What's the big deal about Young Living

Is Multi-Level Marketing a Scam?

Is Multi-Level Marketing a Scam

Recently I’ve been seeing negative rumblings around the internet about “that MLM thing.” That’s “multi-level marketing” if you don’t know.

Some companies, like Jamberry, Younique, Young Living, Pampered Chef, Avon, and others take the money that is usually spent in traditional advertising and pay their members in commissions to spread the news about their products.

In other words, Kohl’s and K-mart spend money in advertising to convince you to buy their products. This doesn’t necessarily make them sneaky or dishonest, nor does it make their products worthless. It just means they are using their advertising budget to increase awareness about their products.

And, by the way, if your favorite blogger is showing you a great deal at Amazon or Wal-mart or Vista Print, there’s a good chance she is getting paid to do so. And there is nothing wrong with that. They are receiving a payment from a company in return for advertising. This is often called “capitalism.” (See Proverbs 31 for other examples of a woman practicing capitalism.)

Alternately, multi-level marketing companies pay their members to promote their products. In the same way the stores mentioned above aren’t trying to trick you out of your money, neither are multi-level marketing companies. Again, this is capitalism at work and isn’t illegal or shady, as some claim.

What both kinds of companies are doing is simply trying to spread the word about what they are selling. 

The claim I have seen, and one specific claim which was aimed at me, is “She is only telling me about this so she can make money!”

And it is indeed true, that I could be writing everything on my site for the single purpose of getting you to give me your money. Heck, for all you know I’m not really a homeschooling mom of 8 at all, but instead a 52 year old ex-convict named “Scary” Larry Rodriguez.

MLM scams?

It could be that I haven’t really taught 7 of my children to read using “Teach Your Child to Read in 100 Easy Lessons,” and that I don’t really read “Little Britches” aloud to my children because they beg me to every couple of years, and these pictures of my children doing the Bible study I wrote, “How to Manage Your Mouth,” could even be fakes!  (Those are affiliate links, by the way.)

That could all be a ruse.

It might be that my singular interest is to trick you by dishonest means into making myself rich, and in the process making you poor.

And by all means, if you believe those things, I would click away from this site as quickly as possible because you would be a fool to follow my advice on parenting, homeschooling, or anything else!

Except that some of you know me in real life. And you know that I really do homeschool my 8 children, and I really do deeply love many of the books I use to teach them, and I really am not a scam artist who is only interested in getting your money from you.

And that is the beauty of multi-level marketing. For example, when I bought Younique mascara from my long time friend, Ellen, I knew that she would make a commission from the sale, and I was happy for her to have that. I also knew that she would never try to scam me or trick me into buying a product that was worthless.

Ellen

(Ellen and me – First day of college, 1984)

When I mentioned to Ellen that the only thing I didn’t like was that I sometimes ended up with flakes under my eyes at the end of the day, she told me that meant I wasn’t applying enough of the sealer in the second step of the application process. Voila! Problem solved! Because I know Ellen and because we have a relationship, I can go to her with any concerns I have about the product and she can figure out how to resolve any problems! I know she is honest and believes in any product she promotes, and I trust her.

Ellen

At the lake with Ellen, summer 2014

Now, if you know and trust someone as a source of valuable information, and you are interested in the product recommended, wouldn’t that be the perfect person to buy from? I know that I probably wouldn’t have been able to get the advice Ellen gave me on applying my mascara from the lady at the counter at CVS. But because Ellen is my friend, she helped me out.

Of course, Ellen didn’t coerce me, pressure me, trick me, or Duck Tape my hands behind my back and force me to order the mascara from her. I was already interested in it and I decided on my own that I wanted to order. Again… capitalism. It was a win/win. Ellen got the commission for bringing the product to my attention, and I got the mascara I wanted with excellent customer support.

No trickery. Valuable product. Excellent customer service.

See? Win/win.

So, if you are interested in a product, you know the company to be reputable, and you trust the person recommending it, there really is no reason to avoid it simply because it is available through multi-level marketing.

And there is certainly no call to insinuate someone who is involved in multi-level marketing is working toward dishonest gain. 

