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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The key difference is the revenue source and cash flow. In traditional retail companies, the primary revenue source is purchases made by outside customers. Money does not flow “up” the pyramid…it comes in from the outside. From this revenue, the company is able to pay their bills and make payroll.
In MLM companies, by contrast, the primary revenue source is purchases made by the folks inside the sales force. This revenue is used by corporate to pay the bills, and a portion is paid back to the sales force in the form of bonuses and commissions.
Since only a fraction of the money going from the sales force TO the MLM company comes back FROM the company to the sales force, it is impossible for any MLM downline to be profitable as a whole.
In traditional companies, the fact that the money comes in from customers outside the workforce makes it possible for every employee to earn positive income.
Such a good explanation, DJ! For those who know, is it even possible for a customer to order directly from the company? Do they always have to go through a consultant?