When we lived in Grand Rapids, Michigan I was used to getting a multi-level marketing (MLM) pitch on a regular basis.
After all, we were in the home of Amway, the mother of all multi-level marketing companies.
It took me a while to catch on to their system.
After all, they were a finely trained army of network marketers and I was an innocent lad just trying to help whoever I could. Ha!
Anyway, their approach always went something like this:
- I would be contacted (phone or email usually) by a friend of a friend, a member from some group I belonged to (like church), etc. Not someone I knew well but had some sort of connection to.
- They would ask if I wanted to get together for lunch.
- I would say “sure” and ask if there was something specific they wanted to meet about.
- They would then get very vague and say something like, “Not anything really, I just want to connect.”
Then when I’d get to the lunch they would launch into a very obscure description of a “business” they were in, how they were killing it, how amazing it was for this reason and that reason, and so on.
Eventually they would invite me somewhere (usually some sort of meeting with a “top notch” speaker) and I would get a clue. I would ask if it was Amway and they would do all they could not to admit it (kind of like you’re supposed to do when a potential employer asks your current salary and you don’t want to give it.)
But I don’t take no for an answer easily. I would eventually get it out of them that it was Amway. I would say I was not interested, they would plead some more, I would get more firm, and we’d break off lunch. I would never hear from them again.
After this happened three times over the course of a few years, I stopped taking lunches like this altogether. When someone I didn’t know well would request a meeting they would have to give me a clear idea of what they wanted up front. If they didn’t it was a no-go.
My Experience with Multi-Level Marketing
Unfortunately by the time these meetings occurred I had already had my experience with an MLM company and it was not good.
Soon after we got married, my wife and I got involved in a network marketing/multi-level marketing/direct sales “business” selling primarily household cleaners. We worked at it for several months, attending meetings, spending on company radio advertising programs, and talking to everyone we knew about it.
A year later we ended up being down a couple thousand dollars and having enough household cleaners to last us three years (we needed to buy these to keep our downline “in bonus” — our major source of income). We eventually cut our losses and that was that.
Fortunately it wasn’t a huge loser for us and we could afford it.
Our experience was pretty common. The fact is most people do not make money in MLM organizations.
Here’s what the FTC says about this issue:
Of the 350 MLMs I have analyzed for which a complete compensation plan was available, 100% of them are recruitment-driven and top-weighted. In other words, the vast majority of commissions paid by MLM companies go to a tiny percentage of TOPPs (top-of-the-pyramid promoters) at the expense of a revolving door of recruits, 99% of whom lose money.
This is after subtracting purchases they must make to qualify for commissions and advancement in the scheme, to say nothing of minimal operating expenses for conducting an aggressive recruitment campaign – which (based on the compensation plans) is essential to get into the profit column.
Failure and loss rates for MLMs are not comparable with legitimate small businesses, which have been found to be profitable for 39% over the lifetime of the business; whereas less than 1% of MLM participants profit. MLM makes even gambling look like a safe bet in comparison.
Yeah. That’s kind of my experience as well.
I’m guessing you might have a similar experience. We’ll get to that in a moment.
Return of the Amway Distributors
Shortly after I retired, a friend of my wife’s asked if we wanted to have dinner with her and her husband.
They had asked us previously and we knew they were involved with Amway (there was no way to avoid it — they talked about how great it was all the time, how they were doing, and so on). I had declined because I knew they wanted us to be part of their “team” and dinner was likely a pitch.
But my wife really liked the lady and they guy was fine (I had met him briefly at church), so we said yes. And after all, it was at a neutral location so we could leave when we wanted.
As I had guessed, the subject of their “business” came up. Here are the highlights:
- Their business was going VERY well. Of course.
- They had been to this guy’s mansion (their “boss” in the system) and that guy’s mansion (another big-wig of some sort) and it was just so amazing.
- They were off to the Amway HQ in the near future (I believe as a reward of some kind).
- Their business was doing so well that the husband was going to quit his job in the next year or so.
They were actually very nice people and all this conversation was mixed with the general conversation couples have at dinner. So it wasn’t nearly as bad as my past experiences.
