MLM Products: Are they Overpriced? Do They Work?

About 10 years ago, Jon Taylor, PhD (a well-known researcher on MLM schemes) wrote a piece about MLM products and their quality and pricing. While the pricing may have changed a bit, the overall conclusions are still valid. I hope you red this whole  piece, but the bottom line is that the products are priced much higher than comparable products you can find online or in stores, and the quality is no better (even thought that is how they justify their higher prices).

How do prices for products from MLM companies compare with alternative outlets?

Not very well. In spite of the claims of MLM/DSA communicators that most MLM participants sign up to buy the products at a discount or to resell them for “a little extra income,” the facts do not support either claim.

MLM products purchased at wholesale prices are so expensive that few persons can be successful in selling them at retail prices for a profit. Also, since MLM sponsors have struck a deal with state tax commissioners, requiring sales taxes to be paid on wholesale purchases, and since shipping charges to one’s home must be added, the margin is too slim to provide much incentive for direct selling to non-participants.

To check this out, I asked representatives from ten MLM companies for the prices of their “best reasonably priced formulation of multi-vitamin multi-mineral products, with antioxidant protection.” Then I asked ten retailers of health foods likewise to give me prices for their ” best reasonably priced formulation of multi-vitamin multi-mineral products, with antioxidant protection.” Interestingly, representatives for each of the health food stores recommended a different product. Here are the results:

 From MLM sponsors (including Pharmanex, Quixtar, Melaleuca, Shaklee, Usana, Isagenix, Sunrider, Herbalife, Arbonne, and Neways)  Ten separate products from ten separate retail outlets
 Average cost per person per month (retail prices) $62.33 (not much less at wholesale, after taxes and shipping are added) $11.52 (including shippint)

The same observation could be made for other products and services offered by MLM companies – telecommunications, Internet services, fuel additives, financial services, etc. They must claim uniqueness and they must charge enough to support payments to a bloated organization of thousands of “distributors.”

Another option for getting MLM products cheap – ebay!

If you really want some specific MLM products, but don’t want to pay exorbitant prices, there is another option some people are discovering – ebay.  Ex-participants often seek to unload these overpriced “potions & lotions” – or other MLM products far below wholesale! Just click on the “Buy” tab, select the product category (such as “health & beauty”), enter the name of the company, click “search,” and see what you get. Here are some examples: For Usana, I found (among a variety of Usana products) Healthpak 100 going for about $34 (US) plus shipping. For Pharmanex (Nu Skin), I found LifePak for $0.99 (US) plus shipping. Melaleuca’s Vitality Mineral Complex was going for $2.01 (US) plus shipping.

Opinions of experts about “potions and lotions” typically offered by MLM companies

After studying over 600 MLM programs, it has become apparent that a typical strategy of MLM sponsors is to produce supplements that supposedly cure or prevent every disease under the sun. It seems nearly every MLM company lays claim to the latest and greatest supplement  that cannot be obtained anywhere else at a comparable price. They even claim to “bypass the middle man,” when in fact with their endless chain of recruitment, they create thousands of middle men– all hoping for a share of commissions. (See Typical Misrepresentations used in MLM recruiting and 5 Red Flags of a Product-based Pyramid Scheme” and other reports on this web site.)

I consulted three experts on the validity of typical claims by MLM companies about the superior benefits of their products, which are used to justify their high prices. To protect their professional reputations, I am not publishing the full names of two of them.

The first was Lane, a nutritional scientist and the former vice president of product development for one of the leading MLM’s, who told me that the product claims of these companies are overblown and misleading. “The modern version of snake oil,” he called them. He said the supplement industry is rife with people making fraudulent claims, especially MLM promoters. He was very critical of MLM sponsors who promote products with exotic secret ingredients obtained from some remote island, etc. He said the best way to get needed vitamins and minerals is from a healthy diet.

The second was Allen, a nutritional formulator who has manufactured numerous supplements for both MLM companies and standard supplement companies that sell to health food stores. “This is a scumbag business,” he grumbled. He told of his desire to get MLM promoters to buy quality formulations, using top-quality ingredients. He said that In every case, they chose to cut corners so as to allow plenty of margin to pay their many levels of distributors. For example, if a product sold for $50, they would not pay over $5 in production costs.

