folio & fable Designs

Multi-level marketing schemes: the end all be all to the credit behind the word “entrepreneur.” The reason that you went to college. The red flag you keep your eye out for when you notice a company on Indeed is “hiring urgently.” Following a long college career of individuals attempting to sell me a small business, job interviews circulating around running your own office “after just 6 months(!),” and being invited to “like” Facebook pages created by friends about gel nail polish strips, I decided to bring about a discussion advertising the most miserable business structure of them all.

Given the topic, a Wikipedia definition seems to be the most suitable to describe such an unprincipled matter. Kindly put, a Multi-level marketing (MLM) is a controversial marketing strategy for the distribution of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company’s products or services, while the earnings of the participants are derived from a pyramid-shape or binary compensation commission system. Often, no special training is required to become a distributor, but there is an initial “investment” fee. This initial investment fee permits you to become a distributor, where one would then face another investment “opportunity” to purchase the “starter kit.” Often times, the distributor is looking at laying down another $50 to $5000, depending on the MLM. If you fail in selling your products, you lose that money and if you sell everything, you still only get a small percentage of the profit earned. Every distributor in your up-line, along with the MLM, gets a cut of the profit that you earned. This is what encourages the individual distributors to attract more potential employees and create their own downline.

Following a survey conducted in 2018, it was reported that the majority of the people in MLMs that were surveyed were making less than 70 cents an hour. 60% of the participants said they had made less than $500 in the past five years. Beyond the quantitative metrics, married men and people who received money from friends and family to participate are the most likely to lie about how much they are earning, fight with close friends and family, and even lose friendships than other groups. So, with such little profitability, results, and reputation, how do MLMs still continue to attract potential distributors? Do these distributors really believe in the process, or are they just trying to dig themselves out of the hold and break even after realizing their mistake? What is the psychology behind an intelligent individual falling for a pyramid scheme?

When we think of propaganda, we tend to think about the Soviet Union, the United States, and Nazi Germany – there may even be a slight flashback to you reading Animal Farm in your eighth grade English class. However, propaganda is utilized just as prominently in the MLM business model. Most MLMs do not return profit from their products. They prey on people who are typically in a vulnerable mindset and convince them to join their “team.” Moreover, the recruiters focus in on an individual’s “pain points”: the areas of one’s life where they feel vulnerable and need relief. Then follows the backing that powers the MLM: the culture created around the selling of the products. It is the motion behind the prevention of every MLM falling through. The cult psychology used to bait and trap enthusiastic young mothers and hopeful freelancers have been in action since MLMs were developed in the 1950’s, but with a coming of age, we now see the conventions and groups that all regulate one another and create positive feedback loops in the communities they are a part of. If any dissent comes from outside the circle, the group will be encouraging of cutting (or blocking) ties with the “unsupportive” family or friend. This is familiar within the Mormon church – one is encouraged to cut off contact to the family members who stray away from the community. This draws out the us vs. them mentality, which continues to strengthen as the team ostracizes individuals for quitting or discovering contrary information about the legitimacy of the program.

Furthermore, Cialdini provides scientific evidence into why we make decisions and what makes us impressionable. The six principles follow reciprocity, commitment, social proof, liking, authority, and scarcity. Whether through getting to prospect to talk about their challenges and problems or encouraging reps to pressure their friends and relatives to buy, MLMs take advantage of each of these six principles, beginning with scarcity: “This is an opportunity of a lifetime!” Sound familiar? Multi-level marketing schemes will continue to disguise themselves as legitimate, profitable organizations, but their business practices resemble cults more so than actual companies. We all have the ability to influence buyers into making choices that have the potential to add a lot of value to our business. It’s about the morals we hold behind that delicate influence that we need to respect.