How MLMs Stay In Business
If multi-level marketing is one huge scam, how do they stay in business? How is it that consumers don’t know it’s a pyramid scheme? Why are thousands of people signing up for MLMs each day? Haven’t they heard by now?
It’s simple. They have spent decades presenting themselves as real businesses. And they’re masters at it. MLMs depend on an endless chain of recruiting for their very existence. The con game has been thoroughly developed. The late great Dr. Jon Taylor came up with a list of 8 things MLMs do to stay alive and keep the recruits coming in the door:
- Rewards. The profitability for the MLM company and the payout to top distributors is so great that they will routinely misrepresent and will go to great lengths to keep the scheme going, including finding new divisions or areas in which to continue recruiting after a given area is saturated.
- Ruse. MLM’s have been enormously successful in positioning themselves as direct sales programs that are exempt from laws against pyramid schemes. Even many regulators, the Better Business Bureau, educators, and writers will be quick to condemn a no-product pyramid scheme, but will exonerate a far more extreme and exploitive product-based pyramid scheme (MLM). A recruiting MLM company is actually an institutionalized pyramid scheme. Recruits in the hierarchy of “distributors become unwitting agents in collecting pyramid investments (in the form of “incentivized purchases) that fund the company and enrich top “distributors. Another ruse is the idea touted by MLM promoters that their program “gets around the middleman.” In fact, the MLM guarantees that their program will create a whole network of middlemen to be paid off.
- Repeated investments (“pay to play”). Although the cost of signing up as an MLM distributor is usually less than $100, the cumulative investment, in strongly incentivized purchases to “stay in the game,” may amount to hundreds or even thousands of dollars over several months. Products are often sold on a subscription basis by automatic bank withdrawal to maintain cash flow and upline residuals. Often purchases are far beyond the needs of the buyers and are stockpiled or given away. Usually such purchases are discontinued when the person withdraws from the scheme.
- Recruitment of revolving door of replacements. MLM’s are conducted as “body shops.” Those who drop out on the bottom levels are constantly being replaced with new recruits who believe the promises of wealth and time freedom – or a little additional income for persons who are struggling to make ends meet (which almost always sets them further behind financially).
- Re-pyramiding. When MLM company officers see that the “pyramid” is about to collapse, they start a new division, introduce new products, or enter a new region, all within the same corporate umbrella. This makes possible a whole new “ground floor opportunity” to participate in the “hyper growth” of the company, or to “ride the wave of opportunity.” This Ponzi-like behavior is what Amway, Nu Skin, and other long-lasting MLM companies have done.
- Rationalization and self-blame. Self-deception is common in MLM’s, making it the perfect con game. The very people who are being victimized are often its most ardent promoters – until they run out of resources and quit. They seldom complain to regulators, having been taught that any failure is their fault for not having tried hard enough, rather than the fault of the MLM. They may also fear retaliation from or to their upline or downline, which may include close friends or relatives.
- Retail “rules.” The trick for a recruiting MLM to evade regulatory scrutiny is to create the illusion that retailing is being done by establishing “rules” for minimum retailing with which distributors must comply – which are satisfied cosmetically so as not to arouse the attention of regulators. Compliance with these rules is not independently audited, nor are they reinforced by corresponding incentives in the compensation plan. MLM rule-making is ineffective without correcting problems in the compensation plan itself.
- Recognition. The MLM company may go to great lengths to enhance its legitimacy and its credibility. They may donate heavily to influential politicians and parties, to the Olympics, and to worthy, highly visible causes. Their support for these causes is given top billing at opportunity meetings and often given recognition by an unwitting press. Celebrities are hired to speak at MLM conventions. Top MLM officials and founders have been honored by university and civic groups.
I dare you to read those 8 points and not see Mary Kay in every one of them. You can’t do it.
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Well written! I’ve been chewing on this question for a while now. The programming is fierce and some of us are more susceptible to it than others (my opinion).
The rationalization and self blame is the what kept this pink pawn (myself) in the game for 21 years.
Next month will be better! I’ll get those 5 by the 5th. I’ll have all my production done by the 15th so we can just coast to the end of the month; everything else will be gravy. Nothing a gold medal can’t fix! The speed of the leader is the speed of the gang.
I drank copious amounts of the pink koolaid.
And then when it doesn’t happen, we’ve been so beautifully “trained” to understand that it was my fault it didn’t work. If I would have just made another phone call, gone and found another lead, sent off one more text for a reorder. Just one more! The Power of One. Stretch for that star.
