MLM companies are notorious for scamming, misleading and deceiving people. Multi-level marketing has got a bad name for a reason, there’s a lot you want to avoid if you’re considering getting into network marketing.
That said, there are definitely MLM companies that provide genuine products and aren’t just out there to scam people and take all your money!
This post is focused on helping you avoid becoming a victim to one of the many pyramid schemes out there.
Here a quick outline of what you’ll take from this post:
- What to look out for when it comes to MLM pyramid schemes.
- How people achieve success with MLM.
- MLM business alternatives.
So What Is MLM Exactly?
MLM or Multi-level marketing is a strategy that many direct sale companies employ to their existing distributors to recruit other people into distributing the same goods. These direct sale companies incentivise their distributors by paying them a percentage of their recruits’ sales.
This is a powerful incentive because it provides the opportunity for distributors to earn passive income from their recruits. More recruits usually results in more passive income for the distributor (depending on individual performance).
Anyone recruited by a distributor is referred to as that distributors “downline”.
Distributors generate an income by selling products directly to consumers and recruiting other people into the company.
People typically sell products from MLM companies through word of mouth marketing and event networking. Essentially, meeting and talking to a lot of new people. They build connections and recommend products and services from there.
Why The Bad Rap?
Multi-level marketing is legal as long as the business is primarily focused on selling products and services to consumers. The problems start when MLM companies focus more on recruitment, rather than direct product sales.
This is something that would normally raise a red flag for people that know about the tactics employed by shady MLM companies.
The link between multi-level marketing and pyramid schemes becomes real when companies use money from recruits to pay people at the top. In almost all cases, this is done by taking advantage of people under a false pretence of legitimacy.
So people think they’re working for a legitimate business but don’t realise they’re actually being scammed!
MLM companies have been linked with pyramid schemes many times in the past. Companies have been fined by the FTC or shutdown all together for their questionable business strategies.
10 Ways To Avoid Being Scammed By MLM Companies
They Focus More On Recruiting Than Selling
If you’re checking out an mlm company and notice that they focus heavily on recruiting other people, it should raise alarm bells. Direct sale companies should be focused on selling products directly to consumers, not recruiting other people into the company and incentivising people to do so.
If you find that the recruits are also the customers in the company, it’s probably best to stay away!
It Sounds Way Too Amazing To Be True
If a company is making outrageous claims about the results you can get in a short space of time then you should be suspicious. Many so called network marketing guru’s are obsessed with hype. They come across as very hypey in a non-genuine way.
I say this because I’ve experienced this myself at a couple of network marketing conferences.
They pump everyone up and get them all excited but unfortunately they’re full of empty promises.
If you find that the company you’re looking at is making crazy claims about income potential and trying to hype you up in a way that seems a little off, take a step back and think twice before making any decisions about joining.
Just like the famous saying goes, if it sounds too good to be true, it probably is!
The Training They Have Sucks
What kind of training and support do they have in place? Is the training focused on becoming successful in direct selling or is it more about getting other people into your downline?
Great training is essential to your success in any business venture. Your results will only be as good as the knowledge, understanding and effort you put into your business.
Two of those things are directly governed by the training you receive so it’s something that should be top of your importance list.
If the training offered is more about how to sell your friends and family into the system then it could just be another MLM scam.
They Push You To Upgrade Your Membership
Do they employ pushy sales tactics and make you feel pressured into buying something you aren’t entirely sure about? Do they really want you to buy more of their products?
They might try and push you into making a decision very quickly without giving you a chance to think about it, claiming that you need to for you to get the “special price”.
Maybe they’re offering some sort of “elite” membership deal or a special package that gives you extra business support. If you’re forced into paying for extra training on a consistent basis, the alarm bells should be ringing in your head.
Be especially wary if they’re trying to convince you to upgrade regardless of your financial situation. Some of these mlm companies will try to take your money in any way that’s possible for them. Even if it means paying by credit card or getting you to take out a loan to fund this “investment”.
This is something I experienced first-hand at a network marketing conference. You’ll have the speaker up there hyping things up and falsely trying to get people excited with crazy claims. But when you question anything they’re saying, all you get is “we’ll take questions later”, funnily enough this “later” never happens.
Clear and open communication is so important when it comes to business (or anything really). Don’t hesitate to ask those hard questions about any concerns you may have. If your question just gets deflected or you get bashed for being “negative”, this should be a red flag.
MLM companies are required to be transparent with their business model. This includes being open about the average income people earn! So don’t be afraid to ask questions and do your research.