That said, they were wanting us to get involved in their business. And it was clear to them that we needed to because, after all, I didn’t have a job. I was “retired” which they interpreted as “got let go for some reason and is looking for income somewhere.”
They kept talking about how great the “business” was at generating income, how it could really help anyone’s finances (i.e. ours), and so on.
I tried to be as tactful as I could in communicating we were fine financially, but they were not having any of it. Maybe I should have said something like, “We have a few million in the bank and enough investments to cover living expenses for the rest of our lives without touching those assets.” I’m sure that would have been a show-stopper, but I was still new to this retired thing, didn’t know exactly how to explain it, and didn’t want to be rude.
Of course they invited us to a big meeting with an important speaker (I can’t remember who) a few weeks in the future. We told them we would think about it and let them know if we were interested. My wife wanted to go to be polite but there was no way I was getting roped into that so we decided not to go.
Once we declined they got the hint and left us alone. My wife still sees her friend often and they are still friendly, so it’s nice their friendship wasn’t impacted.
The Subordinate Who Wanted to Be My Boss
Around that same time, one of the former employees at my last employer contacted me and wanted to meet for coffee. He had left around the same time I did and he just wanted to chat.
I like coffee and thought he could use some career advice (he had just started a new job and we had talked about career planning at work). He was in my department but down the line a bit from me. He reported to someone who reported to someone who reported to me.
We met and he told me about his new job and we had a good chat. He also told me he was just getting started in this MLM organization (I can’t remember what it’s called) and he would “keep me informed” on how it was going because, you know, I probably needed some income sources. Uh, yeah. I kind of nodded and that was that.
A few months later he reached out to me again and wanted to have coffee. This time he was full-blown into the MLM lifestyle as I could see from his Facebook posts.
Having played this game before and not liking meetings in general, I asked if he wanted to discuss something specific. He responded with a vague answer that really didn’t say anything.
I immediately had a flashback to my days in Grand Rapids.
I told him that I appreciated the invite but I just didn’t have the time. He clearly didn’t believe me and hinted that I had “all the time in the world since I was retired” and that we should chat. Eventually I told him 1) I don’t take meetings any longer and 2) while he’s a nice guy and I wish him the best, there really wasn’t much we had in common and needed to discuss.
He never contacted me again and that’s been great. It appears he’s doing well from Facebook — just got a car from the company and is traveling around speaking for them. I’m glad he likes it and really hope he and the people he’s involving are doing well — though stats will say most of them aren’t.
Lots of Thoughts on MLM
So other than this great set of stories, let me leave you with some general thoughts on all this:
- I like side hustles, as you know, but I can’t recommend MLM as an option for anyone. Sure, some will do well with it, but IMO there are a lot of other way better ideas worth pursuing for side income.
- Why can’t people accept that I’m retired and ok financially? This is a theme that’s still part of my life, though I think it’s fading. In January I went to a Super Bowl party hosted by one of the executives at my former employer. Many of my past co-workers were there, we chatted, and they could see that I had made it a year and a half into retirement and was still doing well — so I think they finally started to believe I was really retired. BTW, I was soooooo hoping my former boss was going to be there so I could show him my pictures from Grand Cayman and rub it in (just a bit) but alas he was a no-show.
- Why are the MLM people always so sneaky? Is it because they can’t sell their product otherwise? I tell you, if you have a product that’s so bad that you can’t tell people about it, that’s not really a great business to be in.
- Why are the MLM people so over-the-top in flaunting their wealth/success? Is this supposed to endear me to them? Or is it because they want me to think they are a cheap version of Don King (non-boxing fans can look up who he is)?
Anyway, I’m sure many of you out there have your own MLM story to tell. Please share it in the comments below so we can all enjoy.
My mother, who is the worst sales person and definitely not a recruiter, got sucked into Mary Kay when I was a child for a while. And even though I knew it was awful, I ended up at one meeting as a college student. But they didn’t get me! And it has made me very firm as an adult. I believe my quote to a new friend many years ago was, “ I used to use their products but have moved on and I will never sell or recruit for that company. I hope we can still be friends.” And we are ?. The more recent scourge in the personal care MLM world is Arbonne. Quite a bit more expensive than MK and my peripheral experience through my SIL (who got sucked in for a while) was that their recruiters were even more cut throat. Did not leave a good impression on me.
