Episode 25: Multi Level Marketing

You know 'em. You hate 'em. Let's break it all down. 

Transcript

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Oh my gosh. Hi! I just had to stop you and tell you about this amazing podcast. It talks about topics and things, and the host even has a cat. I have to get you tuned in. Today they're talking about MLMs. Let's get you signed up. MLM stands for multi-level marketing, which is a tiered business model that funnels money upwards, making the few at the top rich. Some of the most popular MLM companies are Monate, DoTERRA, New Skin, Young Living, Optavia, Herbalife, Plexus, Arbon, Amway, and Beachbody, now just body. The simplest way to explain it is this: a company is created by a group of people. Those people recruit new people to work under them to sell the company's products and recruit more people to sell under them. With each new recruit and sale, a commission is paid to each person above the seller that recruited them. For example, Company ABC is created and Jane Doe is one of the company's founders. Jane goes to her Instagram, her church, her mom friend group, and recruits people to be on her team and sell the products. Jane recruits Mary, who recruits Sally. If Sally makes a sale, a percentage of her sales gets paid to Mary and to Jane. At some point, Jane can stop selling and just make money off of all the people that are selling beneath her. It seems great, but I'm here today to tell you the truth about this business model and how it is not at all what the reps make it out to be. Let's start out with some basic terminology that I'll be using throughout today's episode. As I said, MLM stands for multi-level marketing. MLMs go by other names as well, such as social selling, network marketing, referral marketing, or the most accurate, pyramid scheme. These companies make sure to tell their sales representatives to use one of these other names because more people have become wise to pyramid schemes. If you tell someone you work for an MLM, that person will most likely walk away. If you tell them you work in network marketing, they may keep listening. A huge part of the MLM business model is to have uplines and downlines. Using my example from before, Sally's upline is Mary and then Jane. Jane's downline is Mary and then Sally, and anyone that Mary or Sally recruit. Terms like upline and downline are now synonymous with MLMs. So they now like to use the term team. Sally is part of Mary's team. Mary is part of Jane's team. The word team also gives the setup a more wholesome feeling. You don't want to be left out of someone's team, right? Also, money flows up the pyramid. Money is paid from the seller in the down line up the up line. The other two terms I want to hit on are commissions and PV. Commission is a fee or percentage of a product's sale. For example, Jane makes 5% commission off every product she sells. If the product is worth$25, Jane will make$1.25 off of that product's sale. PV stands for personal volume. This is the amount of product the seller has on hand. It can also be called inventory, but again, saying you need to have inventory doesn't sound as good. And lastly, a hun. This term is used to label the seller of an MLM product. Back in the day, these people would message their acquaintances and sometimes complete strangers online, opening with, hey hun, this is how they got their name. The early MLM companies started out as a normal business model. Examples are Avon, a makeup and skincare company, Kirby, who sold vacuums, and Tupperware that sold plastic food storage containers. These businesses had sales rep who would sell the products to friends, family, and whoever else wanted to buy, and the seller made a commission off of each sale. Over time, these companies wanted to boost sales, and so the multi-level commission plans were born. This model now pressured their sales rep to not only make sales, but to build a downline so that they could get commission from their downline's sales as well. With this model making millions for the people at the top, new companies sprang up with the same model. In the MLM business model, you get money in a few different ways. The first is recruiting people. When you sign someone up to be in your downline, you get a sign-on bonus, plus commission from the starter pack that the new recruit is encouraged or sometimes has to buy. Second, you get commission from selling products. And third, you get commissions from your downline's sales. I know some of this was repetitive, but I want to make sure I'm laying out all the facts for you. A huge factor that plays into recruiting is what is called making rank. The pyramid has different levels to it, and each level is a rank, which often has some nonsense name, like regional director or executive. These labels mean absolutely nothing in the real world, by the way. In order to reach a specific rank, you have to hit a few goals each month, and the clock restarts every month. Each MLM business is different, but for the most of them, you yourself have to sell a certain dollar amount of product. Each member of your downline has to sell a certain amount, and you have to sign up new people to maintain your rank. When your upline is up against the clock and it's five minutes to midnight at the end of the month, they will tell their downlines to buy product to hit the quota and help your upline either maintain their rank or move up a rank. I'll get into this a little more later. This is also why the products are so expensive. The company needs to cover the cost of the item, make a profit for themselves, and be able to pay these different commission tiers. Remember, money flows up the pyramid. Sitting under those few at the top is every single person's downline. They do not see downlines as people, they see them as dollar signs. As much as these team leaders