The third is Dr. Stephen Barrett, a medical doctor who has spent many years exposing all kinds of health quackery. He also recommends a healthy diet as the best source of needed nutrients. However, there are special cases where supplementation is needed, and this should be done in consultation with your doctor. Read his report on Quackwatch. He also has done much writing and research on MLM supplementation. Check out his many articles on MLM Watch.

I have read reports that many nutritional scientists do take supplements, but usually in modest amounts, not megadoses. They often explain their use of supplements as “insurance” to make sure they get what they may be missing in their diet. But they buy reasonably priced supplements and focus on a nutritionally sound diet.

Does anti-oxidant supplementation extend life and improve general health?
A review of dozens of studies delivers blow to popular antioxidants.

Researcher found that the popular antioxidant vitamin E doesn’t lead to a longer life. Neither do vitamins A or C. But experts are divided on whether that means you should skip the pills altogether.  (MSNBC-  Associated Press, Updated: 4:18 p.m. MT Feb 27, 2007) 

Antioxidant vitamins, including A, E and C, don’t help you live longer, according to an analysis of dozens of studies of these popular supplements. The new review showing no long-life benefit from those vitamins, plus beta carotene and selenium, adds to growing evidence questioning the value of these supplements.

Some experts said, however, that it’s too early to toss out all vitamin pills — or the possibility that they may have some health benefits. Others said the study supports the theory that antioxidants work best when they are consumed in food rather than pills.

An estimated 80 million to 160 million people take antioxidants in North America and Europe, about 10 to 20 percent of adults, the study’s authors said. And last year, Americans spent $2.3 billion on nutritional supplements and vitamins at grocery stores, drug stores and retail outlets, excluding Wal-Mart, according to Information Resources Inc., which tracks sales.

The new study, appearing in Wednesday’s Journal of the American Medical Association, was led by the Cochrane Hepato-Biliary Group at Copenhagen University Hospital in Denmark. The Cochrane organization is a respected international network of experts that conducts systematic reviews of scientific evidence on health interventions.

For the new report on antioxidants, the researchers first analyzed 68 studies involving 232,606 people and found no significant effect on mortality — neither good nor bad — linked to taking antioxidants. Read the full news report. Read also the report released on the Today Show.

The latest trend in MLM products – exotic fruit drinks.

In recent years, several MLM companies have offered exotic fruit drinks, such as acai, goji, noni, mangosteen, aloe vera, etc. They are usually from exotic rain forests or other out-of-the way places, such as the Himalayas or islands of the South Seas. Typically, they are priced at multiples of prices for similar products from alternative sources.  For example, a particular juice drink that may sell for $40 through an MLM company may be available from other sources for $10-$20.

Much of what is written above regarding nutritional supplements applies to these drinks. They are overpriced and overhyped by MLM promoters. Though they may taste great and be as beneficial as any other fruit drink, their promoters’ excessive claims of magical health benefits are not supported by research.

To survive, MLMs sell products that are unique and consumable.

Since MLMs are structured with a bloated hierarchy of participating “distributors” ( or whatever they choose to call them), the prices of their products are high to accommodate them. So MLM founders typically select or develop products that are unique enough to make comparison shopping difficult for unsophisticated consumers. And since most purchases are by the participants themselves, and not the general public, products must be consumable – assuring repeat purchases by participants who must buy a specific amount of products on a regular basis to qualify for commissions and advancement in the scheme. These can be considered “pay to play” or incentivized purchases – and are what typically finances product-based pyramid schemes that are dependent upon recruitment of (and personal consumption of) a revolving door of recruits, rather than on sales to the general public.

High prices and misleading product claims are a hallmark of MLM offerings.

7 Comments

  1. BestDecision

    $70 sheet masks and $32 for 1.7oz of moisturizer shows MK is desperate to elevate themselves into the ranks of better brands. I can’t imagine how bad the fallout of this is with the sales force, nor can I imagine any of my customers would’ve been happy about the price increases.

