Ah, multi-level marketing.
It’s been around before social media (I have fond memories of all of my mom’s Pampered Chef products growing up), but muli-level marketing scams have become all the rage with the advent of the internet and how increasingly easy it is to message someone you haven’t talked to in 10 years and say, “hey girl! Hope all is well! How are the kids? I’ve got the perfect product for you!
Sadly, these schemes have completely ruined families, taken people’s livelihoods and savings, and ruined relationships.
Because a multi-level marketing scheme, usually relies on you recruiting more and more “sales reps” underneath you to sell products, and often the well runs dry.
People don’t have the money to invest in buying products to sell, people are tired of their friends and family constantly asking them to buy things, and it turns into mostly a nightmare or, at best, a complete waste of time.
In this guide to multi-level marketing scams, we’re going to learn what they are and how to avoid them so you can make sound financial decisions and not get wrapped up in them.
What are Multi-Level Marketing Scams?
In a multi-level marketing scam (and yes, I think most are scams), there are a few things that usually happen.
Firstly, the person who is making money, the sales rep, can only make a substantial amount of money by recruiting other people.
Someone recruited them to join, and that person above them gives a cut of their sales.
Then the new sign up tries to recruit other people to get a percentage of their sales, and the sales underneath them, and so on and so forth.
This differs from regular “work” where you either make money by selling something, full stop, or you make money for providing a service.
Your ability to make money might rely on sales in a sales job, but it does not rely on your ability to RECRUIT people to sign up as new sales reps.
Secondly, the person who signs up as a sales rep will often need to buy their own products to sell them.
You will be encouraged to “invest in yourself” by investing in your sales inventory, which you will then try to turn around and sell, upmarked, to other people.
But the fact that you need to pay money to have a job shows you that it’s probably a MLM.
Jobs pay YOU money, not the other way around.
Now, technically there is a difference between a “pyramid scheme” and a “multi level marketing” program, where the pyramid scheme will be more focused on the recruiting as opposed to moving products.
However, they are extremely similar and any opportunities like this should be approached with caution.
Does Anybody in a Multi-Level Marketing Scam Make Money?
Yes, the people at the “top” will make money, because they will have lots of sellers underneath them that they make a percentage on.
However, the top can only be so big and hold so many people – it’s been said that up to 99% of people who participate in these multi-level marketing programs end up losing more money than they make.
Is Multi-Level Marketing Legal?
Yes, multi-level marketing is legal in the USA, but “pyramid schemes” are not.
Again, they are very, very similar, but multi-level marketing schemes get out of problems with the authorities because technically they are selling products.
Pyramid schemes don’t involve products, just trying to recruit people below you.
Multi-level marketing schemes do both, and have been able to avoid being made illegal.
Just because they are legal, does not mean they are a good idea to join.
What About Affiliate Marketing?
Another similar idea is affiliate marketing, and NOT in the traditional sense like when trying to make money blogging.
Traditional affiliate marketing is simply where someone, like a blogger, uses an “affiliate link” on their website and gains a small commission if you click through and purchase that product from that company.
There is no extra charge to the person who buys, it’s sort of like a referral code so the buyer gets the same deal, but the “affiliate” gets a little change as a thank you from the company.
In affiliate marketing scams, people try and basically “teach you how to make thousands of dollars affiliate marketing,” but in order to do that, you have to invest hundreds of dollars in their course or program and then you make the money back by teaching other people how to make thousands in affiliate marketing.
See the classic signs of a scam here?
You have to invest in something in order to sell it, and the emphasis is on recruiting more people to sell as well.
Regular affiliate marketing programs cost nothing to join.
Other Ways to Spot a Multi-Level Marketing Scam
If you ever get contacted by a friend or family member, even from a long time ago, telling you that they have a great new product for you, it’s probably a mult-level marketing scam.
There are also very familiar categories in multi-level marketing like herbs, weight loss tools, body products and fragrances, and clothing.
Of course, someone wanting to sell you product is different than them asking you to join the scheme itself, but they’ll definitely try and recruit you.
You may also hear about things like “Pampered Chef” parties where someone invites a lot of people over to their house for a dinner and basically tries to sell them product or try and get them on board.
Most multi-level marketing schemes have poor quality products, but not every one of them.
The scheme is defined by how the sales reps or “consultants” make money, not how good the product actually is.
But They’re Claiming I Can Make Millions/Work from Home/Buy a Unicorn
Before getting into any multi-level marketing scheme, look up the name of the company + “stories” or a similar search term to get real life advice.
Do not just rely on social media and testimonials that are listed on the website of the company.
You don’t even have proof that the testimonials are real!
There are a lot of legitimate things to be doing as side hustles.
You can make honest and legitimate money blogging, start a Youtube Channel, or even something like taking surveys in your spare time.
But multi-level marketing schemes aren’t one of them, and you owe it to yourself, your finances, and your mental health to not get involved.