionaires.
The compensation plan of most companies is complicated and can only be interpreted by the owners. For instance, when a company says you would be paid 25% when you get to X level, they actually imply that the 25% will be shared within your organization (you and your downlines), a lot of people misrepresent the figures either out of ignorance or act of sheer deceit.
2. You are not actually in control of your income. The company`s compensation plan determines how much you earn. The companies` structured the earning potentials in such a way that you can NEVER earn higher than the owners of the company, even though you do most of the work that brings in money to the company selling products and bringing in people that will sell the products as well.
Most companies are also structured in such a form that you can NOT earn higher than the up lines.
Others have what they call the monthly authorship, this is usually a fixed amount of products a distributor must buy in order to qualify for monthly payout, and I have seen folks out there who buy their monthly authorship of $100 without receiving a check from the company in the guise that they don’t have the necessary cumulative points to qualify them to receive checks. This, to me, is RIPE OFF, its personal anyway.
3. You are also not in control of how the business grows. The company is actually in control of virtually all the aspects of the business, from products, down to how much distributors earns, down to the tools to be used by distributors.
They also fix prices for the products and in most cases, the prices are way above normal market prices.
Most companies also don’t leave distributors with choices of products to promote, they often pack some ‘COMBO’ as they are called and give it to the new recruits, leaving them with no choice than to dump those vitamins in the booth of their cars.
4. The issue of market saturation is also not ruled out. The more people come into a particular company, the greater the risk of the market been overstuffed with the company`s products, and soon, the system becomes saturated.
I have seen products of a renown MLM company been peddled on the streets daily.
5. Some MLM companies are actually more interested in selling their recruitment forms than in products, this is not far from the fact that, most don’t have products.
A pyramid scheme cannot also be ruled out completely. There are companies that operate on a single line matrix, and no matter what a distributor does, he/she cannot earn higher than the up line.
Generally speaking, MLM is hard to build, and also, the concept might be great, but those that implements it, most times lack the integrity, to say the least.
Having previously been part of the system, I won’t call MLM a scam, rather in my honest opinion, MLM is a business model that is highly abused by those who should be promoting it. In my opinion, the business model presents a great opportunity for someone with the skill of communication to start a great business with a very little amount.
It is indeed sad that some companies have rather chosen the unethical way of doing the business.Again MLM is definitely not for everybody.
Would I encourage someone to go into it
The high number of failures in the industry is a direct reflection of how MLM works, so if you are thinking of going into the system, consider the pros as well as the cons, and if you are satisfied; good luck.
If you are in MLM currently or you previously were in it, then let’s hear from you.
Or if you would want a point clarified or you need more information, then talk to us.
Drop your comments in the comments box bellow.