MULTI-LEVEL MARKETING???

Okay maybe it is me, but I was wondering – has anyone else notice the alarming up-swing in prospecting? Not job offers but trolling or prospecting under the guise of a business proposals. For those that are trying to figure out my cryptic observation – I and referring to Multilevel marketing (MLM), also known as – Peer-to-Peer Marketing, Network Marketing, Pyramid Selling, Referral Marketing, Business-to-Consumer (B2C) sales, or Direct Sales.

So, who am I, and why am I talking about this? Well, I will start by saying I am not a novice to MLM.?I was an “Independent Representative” and event speaker for multiple MLMs over a 10-year span, but more about that later.

I want to talk about the latest trend – “Direct Sales”. How many of you received a response to a congratulation, well wish, or connection request that goes like this:

Hello

Thanks for connecting!

Are you planning for SEC+, NET+, A+, CISA, CISM, SCRISC, CEH, CISO, PMP, ACP, CAPM, PRINCE2, SIX SIGMA, ITIL, AWS, AZURE, SCRUM, TOGAF or any other Certification?

Guarantee to pass the exam on first attempt.

Now at first glance it looks like someone trying to offer certification training – but if you ever make the mistake of responding, you will receive the training information; but in some cases, you will also be offered a “life changing opportunity”. They will tell you that you can make money offering certification classes to others and build a team to offer the same opportunity to others – GO FIGURE…

Okay, okay, I digress – first let talk about what a MLM is. According to Websters dictionary: multi-level marketing is a business model or structure that involves unsalaried, hierarchical sales teams selling products directly to consumers in conjunction with recruiting additional independent sales representatives. Individual sellers earn commissions both from their direct sales and from the sales of their network recruits and from their recruit’s - recruits, and so-on.

Now that we know what MLM is, let’s look at what it is not. Legitimate MLM are not Pyramid or Ponzi schemes (emphasis on legitimate!!!). Pyramid and Ponzi schemes are fraudulent structures, disguised as a MLM organization. The difference between a lawful MLM program and a pyramid scheme is that pyramid schemes do not have real (tangible) products for sell. Participants attempt to make money solely by recruiting and charging new participants a fee to join the program. That includes the useless widgets, and the give me $500 today, and you will get $1,000 next week opportunities (SCAMS).

By now I am sure you are asking “Can I still make money in an MLM?” The short answer is – YES!?Did you know that more than 74 percent of the American public has purchased goods or services through direct sales.

The top 5 MLM companies, as of January 2022, are:

Even with all the controversies, several MLM companies have proven to be very profitable, with Amway leading the pack with $8.4 billion in revenue in 2021. Think about it the top 5 MLMs generate over $26 Billion in revenue annually – now that’s just the top 5 y’all. Think about it, if you could get less than 1% of the number one MLM (Amway) you would generate about $400,000.00 a year – WHAT!!!

So how much can a Multi-Level Marketer make? According to the employment website Indeed an active Distributor earns around $6,900 a month, an Independent Distributor earns about $5000 per month, and a Financial Representative can earn as much as $1,500 per month.

Got-cha attention yet? If not, I have a few more attention grabbers that I use to use to recruit prospects – and believe it or not, they worked!?Well at least long enough to get them started – but sadly reality would set in, and I would have to head out and prospect for more sales representatives. Now what’s funny about that is that the other independent reps, normally the sponsor, told me “Don’t worry about it, that recruit just didn’t have the vision”.

Why are Multilevel Marketing opportunities so popular?

Because of the confidence given to participants of the potential to become financial independence through participation in the MLM. Prospects hear phrases like "the lifestyle you deserve" or "you will be independent distributor". One important aspect of the MLM experience is that the products or services are normally secondary to the MLM recruiting process. Most MLMs promote the principle known as "selling the dream". You are told that with a little effort you can supplement your income through the revenue generated by your downline representatives. I have even heard some recruiters refer to this as a second income stream.

Another reason MLMs are so enticing is that it is usually inexpensive to become a distributor, all you need to get started is to purchase a starter kit and some products and/or acquire the service. So, becoming a distributor is much cheaper and easier than starting a business of your own or buying into a franchise. Also, the conferences pump you up, and the bonuses give you something to strive for.

