The facts about network marketing: 10 reasons to NOT join an MLM.
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The Facts About Network Marketing: 10 Reasons to NOT Join an MLM

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Wait! Before you join an MLM, read these sobering facts about network marketing. It is not all free cars and beach vacations. Here are 10 reasons to NOT join an MLM.

What is network marketing and how does it work?

Network marketing is also called multi-level marketing ( MLM) or referral marketing.  In the multi-level marketing business model, salespeople of network marketing companies are not salaried.  Instead they receive a portion of the revenue from products they sell.  They also recruit new salespeople, and then get a portion of their salespeople’s sales.

74% of MLM salespeople are women between the ages of 35-45.

Multilevel marketing companies, or MLMs can be appealing opportunities for those who don’t want to be tied down to an employer. As a direct sales consultant, you can choose your own hours, work from home, and belong to a community of like-minded business partners. MLMs boast unlimited earning potential and hefty rewards for going above and beyond your expectations. All you have to do is “work the business” and you’ll be free from corporate chains.

    

Is network marketing a pyramid scheme?

Are companies like Avon a pyramid scheme?  No. Avon is an MLM/network marketing company but network marketing is NOT a pyramid scheme.

The multi-level marketing business model is legitimate, even if most people will not make any/much money off of it (we’ll get to that below).  While at first thought, it can seem like MLMs are like pyramid schemes, a big difference is that MLMs involve true physical products.

In a pyramid scheme, there is normally no true product, just money changing hands. Pyramid schemes are illegal.

It can sometimes be hard to tell the difference between an MLM and a pyramid scheme. It all goes back to the product/lack of a product. An MLM salesperson should (in theory) make money from selling the product to customers. In a pyramid scheme a salesperson makes more money by recruiting new members than selling a product.

MLM products

Currently popular MLM products available to sell:

  • doTerra (essential oils)
  • Usborne (kids’ books)
  • LuLaRo (clothing)
  • Rodan and Fields (skincare)
  • Isagenix (supplements)
  • Beachbody (fitness)
  • Primerica (insurance)
  • Mary Kay (beauty)
  • YoungLiving (essential oils)
  • Tastefully Simple (food)
  • Norwex (cleaning supplies)
  • Herbalife (supplements)
  • Younique (beauty)
  • Usana (supplements)
  • Pampered Chef (kitchen)
  • Avon (beauty)
  • HempWorx (CBD oil)
  • And many more

Some of these products might be useful, but that doesn’t mean you should join an MLM. If you are considering how to start network marketing and wondering how to succeed in network marketing, please keep reading before you make any decisions.

The truth about network marketing

For all the promises and claims of MLMs, unfortunately these direct sales opportunities are too good to be true. People who join MLMs often face social, financial, and emotional consequences as a result of their work. While some product and new consultant marketing includes exaggerated results, other companies rely on downright lies.

With so many companies to choose from, you might believe that the company you’re interested in joining is different from the rest. In reality, they all produce similar outcomes. When you join an MLM, you fall into a trap.

10 No-BS facts about network marketing

For every reason you may have to become a direct sales consultant, there’s an even better reason not to. When there are so many better work-from-home career options, you can support yourself and your family without relying on dead-end business models!

1. Almost No One Earns an Income

Many MLM companies will out their top performers on a pedestal for all to see. They’ll receive bonuses, vacations, and even cars. These top sellers will also be used to reel in new consultants – after all, they’re living proof that these companies are legitimate. If you work as hard as the all-stars, you too will see results!

What multilevel marketing companies don’t always tell you, though, is just how few people make a single penny in profit. The Federal Trade Commission found that only 0.4% of direct sales consultants made money. Even if you earn a paycheck from your company, your membership and stock costs almost always outweigh your earnings. Would you accept a job if you were told that 99.6% of people lost money working for that company? It’s unlikely.

All entrepreneurs face substantial risks when starting a business. However, 39% of small businesses remain profitable for the lifetime of the operation. If you’re dead set on selling a product you’re passionate about, you’d have far better luck buying goods at wholesale prices and reselling them online.

Related reading:

2. MLMs Manipulate Their Statistics

Multilevel marketing companies often share incomplete and misleading data regarding their consultants’ success. The Federal Trade Commission compared MLM companies’ disclosed compensation model to the data they don’t share.

At the time of this study, Nu Skin Enterprises shared that the average active, non-executive distributor who earned a check made $62.00 a month in commissions. What they didn’t tell potential consultants is that 85.89% of active distributors never even earned a check. Why would you join a company that doesn’t share your actual likelihood of success?