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Comments

  1. When I think of MLM, I think of Amway, which Hubs and I were a part of briefly back around year 2000. While the products were great, they were pricey and there was a lot of pressure and hype to sell and “get rich,’ and grow your business. It was almost like a secret society in some ways. BUT, I’ve had great experiences buying from companies like Mary Kay, Young Living, Tupperware, etc. I still have some fabulous Amway products that I use. The business model of MLM does work, but you have to avoid the hype and the pressure. You had great thoughts on this. Thank you.

  2. Yep! Love you too Connie! :-) And you are the reason I decided to truly give the Young Living Oils a try because I KNOW you and I KNOW how honest and trustworthy and loving you are and what a great mom you are. Plus I SAW how amazingly they worked on Peyton’s burns. Love you sister!

  3. I don’t think most of these companies are scams. They’ve been around for decades.

    What I can’t stand is the constant push from “friends” to buy from them. People who NEVER talk to me any other time send PMs and post on my Facebook page about what they’re selling. KMart doesn’t send me constant PMs about how I should join in on a conference call to hear about its product or insist I take time out of my day to go on a “web walk” or listen to a phone call pushing its products.

    KMart tells me in an ad that I can view at my leisure what it has for sale and then I choose to buy or not buy the products. I don’t hate MLM because I think it’s a scam. I hate it because I’m sick of people pushing their crap on me that I don’t want after I have REPEATEDLY told them I don’t want it. And that puts me in a crappy position because sometimes it is someone who is a good friend or family member and I have to walk a line between keeping a friendship and being forceful enough in my “NO!” to make it stick (and it never does, by the way).

    • Smockity Frocks says:

      Thanks for bringing up those points. I can see how it would be annoying to be bombarded with messages from people you usually don’t interact with. There are obnoxious people in all walks of life! :)

      I guess because I don’t have a problem saying, “I am not interested in the least in your product and would never spend money on something like that. You might as well focus on someone else,” I don’t have a problem with my “no” not sticking.

  4. Hahahahahah. I love it. Oh those darn affiliate links. I love MLMs. I think it gives people real opportunities. Thanks for sharing.

  5. Thank you, well said. I am a Team Leader with Usborne Books & More… a MLM for children’s books! People often seem excited about the books when they think I’m a book store with a shop somewhere, but when I tell them I am an independent consultant and do home parties along with a myriad of other things (bookfairs, etc), often times they suddenly jump to the conclusion that I must be a scam. But, I am the SAME as a book store, only I work from home so I can be with my children – yes, we home school and USE these books – and I help you get FREE BOOKS while providing excellent, personalized customer service. How can that be so scary?! Do brick and mortar book stores do that? No, not usually. On the contrary, it’s totally awesome that so many moms can be successful businesswomen from home or while working other jobs, too. Anyway, thank you, Connie, for your insightful blog post on this topic!

  6. The facts are against your argument that “Alternately, multi-level marketing companies pay their members to promote their products.” See the following excerpt summarizing the research:

    “Myth of MLM Income Opportunity: 99% Lose Money in MLM

    Pyramid scheme expert and multi-level marketing expert Robert FitzPatrick has been studying these MLMs and business opportunity schemes for years. He is an absolute expert on how they operate, the pay plans, and the failure rates of distributors. Robert produced a report on 11 MLMs , including Arbonne, Cyberwize, Free Life, Herbalife, Melaleuca, Nikken, Nuskin, Reliv, Usana, Your Travel Business, and, Amway/Quixtar.

    The study utilized information disclosed by these eleven companies, five of which are publicly traded. The annual revenue of these companies collectively exceeds $12 billion, and about 9 million people around the world are recruited into them each year.