    1. TRACY

      They’ve always tried to position themselves as prestige brands but at a lower price. Some people believe it. I always believed that they were on par with brands found at Target, which is perfectly fine. Therefore, the products are overpriced. And they HAVE to be priced high in order to pay out commissions at so many levels.

  2. cindylu

    Nothing but a scam where women have to exploit each other to break even. Fifty plus years later when I get invited to yet another home party I shudder. It really irks me that women still feel some sort of obligation to help a friend who has been conned into these mlm’s. Uggh.

  3. Char

    Here goes:

    Even IF the products could be a high quality prestige brand, due to the multi-level marketing structure of recruiting/canabolizing your own best customers, or the fact that anyone can sign up, the product becomes a secondary matter; hence they are not prestigious or high quality. Why would the company bother and waste money on manufacturing premium products if they are secondary? Allen confirmed this in the article.

    Furthermore, if it were a miracle product, it would surely go the traditional route. If you discovered a cure for cancer, or wrinkles, do you think you would associate with a method with such a horrible scam reputation, rely on Aunt Sally MLMing your product, and share the wealth of your discovery. MLM founders want you to believe this crap. It’s ludicrous.

    We have been led to believe that MLMing is about the product. I maintain that most MLM founders utilize an MLM to pass money up the chain, AND THEN THEY SEEK OUT A PRODUCT to mask the multi-level money game. Or, more rarely, someone has an inferior product that failed or will fail with the general retail public. They realize by attaching an income opportunity, affiliates will buy it regardless of quality or value; thus providing built-in customers aka consultants (big spenders) for the founder and top of the pyramid. The former is more the norm though.

    This then explains why MLM products are indeed of lower quality value per dollar, or placebo bunk. It also explains why the products in MLMs are mostly used/purchased by those in it for the supposed income opportunity. Money goggles do have a way of affecting people.

    Since we’ve established that the products dont really have significant real retail viability, the only way to make measurable money is to be a professional recruiter aka pyramid/Ponzi schemer or founder, convincing gullible downline that MLMing is legit. Adorning these poor people with fancy names like “business owner”, Star, etc. makes it more enticing. Also, people who think they have a vested interest will be inclined to “spend” more. Brilliant!

    The Ponzi/pyramid money is worked into the cheap low quality, yet higher priced product for the payouts way up the chain – to those in the know.

    Also, back door deals bringing big teams in is very common in this scam arena. What a shame you are busting your butt thinking “the plan” needs to be followed.

    The wannabe willing victims actually believe the illusion and everything they are told. This is the real reason for all the meetings, rallies, and mentoring by the scammers also called career or successful MLMers. It’s all brainwashing techniques.

    The most important point after realizing your MLM is a scam, is that all MLMs are the same because they all require you to commit the act of multi-level marketing. The silly product is just a cover for siphoning money off 99% of recruits. The other 1% are con artists in fancy clothing.

    1. Lazy Gardens

      I maintain that most MLM founders utilize an MLM to pass money up the chain, AND THEN THEY SEEK OUT A PRODUCT to mask the multi-level money game.

      that is EXACTLY what Mary Kay Ash did … it’s in one of her books or interviews that they had the way the money and power structure would work and then started looking for a product to use as lubricant to get the money flowing.

  4. enorth

    The following is from the BehindMLM website 3/24/2018:
    __________________________________________
    When Nerium founder Jeff Olson first approached the Smiths, they claim they were in the midst of a “successful career” with PrePaid Legal.
    Olson nonetheless eventually convinced the Smiths to jump ship to Nerium, on the promise of a secret backroom deal.
    In their lawsuit, the Smiths claim Olson was well-aware of the legal repercussions that would likely manifest as a result of Nerium poaching two of Prepaid Legal’s then top earners.
    After their fallout with Nerium, the Smiths allegedly have signed on with Jeunesse.
    Top earners leaving a company… signing on with a competitor… downlines following…
    ____________________________________

    Backroom deals, poaching, lawsuits. (Oh, but the daughter of ItWorks founder Mark Pentecost “started at the bottom and worked her way up” just like other distributors.)

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