3. The Money Isn’t in the Products

MLMs are recruitment driven – consultants make a commission on their own sales, but also the sales from any consultants they sign onto their team. At the end of the day, though, someone has to sell the products in order for recruiters to see results. You might get a bonus simply for signing someone on, but you’ll be spending so much on making an effective recruitment plan that you’ll still lose money.

4. You’ll Need to Keep Your Recruits from Quitting

In order to make money from your downlines, you’ll need to keep them on board. Since the success rate for direct sales consultants is so low, it’s hard to keep your recruits hopeful about selling. Within the popular MLM, Herbalife, net profits are possible once a consultant reaches World Team status. Only 5.71% of Herbalife consultants were at or above this level. Since so many people are below the level at which they see profit, the consultant retention rate is at maximum 10%. As a result, only 0.571% of Herbalife consultants have the potential to earn a net profit.

If multilevel marketing companies were viable sources of income, the retention rate would be far higher, making it easier for direct sales consultants to profit off of their recruits.

5. Your Family and Friends Won’t Appreciate Your Sales Efforts

While saying that MLMs destroy families or friendships is a stretch, getting bombarded with sales pitches from MLMs can be annoying. You’ve probably seen direct sales consultants plaster their social media profiles with sales and recruitment pitches.

Thankfully for your social network (and unfortunately for you), your friends and followers have the option to hide your posts. The MLM advertising model heavily relies on word-of-mouth and social media promotions, so you’ll likely get promotional tools from your company that encourage you to irritate your loved ones.

6. Your Upline Won’t Be a Business Expert

Have you ever gotten a message on social media from a stranger asking you to try their products or join their company? Their upline told them to do that, and that upline was told by their upline to teach it. Direct sales consultants are taught to see strangers who look like they might be interested in the products as leads. Their uplines will even provide sales pitch templates for their recruits to spam random inboxes with.

This approach backfires – fast. For example, when consultants selling weight loss products offer their products to strangers on the Internet, those people will likely interpret it as being called fat. Direct sales consultants are even taught to use publicized life events as sales opportunities, reaching out to everyone from cancer patients to grieving spouses promising to change their life with a product.  Do you really want to use someone’s suffering as a means to make money?

7. You’ll Be Taught to Use Unethical Sales Tactics

Direct sales consultants are often taught to promote their products in unethical ways. A consultant selling weight loss products might post beach photos on Instagram while talking about their products’ benefits. This gives people the illusion that these consultants got that body from using those products. In reality, they already had that body. Talk about misleading!

You may even be told to downright trick people into hearing your sales pitches. If you’ve ever given David’s Bridal your contact information, you may have received an e-mail from a Mary Kay consultant congratulating you on “winning” a makeover for you and your bridesmaids. Everyone gets that e-mail, and the “makeover” is a product sales pitch. Using these tactics is like throwing your reputation down the drain – but that’s sometimes all direct sales consultants are taught. “I was told to advertise this way” isn’t an excuse for doing it!

8. You’ll be Turned Against Your Loved Ones

Let’s face it: not everyone has a use for MLM products, and not everyone can afford them. Your upline might tell you that those who don’t buy into your business don’t support you as a person. Your network isn’t always your target market, and despite what uplines will tell you, your loved ones can support you without handing you money.

9. You’re Not in Control

When you belong to a multilevel marketing company, they determine your commission. You can’t buy stock from other vendors with different price points, and your company determines your consultant discount. You’re often bound to the prices your company sets for the products – while you can technically sell them for more money at vendor events, customers can order at the regular retail price from the website, catalog, or another consultant. Certain forms of advertising and sales are off-limits because you don’t own the rights to the company name.

People join MLMs to gain freedom, but find that they don’t have much once they’re in the company. Despite some companies telling consultants that they’ll be running their own business, they have almost none of the same rights as a business owner.

10. MLMs Have a Bad Reputation

Most people who are familiar with these companies don’t think very highly of them. That means you’ll have a hard time selling, recruiting, and being taken seriously by business owners. Belonging to any organization with a bad reputation reflects poorly on you, even though you hardly have control over the practices you employ.

When you join a multilevel marketing company, you set yourself up for disappointment. You’ll be restricted to a set of sales tactics, policies, and income ceilings that recruiters are just not honest about. If you’re looking for a legitimate work-from-home opportunity, you’re bound to find one that fits your skill set without the near guarantee of losing money. Trust your gut when researching new side gigs – if it sounds sketchy, it is sketchy!

