What Is Wrong with Multi-Level Marketing (MLM)?

Multi-Level Marketing (MLM) is one of those businesses which supposedly seek to empower people by turning them from employees or unemployed to self-employed. It encourages people to become entrepreneurs by getting them started in business which is (there is no other way around it) selling products.

To further maximize or optimize their chances of making more money, they need to recruit people to do what they do and so on. The more they recruit (and if they are active in selling), the more it will benefit you in monetary terms and other perks. If you have been attending their seminars which they call Business Opportunity Presentations (BOPs), they will cite examples of invite those who have made it in the business with the hope of inspiring others to follow the path they have taken.

networking
The main selling point of MLM is the more people you recruit, the more you earn thru passive income. The problem here is a lot of MLM companies rely entirely on recruitment rather than promoting the products distributors sell. Source: EducationInsta

However, critics of MLM will point out something is not right here. For them MLM is a “get rich quick scheme” to get people to join but hardly anyone benefits from it. For others, it is a sort of a pyramiding scheme which is considered illegal considering prospects are encouraged to recruit more people into the program to increase their chances of making more money rather than focus on selling products. If MLM claims to be the wave of the future in business, why is it a lot quit and only a few profit? Business analysts have identified the flaws of MLM.

Related Article: Typical Lies of Network/MLM Companies

To look at the opposite view, view the Benefits of Multi-Level Marketing

  1. Prospects must pay for a start-up kit. Analysts claim such fees are not necessary. The only thing prospect should pay is to cover for the education and training expenses during BOPs. This is especially true for people who have no work or no money to begin with because they are either poor or unemployed. They may try to borrow money but it might be difficult to convince people to give them loan to start up because of their skepticism towards MLM.
    1. In relation to the first one, the products prospects are encouraged to sell are rather pricey compared to those sold in the mainstream market. During BOPs products like health supplements are appealing. There are testimonials and all. They are so convincing you would like to buy them yourself. But when it comes to selling, you might find it difficult given the prices. Some resort to the “tingi” system though not encouraged by their uplines (those who recruited them).
    2. Furthermore, not everyone can be a salesperson. You really need to be aggressive in this line of work and you need to have a vast personal network of prospects to market the product and possibly recruit into the business. In addition, there is no guarantee everyone will buy your product. They will cite many reasons and it will take time until you find someone who is genuinely interested.
    3. Usually, the immediate recruits are relatives and friends. While they are the most likely candidates, it is noticed they tend to be more difficult to manage and may cause a strain in relationship when business is mixed with personal matters.
    4. MLM is commission-based. Distributors do not get a fixed salary like employees. Their compensation depends entirely on their ability to sell products. But that is not all. They have to meet a quota in order to get that commission. If they fail to meet the quota, they get nothing at all and it would be frustrating to fall short of the quota after all the trouble they go through to sell the products. Some quit because they do not have “operating expenses” to sustain themselves since they have no other source of income and borrowing money is out of the question (they cannot rely on loans all the time to keep going).
  2. One other thing wrong with MLM is their unrealistic pitch of promising big money with little work. People get the wrong idea that they can make a lot of money without making an effort by simply recruiting people. The reality is you really still need to work not by merely recruiting, but you also need to guide your recruits or downlines. Plus you may also have to do some selling yourself.
    1. In connection, during BOPs, presenters tend to emphasize how much you can make but hardly mention the “how” part. It is here prospects tend to be left to their devices on how they can make it work.
  3. There seems to be the lack of proper education or training of prospects when it comes to selling. Although they are called. “distributors,” they are still salespeople and salespeople are not exactly popular given the stereotyping and negative image attached to them as being too aggressive and unscrupulous. They will do everything and anything to get people to buy even if it means bothering them at odd hours or inopportune times. They have no respect for other people’s time. In the eyes of critics, they see customers more as a source of profit rather than people they want to help. It also does not help that they have to meet a quota to get compensation and other perks.

What makes MLM different from other companies like Avon, Tupperware and other similar companies that are more successful? MLM defenders will claim the aforementioned companies also thrive on traditional selling (that means selling door to door). If you are to ask anyone salesperson connected with these companies, what makes them different is they believe in their products and the company is behind them.  Mention these names and people can recall or associate certain products, products they really need and the prices are not prohibitive which makes them sell a lot easier.

Furthermore, they empower their salespeople, encouraging them to start their own business. In addition, they have a very robust infrastructure, great training program and deliver on rewards promised such as all-expenses paid trips abroad and cars. What’s more, they do not make lofty promises of getting rich quickly and their salespeople understand what they are getting into. They work hard, persevere and are eventually rewarded.

The salespeople are also assured of support when they need it and are not left on their own. If there is anything that can be inferred here, the reason why a lot of MLM companies are not trusted or do not last is because they have not educated their recruits well enough to believe in the products and they leave them on their own without giving them support.

In addition, these companies have passed government regulations and duly licensed, making them legitimate. A lot of MLM companies are questionable as far as being regulated is concerned despite claims of being accredited. It may require careful research on the part of the prospect to see if what they are getting into legitimate and it will got get them into trouble.

Featured Image Source: Constative

Aaron Ronquillo

Quizzer, Practical Shooter, Martial Artist, Movie Buff, Avid Reader, Amateur Foodie and Photographer, Cat Lover; Someone with a wanderlust; got a keen eye for detail, trivia; enthusiastic but cautious; patient, calculating