What Exactly Is Multi-level Marketing, and Why Is It So Flawed?
We’ve all heard the expression “if it’s too good to be true, it usually is”. Does this apply to all multilevel marketing schemes? Or as I heard them referred to recently, “multilevel marketing scams”.
I know it’s not just me who signs into Facebook, and is bombarded with invitations to groups selling revolutionary body wraps, low-cost make-up that will make me feel beautiful, and scented candles that will transform my home.
And it’s not just the groups that I’m asked to join – there are countless invites to become part of the team and sell these items. With all the assurances that these products sell themselves and I’ll earn lots of money, it seems too good to be true.
Or, have I just stamped on the dreams of those who want to have their own successful business? Is the problem with the marketing technique rather than the business structure?
What is Multi-level Marketing?
Multilevel marketing (MLM) is a marketing strategy where salespeople earn money by selling products and recruiting people to join their team. They receive a slice of the money earned by those whom they recruit. These sellers are in turn urged to sell and recruit. It started in the US at the turn of the nineteenth century with California Perfume Company, better known as Avon.
Search on Google for “multilevel marketing” and it’s hard to avoid terms like ‘scam’ and ‘pyramid scheme’. Claims that the entry and product costs are high, and that reports of profits are vastly inflated help to give this type of marketing a negative image. But balance that with reports of Donald Trump and Myron Wentz earning billions from their associations with multilevel marketing organizations, and it’s not hard to see why so many people want to be part of the endeavor.
Why Do People Join Multi-level Marketing Organization?
The jobs market is tough, whatever industry you’re in. Promises of easy money that you can make from the comfort of your own home are bound to be attractive to those who are between jobs, unhappy with their present employment, or who have to schedule work around other commitments.
I’ve also seen highly-paid professionals selling for these companies. With so many expenses around childcare, saving for a house or paying off a mortgage early, or even a dream holiday, it’s a good way to accumulate cash.
Or is it?…
Do You Really Make Money from MLM?
The short answer is, it depends on how much you sell. Obviously, those who sell a lot will make more money than those who sell very little. Of course, no company can give assurances that anyone will make a certain amount of money if they’re relying entirely on commission, but there are figures that they can provide.
However, it’s been impossible to find online any figures setting out average sales income, average profit margin or even average turnover of salespeople for any MLM. Information is limited for people like me who are simply curious (it could be different for those who have signed up). Where it is given, it tends to be in terms of the percentage of commission that’s earned on sales. It’s hard to translate that into ‘real’ terms.
There are widely publicized bonuses for sellers who hit certain targets. I’ve seen reports on social media of fabulous vacations that have been enjoyed by friends who’ve had a good sales month. But, these aren’t just to brag about their vacation, it’s to also sell social media followers on the idea of also working for that company. (“If SHE can do it, then I’m sure I can! Where do I sign up?”)
The problem is that by recruiting more sellers, there are more people competing for customers. So why recruit when you’re going to damage your sales figures? Because you’re paid for it.
This where the difference between MLM (which is legal) and pyramid schemes (which are not) comes in. The pyramid scheme relies on recruitment, and it eventually collapses because there are not enough sales to sustain the recruits. MLM firms rely on sales of products, rather than recruitment.
To this end, people who opt into a genuine multilevel marketing scheme should be able to make money, providing they set their goals beforehand. I don’t believe the claims that it’s easy – I do think that those who have earned significant amounts have gone into it with a clear vision, surrounded themselves with dedicated and talented team members and worked extremely hard. In that respect, it’s no different to other forms of marketing.
Read More: 5 Lessons To Streamlining Your Sales And Marketing
What’s the Problem with MLM?
MLM has an image problem that is partly caused by the techniques that I’ve witnessed some sellers use. No one uses social media to be overtly sold to and very few people respond positively to borderline aggressive sales techniques. Sometimes, the products that are offered to me are items that I don’t consider relevant for me personally.
Would a friend push diet pills/fat-burning wraps/group vacation memberships/insert-almost-any-service-or-product-here at you while they were visiting your home? I doubt it. If a polite, “Thanks, but it’s not for me” was the answer to a “job offer”, would the employer asking another five or six times change your mind? Probably not.
The Future of MLM?
If a more content-driven approach was adopted, with greater sensitivity to the interests and requirements of potential customers, it’s likely that sellers would benefit. Selling online is a new frontier to many MLM salespeople and growing pains are to be expected.
Ongoing and comprehensive guidance in the best way to approach customers, how to sell to friends, and how to recruit effectively, would not only be responsible, but lucrative for those at all levels on the MLM tiers. It’s the best way to turn this form of marketing into a genuine opportunity.
Want to write for Social Media Week?
We're looking for individuals around the globe to contribute articles on marketing, media, technology, and more.