My story is quite similar. I had someone recruit me to a MLM in college but they didn’t get me. I shot it right back into their face. My mom fell for one too when she was younger. I was a wiser about MLMs because of a better built in BS detector but it puzzles me why it keeps working…
Some companies are a little more vague (since everything is considered a pyramid) but when you’re one google search away from 100,000 articles of warning… Its like… How did they NOT know?! Did you do research before giving money to these people? Hello!!
It seems like MLM is more popular than ever. Some Teachers who work with my wife are into these scams. They try selling her overpriced clothing, make-up, and fitness shakes. They talk it up like it is a cult. Don’t walk away, run away from MLM scams.
ESI, maybe they don’t “get that you’re retired” because you’re not blunt enough about it. I know it’s not your nature to basically out and brag, but it may require you pulling out those Cayman pictures and then asking why they think you need money so bad.
Haha! Maybe that’s it… 🙂
Spot on! Between MLM pitches and whole or universal life insurance/”financial advisor” salesmen, I stopped accepting lunch invitations in my early 30’s as well!
I only know one person successfully doing MLM with Mary Kay but she has never approached me to join her team. That is why I order occasionally from her. She runs it like a business and not pyramid business. Just remember in my starving 20’s all of my friends that were really bad with money were the ones always sucked into MLMs. They thought I was crazy not to join them each time they tried the next MLM that was going to be the ticket to riches. They thought I was even crazier to be sending the tiny amount that I could to a mutual fund every month. What a waste of money that could be used for new clothes, clubbing, weekends at the beach to check out guys, etc. Hah! 30 years later I have a happy net worth. No clue where they are in life but I am doing great and getting better and better each day.
Maaan I hate these things. I don’t get as many pitches as you do but when I do, it’s so off putting. It’s always someone you don’t really know that well and the pitch is always so poorly delivered and weirdly vague/disguised. These things are garbage.
I’m sure there are people who do well with it but it always relies on monetizing the social good will you’ve built up for a few bucks. It’s a terrible business to be in, regardless of what you’re selling.
As for the MLM over the top – it’s because it works. It doesn’t work on YOU, which is partially why you’re doing so well despite being UNEMPLOYED :), but it works on a lot of other people.
There is a site that has reviewed some mlm’s.
http://www.finance-guy.net/mlm-reviews
It’s fun to confront mlm people with the facts from that site. All of the mlm people begin to stutter and then tell you that the site is incorrect, but can only be very vague as to the why.
I have not had an MLM pitch before but get the whole life insurance one a lot. Currently I am getting it from a family member and have yet been direct enough to stop the pitches.
As for MLM and flaunting wealth, I imagine it is because everyone wants to keep up with the Benjamin’s…or Joneses and so it’s an effective ploy to rope people in.
Great article with terrific points. I’ve learned, a good smell-test for MLM is “If they are more concerned with downlines and recruiting people than actually selling the product or service…RUN!”
My brother and I got roped in one of one of those Amway meeting ago. I was approached right out of college by an associate at the bank I worked at. So we ended up going to the guy that was over her in his tiny little split-level Ranch. He spoke on and on about toothpaste that he would buy but instead of Crest, it would be Glister. There was also Capital type equipment you could buy like washing machines and things of that nature. He said, boys do you know what the name of this multibillion-dollar company is? I made I said, Amway, we’re not interested. We got in our car and drove away. The associate that had invited me approached me at the bank again. She said, Lee said that you don’t want to be rich. I said, Lee is 60 years old and lives in a tiny house in the middle of a poor neighborhood. Now don’t get the idea that I’m trying to bash Lee. I’m just saying, if Amway was so great and he was doing so well, why was he doing so poorly financially.
That was almost 25 years ago.
No, my brother and I are both millionaires in our mid-40s. A simple formula of working hard, living below your means, and saving your nickels. And my brother, is doing really well, he lives on the water and takes about 10 vacations a year. Of course, there is no Amway in our lives.
Nothing beats hard work and planning.
How many times have I been happy someone wants to get together for coffee – then it turns out it’s all about their leggings or other MLM product. When I was in women’s Bible study and our emails were shared with the group there were endless rounds of invitations to “parties”. I went to a few but never saw the appeal of the overpriced products.
