Do people actually make money in MLM's?

We would like to invite you all to join our team of BOSS BABES on our mission to change the world! Make the most amazing change in your life and you too can stop being a cog in the corporate machine. Does this sound familiar?? Maybe we’re trying to recruit you for our MLM… Take a listen this week to learn all about the scamminess of MLM’s (you know like Young Living Essential Oils, Herbalife, Arbonne, or as we like to say more generally -- pyramid schemes) and find out just how much money people make from selling their products. Keep living that #blessed life folks

Articles Referenced:
FTC.gov - "Multi-Level Marketing Businesses and Pyramid Schemes"

jstor.org - "Is Multi-Level Marketing Really Just a Pyramid Scheme?"

prnewswire.com - "New Survey Reveals 73 Percent of People who Participate in Network Marketing Opportunities Lose Money or Make No Money"

TheBalancesMB.com - "The Likelihood of MLM Success"

MLMStatistics.org - "'Average' Income"

BestLeap.com - "5 Great Advantages of Multi Level Marketing (MLM)"

Transcript

Intro 

• WELCOME BACK BOSS BABES
• Noreen is very intrigued by MLM’s (Arbonne, Younique, Mary Kay, Cutco, Young Living Essential Oils) 
• I follow this girl that is ALWAYS posting about how amazing they are and how she got a free white mercedes for hitting “regional VP” or whatever and i just dun GET IT
• We feel like in society it’s very commonly known that MLM’s are money pits where you lose more $$ than you make, however every MLM poster on social media seems to be killing it, what’s the TEA SIS
• Reminder of format:
  • Ask a Question (explain why we chose topic)
  • Research Background Info (briefly present data and articles)
  • Hypothesis / Unique Angle (state our angle on the topic/data)
  • Analyze Data (deep dive into data)
  • Conclusions on Data (our opinion on what data says)

Discussion

Ask a Question (explain why we chose topic)

• What are MLM’s and why do they have such a bad stigma

Research Background Info (present data and articles)

• FTC.gov Information Page “Multi-Level Marketing Businesses and Pyramid Schemes” 
• JSTOR Daily Article “Is Multi-Level Marketing Really Just a Pyramid Scheme?”
• AARP Foundation Graphic “Multi-Level Marketing: The Research, The Risks, The Rewards”
• MLM Statistics.org Article “Average Income” 
• Best Leap Article “5 Great Advantages of Multi-Level Marketing”

Hypothesis / Unique Angle (state our angle on the topic/data)

• MLMs have a bad stigma because they target hard working adults (mostly women) and use fake positivity & uplifting marketing to scam their employees into giving them money with the false hope of making substantially more money.

Analyze Data (deep dive into data)

FTC.gov Information Page “Multi-Level Marketing Businesses and Pyramid Schemes” 

• So first off, what is an MLM? And how do they differ from Pyramid Schemes?

MLM

• The FTC states “MLM companies sell their products or services through person-to-person sales. That means you’re selling directly to other people, maybe from your home, a customer’s home, or online.”
• “If you join an MLM program, the company may refer to you as an independent “distributor,” “participant,” or “contractor.” Most MLMs say you can make money two ways:
• by selling the MLM’s products yourself to “retail” customers who are not involved in the MLM, and
• by recruiting new distributors and earning commissions based on what they buy and their sales to retail customers.
• “Your recruits, the people they recruit, and so on, become your sales network, or “downline.” If the MLM is not a pyramid scheme, it will pay you based on your sales to retail customers, without having to recruit new distributors.

Pyramid Scheme
- “Pyramid schemes are scams. They can look remarkably like legitimate MLM business opportunities, but if you become a distributor for a pyramid scheme, it can cost you and your recruits – often your family and friends – substantial time and money.”
- “The promoters of a pyramid scheme may try to recruit you with pitches about what you’ll earn. They may say you can change your life – quit your job and even get rich – by selling the company’s products. That’s a lie. Your income would be based mostly on how many people you recruit, not how much product you sell. Pyramid schemes are set up to encourage recruitment to keep a constant stream of new distributors – and their money – flowing into the business.”
- “Eventually, most distributors find that no matter how hard they work, they can’t sell enough inventory or recruit enough people to make money. They also can’t keep up with required fees or the inventory purchases they need to make to qualify for rewards, and they can’t earn enough money to cover their expenses. In the end, most people run out of money, have to quit, and lose everything they invested.”
- Here are some warning signs of a pyramid scheme:

• Promoters make extravagant promises about your earning potential. Stop. Such promises are false.
• Promoters emphasize recruiting new distributors for your sales network as the real way to make money. Walk away. In a legitimate MLM program, you should be able to make money just by selling the product.
• Promoters play on your emotions or use high-pressure sales tactics, maybe saying you’ll lose the opportunity if you don’t act now and discouraging you from taking time to study the company. Leave by the nearest exit. Any company that tries to pressure you to join is one to avoid.
• Distributors buy more products than they want to use or can resell, just to stay active in the company or to qualify for bonuses or other rewards. If you see this happening, keep your money.
• This is interesting to me because i feel like i always thought the two were the same
• When i think of MLMs and people I follow i think of the constant recruitment, people buying their own product to keep themselves afloat, etc. 