    The most important results of FitzPatrick’s work were the following:

    99% of all distributors in these companies earned on average less than $13 a week in commission income. (In 10 of the 11 companies, the commissions were less than $10 a week.) This isn’t even enough money to cover the minimum purchases they’re required to make in order to “qualify” for commissions.
    Recruitment into these companies is largely based upon the offer of an “income opportunity,” yet these statistics show that the income opportunity is essentially non-existent and falsely promoted.
    Recruitment into these companies creates billions of dollars of losses to consumers each year.
    The losses of 99% of the distributors are transferred to less than 1% of the people at the top of the sales chain as “commissions.”
    . . .
    The sales forces are churned (lost money/quit/replaced) at rates between 60-90% each year. Nearly all these churned sales people stop purchasing the products when they quit the schemes, indicating that they had made purchases primarily as part of the MLM income proposition in which they inevitably “failed.”
    The massive losses among MLM recruits are explained away by MLM’s lobbying organization with the claim that the great majority of MLM participants don’t want to earn money. They only are interested in buying the MLM goods at a “discount”, the Direct Selling Association claims. The explanation does not address the impossibility of broad-based profitability – regardless of time commitment, intention, motivation or levels of talent – in an “endless chain” recruitment model. The claim of “discount buyers” also does not account for the extraordinary churn rate among MLM participants, the majority of whom quit the schemes within a year and stop buying the MLM goods forever.
    The lack of broad-based and profitable retail selling is the single most telling sign that MLM companies are merely pyramid recruitment scams, not direct selling businesses. They have no “customers” and they have no profitable retail salespeople. A business in which almost none of its sales representatives earns a profit and almost none has a sustainable retail customer base cannot be called “direct selling.”
    In virtually all cases, MLMs require monthly or annual purchase quotas by the sales people in order to qualify for the promised “commissions and rebates” gained from new recruits. The required purchases gained by making false promises of future income account for virtually all of MLM “sales,” not consumer demand or legitimate marketing.
    Commission pay plans in these companies send most of the money to the very top levels:. One of the largest MLMs in the world sends 84% of all commissions to the top 1% of its distributor chain. What chance would the newest recruits at the bottom have to earn a profit?
    In half of the 10 companies, 70% or more of participants earned no income at all. For example, 96% of Arbonne’s sales representatives never earn any commissions at all. 80% of YTB’s “agents” also earned no commission at all. In other cases, the same pattern may exist, however, the companies hide that information by only counting the “active” participants or those “active for

    Women are not making a living. . . . The very top distributors earn mostly small incomes (not real career earnings) and a very tiny number of distributors earn big money. Everyone else earns next to nothing… with most everyone else actually losing money.”

    quoted from the following article:
    http://www.pinktruth.com/mary-kay-facts/myth-of-mlm-income-opportunity-99-lose-money-in-mlm/

    • Smockity Frocks says:

      This has been the opposite of my experience. The last check I deposited was a WHOLE lot more than $13, and I have many friends who would say the same.

      Also, in the example I gave in the post, I WANTED mascara and I ordered it from my friend who made a commission. If all she got was $13, so what? I am happy. She is happy. I’m not sure where the scam is. ??

    • Oh, that’s easily explained! The research isn’t wrong, and neither are you, but it IS misleading, and here’s why. Many MLM companies allow members to invest for THEMSELVES and their family. And that’s what most people do. In the company I’m with, for example, people may buy the wholesale kit (to receive wholesale/distributor pricing for life) without ANY commitment to distribute/sell product. At this time 92% of wholesale members don’t distribute product/earn income BY CHOICE. Only 8% of us have chosen to make money with the business.

      I love that MLMs offer that option!

      I do disagree with your “woman are not making a living”, though, because those of us who CHOOSE to distribute with a company that is a GOOD fit with a product that we can stand behind that people need and can buy online on their own whenever they want without us having any inventory at all… Yep. We’re making money. :)

    • Thank you for quoting this. It is helpful. I think some of the disagreement comes because we have experience with different MLM companies, some of whom have different requirements for commissions.

      I think some companies are “scams” in that they sell a strategy that simply doesn’t work for most people. The fact that they don’t usually work isn’t illegal (let the buyer beware!), but it may be unethical or at the least, misleading.

      I think our problem may be the sweeping generalizations that are given for all MLM companies even though we don’t have experience with all (or even several) of them.

