Perpetuating the Myth That People in MLMs Make Money

It is common for multi-level marketing companies to publicize  that  “direct selling” (the code name for multi-level marketing or legalized pyramid schemes) picks up during a recession. The whole industry is portrayed a massive opportunity for consumers to make money when their lives are otherwise in financial disarray.

This is sad, especially when the research clearly shows that 99% of people lose money in MLMs. People are looking to make money, are told that MLM is the answer and they will make money if they’re willing to work hard, yet they are almost guaranteed to lose money.

Sure, people might be able to make a little extra spending money from hawking MLM wares. But think about it…. If the economy is in such dire shape, who would really be buying these goods? That’s the part of the equation the recruiters leave out.

And the media is in on the con. Here’s an example of a story by major media. They want you to believe this is the norm:

THREE weeks before her third child was due, Susan Drucker Hunsaker had more than 20 women over to her home in Burlingame, Calif., for conversation and refreshments. She also invited them to look at Stella & Dot costume and semi-precious jewelry, which she had begun selling the week before.

Ms. Hunsaker, a former high school art teacher with a master’s degree in education, sells jewelry because she needs cash, and she needs it quickly. Her husband works on a commission basis in commercial printing sales; his income dropped by half in 2008, and he expects more of the same this year.

“We had already pared down as much as we could,” Ms. Hunsaker said. “I knew as soon as the baby came, I would probably have to go back to work. But with three children under 5, if I went back to teaching I wouldn’t make enough to pay for child care.” In the first two months of this year, she sold $12,000 worth of jewelry at six parties, taking home 30 percent of that as commission.

Did she sell this much? Maybe. If she’s like the Mary Kay consultants we know, she probably heavily discounted the products, yet reported the “retail value” of $12,000 to make it sound better.

And this type of volume isn’t something she’s likely to replicate more than once in a blue moon.We’ve all heard of “$1,000 weeks” and “100 faces in 100 days” and other gimmicks. These sound great. But we all know that these things are not replicated on a consistent basis.  Those 100 faces probably grossed the Mary Kay lady something less than $5,000, which leaves her with less than $2,000 gross profit over 3 months. And she probably had to annoy and harass her entire customer base just to get those 100 done. She won’t do this type of activity again for another year.

Sometimes the authors of such pieces try (at least a little) to present the truth about MLM:

“Most of the commission should go to the salesperson, not the recruiters above her,” said Robert L. FitzPatrick, founder of PyramidSchemeAlert.org, a nonprofit consumer education Web site. He advised asking a company how sellers are compensated.

Too bad they didn’t provide more information here, because I’m quite sure Robert gave it to them. If you take a look at the pyramid of any of these companies, you see that it’s nearly impossible for the new recruit to make a living(or anything close to it) just by selling the product. That’s one of many problems with MLM. You can’t make real money unless you recruit, and even those who do recruit aren’t likely to profit.

Why is the media so hell-bent on reporting that “direct selling” is the answer to money woes?

5 Comments

  1. MLM Radar

    In the first two months of this year, she sold $12,000 worth of jewelry at six parties, taking home 30 percent of that as commission.

    Numbers are eye-catching. Remember the old quote? “There are three kinds of lies: Lies, D—ed Lies, and Statistics.”

    Deception #1: A lot of people reading this will notice the big number and not much else. “She made $12,000.” No, she didn’t.

    Deception #2: You aren’t told that more than half of the product “value” is sales commissions. The real value of the products themselves is far lower than similarly priced products found at the mall. “She sold products worth $12,000.” No, she didn’t.

    Deception #3: The expenses are hidden. You aren’t told the commission is gross, not net. “She took home 30%.” No, she didn’t.

    Deception #4: A big start falsely suggests a promising future. All MLMs begin by exploiting your friends and family. For most people that gets exhausted within two months. “If she could make 30% of $12,000 in just two months, that means she’ll make six times that much in a year.” No, she won’t.

  2. I have been in MLM for several years and it can be profitable if you watch your expenses and treat it like a business. You sound very negative and skeptical and need to look into the leaders and how they got there and how dedicated to the work and time it takes to make money. Sales and recruiting a sales group of dedicated individuals is essential for any business to succeed. MLM is certainly no different. I say good luck to the ladies who want to stay home with the baby and other children and work in their spare time at this business. It can be rewarding and no I am not in this company but might be interested in the near future.

    1. BestDecision

      Do you consider recruiting deceased people as a way to be profitable? Cheating is rampant in MK. I can’t speak for any other companies, but I do know many of them have tried to emulate the success of MKI. The example I just gave is 1 of scores I could give of how people are “earning” cars and moving up. I personally know more than one Trip Director that finished each of their trips on the very last night by spending THOUSANDS of dollars on inventory to make up for the production their “dedicated” Consultants weren’t producing. We’re talking more than $10,000.

      If you ever think of MK as an option, this Cadillac Director can tell you much of what you see is fake, bought, and a lie.

  3. raisinberry

    Best Decision is speaking the truth. Absolute fact. The year end fraud is off the charts, and EVERYBODY knows it! >WinkWink<

    Back in the day, one of my friends who drove a pink grand prix (remember those?) Was "finishing" 350,000 Unit club. Only SHE QUIT. When it suddenly dawned on her that that last bit of production, some 3,500 wholesale was going to have to come from her, and she was pressured to "find a way or make a way" by her SSD/NSD her Husband stood in the gap and made her SEE what this really was!
    She COMPLETELY QUIT!

    We go along, month after month, year after year, always doing what we did before, without evaluating what it is we are really doing…caught up in the "Cult", camaraderie, and expectations of others. If YOU have to kick in to make your numbers, YOU and your Unit are not producing- BUT…BUT! You are never to let anyone know that! You can't KEEP the lie going if you FAIL!
    So you see? They've got you.

Comments are closed.