How to Avoid the Multi-Level-Marketing (MLM) Scam
Learn how to spot signs someone is trying to recruit you to an MLM
We all have a friend or an acquaintance who is trying to either sell or recruit us for an “exciting business opportunity, which allows you to make as much as you want while working 2 hours a month!”. Multi-level-marketing schemes are not always considered Ponzi schemes, yet they are very close. If it sounds too good to be true — it probably is.
While the idea of working for yourself and making a substantial amount of money sounds like a dream come true, you should be extremely careful with those kinds of companies. They prey on the most vulnerable in order to make a profit. It’s misleading, unethical, and upsetting.
I would like to point out ways to avoid being recruited to such an organization. Marketing is a beautiful tool to promote yourself and your business, but MLMs are the disgrace of this industry. In fact, they don’t represent it at all.
What is MLM?
Investopedia defines MLM as follows:
“a strategy some direct sales companies use to encourage existing distributors to recruit new distributors who are paid a percentage of their recruits’ sales. The recruits are the distributor’s “downline.” Distributors also make money through direct sales of products to customers.”
There is a countless number of multi-level-marketing companies out there, and some of them are known around the world. Amway and Arbonne are two ample examples, with more recent ones like LuLaRoe and World Financial Group.
You can avoid being recruited to work for MLMs if you can spot the warning signs. Let’s review the tactics that MLM participants use to get more people on their teams.
If it sounds too good to be true — it probably is.
Someone You Barely Know Reaches Out to You
A close friend or even a family member can become the victim of MLMs, but more often than not, you might receive a message or a text from a person you haven’t talked to in 10 years. It can be a middle school friend or someone who was in your high school science class. You may not even remember that individual, and you only added them because you work in the same building. In other words, usually, the promotor is a person you don’t have close ties with.
It happens, because MLM “employees” quickly exhaust their connections, and have no other choice but to start reaching out to everyone on their contact list. Naturally, if you haven’t spoken so that individual for years, there should be no reason why they would extend the kindness of sharing such a “unique and exclusive business idea” with you. Those people are desperate. They have probably talked to hundreds of others before you.
The best idea is to politely decline. However, MLM recruiters are trained to refute dozens of rejections. They have an entire manual dedicated to securing a “sale” and “closing” you. Once you start replying, you will be bombarded with a ton of different counter-arguments. The best option is not to reply at all. If they keep messaging you, you might want to consider blocking them altogether. If this seems too radical — just don’t respond.
Depending on how desperate or dedicated the recruiter is, they may reach out to you through other channels. Most people would be too embarrassed to ask your friends to pass a message through; unfortunately, some are not. In this case, make sure to come up with a bunch of excuses as to why you cannot join their “one-in-a-lifetime opportunity to become rich in six months.” Tell them you’re moving to Antarctica, or that you’re giving up all your worldly possessions and joining a community in the Himalayas. Their is no Internet in the Himalayas connection, which is why you absolutely cannot be a part of this business.
Pitch Seems Too Sweet and Contains Buzz Words
All multi-level-marketing organizations have pitches, which their promoters have to memorize. You will hear a lengthy speech about how great the business is. Here are examples of what the pitch might include:
- You can work for yourself, instead of working for someone else!
- You will be your own boss! Isn’t being self-employment sound better than working for others?
- You can make your own money! There is no limit on how much you can make!
- You can earn income and make all your dreams come true!
- You will become the breadwinner in the family, and your spouse and kids will be so proud of you! (Targeted at stay-at-home parents)
- You can earn money and give your children everything they deserve! (Targeted at single parents)
- You can set your own hours and have a flexible schedule! No more fixed shifts — you are your own boss!
- You will make the world a better place by selling our green, toxin-free, cruelty-free, vegan, organic, magical, unbelievable products! You will help people around the world to make better choices and change their lives!
- The products we offer to clients are better than the other ones on the market! You will help others to recognize the value of our product and replace their inferior items with ours!
- You can build your own team of successful, dedicated, free-thinking men and women who will support you no matter what!
- We are not just a company — we are a community of kind and supportive business people! You will get access to unlimited support to help you grow your business.
- You’ll be working with us, not for us! And we will have lots of fun!