One aspect of MLM is that non-salespeople get sucked into it. Sales aint easy. It takes skills that not all of us have and are willing to develop.
I have actually been sucked into a couple of MLM companies when I was young and stupid. After losing a few hundred dollars (which was a lot to me at the time) I finally got wise. Love your post and you are right on the money (ha!) as to how these companies work (and don’t). I live in big Mormon country and am always amazed that they seem to be more into MLM than anyone. Being clear that I am not interested has kept me out and yes, I don’t take those meetings either.
I once had the worst of both worlds. Early in my career I wanted to do a side hustle as a financial advisor, so I asked people for recommendations of a company I could work extra hours at. Of course the recommendations were all mlm. I ran the other direction.
The documentary on Herbalife is really interesting. Unbelievable how the people that are supposed to be getting rich end up with storage lockers full of a product because they need to keep a certain amount of sales going.
My first interview out of college was at a MLM type place. This was back when you looked in the newspaper for jobs. It was always the same ad and I learned quickly to spot them “entry level marketing job working in [sexy industry].” It was awful. They took us out on some coupon door to door sales thing with no way to get home. Hours of this. Then when you got back everyone was yelling and rining a bell and they let you meet the boos, who explained to you how it all worked and how you got rich. Terrible experience.
I was invited to Amway many, many years ago, but quickly declined. Overall, I haven’t had too many MLM pitches…maybe my contacts are too smart for that, or maybe I just don’t have that many contacts! In any case, my poor wife is often invited by relatives to various parties for overpriced goods like jewelry and seasonings and cookware. She’s made it a policy not to attend, because once you attend, the social pressure to buy is enormous.
It’s kind of funny that none of your contacts believe that you are really retired and not looking for an income. But it’s also kind of sad that they don’t seem to believe it’s even possible. Keep spreading the word!
My ex-wife is involved in one of those things, for one of those home-remedy companies that sells creams with whatever *amazing organic ingredients* they found in the rainforest this week.
I guess it works for her. We’ll stick with living on less than we make and investing the difference.
I can’t believe that there are still some many people who don’t understand how MLM works. Most people think that buying a kit will make them rich. It’s a business and like any business if you do not work, you won’t make any money. How many people get a real estate license or insurance agent license and don’t make any money? That’s why it’s called network marketing, not net do nothing marketing.
My experience has been slightly different and scary. I taught for many years at a private school and accrued a tidy amount in the retirement scheme. When I retired, I got regular emails from World Financial Group about investing in the local branch. I tracked back and found that the guy in charge was a former local basketball coach who had been sent to jail for sex with one of his students. Our basketball coach was renting a house from him. I got my money out quickly and reinvested it elsewhere. I didn’t want to deal with the ramifications.
Having had several MLM brushes, my thought is that the ‘recruiter’ is really selling a ‘relationship’ rather than a business or products. Selling a dream, not a viable business. There is a preponderance of church-connections (100% in my case) and the ‘recruiters’ also seem to have a lot of personal problems (100% in my case) and the MLM seems to be a way for them to socialize with a like-minded tribe.
My wife’s manicurist (!) managed to insinuate herself (and her fourth husband) into many people’s lives. Long story short, she blew up her life and had to relocate just to get away from the people she had made angry; everybody else in her life abandoned her.
In the ’90s, am recalling ‘Amway’ tried a rebrand satellite MLM called ‘Quixnet’. Ugh, they even had a credit card and e-mail service. Bottom line, never met anybody (even the honchos!) who made money, and the ‘mansions’ were often homes bought when the honcho was a doctor, inherited, or from some other non-MLM source.
My first Amway pitch came from a very attractive young lady who invited me to lunch.
Of course I said yes. I thought she was interested in me.
I got the pitch and a “Kit” shoved across the table at me along with a demand for $100 to cover the price of the kit. I was so broke that I didn’t even have that, so I shoved the kit back.
Never saw her again.
This was back in the 70s, so – no internet to do research with, but I did my research by talking to older folks. I heard horror story after horror story, so I avoided it.
Over the next few years I got roped into another Amway pitch and a Shackley (Vitamins) pitch before, like ESI, I learned to recognize the approach and just say no.