But even with all the bribes, I meant bonuses, two-thirds of MLM participants said knowing what they know now, they would not have joined the MLM in the first place; and 62% of them said that they would not join another one in the future.

Some surprising statistics about MLM participants

• ?95% of representatives, at or near the top, drop out of the MLM after 10 years
• 90% of representatives leave the MLM within 5 years
• 52% have some level of secondary education
• 50% of representatives call it quits in the first year
• 41% said that they felt that the sponsor misled them with false promises about their chances of achieving financial success
• 39% quit MLM organizations because they felt awkward selling to family and friends
• 34% were recruited based on their friendship, and not business strengths
• 12% were recruited by a family member – without a clear description of the MLM opportunity

What is the advantage of joining an MLM?

Advantages to joining a MLMs:

• There are absolutely no entry barriers to entering MLMs.
• There is no prerequisite training or education level.
• There is no set schedule, you can work full time or any number of hours you want.
• You can work from anywhere, even from your home.

You have to be careful though, because even though they are called advantages, they can also be disadvantages.

• No barrier to entry – anyone can join, even individuals with nefarious motives
• No education or training requirements – individuals without any business experience can join
• No set hours – you only get out what you put in
• Work from anywhere – easy to get distracted and lose focus on your main goal

If I do join, how should I recruit?

What every you do, avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That's a time-tested and traditional tip-off to a pyramid scheme.?And please, DO NOT pay anything or sign any contracts at the "opportunity meeting." Wait 24 hours to think over the sales pitch. Because even though most MLM startup cost are low, this is your hard-earned money, so don't rush into it.?The bottom line is that even though it is a low start-up cost, it can be a lot when you are living paycheck to paycheck.

Before you join, ask yourself the following questions:

• How long has the company been in business?
• What is the company’s reputation (have they every been sued)?
• Is the company easy to find on social media, blogs, and websites?
• What are the terms and conditions for joining?
• What is the compensation structure?
• Can I get all of the terms and conditions in writing?
• Who will be my point of contact?
• Am I required to purchase a large number of products or services?
• Are there any additional expenses or fees associated with this MLM opportunity?
• Is the amount I can earn mainly based on the number of individuals I recruit, or the number of products sold to consumers?
• Do I have to purchase a certain number of products or services to stay at a particular level or rank in the company?

Keep in mind that when you recruit new distributors, you are responsible for the claims you make about how much money they can earn. BE HONEST and REALISTIC, because if your promises fall through, you could be held liable. Even if you are just repeating claims written in the company brochure or what you heard from another distributor. If you don't understand any part of the MLM products, services, or is compensation structure; ask your sponsor for more information. Keep asking until you are absolutely clear about the process.

Although the emphasis is on the potential for achieving financial success (that may or may-not happen), make sure you disclose the pitfalls, and that the earning results will vary. Sadly, sponsors rarely emphasize the extreme likelihood of failure, or the extreme likelihood of financial loss, while participation in the MLM.

Even though MLMs are legal, the way that most people recruit is unethical. How many of you have been contacted by someone who desperately tries to find things that you may have in common, or they sheepishly give you complements about how astute you are??Then they invite you over for dinner or send you a link to “check out”?

Hey, to all MLM recruiters out there, don’t pretend that you are interested in building a relationship, when you are just prospecting for a new recruit. When you do that, you are treating them like they are oblivious to a sales pitch. Even if you get their attention, most will be offended in the end. Oh, and please don’t be that friend or family member that always has a business opportunity. Because I am telling you, you will lose friends and your family will begin to avoid you.

Use the BLUF method – Bottom Line Up Front:

• Introduce yourself – your background and prior success. If you are not successful be honest and tell them
• Tell them why you are bringing the opportunity to them.
• Do not lie, omit, or mislead – if it is all about increasing your numbers, let them know.
• Make sure that they understand that they will earn commissions from the sales of the recruits they bring in.
• Set expectations by giving them the vision, but let them know that there is a possibility of financial loss.
• Let them know that their financial success is based on the amount of work that they are willing to put in.

