What is wrong with Multi-Level Marketing?

A critical look at MLM schemes.

by John Jackson © 2004

Friends, family and acquaintances usually promote MLM schemes in a very enthusiastic manner. We have a tendency to believe what people tell us; personal testimony is a powerful convincer. This is usually a person's introduction to MLM.

The promise of great wealth for little work appeals to our less attractive characteristics of greed and materialism. Someone we know telling us that they have discovered an incredible opportunity to achieve great success can be enough to allow our base instincts to take over, and leave our common sense and critical thinking skills behind.

This "appeal to greed" is often the main focus of MLM promotion. MLM companies don't hide it; there will be photographs of luxury cars, exotic locations, and Lear jets everywhere, yet little mention of the product that is to be sold. The product is an incidental feature in this great "opportunity".

The old saying, "If it looks too good to be true, it probably is", should be borne in mind when facing such extravagant claims.

Flaws with MLM schemes:

  • Doomed by design

    The idea of sponsoring ten people, who in turn each sponsor ten people, would very quickly lead to saturation of the market.

    A traditional business will be careful to match its sales staff to the market otherwise they will have over employed people to sell to a market that isn't there; a costly mistake to be avoided.

    MLM schemes very quickly saturate their potential market. The problem is that because new members to the scheme pay to join, there is always a plentiful supply of money flowing into the company. This money is not raised by product sales, and has to be recouped by the new member by selling the stock they have bought from the company.

    Recouping this money will not be easy in a saturated market. The rules of supply and demand are a real factor in business. They are completely ignored in MLM as the company makes money from recruiting new members whether they sell any products or not.

  • The perfect product and exponential growth in an untapped market

    Whether it is Internet/Telephone services, perfumes, pills and potions, or gadgets by catalogue delivery, the product is usually described as a "perfect consumer product". This new marketing approach means that the market is almost untapped and the potential for growth is immense.

    In reality products and services only ever achieve a partial market penetration. Goods and services are no more attractive to a potential customer simply because it is offered by a friend or relative.

    The inconvenience of buying products on a one-to-one basis is not something most people want to endure; it means changing their normal buying routine, and it means restricting their choices.

    Products are much more difficult to sell than the sales pitch promises.

  • Relationship issues

    The most disturbing issue regarding MLM is the impact it has on personal relationships. MLM is often called "relationship marketing". The premise is that as the products and the "opportunity" is so good that we should share it with our friends and family.

    What happens in reality is that your friends and family become "prospects": people to sell to; potential members for your downline. You may receive help, in the form of orders, from those who wish to help you start your new venture at first; however, overwhelming pressure to buy, to join the scheme, and the constant one-track conversations about the scheme will quickly alienate you from other people.

    You can quickly become a bore, then someone to be avoided at all costs!

    This damaging effect on relationships extends to wherever you decide to operate. If you are a member of a church, community centre, golf club, etcetera, you run the risk of alienating those around you and losing friends and of course your personal credibility.

    If in your early enthusiasm you manage to sign up some friends and family to your downline, you may not be very popular once they realise that the wonderful scheme that you got them into has ended up costing them money. Relationships, whether formal or informal, that were based on trust, may never be rebuilt.

  • You need to be "teachable"

    One feature of MLM schemes is the use of "inspirational seminars". Meetings where members get together in a positive, motivational atmosphere, and are given propaganda and encouragement to continue with their venture.

    One key feature is that members are reminded that the system the MLM works by has been tried and tested and that members should not try to do things their own way otherwise they will fail.

    They are told that one quality of a successful member is that they are "teachable". Members should listen to what they are told and follow instructions.

    This includes following the system, but more disturbingly, it includes instructions such as: not listening to negativity; ignoring the concerns of others; letting any ridicule go above their head; and only focusing on and staying committed to their cause. "Enthusiasm" is the buzzword.

    This is the main reason that people get so alienated by those around them. Concerns and objections by friends, family and colleagues are dismissed because they are too negative to see the opportunity.

    Talking the scheme up is also a must. No matter how badly you're doing you must always talk in a positive light. Things are always going very well indeed and joining the scheme is the best thing you've ever done. It is extremely unusual to hear someone admit that they are struggling to sell products and that they are disillusioned with the scheme.

    If the word "gullible" is used in place of "teachable" then a true picture of what is really going on emerges.

MLM schemes are selling false hope. They promise the opportunity of great wealth, freedom, and independence from the rat race. In reality MLM schemes are nothing more than glorified "get rich quick" schemes that will cost you money, time, credibility and even your self-esteem.

Summary of an MLM scheme:

  1. The business model is fatally flawed.
  2. It suckers people in with an appeal to greed.
  3. People can be convinced of it due to wishful thinking.
  4. It can get a grip of people due to indoctrination and self-deception.
  5. It may result in the loss of money, credibility and self respect.
  6. The perpetrators of the scheme will have made a profit out of you regardless. They are the ones that can't lose!