Scam or Totally Legit Business? What You Need to Know About Multi-Level Marketing
I grew up watching my mom jump from one multi-level marketing business to the next. She was a stay-at-home mom who needed a hobby. It began with blocky 90’s jewelry and ended with Longaberger Baskets. I saw various things fill my parent’s shelves from candles and stamps to useless cooking utensils. My mom recently tried to give me some Longaberger baskets when I complained my shelves were empty.
For my mom, MLM was a social opportunity. She had friends who wanted to buy stuff from her. And she got to throw parties at their houses (more fun cause you don’t have to clean up after).
But if you’re actually trying to make money, is multi-level marketing really worth it? Or is it a “pyramid” scheme like so many claim? Let’s take a closer look.
The Basics of Multi-Level Marketing
Alright, let’s banish the idea of the pyramid scheme. A pyramid scheme is illegal in the United States. A pyramid scheme relies on investment rather than product sales. The Ponzi Scheme is a good example.
While some multi-level marketing businesses have a history of shady practices, they aren’t usually intentional scams. And, as long as a company is selling a legitimate product to the public, in the U.S. they are a legit business.
Where Does the Name Come From?
The biggest incentive to get others to join you in an MLM business? You get some of their money.
When you recruit someone into an MLM business, the company often awards you a percentage of their profits. This is the multi-level aspect of MLM. The money flows upward and the lower you are on the totem pole, the less you make.
But the more people you have under you, the more you make. You get a higher percentage of overall profits the more people you have below you.
The higher you are on the totem pole, the more you make as well. It’s pretty easy to see why people might get this mixed up with a pyramid scheme. The structure still mimics a pyramid.
Benefits of Multi-Level Marketing
Most MLM businesses draw people in by pointing out how little they need to invest. Get started for only x dollars, they say. They’ll point out that you become your own boss and you make your own schedule.
And it’s all true.
The Entry Bar is Comparatively Low
But the biggest benefit of MLM is the low cost of entry. Even the most expensive businesses like Lularoe ($5,000 worth of merchandise? No thanks…) don’t require much compared to the overhead of a typical small business. A franchise itself could cost upwards of $100,000 and you might need a net worth of over $500,000.
There are a ton of MLM businesses who charge way less than Lularoe. Some have an entry fee of $500 or less.
The Mentorship is Inherent in the Program Itself
Just because the person above you is profiting off your sales doesn’t mean they don’t care. In fact, the better you do the better they do. It’s a win-win scenario if they want it to be.
It’s how the best MLMs grow rapidly at first. If the product is a great one, they then remain stable after a time.
Those above you can help you set up your marketing, answer questions, and even some companies feature regular meetings for their sellers.
You will succeed only if you have the best support from above in an MLM. You don’t want to be caught out alone not knowing anything about marketing.
The Marketing is Social and Simple
My wife bought into the Lularoe craze for a while. She didn’t sell, but she bought…a lot. One of her favorite sellers had the best marketing strategy out of most Lularoe consultants.
She had two platforms and kept them simple. She built a blog and she created a Facebook page. She put all her efforts into these two platforms. And it yielded results.
She is still strong and selling two years on when many consultants have fallen away.
If you enter an MLM, be sure to learn how to build a blog. Getting your storefront to the top spot on Google will help you immensely in attracting customers.
Then focus on one social media platform. With Facebook’s live video platform, it’s easy to attract customers there. But you could use Instagram’s similar features.
My wife’s consultant would use Facebook’s live video feature to host online “parties.” She would showcase clothing live and people could live-claim the clothes as she went along.
You can make quite a small living from MLM marketing if you’re willing to treat it like a business.
A Few MLM Negatives
Unfortunately, some MLMs begin as a fad and then fade away if they don’t pivot. Lularoe is a great example of this. They rode the wave of popularity until they couldn’t. Then they shrank and many sellers went out of business.
Only the sellers with the biggest audience continued once Lularoe pivoted away from cartoonish prints. The rest were stuck with inventory they couldn’t sell for full price. They ended up discounting their wares drastically just to get back some of what they gambled.
Most people don’t turn a profit in MLM because they treat it as a hobby rather than a business.
My advice for success in an MLM? Create a business plan and stick to it as much as you can. Pay for good marketing. Build a blog. Then build an audience.