The Problems With Using Multi-Level Marketing To Make Extra Money
Over the last couple of weeks, I’ve been discussing ways people can make some extra money. We live in a world with endless possibilities and one of those happens to be multi-level marketing. Personally, I’m not a huge fan. There are some major issues with this form of income that come close to actually breaking the law (yikes). I’m not trying to push you away from a great opportunity though; I just want to show you the problems with using multi-level marketing to make extra money.
What are the problems with using multi-level marketing to make extra money?
1) People are selling a product they don’t believe in.
2) They come across as pushy.
3) The focus moves from selling a product to recruiting new people.
4) The description of the product usually isn’t accurate.
5) It’s usually unsustainable.
Before we even get into this topic, I want to make one thing perfectly clear. Multi-level marketing can be a great way for people to make supplemental income or even a living. It allows people to take initiative over their income and act as a business owner. If you do it for the right reasons and the right way, then I’m a huge fan.
Most people do it for the wrong reasons though. They believe they can sign up for a program and six months later be rich. If it seems too good to be true, it probably is. That’s just not how it works and most of the time people start with these companies, don’t receive that instant gratification, and then quit only to try another life-changing product a year later. This is a vicious cycle that repeats itself over and over after people watch another flashy marketing video depicting someone living their dream life.
Like any business, multi-level marketing takes work. Just because you have an established product and a written out marketing plan doesn’t mean you get to sit back and count your money.
Multi-Level Marketing vs. Pyramid Scheme
Let’s start this article off by figuring out what’s legal and what’s not. Making money is cool and all but you can’t do it very well if you’re in prison.
All too often, multi-level marketing businesses and pyramid schemes get mixed up. They are extremely similar and incredibly hard to tell the difference between. Even the courts have trouble from time to time.
I can remember being a sophomore in college and I was invited to an apartment to listen to a pitch on how we could make a ton of money, fast from a guy through a webcam. I was excited and thought I could take advantage of the opportunity. That was until they told me I needed to invest $500-$1,000 at the start. This was the first red flag.
To keep a long story short, I didn’t end up investing. I ran it past some trusted people and they told me it sounded a lot like a pyramid scheme. Lo and behold, a few months later, the ‘founders’ of this great opportunity were charged with fraud and ended up having to spend some time in prison. Talk about dodging a bullet!
The main difference between a pyramid scheme and MLM is the focus. A pyramid scheme focuses on recruiting as many people under you as possible. You take a large investment from these people and funnel those funds up to the top of the pyramid. MLM, on the other hand, focuses on the actual sale of the product. Yes, you may make a commission for recruiting people but you make more from selling the product.
It can be a thin line, so do your research and ask around. Avoiding the trap as I did will save you thousands of dollars and even more embarrassment. For more information on the legalities go read Find Law’s piece on this. If you want more stories and to hear me ranting about pyramid schemes, then check out my book, Young, Dumb and Not Broke?!
Actually Use the Product
I listed five of the major problems with using multi-level marketing to make extra money above but I want to focus specifically on the first. If you are going to get into MLM, then you absolutely, 100%, no questions asked, use the product.
We’ve all had the experience of mindlessly scrolling through Facebook only to come across a post from someone we haven’t talked to in years. They’re selling this amazing new product and think that you need to have it immediately!
Now, I’m not going to mention products directly because I’m not trying to get sued here but some of these products are just plain ridiculous. They make promises that are too good to be true and prey off people’s weaknesses. Before you pass judgement on these people, you need to remember they are just trying to make a better life for themselves, which is commendable.
It’s blatantly obvious that this is their goal, to only make money.
In any business, if your only goal is to make money, then you will fail.
When you become aware of this, you start seeing that they don’t actually use or like the product. Worse yet, faking like you enjoy a product is see-through even to a 4 year old. People are smarter than you think and if you want these people to be your customers then you need to show that you care about them and not a commission check.
You need to use and believe in the product you’re selling or else you’ll fail every time.
How to Be Successful With Multi-Level Marketing
If you want to be successful at selling multi-level marketing products then you need to learn to sell. This seems like a no brainer but most people have no clue what they’re doing.
Selling is not posting on Facebook everyday.
Selling is not calling your friends once a month only to push your product.
These are the two most common mistakes I see people make and while they seem like a good idea at the time they are going to kill your potential business in the long-run. If you want to be successful then follow these three rules.
1) Use the product!
I just spent the first half of this article going over how important this is. Go read it again and drive it into your brain!
2) Match the product to the person
This is the basics of successful selling. You need to figure out the value that your product has and match it to a person. Where most people go wrong is they throw a wide net over their whole network (usually social media friends) and see who bites.
This process is done over and over again until people just get plain annoyed. Sorry Susan, but I don’t need any new makeup this month nor ever in the future.
There’s nothing wrong with letting people know that you’re representing a certain product but from there I would stick to contacting people individually. Be careful, as this can become a slippery slope though
If you truly believe someone can benefit from your health product, makeup,
3) Be Honest
I get that this list seems like some pretty obvious things to do but for some reason, people can’t seem to do them. To be frank, I don’t think it’s their fault. There are a lot of factors at play with MLM which is why you have to hold yourself accountable. This especially applies to how you should be honest about what you’re selling.