Pretend Mary Kay is watching your every move. What would she say about your choices/behaviors? {{{{lol this one always creeped me out a bit, but I still played along}}}}
Intrigue, I would love to hear your story. If and when you’re up to it, please share. There is power in getting your words and our experience out there. And I have found a great deal of healing in the process of sharing my story and learning that I was not alone.
Mary Kay is extraordinarily effective at silencing questions–they label them as “negative” or “critical” and only allow what is 100% positive. In MK, that means what is 100% aligned with the company line. There is so much shame in failure because we have been trained that all failure in MK is our own fault. Stepping out of the fog, hearing that others experienced similar doubts and failures, that maybe, just maybe, it’s not all my fault after all, but the way that the system was designed… It’s just been so freeing, and it has been an incredible help in the process of trusting my own judgement again.
Frosty, I love your name!! It’s so appropo! I started a thread on the discussion board, “Lowest Paid Teacher in America” and it’s under the heading of How we got Roped Into MK or something like that, lol. It is super cathartic to get it all out of us. My life has been this beautiful tapestry of chaos. It’s challenging to re-learn how to live life – reprogramming. I think I’m running on Apple IIC+ programming, or at best, Windows 95, haha!
Thanks for being here. Together we all make a difference!! <3
“Repeated investments (‘pay to play’).”
Please, recruits, ask the question! “Why do I have to order so much of this personally just to be eligible for commissions selling it? What is the reason for this? I know salespeople in other businesses who make good money selling products they don’t use personally.”
That MLMers can successfully suppress such basic curiosity intrigues me. The “Pink Fog” is real, thick and effective!
Great article! Avon was bought by Natural (Brazil). I know of three MLMs in the Dallas, TX area that are now defunct: BeautiControl, Home Interiors and Premier Designs. There are several others there I don’t hear about much. I saw a car with an HerbalLife sticker; hadn’t seen that in awhile. I tried Arbonne, but got out before any damage was done! I am also surprised any of them stay in business.
Interestingly, two of those three have MK ties. Home Interiors was owned by the family Mary Kay married into. And BeautiControl was a direct response to MK by two directors who felt betrayed by Mary Kay.
https://www.texasmonthly.com/news-politics/hostile-makeover-2/
Yes! Very interesting. There was a movie years ago called “Hell on Heels
the battle of Mary Kay” about the ongoing feud between BC and MK. Shirley Maclaine played Mary Kay.
There is also “Re-inventing” or “re-naming” … When MLM company officers see that the “pyramid” is about to collapse, some of them start a brand new company and shunt the high performers over there and let the old one wither. These are “serial MLM founders” and you find a lot of them if you Google the names of the founders of the hot new opportunity.
And if you look closely, many of the serial MLM kingpins also have rap sheets. Google “What’s wrong with Multi-Level Marketing?” to read this prescient piece (from the 1990s) by Dean Van Druff for more on this. He cautions against the “hero worship” of the slime-balls in the upper ranks of MLM.
I have a simpler answer to all this – doesn’t anybody remember what P.T. Barnum said?
It’s no surprise to me that MLMs continue to survive and thrive in the USA, with one of the largest world’s economies and bases of unsophisticated consumers who have some kind of purchasing power and think they’re becoming business owners to “buy in” to this nonsense.
But there is a much bigger mystery I wonder about – why do so many MLMs manage to survive and thrive in much smaller countries without nearly the massive amount of potential recruits (and would-be suckers) with the money (or credit) to spend? Mary Kay operates in Canada, a country with less than 1/8 the population of the US and huge swathes of countryside where nobody lives. According to their website they operate in something like 37 countries, including Guatemala and El Salvador. ??? Amway operates in over 100 countries and I guarantee you most of them have economies that aren’t anywhere near the size of the USA’s. Exactly how does an MLM scam operate in such a small economy without almost instantly saturating and running out of potential recruits?
My guess… money laundering. And in the case of some mlms, slave labor and kidnapping (Qnet).
I’m here because I literally just signed my name with the pink ink less than 24 hrs ago and was so hesitant due to personal circumstances.. still, I thought it could be a good opportunity to explore my marketing/sales interest. However, judging by the cruelty recently displayed by a MK national director via phone call and this article+comments…That hesitation was with good reason! Whoa! Thanks a million!
Trust your gut!