The terms multi-level marketing, Ponzi schemes, network marketing, and get-rich-quick schemes are often used interchangeably. Although at first glance they can seem different, the truth is that they’re essentially the same thing but under different names.
Herbalife, Amway, and Usana are all prime examples of these risky schemes. Perhaps you know someone who has fallen prey to the allure of becoming rich by selling products for a company. Maybe you’ve even taken the bait yourself. If you have yet to become intertwined with such a company, you’re one of the lucky ones. Keep reading to find out why!
Multi-level marketing, also known as MLM, is a business strategy that draws people in with promises of wealth. The trouble here is that those promises very rarely are fulfilled. People are generally more informed and able to avoid working with illegitimate businesses nowadays, but multilevel marketing companies are smart. Their business models now often overlap with those of legitimate businesses, making it much harder to distinguish between real opportunities and fake ones. How can you steer clear?
Why MLMs are hard to spot nowadays
As multi-level marketing companies continue to get more creative, the likelihood of someone falling for a scheme and unknowingly falling into the trap becomes even more common. From essential oils to software and even yoga pants, MLMs have taken on different forms across a more diverse product range. The items they sell now go far beyond the standard cosmetics and nutritional supplements guise. Along with proper branding strategies, brand-new tactics, and strong social media influences, MLM companies have been taking the investment market by storm. They sell people on an idea, neglecting to truly explain the risks that come along with them. While these MLM companies might look like trendy must-join organizations that offer “more promise than working a nine-to-five”, the reality of it all is that they still have the same shady business models under the surface.
When it comes to distinguishing MLMs from regular trustworthy companies, it’s important to know about and tell apart between the two forms that these organizations come in: legitimate and predatory.
Legitimate MLM programs
Also known as “non-predatory” MLM programs, this type of scheme allows “joiners” to make money based off of actual sales to real customers. This proves to be more realistic and sustainable considering that the majority of the company’s income is made off of products. Often, legitimate MLM programs are safer to join as the risk of being scammed is much lower compared to predatory ones. However, even legitimate or non-predatory MLMs face problems due to unsustainable business models and eventual full-on losses. These organizations typically meet their untimely ends in bankruptcy.
Predatory MLM programs
On the other hand, these are the organizations that you’ll have to watch out for and stay far, far away from. Predatory MLM programs are highly-illegal in nature and are often characterized by their intense, no-holds-barred selling styles. Compared to a legitimate MLM program, a predatory kind makes income solely through recruitments and one-time registration fees (read initial investment), hence the aggressive recruitment styles that are employed by its members. Aside from solely making money off of recruitment and their personal finance, MLM programs are best known for deceptive practices, unfavorable return policies, and a tendency to oversell non-substantial products like it’s second nature.
How to spot an MLM program
In order to avoid being duped by an MLM program, you’ll have to know what signs to look out for. You will also have to develop the ability to discern whether a program or company is legitimate or predatory. Fortunately, if you familiarize yourself with the dialogue of the standard MLM, it will be much easier to distinguish them apart from legitimate retailers. Most of the time, their offers are too good to be true. Here are a few key phrases and types of media to watch out when trying to avoid multi-level marketing:
- “Become a distributor”
- “Join our affiliate program”
- References to making commission or “financial freedom”
- Uses of words such as “reward,” “referral,” “level,” “opportunity,” or “reseller”
- Phony-sounding testimonials
- Excessive displays of wealth, such as cars, houses, and trips abroad
- Continuous updates on “cash-outs”
- “Turn your 10 dollars into a grand, ask me how!”
- “I had no work before, but with (insert MLM name here), I’m a few cheques closer to being a millionaire!”
If you hear any of these catchphrases, stay far away! You’re better off putting your money elsewhere.