A few months ago I was mentioning to a friend that I strongly dislike (hate is such a strong word) MLM companies. She asked what is that? I went on to describe it and later she said "Oh I'm involved with several of those companies." I didn't really know what to say after that since I was so adamant with my opinion on them. Later I was talking to a different friend who was trying to sell me membership into her program, I told her I don't join MLM's and she also asked "what is that?" After I described it to her she said "Oh well you can still make money if you join", I just smiled and said no thanks and ended the conversation.
After considerable thought about these two scenarios I decided I should write a blog post on exactly what Multi-Level Marketing (MLM) companies are. If you are involved in one that's great! Especially if it works for you, please leave me a comment below about that. I know they wouldn't work for me, I'm a terrible sales person.
First lets define what exactly makes an MLM an MLM.
Wikipedia defines MLMs as: a marketing strategy in which the sales force is compensated not only for sales they generate, but also for sales of the other salespeople they recruit.
Dictionary.com defines MLMs as: a marketing strategy in which sales representatives of a company recruit other salespeople and earn commissions on their own sales and on the sales made by their team: Use your personal relationships to be successful in network marketing.
Basically it's network marketing. You sign up and get other people to buy your product. If they continue to be interested and want to sign up they sign up under you. Now any sales they make to family or friends will benefit you (the original seller) and you both get commissions off those sales. Some people refer to this as "growing my team". If you look at the image above its clear that one person at the top, now has 9 people under him, making his commissions high if each of those recruits continue to sell the product they are offering. Please note if you draw a solid line from the bottom all the way around the image you will eventually get a triangle, or a pyramid.
Now pyramid schemes in the US are illegal. Because MLM companies have a product they sale, that alone makes the company legal, even if the main income from the company comes from the overall pyramid of recruiting salespeople. It may be legal but it is still touch and go. The FTC (federal trade commission) monitors MLM companies very closely to make sure they are in compliance with business laws.
MLMs are legal and different then pyramid schemes for the following reasons:
1) you can make income still with out singing up new members. Say you are that bottom person in the image above, and you decide not to recruit any more members can you still make money? Absolutely. That is one of the things that can make an MLM appealing, you can buy into the business and get the product at the distributor price without having to have people join you. You can still make an income based off of your sales alone, it may not get you far but you can do it.
2) Members of any level can earn money, they also have the ability to earn more than the people who signed them up. In the image below you have three levels, the top (single guy), middle (three guys) and bottom (six guys). The guys in the bottom level do have the ability to make as much as the single guy, if they are successful and take a bottle of Felix Felicis to help them with sales.
3) As already mentioned MLMs are marketing a product which makes them legal compared to pyramid schemes. (source for the above referenced points can be found HERE)
A major PRO for MLMs is that the cost of advertising is significantly reduced for a business because the primary way of letting people learn about your product is through word of mouth and networking. (A.K.A. Facebook) This allows the business to be spread quickly and have a trusted face for the product, I am much more likely to purchase something from a friend or family member then I am for a sales guy who knocks on my door. In face I don't even answer the door when I see them on my porch.
So here's why I avoid MLM's and why I wont be joining yours anytime soon.
1) Difficult to purchase
I know this seems odd, but I like to buy things online. Amazon Prime is my best friend. I love being able to have the convenience of buying something without getting pressured into something else buy a sales man. Buying online with MLM's is available. However, its a little difficult to purchase something without having to sign up under a consultant, distributor, sales person (all the same thing). For example, say I want a SCENTSY candle. I go to scentsy.com find a warmer I completely fall in love with and add it to my cart. I go click check out but wait its saying I have to enter my zip code to find a consultant near me. I enter the zip code and several names pop up, no one I know and I am forced to choose one in order to buy my warmer. Next thing I know they are sending me an email asking if I would like to come to a party near buy to look at more items in person. This creates an awkward situation as I come up with excuses on why I can't do it and I was just interested in that ONE product. Why did buying one product turn into a sales pitch? Because that is what happens with MLMs all the time.
2) Pressure to hold parties
As mentioned before if I buy something its a key into the world of persistent sales people. The terrible part about it is that all of these sales people are dear friends who I care about. They call me all the time, only to see if I will buy more products, or invite me to events, or give me a free nail set to be a model. It all starts there but ends up going into wanting me to sign up, etc. Here's the thing I am an Introvert. And I am an extreme Introvert at that, so for me to host a party well that ain't gonna happen.
3) Exploitation of relationships just to get you to purchase something
I have a few friends involved in MLMs who I feel ONLY contact me to SELL me their product. That makes me feel terrible about myself. I mean really you can't call just because you want to catch up? You can't Facebook chat just because you wanted to really know how I was doing? You just want my money do you? Well great that makes me feel awesome :)
Now if you are involved in an MLM that is awesome!!! Especially if it works for you. If it does and you have a neat experience to share please comment, I am truly writing this so everyone knows what an MLM is and why I wont join yours, even if you keep asking me a million times. I still love you even if you try to sell me something.
Young Living Essential Oils
The Pampered Chef
Stella & Dot
Hope you found this information helpful!