The Problem with MLM

Disclaimer: As with any generalizations, what I’m about to say may not be applicable to every possible case there is. It just means that these things happened to a lot of people often enough that it probably is the general case.

I don’t really mind people selling me stuff. I bought a couple of games in the last Steam Summer Sale. I sometimes take up upsell offers on fast food. I entertain sales people when their product looks interesting.

The problem with Multi-Level Marketing is it’s disproportionate focus on recruitment. This plays a large role on how we perceive MLM (deceitful, scammy and general mistrust) and probably affects how the product is perceived.

This disproportionate focus on recruitment is reflected in how recruiters draw people in:

The top-earning person in the PH earns <insert number greater than 500,00> per month after just 3 years in the company. See that guy with the 1,000 peso bills fan? That’s my upline. Here’s his upline with his BMW car. Work hard enough and you can be exactly like them. If you just get 3 people per month, and do so consistently for a year, you’ll be earning so-and-so per month. Oh, here are our products, by the way.

Of course, I’m exaggerating but recruiters’ pitch kind of feel like that. I wouldn’t be surprised if someone pitched like that almost verbatim.

The pitch is designed to make you feel envious. To make you want to be like the ones you see. It’s designed to get you to sign on the line that is dotted. (By the way, watch that entire clip. Best. Salesman. Ever.)

If you compare insurance sales and MLM organizations, they are structurally similar. The crucial difference is that in a product-centric sales organization, a huge proportion of their marketing/training/sales materials and tools are about pushing the product. This isn’t to say that insurance companies are better at selling. Some fail miserably at this. But at least you know they’re trying to sell you a product. With MLM, you’re never sure exactly what they’re selling you.

If I were to join an MLM, this would be my business model:

  • Let’s assume that the products are legitimate
  • Acquire products for a discount
  • Mark it up, and sell it for some profit
  • If someone was interested in selling the product and was really passionate about it, then I would invite them to be part of my downline

That’s essentially a distributorship. If recruiters used that as a model, they’ll have a hard time recruiting people. It’s much harder to sell a business than a get-rich-fast dream. Oddly enough, the get-rich-fast dream they’re peddling you requires just as much time and effort but requires you to sacrifice some of your social capital.

As with any business, that model is going to take a lot of work and time. Time and effort that I’m not prepared, nor can I afford, to put in right now. If I’m going to sell something, give me software to sell. That’s right up my alley.

You know what they say, if a deal sounds too good to be true, it probably is.


End notes:

I came across this in my research:  What’s wrong with Multi-level Marketing? and when I read that, I almost didn’t want to publish this post because they touched on all of my points (and more) more elegant and comprehensively than I did. So go read that. It’s pretty long though, so click only if you have time to spare.

Some more points I wanted to put in but was having a hard time refining:

  • Spending 2 to 3 years working on something guarantees that you’re going to get good at it. Recruiting people included. Are you willing to spend the next 2 to 3 years on this?
  • Getting people to come into orientations will work in the short run, but it would drain your social capital. How much social capital are you willing to exchange?
  • Some of the right reasons to join an MLM: gain sales experience, actually want to sell the product to other people
  • Sales is not for everyone. Dragging people in to turn them into salesmen is irresponsible.


Featured photo from .faramarz