How To Spot Multi-Level Marketing Scams, And How To Avoid Them

You might think you’re too savvy to get caught up in a marketing scam, but the truth is anyone is susceptible to these ploys. The promise of easy income with flexible hours is everyone’s dream. Especially for individuals who don’t have as much access to employment opportunities, or who’s only option is working from home. 

Multi-level marketing (MLM) scams are on the rise. They have rebranded themselves and have new, catchy names and slogans which make them more difficult to identify as dangerous enterprises. 

If you’ve ever wondered how people can get wrapped up in a MLM, we’re here to shed some light on these nefarious organizations. 

Multi-Level Marketing Explained

Multi-level marketing (aka MLM) is a commission-based method for selling products. You probably used to hear the term “pyramid scheme” used regarding these businesses, which is the most helpful term to use when describing their whole setup. 

A MLM works by individuals being recruited by a company distributor, sales representative, or sponsor to sell a certain product. The sales representative’s paycheck hinges on how much product each recruit can sell. Everything is commission based and supposedly builds on itself as each person grows their sales and recruits more people to join. These companies usually claim representatives can earn impressive salaries in a short amount of time, with little to no work.

Sounds easy, right? 

The MLM Targets

Of course, a majority of these claims aren’t true. Not only is it incredibly difficult for people to sell enough product to get into the upper-levels of the salary scale, most companies require a buy-in to get started. Some companies even require monthly product purchases to keep your status. 

So now people have sunk their own money into a company and become stuck peddling wares no one wants. These practices should be enough to make anyone mad, but MLM atrocities take it a step further by targeting those who are particularly susceptible. 

Many MLMs advertise themselves as an easy and achievable way to earn a salary with minimal barriers between selling and success. These claims are appealing to people who are struggling to find work, aren’t able to work in traditional spaces, or can only work from home. 

According to a 2018 study conducted by the AARP, the majority of MLM participants are women (60 percent), most with no experience in commission-based sales. A large percentage of participants quit after only a year or less of selling, and over 52 percent of people say the representation of potential success was not accurate. 

The demographic breakdown statistics from the Direct Selling Association shows that 74 percent of their sellers are mostly white women, ages 35 to 54. 

The Role Of Social Media

Back in the day, most MLM participation spread through hosted parties, where sponsors put on a good show and shared products and literature to their group of friends. Now, thanks to social media, the illusions of MLM success can be carefully curated and shared instantly with millions of people in mere seconds. 

These companies use mainstream ideas of “becoming your own Girl Boss” and “harnessing your own girl power” as hooks. But once you’re in an MLM, the work doesn’t stop. You are financially tied to making sales, posting on social media, sending direct messages to friends, and constantly trying to recruit new members, despite many companies claiming they’re a “chill side hustle” option. (companies demand a certain social media representation. Have to curate your pages if you work for them)

How To Avoid MLMs

MLMs thrive during recessions. They depend on large groups of people needing support and resources. They prey on people who are struggling just enough, but are still able and willing to spend their own money to get started. 

It’s important to recognize the signs of an MLM scam. Here are some main qualities to look out for:

  • Outrageous product claims, such as being able to cure specific ailments
  • Primary focus in recruitment
  • No product or low-quality products to sell
  • Required to purchase a back-stock of items
  • Poor communication with the company
  • Extended and expensive training periods

Because of social media’s role, you’ve probably encountered a friend or family member using their profiles to sell products. Some popular brands include LuLaRoe, Herbalife, Nu Skin, Arbonne, and Isagenix. These companies are MLMs, all of which have had members speak out against their practices. 

If you notice people in your life making questionable, product-related posts on social media, or even get direct messages from a high school acquaintance about a new business opportunity, they’re probably working in an MLM.

Of course not all commission-based jobs are scams, but before jumping in on one with a friend, it’s important to do basic research. A simple Google search will reveal the true nature and experiences with these companies—and knowing this information can save you a lot of grief (and money).

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