like to love bomb you, you are just a commission check to them. These sales reps are very good at sniffing out the vulnerable people around them and getting them to join their downline. Some are even encouraged to use their tragedy and pitch the business to other people like them. I watched one Zoom meeting for a popular MLM company where the team leader told a woman to use her support group for those that lost children as a fishing pond. It's a very predatory behavior, and frankly, it's gross. There's also the fact that you'll run out of people to pitch to. You get signed up by your cousin, let's say. You both share the same side of the family, and the cousin already pitched to them, so you try the other side of your family. If you get someone on that side of the family to sign up, great. But now the person that that person can pitch to is cut in half because you already tried everyone. If neighbors keep pitching to neighbors and family to family, you'll run out of people. Everyone you know will already be a sales rep, and now it's a race to try and make money each month. The MLM business model has a lot of similarities to cults. A key tactic that cults use is isolation. Get the person away from any naysayers or haters and surround them with people that support the cause. The second you join one of these businesses, you're added to social media groups, text change, and video conferences. They want to keep you surrounded by like-minded people. These groups want to make sure that the only information you're receiving is coming from the group. They don't tell you to research the products and their ingredients. They send you a link to a report that was issued from the company's laboratories. They send you claims to make in your pitches, but nothing to back up the claim. If people question you or your company, they're just haters and you need to move on. Another tactic cults use is sleep deprivation. Good example of that is David Kuresh in the Branch Davidians. David set up his own sect of a religion, built a small community, and would preach to his members for hours every day. Even kids had to sit in these sessions. Nowadays, MLM team leaders use Zoom calls. There will be weekly check-ins or hangouts to make it sound more informal and relaxed. You're also pressured into training sessions that take more time out of your day. These businesses don't want you to have downtime. Downtime gives you time to reflect and think about what it is that's being expected of you, and they certainly don't want that. If you aren't on a Zoom call or a training session, you best believe you're expected to be posting multiple times a day on your social media accounts about the business and tagging your upline. The reason you aren't being favored in a cult leader's eyes is because you aren't giving enough. The reason why you aren't succeeding in your business is because you aren't working hard enough. You need to give your all. And even then it may not be enough. There's always the threat at the end of each month that if you don't pull your weight, you may not get paid. This is where a lot of the love bombing comes in, or in some cases the bullying. It's not a good place to be, and not how a true team acts. There are quite a few lies that potential uplines will tell in order to get you to sign up. The one that every company uses, yet is never true. You get to own your own business and be your own boss. No, you don't. If you do sign up, your boss isn't you, it's your upline. They enforce expectations on you and keep you in line. It also isn't your own business, nor could it ever be. If you own your own business, you are in control of the product sold and the prices. In the MLM business model, you're told what to sell and for how much. Even discounts are determined for you. The only thing you might own is your website link that the company makes for you. If you join an MLM business, your boss is your upline, and you are not a business owner, you are a sales rep. Being a sales rep alone doesn't sound so bad, but you need to remember that this is a predatory business model that you would be supporting. If a sales rep approaches you to join their team and you counter with, that sounds like a pyramid scheme. Nine times out of ten, they will respond with, pyramid schemes are illegal. Yes, Susan, I know that. That doesn't mean they still don't exist. On paper, the only difference between an MLM business model and a pyramid scheme is that MLMs sell products, whereas pyramid schemes sell an idea. The way both of them make money, and the only thing keeping them afloat, is recruiting new people. We talked about ranks, but what I left out was the practice of rank stacking. This is usually against the company's policy, but that doesn't stop people from doing it. Rank stacking is this. Jane signed up Mary, but Mary is having trouble finding people to sign up. Jane takes people that she was going to sign up under her and instead signs them up under Mary. This does two things. It helps Jane move up a rank, and it gives Mary this false confidence that she's successful. Mary will also use this confidence and the fact that she now has people under her to use when she pitches to new people. The brand of car changes by the business, but the carrot is the same. Here's what they don't tell you about this car. Probably because they don't know themselves. The sales rep that is driving that car is financially responsible for it. That sales rep has qualified for a car bonus. The company does not give them a car. It works as such. If you reach a specific rank, you qualify for a car bonus. This is a check that the business gives you every month for the car payment. It's not as simple as that though. Duh. Let's use our girl Jane. Jane moved up a rank by rank stacking and signing up five people under Mary. Jane now qualifies for the car