MLM companies divert attention from the flawed business model and the disastrous financial outcome suffered by participants by presenting a compelling and very alluring picture to recruits. Virtually all companies of this type in every country that they operate in make the same alluring and misleading promises to recruits:
▲ Opportunity to earn “residual” income, that is, ongoing commissions on the purchase by others whom you recruit or whom they in turn recruit. This expands earning power well beyond one’s own personal efforts. You can be freed from “wage slavery!”
▲ Continuous income without continuous work. Most products are “consumable” goods that people might re-use month after month.
▲ Extraordinarily high-income potential, much higher than most salaries or professions would normally promise. This claim is based on the theoretical potential of expanded recruitment efforts of others. A typical presentation shows the potential of one distributor recruiting just five other people, who each recruit five, and this continues just seven “generations.” The result is over 78,000 new sales representatives. Commissions on all of their purchases, the promotions claim, will go to that one salesperson at the top, month after month. That person could be you! Does your current job offer that kind of income opportunity?
▲ Possibility of early retirement provided by a continuous, residual income stream from the labors of others in your sales organization. No need to work and save all your life
▲ Personal freedom, financial independence as a self-employed person. No more bosses!
▲ Time flexibility and more free time. More time to spend with the children, to take vacations, and to do more in life!
▲ Security provided by self-sufficiency against the many changeable and unpredictable
factors in today’s economy, including corporate downsizing, government cutbacks, inflation, corporate profit taking, increasing requirements for high tech competency in the job market and job discrimination against older workers. You are protected!
▲ Opportunity to enter the business for a low initial investment of money. No risk!
▲ No need for specialized skills or higher education. Anybody can do it!
▲ No marketing expenses or “cold calls” to strangers are required because your friends and associates are your first prospects. Your first recruit is as close as your neighbor next door or your own mother in the next room!
Blaming the Victims
Even as millions of consumers are solicited into MLM and then quit after losing money, most do not understand why they lost. They are shown the luxurious lifestyles of the top promoters and are told that “anyone can do it.” The promoters convince them that they personally “failed” and that it was “their own fault.” Most have no idea of the sheer scale of people joining, losing and then quitting. They are led to believe that they are unusual in their “failure.” Consequently, they not only do not complain to the government authorities but they do not even warn friends or relatives to stay out of MLM. Shame and disappointment are covered up with silence. The recruitment program continues largely unabated.
The massive failure rates among those who invest in MLMs have almost nothing to do with the individual recruit. These multi-billion-dollar consumer losses are due to the pyramid business model. Retailing is unfeasible and the recruitment-based income plan is designed so that most will lose. It cannot be otherwise. For a few to win, basic mathematics requires all others to lose. “Anyone” cannot do it. The “endless” chain schemes do not, of course, go on forever. Nor do they continue until they quickly exhaust all possible new recruits. While the schemes are structured as endless chains and make promises to new recruits as if they were “limitless” and could fulfill the promise of success to all, in practice, the chain keeps breaking at the bottom and being “repaired.” Large-scale failure is, in fact, necessary. If most did not quit, but continued to recruit, the earth would soon be entirely filled with MLM distributors in a very short period of time.
The way the mathematical limitation works itself out is in the pattern of dropouts. Non-retailing MLMs don’t fully or quickly saturate areas with members because most people quit within a year. All such schemes experience a 50-75% annual dropout rate.
Dropouts thwart the recruitment process at the lower levels. The people trying to build the downline are always dependent on others below to “duplicate” the process. When their new recruits become discouraged and drop out, the rebuilding process must start yet again. And while the hopefuls engage in this constant rebuilding effort, they are also continuously paying money to the scheme and its organizers – in product purchases, training fees and marketing costs – as well as incurring other normal business expenses.
With its ongoing operation, continuous enrollment of excited new recruits and public displays of wealth and success by the organizers, the organization appears to the uninformed as viable, stable, and successful. Most schemes can go on for many years by successfully recruiting new people to refill the bottom ranks, which become open as past recruits quit the business in “failure.” Eventually, they must move to new markets, usually in other countries and some also use the ploy of changing their names in order to continue deceptive recruiting.
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