By Kendra Stager
Multi-level marketing (often abbreviated to MLM), also known as pyramid selling, or even a pyramid scheme, is a business and marketing strategy that companies use where members are recruited to advertise and sell a product for a company based on the presumption that they will make money while working from home. MLM sellers are sold the idea that they can work from home, choose their own hours, and make up to thousands of dollars a month just by selling a product to their friends and family. Sound too good to be true? That’s because it is. This predatory business model usually ends up costing people more money than it makes them, and it can in fact alienate them from their friends and family.
Since people will often have to pay to become a consultant, or seller, for one of these companies, then pay for any conferences attended, materials needed and training, they can end up racking up credit card debt that they cannot pay off.
This becomes especially concerning when you consider that, in Canada, the average annual earnings for a consultant are $1,000.
MagnifyMoney.com, a website that helps consumers compare financial products, surveyed 1,049 multi-level marketing participants that were involved with at least one company over the past five years, and found that most people were making less than 70 cents an hour in sales, and that was before deducting their business expenses.
In fact, nearly 60 per cent of participants said they had earned less than $500 over the past five years. What’s interesting about this is that a lot of these consultants like to promote themselves by claiming that they make their money while working from anywhere and working whatever hours they want, putting down more “typical” jobs, but even a typical minimum wage job will end up earning someone more money, as well as benefits and job security.
Have you ever been on Facebook and suddenly received a message from someone you went to high school with five years ago but haven’t spoken to since, telling you all about some wonderful new product they’ve discovered? Multi-level marketing. Chances are they’ve sent the exact same message to dozens of other people that day, and are just waiting for someone who doesn’t know any better to respond.
This is because a lot of the business in multi-level marketing companies comes from the recruitment of consultants: consultants are expected to recruit more consultants to work underneath them, and in addition to their own sales, they will earn a percentage of their recruits’ sales. This cycle continues, resulting in the pyramid-shape that has become associated with this business practice.
This causes consultants to contact as many people as they can (typically through social media) to try and convince them to join their business that isn’t really their business, with the false promise that they too can make lots of money all while working from home and being their own boss. Not only will this annoy those that are being spammed with messages, causing strain on relationships, it will also suck innocent, naive people into risky business, causing financial strain for them as well.
Some typical targets for these messages are young women, who are promised that it’s a great way to make friends and earn lots of money while barely having to do anything. College students are targeted due to the fact that they’re looking to earn some extra money, or are looking to pay off their debt, and mothers are told that they could now work from home and get to spend lots of time with their children.
Not only is this emotional manipulation, it is incredibly misleading and dangerous. Think about it: how badly must this person need to make money that they are messaging people they hardly know in order to try and sell them a product? Sure, they get to work from home, but how is their pay? Terrible. What are their benefits? Nothing. How is their social life? Non-existent because people don’t want to talk to them anymore.
Multi-level marketing, pyramid selling, pyramid scheme—whatever you want to call it, it’s a risky business practice, to put it lightly, but a fast track to debt and social isolation, to be more blunt. Buyer beware: if a business opportunity sounds too good to be true, it is.