How MLMs Stay in Business

If multi-level marketing is one huge scam, how do they stay in  business? How is it that consumers don’t know it’s a pyramid scheme? Why are thousands of people signing up for MLMs each day? Haven’t they heard by now?

It’s simple. They have spent decades presenting themselves as real businesses. And they’re masters at it. MLMs depend on an endless chain of recruiting for their very existence. The con game has been thoroughly developed.  The late great Dr. Jon Taylor came up with a list of 8 things MLMs do to stay alive and keep the recruits coming in the door:

  1.  Rewards. The profitability for the MLM company and the payout to top distributors is so great that they will routinely misrepresent and will go to great lengths to keep the scheme going, including finding new divisions or areas in which to continue recruiting after a given area is saturated.
  2. Ruse. MLM’s have been enormously successful in positioning themselves as direct sales programs that are exempt from laws against pyramid schemes. Even many regulators, the Better Business Bureau, educators, and writers will be quick to condemn a no-product pyramid scheme, but will exonerate a far more extreme and exploitive product-based pyramid scheme (MLM). A recruiting MLM company is actually an institutionalized pyramid scheme. Recruits in the hierarchy of “distributors become unwitting agents in collecting pyramid investments (in the form of “incentivized purchases) that fund the company and enrich top “distributors. Another ruse is the idea touted by MLM promoters that their program “gets around the middleman.” In fact, the MLM guarantees that their program will create a whole network of middlemen to be paid off.
  3. Repeated investments (“pay to play”). Although the cost of signing up as an MLM distributor is usually less than $100, the cumulative investment, in strongly incentivized purchases to “stay in the game,” may amount to hundreds or even thousands of dollars over several months. Products are often sold on a subscription basis by automatic bank withdrawal to maintain cash flow and upline residuals. Often purchases are far beyond the needs of the buyers and are stockpiled or given away. Usually such purchases are discontinued when the person withdraws from the scheme.
  4. Recruitment of revolving door of replacements. MLM’s are conducted as “body shops.” Those who drop out on the bottom levels are constantly being replaced with new recruits who believe the promises of wealth and time freedom – or a little additional income for persons who are struggling to make ends meet (which almost always sets them further behind financially).
  5. Re-pyramiding. When MLM company officers see that the “pyramid” is about to collapse, they start a new division, introduce new products, or enter a new region, all within the same corporate umbrella. This makes possible a whole new “ground floor opportunity” to participate in the “hyper growth” of the company, or to “ride the wave of opportunity.” This Ponzi-like behavior is what Amway, Nu Skin, and other long-lasting MLM companies have done.
  6. Rationalization and self-blame. Self-deception is common in MLM’s, making it the perfect con game. The very people who are being victimized are often its most ardent promoters – until they run out of resources and quit. They seldom complain to regulators, having been taught that any failure is their fault for not having tried hard enough, rather than the fault of the MLM. They may also fear retaliation from or to their upline or downline, which may include close friends or relatives.
  7. Retail “rules.” The trick for a recruiting MLM to evade regulatory scrutiny is to create the illusion that retailing is being done by establishing “rules” for minimum retailing with which distributors must comply – which are satisfied cosmetically so as not to arouse the attention of regulators. Compliance with these rules is not independently audited, nor are they reinforced by corresponding incentives in the compensation plan. MLM rule-making is ineffective without correcting problems in the compensation plan itself.
  8. Recognition. The MLM company may go to great lengths to enhance its legitimacy and its credibility. They may donate heavily to influential politicians and parties, to the Olympics, and to worthy, highly visible causes. Their support for these causes is given top billing at opportunity meetings and often given recognition by an unwitting press. Celebrities are hired to speak at MLM conventions. Top MLM officials and founders have been honored by university and civic groups.

I dare you to read those 8 points and not see Mary Kay in every one of them. You can’t do it.

5 Comments

  1. Cindylu

    The one on one. Female to female or friend to friend helps. Most of us trust our relatives, friends or co workers. I was recruited by a former supervisor who was hard working and trustworthy. I trusted her. Red flags went up for my SD and NSD. My gut instincts sensed something was very wrong. My SD definitely sounded alarm bells in me. However, why would an entire room at meetings or Seminar fabricate all of this? The company doesn’t have to carry any of the true load. In most cosmetics companies you’d also have to stay more current, be stuck with unsold products and advertise. In MK you simply make products, pay a few CEO’s well, have Consultants and Directors front load and store products. You also have hundreds of others recruit a sales force which often quits. A win for a few at the top of this scheme. An often devastating financial, family and psychological experience for most.

  2. bakatusha

    They also promote the community and the fellowship that you will be a part of, which is an attractive lure for many who are looking for friendship and camaraderie. The instant group love and acceptance is intoxicating for someone who craves the fun and friendship that might be missing in someone’s life. They tell you, you can sit with us, you have a seat at the table, you can be a part of this awesome lifestyle and all of us will help you get there. Little does an unsuspecting person know that they are entering a lion’s lair disguised as a puppy sanctuary. Not until you are in neck deep or in over your head, do you realize how deceptive it all was, and then when you leave the mlm, how all those mlm friends were only interested in you for money.

  3. Kristen

    Re: trusting family/friends…this is powerful. I hate MLMs with a passion but I recently got an invite for an online party from a friend I love but with whom I’ve become estranged. I didn’t want to say what I should’ve: don’t do this! You’re contributing to a scam! Because I didn’t want to harm what’s left of our relationship. I didn’t attend or buy, but I also didn’t speak up. Finally, I realized that if she cares about me, I’ll be worth an actual call or message, not just a stupid pyramid scheme party invite. But I considered it, believe me. This method of guilting people into participating is real. Even if you know better, which a lot of people do.

  4. Char

    Money doesn’t grow on trees – money in, money out. Your profit comes from the person you recruited. When you recruit your family member, do you tell them your check comes from their spending? Maybe it’s just me, but I find profiting off of friends and family using an MLM scam disgusting. Don’t kid yourself into thinking you’re doing them a favor. Again, people have to spend money for anyone to profit.

    Repeat a lie or rumor enough times and people will start to accept it as true. It’s everywhere and destroying us humans. It’s not difficult to fix; focus on facts and not belief. Belief and toxic positivity play a huge role in the MLM arena.

    Do we really think women in Salem were witches? Of course not, but people really believed it back then, and murdered innocent victims. It seems so obvious now, but those people “believed” it.

    Believing in the MLM system doesn’t change the math: 1% succeeds in scamming money out of the other 99% of opportunists, and the company itself reaps the most profit. Simple math! This is what happens when outside sales are negligible and everyone is encouraged to be an opportunist. You’d think that the company would not encourage recruiting everyone if they were concerned for the MLMer. But alas, this is an MLM company and it is indeed about the company profiting, not the MLMer making a profit. The MLMer IS the profit – for the company!

    The MLMer is the customer who probably wouldn’t be a customer without the attached opportunity!

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