Watch Out For Illegitimate Multi-Level Marketing Programs
by Erik Folgate
Filed under Extra Income, Scam Alert
I was listening to the Clark Howard radio show today, and he was talking about fly-by-night MLM programs that pop up during economic slowdowns. They prey on people looking to quickly make extra money. There are plenty of legitimate multi-level marketing programs out there, but for every good one, there are at least 10 bad ones.
What is a Multi-Level Marketing Program?
It’s a business model with two levels. You make money by selling a product/service and you make money by recruiting more people to sell a product/service. Think Amway. Amway is the most famous legitimate multi-level marketing program.
Characteristics of a scam disguised as a multi-level marketing program:
- There is no real product or service to sell. If the only way possible to make money is by recruiting new members, this is a pyramid scheme, and they are illegal in the United States. Make sure there is a legitimate product or service to sell to someone before signing up.
- Elevated pressure from members to sign up.
- Extra incentives to sign up for the program.
- Extremely high enrollment fees such as $10k per registration fee.
Characteristic of someone who can do well with an MLM:
- The heart and mind of salesman. You MUST be able to talk to anyone and everyone. You’ll be trying to sell to strangers, and you must have the gift of striking up conversations and selling like crazy. Very few people have what it takes to really make good money with a multi-level marketing program.
- No Shame. You must be friendly with rejection. If you fear rejection, this isn’t the gig for you.
- Tenacity. You must be determined to do well, and you must seek out clients daily.
- Perseverence. It will take a long time to make decent money in an MLM. You cannot give up.
I don’t recommend MLM’s as a real way to make a good side income, much less a full-time income. Clark Howard cited a study that was done by Forbes magazine stating that 1 out of 100 people actually profited from an MLM. But, that’s not to say that there are plenty of success stories out there. Don’t get caught up in the hype, because MLM’s love to lure you in by testimonials of people making six and seven figures. Realize that it’s very unlikely that you will get to that point, unless you have mastered the characteristics that I listed above. Beware of those scam artists trying to take your money disguised as an MLM. When the economy dips, the scammers come out like cock roaches. If you have any questions about MLM’s, you can email me through the submissions form above.
Very nice job touching on the key issues with bad MLMs. When a product is marketed using MLM, there are really two things being marketed simultaneously. The product and the MLM opportunity itself. Unfortunately, when the product doesn’t work as advertised and provides no value to customers, the product still continues to be sold because the MLM opportunity can still be marketed effectively. This is the biggest problem with bad MLMs and I would say this makes them borderline (illegal) pyramid schemes. If a product is marketed using traditional marketing and it doesn’t work, people simply won’t buy it. However, the marketing of the MLM opportunity regardless of the validity of the product is what makes them so pervasive and persuasive.
you hit the nail on the head. There are definitely more bad ones than good ones, but I also wanted to point out that they aren’t ALL illegal schemes.