MLMs have often been accused of targeting stay-at-home moms, military wives and young women looking for time, freedom and additional income. However, the statistics show that most people do not make money, Those who oppose the business model make claims of cult behavior, peer pressure, and a constant push to buy products, seminars, and personal development packages.
MLM (multi-level marketing) is a business model in which participants earn commissions by selling products directly to customers and recruiting new distributors. While some participants of MLM programs can earn decent incomes, most of the distributors actually lose money. This has fueled a growing movement against this business model. This may include distributors that lost time and money, as well as consumer advocates seeking to stop others from becoming involved. For instance, the Anti-MLM Coalition provides resources specifically targeted toward MLM victims and their families.
The MLM movement is built upon a straightforward idea. However, their ethics and business practices are questionable. The Anti MLM advocates claim that vulnerable individuals are being target and victimized. Women are a common target, with the recruiters using language like female positivity and empowerment in an effort to lure them in with promises of community that never materialize. Furthermore, their subliminal messages often shame women for failing to “have it all”.
MLMs also promise freedom from time-wasting commitments, but there are typically strings attached. For instance, if a participant wishes to spend more time with family, he/she must either leave work or hire someone to care for any children. This defeats the purpose of flexible working arrangements offered through MLMs that provide opportunities to be “work from home moms” or “stay at home dads.”
Analyzing data from the Federal Trade Commission’s Anti-Fraud Education Center, researchers studied how MLM firms operate by comparing sales from a large sample of both MLM and non-MLM firms and then looking at relationships between sales and pyramid-like structures. MLM firms appear more prone to fraud, due to adopting pyramid-like structures, which could have greater ramifications on sales figures.
MLMs often fail to live up to their promise of multi-level marketing by having too few levels in equilibrium, contrary to what their distributors expect. The number of levels within an MLM firm depends on anticipated sales by its lowest level distributors, who may be subject to asymmetric information and limited rationality. This results in larger expectations than actual sales, leading to more levels within its structure. Researchers found this effect further reinforced the idea that MLM firms tend to underpromise.
While many multi-level marketing (MLM) companies deny being pyramid schemes, critics often compare them to such structures. MLM participants typically earn commissions from selling products directly to end users, and recruiting new distributors into the fold. They also receive part of any commissions earned by these recruits themselves. The end result is that recruitment becomes more important than sales.
Critics allege MLM companies that take this structure advantage by paying commissions from both sales, as well as commissions generated from recruitment schemes, are becoming prevalent within MLM businesses.
While some individuals do make money through multi-level marketing (MLMs), most do not. This is often due to pressure placed upon lower levels of the MLM organization to meet profit targets, and ultimately forces closure due to not selling enough products to members, leaving those at the base with minimal or no income.
A pyramid scheme typically requires large initial investments and bulk sales of products. This stands in stark contrast with legitimate multilevel marketing (MLM) businesses which pay participants, according to sales to customers, as well as recruiting. According to the Federal Trade Commission, an MLM’s profits should come predominantly from end user sales of actual products; otherwise it constitutes a pyramid scheme. Unfortunately, some MLMs use overpriced goods or autoship/purchase requirements in order to boost profits.
MLMs often provide an array of skincare, makeup and legging products to their members that may help them make more money, with members being incentivized to sign others up in exchange for discounted membership fees. This model has become particularly attractive among women affected by inflation, or those who may require flexible work opportunities.
Avoid becoming the victim of a pyramid scheme by watching for these telltale signs when researching multi-level marketing (MLM) programs: (1) those focused on recruiting more participants than on marketing their products to end-user consumers, and (2) operators that refuse to give you contact details like address or telephone number as these could indicate illegality of an MLM operation.
While there are legitimate MLMs, many also engage in fraudulent practices designed to draw participants in through false claims of financial compensation, purchase incentives that exceed normal consumption, pyramid schemes, or similar scams.
MLM companies are notoriously deceptive, leading to some countries banning them outright. MLMs proliferated during the COVID-19 pandemic as people searched for work-from-home opportunities and side hustles. Unfortunately though, most who joined MLMs lost money.
MLMs can be financially risky and promote pseudoscience simultaneously, by making false claims that their products can cure diseases, heal wounds and improve skin conditions. Such claims can be especially dangerous to vulnerable populations such as diabetics or cancer patients.
MLMs often exploit social media to expand their presence and reach. Many MLMs have established accounts on platforms such as TikTok to attract potential recruits and promote their business, bombarding followers with messages meant to convince them to join. Furthermore, using TikTok’s green screen feature as an amplifier of their message, known as love bombing, amplifies this strategy further.
MLMs can be both financially risky and socially harmful. MLMs exploit people by employing emotional manipulation to lure them into their schemes. For instance, MLMs encourage distributors to recruit friends and family into the business. This not only insultingly intrudes into people’s personal relationships, but may lead to unwanted sales pressure and lead to feelings of resentment among loved ones.
Many multi-level marketing (MLM) companies make misleading promises to recruit distributors, including suggesting that participants can earn substantial income through their efforts. To counteract these practices and encourage critical thought on these businesses, the anti-MLM movement has leveraged social media channels like Reddit and YouTube to highlight this divisive industry, while encouraging people to examine its practices carefully. Furthermore, it highlights how MLM business models may cause harm to people’s financial wellbeing.
Anti MLM Coalition
A growing movement known as the anti mlm coalition has arisen to expose MLMs as fraudulent schemes while offering help for individuals escaping them.
These communities can be found on Reddit and other social media platforms, drawing together individuals with similar experiences and concerns. Here, they share stories of financial ruin and emotional manipulation, as well as warn others of the risks involved with network marketing. By providing educational materials to the public and lobbying for stricter regulations, they are shaping the landscape of network marketing in ways never thought possible before.
Responding to the anti-MLM movement, some direct selling companies have refocused their efforts on consumer education and ethical business practices. This can be seen through an emphasis on training programs for salespeople, as well as making product information easily available to consumers. Furthermore, these direct selling companies prioritize transparency and disclosure in their compensation plans.
The first priority for MLM companies is to stop their cultish behavior, and end the peer pressure that distributors place on any downline members. There are more people that could benefit from a home based business besides single moms, military spouses, and evangelicals. Pushing specific religious opinions, while encouraging distributors to forsake family time, seems to be a real oxymoron!
The next step is to radically change the compensation model. Start with a review of the compensation model in the affiliate marketing industry, where websites pay affiliates based on referrals. That model is already built into the price of goods and services everywhere online! By tapping into an established model, you avoid pushing mediocre products with highly inflated prices.
This model could be implemented to allowed the recruiter and recruit to split commissions, similar to a 2 tier program. As an example, TripAdvisor.com gets commissions when a visitor books travel products and services with their partners. With their affiliate program, if you send someone (with your link) to TripAdvisor, and that person books with their partners, you get half of the available commission.
The third suggestion is to move from selling products to creating content in various niches. For example, the MLM would train you to register a domain and build a website, You would pick a niche, create content, and then find affiliate programs offering products and services in your niche. Your upline would receive affiliate commissions as you set up your business, from domain registration, web hosting, autoresponders, and any other services paying commissions. Remember, these commissions are already built into the pricing structures. No one is having to pull extra money out of an orifice to pay for junk fees.
Using my suggestions, you now have a legitimate website with ethical content on your preferred topic. People come to you because they are attracted and interested in your topic. You do not chase someone and force the topic upon them.
What do you want? A legitimate business model, or a basement full of chemical laden smelly leggings!