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.
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.
- Is selling on Amazon worth it? My honest review
- How this family makes over $100,000/year selling on Amazon
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:
- Teach English to kids online
- Get paid for surfing the web
- Search engine evaluation
- Get paid to test websites
- Side hustle as a petsitter
- Start a blog
- Freelance writing
- Sell on Amazon FBA
Want more ideas? Check out 8 Surprising Ways to Make an Extra $1000/month
What are your thoughts on these network marketing facts?