So why do MLMs have such a high failure rate?

Well, it is because of the way that the Multilevel Marketing programs are structured. As an independent representative, you have to maintain a certain level of product or service sales in order to qualify for the commissions and/or bonuses. You will also have to recruit and maintain a specified number of distributers to advance up the various levels in the MLM personnel structure (also-known-as “rank advancement").

Oh, and on top of having product/service purchase cost, you will incur additional expenses: downline distributor training, sales conferences, marketing books, and sales literature – all “tools” needed to be a successful MLM’er – and yup, these additional expenses come out of your profits! So, you’ll find yourself reinvesting most (if not all) of you profit, and all of these additional expenses benefit the company. Think about it, they have a guaranteed income stream through your product and service purchases, which you are required to maintain, in order to receive any kind of compensation.

Another reason for failure is that The MLM structure is a catch 22 – you have to show you are successful so that you can bring in more recruits, but you need the recruits to be successful, and sadly most people recruit their peers or people who have the desire to be rich, but don’t have the experience, mentality, or resources necessary to succeed.

So, what’s next?

Anyone still interested in learning more about the ethics of a multilevel marketing company can investigate the organization using the tools provided by the Better Business Bureau (BBB), the Federal Trade Commission (FTC), your state Attorney General, the U.S. Consumer Product Safety Commission, and the National Labor Relations Board.

Before you join, learn as much as you can about the company by doing an internet search. Perform your internet search by entering the name of the company and buzz words like review, scam, or complaint. You can also go to the local library and look for articles about the company in newspapers, periodicals, and magazines. If, you can’t find the MLM company rethink joining, because most successful MLMs can be found by performing a simple internet or library search.

Make sure you check for complaints about any company you're considering. Don’t be fooled, a lack of complaints doesn't guarantee that a company is legitimate. You may have to canvas the MLM member prior to joining.

Last thoughts

I hope that I have given you a thorough look into MLM opportunities. But now the gloves come off!

Earlier, I told you I did MLM for ten years – looks like I am one of the 95% that moved on. I didn’t quit because I couldn’t do it, I left because it became too cumbersome. I found that I was prospecting and not prospering. I met a lot of acquaintances but made no lasting friend. I found myself sifting people like wheat, and that is not a good thing (see Luke 22:31).

After 10 years of recruiting, I finally came to the realization that I was solely responsible for the financial welfare of everyone I brought into the business. Slow learner huh, it wasn’t that I didn’t think about it early on – I chose to believe the company hype to justify my actions. I held on to the old-adage – you can lead a horse to water, but you can’t make him drink. In other words, I could show them the opportunity, but it wasn’t my fault if they didn’t continue to do it. I cry foul on that justification, because the only reason that the person joined the MLM was because I talked them into it. Oh, and seeing all of the success of the corporate MLMers – gave me false hope. It really hit home when I saw people that struggled to come up with the funds to get into the business fail.

I also started to see the many loopholes that the MLM companies have, the smoke and mirrors (legal stuff) that allows them to withhold commissions, while still being able to conduct business and generate revenue. The straw that broke the camel’s back is when I got the “Stink Eye” from my upline and sponsor because I started asking questions and making suggestion on things that we could do to make product sales and recruiting run efficiently (reduce overhead and stop omitting key point from the recruiting pitch). Needless to say that didn’t sit well with my sponsor.

If you choose to join a MLM, I want you to understand that the failure and loss rates for MLMs are not like those for a small businesses. Consider this, 39% of small businesses have been found to be profitable over the lifetime of the business, whereas less than 1% (0.3% to be exact) of MLMs participants realize the earnings advertised in MLM promotional materials and talked about in the recruiting meetings. According to a report that was published on the Federal Trade Commission's website, a study of the business models of 350 MLM companies in the United States, at least 99% of people who join MLM companies lose money. That is scary, because for every 1,000 people who join an MLM organization, only 3 will earn more money than they spend.

I will leave you with this. As a MLM recruiter, I know you may feel like you are bringing prospects a great opportunity to make additional income or reach financial freedom, but if you aren’t realizing any success – what makes you think they will? With that said, you are better off opening a small business than joining even the most successful MLM.