We’ve already talked about how important it is to use and enjoy a product but this is just one side of the coin when it comes to being honest. If you use the product and believe in it, use your true personal experiences to represent that. We don’t want to know about Jenny from the Block’s miracle weight loss supplement. We want to know how this helped you. Also, people who sell these products should be honest with their clients about WHY they started and continue to sell. We’re not dumb. We know that you’re trying to make a living, so be upfront with your clientele about how this is a sustainable income for you.
I believe what happens is most people get lost in the potential money they’re going to make. What first started out as a goal to help people or live a healthier lifestyle becomes clouded by the allure of “getting rich quick”.
4) Build Something That Will Last
Just because you aren’t inventing the product or the promotion material behind it, doesn’t mean you shouldn’t take this seriously. Being a part of an MLM company still means you need to take ownership.
If you decide to get into multi-level marketing then you act like you are the owner of a small business. This means doing all the little things that no one wants to do.
This can include but is not limited to:
- Keeping up-to-date books – Understanding your business and the numbers behind it are essential to being successful. Just because you made $100 in sales this week doesn’t mean you get to keep $100, you still have expenses.
- Selling – Every business has to make sales and you are no different. Don’t annoy your FaceBook friends like I described above and instead think outside the box. Who knows, you may have to go old fashioned and start door knocking and cold calling.
- Networking – Attend any and all conferences available to you. Let others know what you are doing and learn from them without being overwhelming.
Examples Of Multi-Level Marketing
The fact of the matter is, we are surrounded by multi-level marketing companies products everyday. You have friends and family that sell their products and you may not even realize it (this is a good thing).
Disclosure – this is just a list of the most well-known MLM companies in the US. This is not an ad nor do I get any commission for mentioning them. I’m not endorsing these products in any way.
- Scentsy – Wickless candles
- Advocare – Health and wellness
- Pampered Chef – Kitchen utensils
- Herba Life – Health and wellness
- Avon – Beauty Products
I could make this list 50 companies long but I’m not trying to bore you. Instead check out multiple streams article about their top 25.
I know I didn’t answer all your questions in this post so I went out and found some of the most searched. I included links as well if you want to learn more about a specific question.
1) What percentage of people are making money from multi-level marketing?
MLM is attractive because the costs to enter the market are relatively low. You have an established product, marketing plan, and even some clients so you should be able to make money easily right? Well, not exactly.
Like I mentioned above multi-level marketing is still work, and a ton of it. For the most
Jon M. Taylor, Ph.D. conducted a study on MLM’s and discovered a couple of things. The most eye-opening was that 50%+ of people quit in the first year. This means a majority actually lose money when going into MLM. Worse yet, this failure rate is higher than just starting a regular small business!
2) What are the advantages of multi-level marketing?
MLM has some great advantages for people that want to get into the business. Here are just a few:
- Low cost of entry – Getting into MLM’s is relatively cheap, usually under $500. This makes it accessible to most people.
- Low risk – When you don’t have a lot of skin in the game, then there really isn’t that much risk. So if you don’t like it after 6 months, you can just quit, no big deal.
- Established Products – MLM’s have established products and processes that you can use. You don’t need to have focus groups or build a prototype. That is all done for you.
- Flexibility – There are no set hours for when you have to work. Instead you can sell whenever you want, however you want.
- Control – You have control of your future (to some extent), you can work when you want, as hard as you want and most of the time that is directly proportionate to your earnings. Not a bad deal.
3) What are the disadvantages of multi-level marketing?
Anything that has advantages is going to have disadvantages and it would be irresponsible to not mention them. I think I’ve made it pretty clear the potential problems with using multi-level marketing to make
- You don’t own the business – While you do hold your destiny in your hands, you can’t make all the decisions and in essence, you’re still an ’employee’.
- Sustainability – Doing this for the long-run is hard. You can tap into your friends and family at first but eventually, you’ll need to branch out.
- Recruiting – Another way most MLM’s allow you to make money is by recruiting people. I didn’t mention this much in the article because I hate it. All too often that becomes the focus instead of product sales.
- Ruins Relationships – Now I’m not saying the moment you sign up for an MLM, you are going to push everyone in your life away but that is definitely a possibility. Getting wrapped up in selling 24/7 is a slippery slope you don’t want to get caught in.
- Lost Identity – This is a part of ruining relationships but different enough to separate. If you work so hard that your identity is wrapped up in the MLM brand, then you’ve lost. You don’t want to be known as the person selling weight loss teas.
The Bottom Line
After reading this article, you may think I’m dead set against anyone ever getting into multi-level marketing. That isn’t the case. In fact, I’m actually a huge fan of anyone trying to find ways to make more money and better their living situation.
What I’m not a fan of, is people thinking it will be easy and in six months or less they’ll be rolling in the cash. Moreover, I hate seeing people get taken advantage of because of flashy sales pitches. This is where researching the potential company you want to work with is vital. I got lucky and dodged a potentially life-ruining experience but many others don’t.
Statistics don’t lie and when the Federal Trade Commission puts out a report stating that 99% of people that join MLMs lose money, then you should probably take time on this decision.
I get it, we all want a better life and while having extra money definitely won’t solve all of our problems, it surely won’t hurt. Take your time, use common sense, and understand the problems with using multi-level marketing to make extra money. If you can do that, then you can be successful.
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