      We can only tell of our experiences and let that do the selling. As buyers we must still “beware” of whatever investments we choose to make.

  7. I too am in there MLM with my Avon business. Anything worth having is worth working for. Over the years Chuck and I tried several MLM products. Some we liked, some we did not. Some we sold, if we believed in the product. When I fell last week, I immediately went to the computer and ordered one of the products I believe in for healing naturally. We sold it for a while several years ago, but did not work it hard enough to make money, friends of ours did…My Avon, I am working it because I believe in the products and if I find one that is not what it is supposed to be, I will let people make their own decision if they tell me they want to order if after I have told them my opinion. As you say, “It is called Capitalism” , the thing that made our country the country it is supposed to be. Freedom to make a living in your own way.
    If you, my dear cannot be trusted, no one can. I love the pic you posted of you and Ellen as your mom and I dropped you off at ACU…Definitely thinner days…LOL and then the BFF Coke can. Reminds me of the Girl Scout song, “Make new friends but keep the old, one is silver but the other gold..Just spent the weekend with my two besties from high school. First time we had been together alone in 56 years. What a blast it was….Love you Connie. Keep up the good work with your blog, your homeschooling, and your children…

  8. There is a HUGE difference between working for a large corporation and getting involved in an MLM.

    For starters you make a set salary with yearly increases and sometimes bonuses when you work for a corporation, which comes with paid time off, health benefits, 401K contributions, training (paid for by the company) and other perks such as onsite daycare (depending on which corporation you work for). You have the ability to change career paths within a large corporation and climb the corporate ladder with bigger and better opportunities. And if you don’t like your manager, you have the ability to transfer out of your department. There are also guidelines that every employee must follow. There is a code of ethics and conduct in place. If you cannot do your job effectively as a manager, you lose your ability to manage and/or your job altogether.

    There is a reason MLM’s are mocked. Intelligent, well-educated people do not fall for MLM’s. They are looked down upon because we’ve heard from people who have lost money from purchasing products and promoting a company who has zero loyalty to ensure you actually succeed. A corporation knows the only way it can compete in their industry is by attracting and keeping new talent. And they do that by offering competitive salaries and additional benefits. An MLM cannot compete with real corporations like the companies you’ve mentioned.

    But people who work for MLM’s will continue to tell you that you are your own boss. You are not. Ultimately, you are working for free until you make sales. That means promoting a company that you do not own with all the fees that go with it: marketing materials, in-person training sessions, booth fees, purchasing tables, stands, table cloths, and banners to look professional. You will also have a team above you who makes money off of your sales without giving much support. If you choose to create your own team, you will make money off of them. It’s what I consider a legal pyramid scheme. The ones at the top make all of the money off of “recruits” while the one’s at the bottom struggle to make any money. If you disagree or question your “team,” they will cut ties from you while they continue to make a profit from you. If you really want to see for yourself, I suggest you sign up without a team to ensure no one feels they “own” you.

    You are essentially volunteering your time to promote a company that is not paying you anything aside from a small commission check or with rewards and incentives. Rewards and incentives do not pay your bills. However, steady income does.

    If you are currently in an MLM, I suggest you make two columns in an Excel spreadsheet. Label Column A Assets and label Column B Debt. In the Assets column, list all of the cash you’ve earned every month in commission. In the Debt column, write down every single out-of-pocket expense you’ve had (this includes travel expenses for training, office expenses, unsold product purchased, office expenses, booth/vendor fees, marketing materials, etc.) . Assets – Debit = Net Profit. You should make this a weekly or monthly routine. Ex. If I have $500 in commission this month and $750 in expenses than I am operating at a net loss of $250. If my commission is $1,000 this month and my out-of-pocket expenses are $300, then I earned a net profit of $700. The free trips and incentives will actually make these figure less as you will have to pay taxes on those “gifts.”

    The best article I found on this was from Mary Kay. Be sure to read the comments, too. They are quite entertaining. http://www.cbsnews.com/news/is-mary-kay-a-pink-pyramid-scheme/

    I wish you all well in any business endeavor you choose. Please make sure you do your research very carefully before jumping into anything.

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