I am SO tired of accepting friend requests on Facebook, only to discover the main reason for the request is to solicit for their MLM business. Then once in awhile one of these “friends” will post a meme making fun of people who choose to work inside cubicle walls instead of having the freedom that an MLM business provides. I was so badly to respond to those posts that at least my cubicle wall career does not rely on hounding family, friends, acquaintances, and people I barely know to support me.
I was almost recruited into an MLM during my undergrad. It was Vector Marketing/CutCo, and I almost did it too. I was broke and needed money. But they wanted $100 or so to start, and I didn’t have the money. Plus, I wanted a job where I got paid, not a “job” where I have to pay.
We’ve never gotten sucked into this. I think that the reason that they flaunt their success is because they want the jealousy factor to kick in and get people to sign up believing that they can attain that as a result of their participation.
Back in the day, I got involved in a couple of these schemes. I never did Amway, but a couple of similar things. The pitch is always the same. Flaunting success of the less than 1% is supposed to motivate people, I guess. All it did was turn people off.
It didn’t take me long to figure out all I was doing was annoying my friends and family and wasting my and their time.
Everyone wants a get rich quick scheme. And these qualify in that category. Of course, the important details of the infinitesimal percentage of successful people are always left out of the discussion.
I haven’t been approached in years and would never take a meeting.
People I know seem to think twice about inviting me to these schemes because I’ll start asking business model questions. My career was helping people start and run businesses, and anyone who knows me knows that they’ll get inquiries as to how the “business” runs, what kind of record keeping are they doing, what’s their marketing plan, etc. I don’t have to run from them, they hightail it away from me at top speed because of course they can’t answer these questions with any certainty (and if they could, they would realize that their “business” was a pay-in hobby).
MLM works like everything else in life. If you treat it like a business, it will be a business and you might make money. If you treat it like a hobby, it will be a hobby and you are not likely to make money. If you treat it like a scam, it will be a scam and you are not only likely to lose money but friends as well.
If you ever watch the show “American Greed” you will understand that any business can be turned into a scam. If you join a MLM business, treat it like a business from the start and things will go well for you. But just like every other business you start, you may or may not make any money. Not all businesses make it. I’ve been involved with a lot of businesses over the years. Some have made it, and some have not.
Dr. Cory S. Fawcett
Prescription for Financial Success
Cory, you can shine that turd all you want. But at the end of the day, it’s still a turd.
Read the FTC report that ESI linked above. 99+% failure rate for MLM participants, versus 64% for new businesses overall.
Amen to that…
John,
It is really not a fair comparison. It takes almost nothing to start a MLM business. But most people who start a “regular” business are very committed, passionate, and sinking significant money into the business. There is a very different commitment level to make it work. Many of those who start a MLM want get rich quick and easy with no cost. I would love to see the comparison of “regular” businesses and people who start a MLM business and treat it like a business. Most new business owners don’t quit when they realize it will take a lot of work to be successful. They knew that going in.
I feel the comparison is a lot like comparing the success rate of people who start blogs vs. those who start businesses in general. Many start blogs, but few keep going to success. The MLM group is tilted towards failure since anybody who is breathing is considered a prospect, not just those who could successfully run a business. It is an extra variable in addition to the quality of the business model of MLM.
Problem is, mlm is not a business. Mlm is nothing more than selling with the risk being mitigated to the selller. And the business model of mlm companies is not a fair one, where people actually have a chance, a real chance.
Like John said, you are trying to polish a turd.
MLM can work but it takes work. Hard work. Most people are not sales people and quit after few no’s. I tried MLM about 20 years ago. The product itself was sellable on its own. I made Mickey Mouse money and realized it wasn’t right for me base on the amount of work. However, I was able to buy company stock directly from the MLM company, which was publicly traded on NYSE. Each month, they drafted me and I got shares. I did this for about 13 years. Over that period of time, the stock price did climb nicely. In 2011, they were bought out by a private holding company (hostile takeover) which drove the stock price up. I ended up getting a check after the buyout, which was substantial enough I bought my first rental property with it. Indirectly, MLM got my real estate investing career started!
