MLM is Not Like Corporate America
One of the common statements made by people in favor of multi-level marketing is that it is just like corporate America. We call MLM a pyramid scheme, and corporate America is a pyramid too! That’s simply not true.
While the SHAPE of the hierarchy of people looks like a pyramid in MLM and in corporate Amercia (one person at the head of the company, a few below, managing several below them, and so on)… that is where the similarities end.
Multi-level marketing is PAY TO PLAY. Everyone has to PAY MONEY in order to participate, and almost everyone loses money in MLM. In contrast, no one pays to get hired for a real job. Instead, the company hires the people and pays them every single payday. In corporate America, everyone makes money (although at different rates of pay), while in MLM almost everyone LOSES money.
Below is a snippet of an interview I did a long time ago on HuffPost live. The talking points about this issue are still relevant today.
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I’m sure the counter argument would be: “But of course you pay to participate! You are investing in your own business!”
It’s the double talk. Different arguments for different purposes.
How much “investing” is needed in your “business?” Why do you have to pay the MLM constantly to be a part of it?
I can tell you, having worked in the corporate world, I didn’t have to “invest” anything into the business. I didn’t need to PAY the company to work there, to have benefits, to get overtime, and more. Yes, I had to pay for the education required to be in the job I had, yet that company offered tuition assistance to further my education and advancement with the company.
I would say this is an apples and oranges situation, but it’s not. It’s more like apples and arsenic.
Exactly. Mary Kay ladies: either it’s a “corporate structure” or it’s a “business”. Choose one. You can’t pick and choose (midstream in the argument) to suit the situation.
While in the corporate world there may be only a few in the C suite and many worker bees at the bottom of the organization, the worker bees are not allowed, let alone encouraged, to bring in more worker bees. In MK, recruiting is the name of the game from the moment the new consultant receives her starter kit.
“… the worker bees are not allowed, let alone encouraged, to bring in more worker bees…”
Exactly! The non-MLM cannot hire an infinite number of employees. But an MLM will “let” literally every person on this earth to “join” their company. Why? Because they don’t pay any of them a single dime to do so. Believe it, every part of joining Mary Kay…from the cost of the starter kit, to what it costs them on average at corporate to set up the new consultant, etc, is factored into their P and L. They know exactly what it costs them for every new consultant, and they at minimum break even on it. Corporations who pay employees only hire as many as they are able. Otherwise, why doesn’t Mary Kay CORPORATE just hire infinite numbers of corporate employees? The ones that they actually PAY to work for them? It amazes me how so many supposed “business owners” in MLM don’t figure this out.
Don’t forget all those wonderful job titles. In traditional companies, people with different job titles have different job descriptions/responsibilities. In MLM, even with that long list of titles, everyone has the exact same job description/responsibilities.
Next is cash flow. In traditional companies, almost all of the corporate revenue comes from outside customers, from which corporate expenses (including payroll) are paid. In MLM, the overwhelming majority of revenue comes from the pockets of their own sales force. Only a tiny fraction of MLM corporate revenue comes from outside customers.
Notice also how the corporation views the workers. In traditional companies, workers are viewed very differently from customers. The corporate business plan has no dependency on the workers purchasing the company’s products, although some offer employee discounts to attract employees. In MLM, the entire business plan and all the incentives are structured around the MLM rep as the target customer of the company. This business plan is structured so the MLM corporation can be profitable even if the MLM sales reps never sell a single item to outside customers.
Look at the incentives to the sales team. In traditional companies, sales incentives are based on actual purchases by outside customers. In MLM, the incentives are tied to buying and recruiting on the part of the MLM rep, with no incentive to actually sell to outside customers.
And then there’s risk. In traditional companies, the financial risk is borne by the company. In MLM companies, the financial risk is borne by the sales reps.
Regardless of shape, MLM has very little in common with traditional companies.