JSTOR Daily Article “Is Multi-Level Marketing Really Just a Pyramid Scheme?”

• So now we can talk about why the two are so similar and people get them confused
• In the “Journal of Business Ethics”, the ethicist Daryl Koehn states that the major difference between MLM’s and Pyramid Schemes that allows MLMs to operate legally is that they claim to offer products as their main revenue base, but overall they often have fundamentally the same ethical issues.
• In a Pyramid Scheme, their success comes not from their product, but from the endless supply of new investors. This leaves the late comers bound to fail. 
• In an MLM, the company places value in their product and uses market recruitment as an additional element - Or at least thats the ~idea~ according to ethicist Daryl Koehn. 
  • there are indicators that a MLM company uses recruitment as its blood supply. These indicators are: heavy emphasis on recruitment over sales; requiring “substantial upfront fees from those people who are recruited to sell the product;” and “pressuring” recruits to purchase corporate products for their own consumption.
  • She notes that another telltale sign is a structure that allows for the easy exploitation of recruits, such as unreliable buyback programs for unused inventory, or not differentiating between sales made by consultants for restocking their own inventory versus genuine, consumer sales (which makes it easy to pressure low-level recruits into amassing more and more stock).
• It seems like the line is fuzzy between these two and very rarely are businesses strict about creeping into the “pyramid scheme” realm
• The girl I follow who shall remain ~nameless~ is always sharing stories on Instagram opening spots to have girls sign up to “learn more” and it’s frustrating because shes a small scale celebrity (from a reality show throw back to our last episodes) so she uses her fame to get people posted on her stories for followers and its messed up

AARP Foundation Graphic  “Multi-Level Marketing: The Research, The Risks, The Rewards”













• Now we’re going to put some data and statistics behind the MLM culture
• Who participates in MLM’s?
  • Nearly 21 million Americans have worked for some type of MLM, 60% of them being women
  • 72% of MLM’ers are married or living with a partner, and 55% are doing it as a secondary job to their main career
  • 76% have no commission based sales experience prior to joining
  • Another interesting fact is that most MLM’ers have a bumpin social life and are more involved in social media & their communities
    • Could think bc they have so many contacts and friends that the sales may be easier?
• Why join?
  • 63% join to sell a service or product to others
  • 23% join to make money by recruiting others (SCAMMM)
  • 43% join to sell to get products that they already love at a discount
  • 56% of MLM’ers make < $35,000 a year in their main profession
    
    
    
• Is It Profitable?
  • 47% of MLM’ers claim they lost money from joining
  • 27% said they made no money
  • 26% made a profit, however 53% of that 26% made <$5000
    • And we don’t have a timeline of how many months or years to took to make a profit, which would be helpful to know
  • MLM’ers work an average of 13.3 hours a week
  • 39% stopped because it felt awkward to pitch to friends and family
    • This is my personal nightmare so i UNDERSTAND YOU

MLM Statistics.org Article “Average Income” 





• First off we have a graph here that compares 5 major MLM companies and their annual income vs annual costs. These costs can include mandatory fees and product costs paid by each seller to the company to maintain their seller status
• As you can see these costs are high and take away a major chunk of profit from each seller
• For some companies the costs are so high that all profits basically get wiped away





• Even the most profitable company here, Lifevantage, only nets $556 annually on average, which equates to $46 per month (approximately 4 burrito bowls per month)



 

• As you can see from this graph, joining an MLM is *much* less profitable than other common side hustles. 

Best Leap Article “5 Great Advantages of Multi-Level Marketing”

• So after we doody’d on MLM’s we want to bring a different perspective to give some rounded information to y’all
• So after all that info, why do people still want to join…
  • Low Risk
    • MLM’s give you the opportunity to start your own business, but at a much lower risk. You have the chance to start your own business without the fear of failure and major financial collapse
    • Minimal costs and financial commitment comparatively to having to create your own product, start up your own business, build a brand, build a clientele, etc.
  • Huge Earnings Potential (I don’t love this one and idk if we want to comment on it)
    • There really isn’t a limit on how much you can earn, compared to corporate America
    • At a typical corporate job, no matter how hard you work you’re locked into a fixed weekly (biweekly) income. Obviously you have opportunities for raises usually on a yearly basis but the harder you work with an MLM you could *theoretically* improve earning potential
    • You get to see the fruits of your labor
  • Low Operating Cost
    • The network marketing model allows you to run your business at minimal cost. Minimal investment, no infrastructure, no staff
  • Attainable Freedom
    • You have freedom and flexibility to work when you want, where you want
    • With freedom comes happiness and a better quality of life
  • Portability
    • With new technology (especially during covid) you can take your business on the go with no downsides
    • No need to go to an office

Conclusions on Data (our opinion on what data says)

• I think the intent of this episode is of course not to shit on MLM’s, just to understand what they are and the potential dangers
• At the end of the day I think the set up could be cool in that you can be a small business owner in a way with a lot of risk aversion, but the structure doesn’t allow or statistically show that most people are successful in this environment
• If you’re thinking about joining a MLM, be sure to do your research, check out the products & make sure you love them, understand the costs, understand your why, and be ethical