Here are some side gigs I recommend:

Want more ideas? Check out 8 Surprising Ways to Make an Extra $1000/month

The facts about network marketing: 10 reasons to NOT join an MLM.

What are your thoughts on these network marketing facts?


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17 Comments

  1. Excellent advice! I had a number of friends try and fail. It’s too bad because some of these MLMs have good products. I really like Mary Kay makeup for example. But their business model is unethical imo.

    Michelle
    http://mybijoulifeonline.com/~bijoube2

    1. Thanks Michelle! And can I say that I’m so happy the first comment on this post on facts about network marketing is a positive one. I wasn’t sure how people would take this post. 🙂

    2. This is all completely true and well written. I appreciate the fact based logic here. Investing time and money should be carefully weighed before joining up with an MLM company.

      One thing I believe is that the consultant is the actual customer of the product. If you were to watch Betting on Zero, you’d see hundreds of former consultants with entire garages of inventory. Lularoe changed their buy back policy many times when people realized how terrible the company structure was.

      A franchise must provide potential owners with over 900 pages of data. It’s difficult to even find income reports for many MLMs. A franchise also makes sure a potential owners will be able to ethically finance the business for a certain time period as not to reflect poorly on their company name. Many MLM recruiters will just suggest you open your “business” with credit cards.

      1. Exactly. Being data driven is extremely important, and it is often glossed over. It is very easy to sell stories and potential. That’s all great and again some people do make money, but how many/what percentage of people make money from the MLM a person is considering? None of that should be secretive information – it should be out in the open for potential consultants of the MLM, just as you mentioned it is with franchises.

  2. What a well written post! It was obviously researched and is full of great information. I have definitely almost been sucked into multiple MLMs but always end up following my gut not to. I think this is an important post for anyone considering it to read.

    1. Thank you Ashleigh! Good for you for listening to your gut before joining an MLM. It can be tempting, and not all are bad, and some people do make money from the network marketing business model. But most people don’t. I really wanted to use cold hard facts about network marketing overall, and then people can make their own decisions.

  3. Technically I’m part of two MLM companies. I did not join with hopes of winning a trip or being able to quit my full time job, I joined because I truly like the products and wanted to get them at a discount. I considered the cost/benefit before joining, and it made sense to me. I also happily give my discount to my friends and family, because I’m not in it to make money off of them. I was upfront with my sponsors about just being in it for the discount, so eventually they stopped bugging me to make sales:) The one company I’m with actually rewards me for buying stuff for myself, while the other one doesn’t. So not all are created equal, not all are bad, just depends what you want to get out of it. And yes, I could potentially work my butt off and get that car or trip with the one company, my friend/sponsor is close to achieving that goal, but I definitely lack that dedication.

    1. I can understand that as a reason to join an MLM. I think some of the products are good, it’s the secretive business model with some I have issues with. For example, I like Norwex products. But before I would consider joining them as a serious seller, I would want some good statistics on the probability of making money with them. Thanks for chiming in with your perspective.

  4. My mom sells Tuperware, her next door neighbor sells Avon, we live in the southern part of IL surrounded by fields. Next door neighbor is a good long walk away (just get in the car and drive to be there in less than 10 minutes)! I tried Primerica quit because their insurance wouldn’t cover me). So we have all tried it. Mom and her friend are still happy with their choices. I just blog now.

    1. Thanks for sharing your experiences with network marketing Jeanette. Are you finding that you love blogging?

  5. i dont completely agree with your post
    In every field there are failures and success
    may be in this field the ratio of success is less
    but positive points are, person can earn a huge profit with little investment.
    reward ratio is very big
    Better than any job, if persons in start do effort to sell more products by their own efforts (Self sale), he/she can get better incentives in start to compensate with expenditures.

    Costlier Products, not all companies are following this. There are companies which are selling on minimum margins also.
    Consistency is main key, the only thing is retainment of distributors in one business which could be caused by number of reasons like : Upline not well trained and consistent, person didnt chose a good company in start, companies education system is weak , etc etc

    so different persons have different opinions and experiences. My experience in start was also not good. but today i am in much better position financially and socially.

    every business has plus and minus. so depend on ur personal experience what u get in start or in period of work

    any way its my personal experience.

  6. akachukwu says:

    Ignorance is a very deadly disease

  7. It’s nice you tried to educate people but not all you said is correct. It’s clear from your explanation that people buy MLM products to join the business. The idea of losing money is untrue then if I get value for my money. It will only be up to me to want to push the business or abandon it. I don’t believe money is lost once you’re given value for your money.

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