bonus. Boss babe. The company determines the make, model, and even color of the car Jane can purchase. Sometimes the color is dependent on the rank, too, which is so stupid. Jane goes to the dealership and takes out a loan for the only type of car the company says she can purchase. Side note, some sales reps have a hard time qualifying for a loan because, as a sales rep, at least in the United States, you're considered a 1099 employee. This means that you do freelance work and this money's never guaranteed. In these cases, the sales rep may need a partner to co-sign the car loan. Okay, so now that Jane and potentially Jane's partner are saddled with a car loan, she now sings the praises of her business. However, then comes the end of the month. If Jane and her downline don't meet the rank requirements, Jane will not get that car bonus. This means that the monthly loan payment is all coming out of Jane's pocket. If her team did hit all the requirements, Jane gets that car bonus check, but it's only for a portion of the loan, almost never the full amount. She may get a$300 car bonus check to go towards her$800 car payment. The company is not paying for Jane's car. Jane's commissions are paying for it, and she may get a check from the company if she and her downline hit all their sales goals. Jane is now even more dependent on her downline making money since she now has this massive car loan and image to uphold. Oh, and those trips and conferences that your upline has you working towards, don't get too excited. The company might pay for your airfare, usually the cheapest they can find. You are responsible for transportation to and from the hotel, all of your food, and drinks. And if this is a conference, which is just a massive love fest on how great the top of the pyramid is, you have to pay for the ticket to get in. Sometimes reps have to pay a deposit to make it on a list to qualify for a conference ticket. Yeah, nothing is ever guaranteed. Okay, friends. You now know what an MLM business model is and why they are bad. Now I want to teach you how to spot one. On social media, it's actually pretty simple. Your friend or in-law or elementary school teacher will all of a sudden start posting a lot about a business that they never name. These posts will be in a completely different voice from them, using a lot of emojis and will come with a slew of pictures to prove how great the products are. Now hang on. Why aren't they naming this business or company? Well, as I said at the beginning, if the sales reps put the name out there, savvy persons will look it up and see that it's a pyramid scheme. If the rep creates mystery around it, they have a better chance of roping you in. The sales rep, though, isn't clever enough to know to do this on their own. Their upline sends them pages of photo captions and posts to just copy and paste. This was sent to them by their upline, who received it from the heads of the company. If you comment that you're interested or want more information, they will respond with messaging you, once again, not sharing any information on a public platform. Now, not everything they post throughout the day will be about the business. No, no, no. They need to play around with the algorithm so that when they do post about whatever nonsense it is that they're trying to sell, they will hit enough people. Social media algorithms are kind of like mathematical equations. The more you click or interact with certain accounts or posts, the more you'll see it. If this seller is posting an innocent question like, what's for dinner? Or Am I the only one who you feel like it's a normal post and add your response? This plays into the algorithm. Now you'll begin to see this person's post more often, and they'll be up towards the top of your feed. Some people will post these simple questions with a picture of their kids or pets to further encourage you to click that like button. But stay strong. Do not engage. In person, sales reps will often play the same game. They'll compliment you and tell you that you would be perfect for their business. No info given, no business name, but they'll pressure you to get your contact information so that they can rope you into a video call with their upline. Remember, no is a full sentence. If they continue to pester you, call over a store manager or threaten to call 911. Let's say you got sucked in and sat in on that video call. Pay close attention to what is being said. So often, the person that recruited you remains silent and lets their upline do all the talking. This upline is going to do a lot of talking without saying a gosh darn thing. Take a minute to process what they just said and ask yourself, Am I walking away with any information? Was my question answered? Do I have any idea what's being expected of me? The answer is probably Nope. They just throw around a lot of buzzwords that they're told to say because more likely than not, they don't know the answers either. Or they may have been instructed to skirt around these questions. The MLM company Herbalife started getting their reps to open smoothie shops. These shops don't have an Herbalife logo anywhere. The shop will also be called Something Nutrition. Their drinks are always brightly colored, most times multicolored, and if you peek behind the counter into an open cabinet, you'll see the Herbalife brand protein powders. If you mention this brand Name or ask if the shop is affiliated, the person behind the counter will usually shut down and be quick to shuffle you out the door. Multi-level marketing companies are everywhere and tout legitimacy all day long. Don't be fooled. Ask questions. Pay attention to the answers. And while you're at it, watch some awesome anti-MLM YouTube creators like Hannah Alonzo, Kiki Chanel, and Brianna Jewell. And come back next week to see what else has been hidden.