A legitimate company will want you to be informed to give you a better understanding of how things work and ensure you have the best chance of success.
Something Smells Fishy
You know that little intuitive thing we call a gut feeling? It’s usually right.
If you walk into an MLM business conference and something just doesn’t feel right, it’s probably because something genuinely isn’t right. Many of us don’t realise that we’re actually very sensitive to the agenda’s of other people. We can usually sense when someone isn’t being genuine about something.
If you feel unsettled and you notice that other people in your position feel the same, it’s probably best to walk away.
They Deceive You With Their Advertising
Some shady MLM company reps will falsely advertise their business opportunities as jobs. With some even making income guarantee’s and insisting that it can all be achieved by doing very little work.
MLM isn’t a job. It’s a business.
Any company that’s advertising business opportunities as jobs should be avoided. Why would you want to work with a company that’s being deceptive from the get-go?
Crazy Product Claims
This cream is so damn good, it’ll instantly remove your wrinkles, get rid of your scars and moisturise your skin, all at the same time!
This happens way too often… reps will hype up the product like it’s descended directly from the heavens. They’ll have you feeling like the products have magic ingredients that produce miracle results.
Outlandish hype like this is a red flag in any industry and direct sales is no different.
Companies that achieve success do so on the basis of having great products and services. It’s the foundation for any successful company.
If the company you’re considering becoming a part of sells products that seem a little too good to be true, be extra cautious!
Reliance On Recruitment
If the recruitment were to be stopped completely, would people still make good money?
If the answer to this question is no then that’s a tell-tale sign that the company is highly focused on recruiting other people for financial gain. Which is basically the definition of a pyramid scheme.
MLM companies should have products that offer value to their target market. There should be a compelling reason to buy the products offered. Products that have unique selling points and competitive pricing are the ones the usually do best in the marketplace.
You’ll find that companies with average products are often more focused on recruiting as many people into the system as possible.
No Mention Of Any Products At All
These guys are the worst offenders. One of the biggest red flags you can get about a business is one that doesn’t offer any products at all. So-called businesses that are solely focused on recruiting and building your team are almost always pyramid schemes in some shape or form.
As mention earlier, the foundation of any good business lies in their products and services. If the products are services are practically non-existant then it’s best to stay away!
How People Find Success In MLM
After reading this list you might be shocked to discover that some MLM companies actually provide legitimate products and services!
The truth is that some people do find success through multi-level marketing, here are some tips to help you succeed if you decide to go for it:
Find Products You Love
It’s always easier to market and recommend products you actually love yourself. If you have a passion for a particular product, you’ll find it so much easier to write about it, talk about it, and you’ll have more fun doing it!
The bottom line is that you represent the product you’re selling. You’ll never beat someone that’s passionate about what they’re doing so if you’re just trying to sell some products to make some extra cash, it’s probably best to go for something else.
Be Open, Honest And Genuine
Part of the reason MLM gets such a bad rap is because too many people hype things up in order to get more recruits or sell products. Legitimate MLM companies will encourage you to be completely open and honest with any new recruits and certainly when it comes to their products and services.
The worst type of customer for a company is a customer that feels cheated. Negative word of mouth marketing can be very detrimental to a company.
If you love what you’re selling, your enthusiasm for the product will be enough to make sales. You don’t need to resort to dodgy recruitment and sales tactics to succeed.
Don’t Spam Your Friends & Family
There’s nothing that makes me cringe more than seeing people trying and pushing to sell their friends and family something. Nothing will annoy the people in your life more than pestering them about some product you want to sell.
Instead of focusing on friends and family, focus on the people that the product would be suited to best. Find out what the target market for the product is and target those people.
Many successful MLM business owners attract people they know into the opportunity by becoming successful themselves first.
MLM needs to be treated like any other business – focusing on the people who actually want to what you’re selling.
Have a Unique Selling Point
One of the biggest challenges with MLM is market saturation. Plenty of people offering the same products that you offer. People that achieve success manage to find their unique selling point. They separate themselves out by offering something more than just the product itself.
Your personality, speed and quality of service are all things that can help separate your services from the rest of the pack!
Focusing on customer benefits rather product features will also help you to differentiate yourself.
So instead of talking about the cool features of the product, talk about how it will improve the customer’s life. For example, if it’s a weight loss product you should focus on the benefit of being slim, fit and sexy.
Learn How To Actually Market
Many MLM business reps focus on the basic rules of network marketing like “anyone within 3 foot is a prospect” but this is a very limiting way to market products and services. Network marketing is very much based on word of mouth marketing and relationship referrals but we have the luxury of the internet at our fingertips.
