Multi Level Marketing Companies – Are They All Scams?

The Multi-Level Marketing Industry Exposed

When you think of the multi level marketing industry,  most people visualize one of two things (or maybe both). They either see the potential for huge success,  fancy cars,  big houses,  yachts,  dream vacations and lots of cash; or they see unethical business practices,   scam ,  pyramid scheme,  ponzi scheme etc.

My goal is to help you understand why people can view multi-level marketing as a wonderful business opportunity while others see it as a horrible pyramid scheme. If you are “on the fence” and really don’t know what to think,  this article will help you by exposing the truth behind the multi-level marketing industry.

What is Multi Level Marketing?

Multi Level Marketing Companies   Are They All Scams?Multi level marketing is a marketing strategy where by the sales force is made up of independent distributors or representatives that are compensated not only for their own sales but also the sales of others they recruit,  which creates a downline or team that generates multiple levels of income.

In 1945,  the first multi-level marketing company was created called Nutrilite.  They allowed their sales distributors with at least 25 customers to recruit others and earn a 3% commission from their sales.  Each time a customer purchased their monthly supply of vitamins,  the sales distributor earned a commission resulting in a residual-income.

People were fascinated by this concept of earning residual income and the ability to earn leveraged income,  which is income produced by the efforts of others.

Multi Level Marketing Startup Fees

Many people dislike the fact that most multi level marketing companies require a startup fee or cost to join. The problem is people mistakenly view the opportunity a multi level marketing company provides as being the same as that of a traditional job while nothing could be further from the truth.

Let me explain the difference between a job and a multi level marketing business.

A person who has a job is often referred to as an employee. Employees earn a particular type of income called linear income.  Linear income is income earned when you work,  if you stop working,  you stop earning an income.

A person who is involved with a multi level marketing business is often referred to as a distributor or representative but a more accurate description would be business owner. Even though they do not own the multi level marketing company,  they function as if they do. In other words,  they are entitled to work when they want,  for as long as they want and where they want. This flexibility or freedom is what so many people desire. Business owners have complete control of not only their time but their income as well.

Multi level marketing business owners earn a special kind of income called passive residual income. Passive residual income is income that is reoccurring in nature but is also generated from the efforts of others. For example: You recruit someone into your multi level marketing business who then makes a sale. Because this sale is reoccurring in nature,  you earn a passive residual commission every month as long as this customer continues to purchase the product or service.

You should start to notice that people who join a multi level marketing business are not getting a job but are getting a business. Once you understand this difference,  you will understand why companies require a startup fee to join.

If you wanted to start a business on your own,  it would cost you thousands,  hundreds of thousands or even millions of dollars to get started. However,  to get started with a multi level marketing business you only need a few hundred dollars in most cases.

Is Multi Level Marketing Legal?

Multi level marketing businesses operate in not only The United States but more than 100 other countries around the world. Not all countries have the same view towards the multi level marketing model but most have determined it to be a legal form of business.

Here is what Federal Trade Commission has to say about multi level marketing:

“Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They’re actually illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses,  most people – except perhaps those at the very top of the pyramid – end up empty-handed.”

The important thing is to do your own research. If a company pays a commission solely for recruiting others then I would  not join this business.  My suggestion is to ask questions,  talk to people already in the business,  call the corporate headquarters,  find out as much information as you can before joining a multi level marketing business so you know it’s not a scam or pyramid scheme.

Multi Level Marketing Success

If you want to have success in the multi level marketing industry,  you need to pay close attention to this section. I will briefly explain why most people are not successful and then share with you a marketing strategy that very few know about that almost guarantees your success with any multi level marketing business.

Multi Level Marketing Companies   Are They All Scams?Robert Kiyosaki,  the author of “Rich Dad Poor Dad” and a world renowned business owner and entrepreneur believes in a rule called the 90/10 rule. He also believes multi level marketing or network marketing as it’s often called will be the business of choice in the 21st century.

The 90/10 rule,  when applied to the multi level marketing industry,  means that 90% of the income will be generated by 10% of the distributors. This rule is true in many aspects of life and business. In fact,  90% of the wealth in the world is controlled by 10% of the population. Its just a fact of life.

The reason why 90% of multi level marketing distributors earn little or no money is because they lack the skills and knowledge required to build a successful business. Multi level marketing requires two simple things. In order for you to make money you need to generate sales and recruit others. Without both sales and recruits,  your income potential will be severely diminished.

Most people are taught to tell their friends and family about their new business in hopes that they will buy their product/service or possibly want to join the business opportunity. This marketing strategy worked 30 years ago but no longer is effective in today’s society.

 

Multi Level Marketing Companies   Are They All Scams?Using this strategy may result in short term success but is not a viable long term marketing strategy I would recommend. Eventually,  you will run out of people you know to talk to. This is why so many multi level marketing distributors quit and give up on their dreams.

Often times,  this failure leaves a bitter taste in their mouths and they view “multi level marketing” as a scam or pyramid scheme.

In order to have success with a multi level marketing business we know you have to be efficient at two things; Sales and recruiting.

If you want to generate sales and recruit others you need to have a source of leads or prospects to talk to. Multi level marketing is really about becoming a successful marketer. If you can learn how to market,  you will have success.

The marketing strategy that most of the top income earners in multi level marketing companies are using today is called attraction marketing. Attraction marketing is simply a strategy that allows you to attract people to you and your business. This is often referred to as lead generation. Remember,  without leads or prospects,  it will be impossible to generate any sales or recruit others.

Once you learn how to generate leads using attraction marketing you will begin to have success with your multi level marketing business.

I hope that this article has helped you better understand the multi level marketing industry and why some people have success while others do not.

If you are involved with a multi level marketing business or are thinking about joining one,  I strongly encourage you to do your own research and learn everything you can about the company and attraction marketing. Learning this could mean the difference between your success or failure. The choice is yours!

See You At The Top,

Multi Level Marketing Companies   Are They All Scams?

PS. For those who want to learn more about attraction marketing I highly recommend you check out this website.

4 comments to Multi Level Marketing Companies – Are They All Scams?

  • Clint, nice primer article on MLM. It is an occupation that has been given a bad name but can be a great vehicle for honest, ethical product companies and their distributors.
    The only addition I would make is that unless a sales leader is paid on anything other that product sales, stay away!
    Network marketing is truly the “Everyperson’s Franchise” in that the star up costs for a legitimate company is much less than any franchise business. And, with MLM growth, there are no employees, only other sales leaders who share their zeal for success with others!
    Here’s an example of how to do a network marketing business online,take a look, here.
    SDBeachguy recently posted..Be a Temp or Be UnemployedMy Profile

  • Let’s not be naive – there ARE scams and scammers out there, and they give all Network Marketing a bad name. BUT, this is an amazing industry that really can provide great income and life-changing events.
    Recognize that it’s like any career change – you probably don’t have the skills, mindset, etc. needed to run your own MLM business. Take your new business seriously, dedicate yourself to becoming better and learning, and you can be successful.

  • Good stuff here Clint.

    It’s amazing the change one can make in this type of business when you mindset is shifted from the old-school methods of Networking to the new methods. Blows me away that there are people who haven’t caught on to this yet. It is our duty to inform and help. Keep it up!
    Brock Blohm recently posted..Why Network Marketing?My Profile

  • [...] for recruiting others. My suggestion is to go to www.mlmrankings.com and review all the multi level marketing companies listed. Find a business that has a product or service you are interested in and do some research on [...]

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