This is what the FTC says regarding MLM’s –
Careful examination of most MLM
programs reveals a pattern of exorbitant
incomes accruing to relatively few top
distributors at the expense of hundreds and
even thousands of downline distributors who –
even with diligent effort – come away emptyhanded.
In this respect MLM is akin to illegal
(no-product) pyramid schemes.
It is interesting to compare the odds of
success of MLM schemes with legalized gambling
in Nevada. It appears that on average one could do
better at most any of the gaming tables or slot
machines in Las Vegas – without investing all that
time and placing valued relationships at risk.
Some zealous MLM distributors will
mortgage their homes or max out their credit cards
(buying MLM products and other expenses) to
finance their ambition to achieve top levels in
their organization—which is seldom achieved.
Others focus so much on recruiting to meet
escalating volume requirements for higher
distributor levels that they ignore the needs of
spouse and family members.
Sometimes the recruiting practices of MLM
distributors are deceptive and overbearing. Often
MLM distributors will alienate friends and family
members they endeavor to recruit for what seems
to them a self-centered pursuit of a vaporous dreams.
You really went “esi” on them, ESI. If you would have come at MLMs with the same vitriol you had for Hilton, this would have been much more entertaining!
I have a strong distaste for MLM’s not for having been the target of recruitment — that’s never happened — but as a result of being married to a doctor’s wife. It’s like MLM purveyors view her not as a lovely person, but as a big, easy target for selling their wares. The Facebook messages, the party invites… so lame and disingenuous.
If the product stands alone and practically sells itself, why do these people pester their friends and relatives, often alienating them in the process?
Best,
-PoF
“If you would have come at MLMs with the same vitriol you had for Hilton, this would have been much more entertaining!”
Huh? –
https://esimoney.com/dear-hilton-hotels-this-15-year-customer-is-done-with-you/
Sorry PoF, I still don’t know where you’re going here?
I hadn’t even read the Hilton blog.
However, if you like, I can lay into them as well…
Cheers,
Jack
Sorry PoF, I still don’t know where you’re going here?
I hadn’t even read the Hilton blog.
However, if you like, I can lay into them as well…
Cheers,
Jack
Oops…
Double post. ?
Why can’t people accept that I’m retired and ok financially? << duh cuz everyone lies all the time. i don't think people even know what words mean anymore. :). I personally have stopped talking, in general… that's why i started blogging! 🙂
p.s. i didn't know amway was a michigan thing… my cousins that live up there did always have a clear bottle of green stuff lying around.
the "lots of thoughts" bit has officially validated my MERJy rambles.
Hey!
Thanks for sharing this excellent article. MLM takes too much hard work to be successful. and it also include that one choose the right firm or people to work in multi level marketing. some people quit this as they don’t get success in few tries and get frustrated.
Oh, my goodness, John! I can’t stand the vague, sneaky meeting requests! They’re so obvious that I can smell it a mile away! Having sold Mary Kay and then Beachbody (and not making anything despite pouring my entire life into it for a year), I can say without a doubt that the MLM model is structured to benefit the company and top-level recruiters…and that’s it. And I couldn’t (in good conscience) recruit anyone into that model ever again. Thanks for sharing this with me!
I was roped in to an MLM, by my cousin, who lives in another State. I was unemployed at the time and knew very few people. She said the product sold its self. After one party and trying to sell to people, I made no money. So I quit.
I got myself into credit card debt just to stay afloat and my husband raised concern.
2 years later, I was contacted by a childhood friend, who acted like she didn’t know me in college. Funny how she kept calling me. I thought she just wanted to start a friendship with me again, i was wrong. I eventually had to block her on Facebook and block her calls, because she would give up trying to get me to sell Arbonne. Oh and that Mercedes and big house she talked about getting, well it never happened.
I had another friend, from church, treat me to a spa night, Little did I know I would get myself into dinner and a long meeting and trying to recruit me to Mary Kay.
I had another friend on Instagram, who I knew sold It Works, a matter of months her communication with me was trying to recruit me and she uses sneaky ways asking me to model, but I would have to sign up for their auto shipment. Red flags. Oh and we are no longer speaking because I refused to help her out.
So really, one says they are religious, watch out.
I applaud those who are actually making money, but I am not stupid to fall for another MLM, let alone do I have any money to buy products.