Millions of people that fit our target market that we can access through various platforms.
Websites, email marketing, PPC advertising, social media. There are hundreds of ways to reach your target market online.
By learning how to market products and services properly, you’re not only enabling yourself to sell more products as an MLM rep – you’re empowering yourself with valuable life skills that can be implemented in any type of business.
Three Of The Biggest Problems With MLM
Three of the biggest issues with MLM:
- Market saturation – Everyone is promoting the same thing and companies don’t cap the number of recruits. Even the best products can’t be sold to everyone. The lack of recruit capping means the market ends up being saturated into oblivion.
- Bad reputation – The word MLM itself is usually followed by “scheme”. People don’t like being associated with a business model that is shrouded in controversy and negativity.
- Dismal failure rates – After five years of operation, 90% of business of reps have left the business. An average of 99.7% of participants actually lose money by getting involved with a multi-level marketing business.
This isn’t to say that MLM isn’t a viable business model because it is. It’s just that lots of people that start MLM businesses don’t treat it like an actual business so they don’t produce the results they want. Many people going into these types of opportunities have unrealistic expectations as well as lacking the business skills and networking acumen required to succeed.
Alternatives To MLM
There are plenty of other business models that are superior to MLM in a number of ways. If you’re the kind of person that doesn’t like the idea of hosting home parties and selling to family and friends, check out these business models:
Affiliate marketing is a form of referral marketing where a person gets paid a commission for making a product referral.
Say for example you own a blog about photography and you post an article reviewing your SLR camera. You can place an affiliate link in your review so people can check out the camera on Amazon. If you’re generating a good portion of traffic, people will be reading your review and a percentage of those people will go on to buy the camera from Amazon.
When that happens, you earn a commission!
That was just one basic example. Thousands of bloggers make between six and seven figures a year, just by blogging and monetising their site through affiliate marketing.
Some of the benefits of affiliate marketing include:
- Location independence – Affiliate marketing is an online business model. So you have the ability to travel anywhere and still be in business as long as you have a laptop and internet connection. No home parties or meetings to go to.
- Business automation – The tools and technology we now have access to allow us to automate the process of generating leads and making sales (after you put the hard work in). You do the work once and it pays you back many times over.
- Work for yourself – With affiliate marketing, you can truly have your own business. You don’t need to network with other people, get good at sales or report to team members.
- Leverage amazing products – You don’t need to take the time to come up with an amazing product yourself. This is one of the hardest things people struggle with when it comes to business. The beauty of affiliate marketing is that you can promote almost any type of product or service out there as an affiliate.
More information on affiliate marketing:
- What Is Affiliate Marketing & How Does It Work?
- Learn Affiliate Marketing: Ultimate Beginners Guide
- 5 Super Successful Affiliate Marketing Websites
Dropshipping is a product fulfilment method where the merchant only purchases a product when it has already been sold. The owner of the dropshipping business isn’t required to hold any stock as this is something that is done by external suppliers.
When someone purchases a product, it is shipped directly from the supplier to the customer, so the merchant never sees or handles the product.
The biggest difference between dropshipping and a standard retail business is that the merchant doesn’t hold stock of any product or have any product inventory.
Instead, they purchase items as and when they are needed directly from wholesale distributors.
Benefits Of Dropshipping:
- No stock hold requirement – As mentioned above, there is no requirement for holding stock, giving you the ability to start a dropshipping business from home.
- Low overheads – Because you don’t have to purchase stock or manage a warehouse, the overhead costs of running a dropshipping business are very low. Many successful e-commerce businesses are run from home with monthly costs of less than $100.
- Easy to scale – With a traditional retail business, having three times as many customers would normally entail a lot more work. By leveraging your suppliers, most of the additional work will be done by them, allowing you to expand the business without increasing your costs significantly.
More information on Dropshipping businesses:
Bringing It All Together
Starting an MLM business is hard. Heck, starting any business is hard work! Anyone that sells you the idea of pressing a few buttons and generating an income is lying to you.
I hope this article has helped to inform you on the some of the most common shady tactics used to bad MLM companies. You should now be in a better position to detect this nonsense and see it for what it is.
If you’re looking for more information on alternatives to MLM, check out the articles below:
I’m a London-born millennial obsessed with online business, passive income and the digital economy. I love learning, researching and curating the most valuable resources to save you time, money and help you discover the truth on what it actually takes to achieve your goals.