If you hear any of the buzz words and phrases, such as: “working for yourself,” “unlimited opportunities,” “unlimited potential,” “no cap on how much you can make,” “not having a boss,” “setting your own hours,” “becoming a strong and successful businessmen/businesswoman,” “making your dreams come true,” “making the world a better place” and similar ones — run for the hills and never look back. It’s a scam.
Shady and Unclear Business Model
The MLM recruiters are trained to avoid questions about the business model from the very beginning. There is a reason for it: the model is quite shady, and even once you’re in, you still don’t understand what is that you’re doing and how the recruiters make money.
Generally, the business model looks like this:
The main principle or of the multi-level-marketing is to recruit people nonstop. While product sales are also involved, they are often very minimal. The main focus of this business is to attract a lot of new members because you make a little bit of money when you recruit someone. And then, they make money off those they sign up, and you receive a small percentage as well. This is an endless cycle. Well, actually, it’s not endless at all: the highest recruiter in the chain can only recruit 13 levels of new members because otherwise, they will go over the entire planet’s population. But, as per the MLM’s well-prepared pitch, the opportunities are endless.
If you are unclear about how the company works, how they sell products, and if recruiting new people is more important — you are probably being sucked into an MLM.
99% of MLM participants don’t make any profit.
You are Obligated to Buy a Lot of Inventory
Certain MLMs do focus on product sales after all. The warning sign you should be on the lookout for is the requirement to buy a large number of products in order to join. If they demand to spend many thousands of dollars of the inventory — recognize the sign and refuse.
They make money off of you when you purchased stock. For example, let’s say the minimum investment in inventory is $5,000. The person who recruited you might get 10% of the money you spend, and whoever is above them will receive a percentage as well — so as everyone in the chain, till the very top.
Not to mention, you will have a hard time selling the inventory. Many people are skeptical about buying unknown products, especially when those items are subpar quality. Why would you spend $50 on make-up, produced by an unknown manufacturer, when Dior or Yves Saint Laurent sell products from the same category for $55?
Some MLM’s focus on product quality, but it results in higher prices. People won’t spend $80 on a T-shirt, even if the quality is off the charts. Unless you happen to stumble upon someone with a lot of cash and lack of understanding of costs, you probably won’t be able to sell your stock.
CNBC conducted an interview and discovered that 99% of MLM participants don’t make any profit. There is no reason to sign up for such a business.
You are invited to a Fun Party and Promised a Community
The MLN participants are being trained to make their victims fall for a promise of friendship, partnership, and community. They excite up the victims by delivering lively, inspiring pitches while hosting parties at their homes to make it seem fun and homey.
The worst part is, those tactics are being applied towards people who feel isolated from communities. Single parents, who dedicate most of their time to children and keeping the family together, often fall for the promise of friendship. Students who are focused on their education, and don’t go out enough, become victims as well. Older people, who may not have strong social support, are preyed upon too. The MLM strategy is built to attract those who are craving social connections.
Moreover, if the recruiters make it seem like they’re having a good time and attend fun events regularly, people are more likely to sign up. MLM represents the worst values.
They Put on a Facade of Wealth and Success
Individuals participating in MLM’s are trained to show off the success they don’t have. Instagram became instrumental in this over the years, as recruiters utilize it as a marketing tool. If you see a lot of fake-happy pictures, photos of expensive cars and pricey purchases, sometimes even stacks of cash — there is a good chance it’s an MLM.
Ironically, people who post those pictures don’t have any success with their business. They are taught to create a perception of wealth so that others would feel envious and desire to get to the same level. Even if some recruiters are making a little bit of money, they are being encouraged to reinvest all of it back into the business.
Don’t fall victim to those lies. If something seems too good to be true, as I said earlier, it most likely is.
Marketing is a gift to humanity. There is a lot of science behind it, and it’s an essential tool to accomplish success with your business. Unfortunately, it can sometimes be utilized in the wrong way. Learning how to recognize the warning signs and protect yourself from potential scams is critical.
There are countless business opportunities out there. You should pursue the ones proven to be fruitful. Do your absolute best to avoid multi-level-marketing schemes.
Helpful Resources:
A Complete Guide of Multi-Level Marketing Business Model