Multi-level marketing (MLM), also referred to as pyramid selling and network marketing, is a business model in which the unsalaried workforce mainly sources the revenue of a company. MLM companies hire independent contractors and distributors to make direct sales for them with an opportunity to attract more workers to their so-called “downline.” With each hired person, a distributor receives a bonus and a percentage of their sales.
It becomes apparent that the easiest way to earn money with MLM schemes is to build a pyramid: recruit as many people as possible and collect bonuses. Today, statistical research has shown explicitly that participating in MLM is highly unlikely to advance a person financially. More so, a pyramid scheme has the potential of leaving distributors in debt. This essay argues that the reason why MLMs do not lose their attractiveness lies in the intricate psychological mechanisms that bring them closer to enterprise cults.
Multi-level Marketing in Numbers
Despite the overall poor reputation of pyramid selling, many MLM companies such as Avon, Oriflame, and Herbalife grow into giant multinational corporations with distributors across the globe. The AARP Foundation (2019) discovered that about one in 13 adults (8%) participated in an MLM scheme at least during their lifetime. However, according to the statistics provided by the non-profit organization, direct selling barely ever becomes a long commitment for those who decide to set on the venture. Half of all new distributors and representatives drop in the first year, and within five years, as many as 90% of people quit. Only five in one hundred people stay with such companies for more than five years.
The lack of commitment and high resignation rate may be explained by the fact that there is only a very meager chance to make decent money with pyramid selling. The AARP Foundation reports that half of the representatives lose money, 27% broke even, and 25% make any profit. Another source, Magnify money (2018), provided even more demotivated figures: the experts found out that the average representative makes only 70 cents per hour, and that is before deducting business costs. The majority of people say that the reality proved to be different than what their companies promised them in the beginning.
MLM, The Psychology of Influence, and Target Demographics
The question arises as to what psychological tactics MLM businesses use to convince individuals in search of a legitimate business opportunity to join an incredibly volatile scheme. Bond (2019) claims that network marketing companies promise not only financial independence and unlimited earning potential but also use actual cult psychological tactics to prey on vulnerable demographics.
In her article, Bond (2018) refers to Hassan, a counselor who escaped the cult of the Unification Church and put forward the BITE framework for analyzing predatory organizations. BITE stands for behavior, information, thinking, and emotions – according to the researcher, MLMs target all these cognitive domains to deceive and brainwash potential employees.
Grooming and recruiting starts with appealing to a person’s emotions. Bond (2019) calls this tactic “love bombing”: the analyst explains that a new participant is practically smothered with love and affection. Other managers and representatives put on a nice mask to lure a potential candidate in and also feign a supportive and nurturing environment. The key is to make anyone feel special and welcome as if they are meeting their old friends.
Drawing on this argument, it is readily imaginable which social groups would be the most gullible. MLM businesses are known for targeting stay-at-home mothers and military wives. Both groups are likely to suffer from a certain degree of isolation and lack a social life. Mothers may be overburdened with family responsibilities and feel unheard and unseen in their own homes. It is only logical that they might actually take pleasure in being the center of attention during an MLM meeting. Because of the emotional allure, participants might be reluctant to leave because they do not want to break personal bonds and offend others.
The second tact is deception and distortion of facts: MLM businesses never share actual financial perspectives immediately. Bond (2019) claims that the misrepresentation starts from the very explanation of the business model. The writer explains that the top sellers that give speeches during meetings and conferences like to pretend that they owe their luxurious lifestyles to the magic of direct selling. In actuality, the survivability of a person in such a business is contingent on their ability to build a “downline”: a team of people who bring them bonuses and percentages from sales.
Another lie is the lie of becoming an independent business owner and the CEO of one’s own company. Soon representatives learn that they have little to no control over their own business. They barely ever decide what comes in their inventory, and they never set prices on their own. In this context, independence means not freedom but complete uncertainty because the company is not going to take any responsibility for the likely losses.
Lastly, MLM businesses construct intricate financial schemes that turn representatives into their own customers. For instance, some companies force workers to meet a certain number of sales per month. If a person struggles to deliver on this expectation, the company suggests that they buy some goods themselves. As one can readily imagine, these actions can put a person into a never-ending cycle investing in a predatory scheme.
The deceiving nature of MLM businesses and their promises of careless living and financial stability also explain why stay-at-home mothers, military wives, and other vulnerable demographics may be so drawn to them. It is likely that those social groups experience guilt because of their dependent state in which they cannot contribute to the financial side of household maintenance. Corrigan, Kwasky, and Groh (2015) show that a significant number of mothers experience postpartum depression and feel unaccomplished because of their stay-at-home parent status. Companionship, an opportunity for personal growth, and job prospects are what swoon vulnerable individuals in search of support.
Conclusion
Multi-level marketing is a business scheme that, despite its poor reputation and available statistics debunking its fraudulent nature, has yet to lose its followers. MLM businesses depend on the unsalaried workforce that is promised high earnings and a luxurious lifestyle, while the companies themselves take little to no responsibility for the outcome. Statistics show that many people quit in the first year of working for an MLM, and only one-quarter makes any money.
It appears that in order to recruit participants, network marketing businesses use psychological tricks and target vulnerable social groups. Companies bombard potential candidates with affection and force social bonds on newcomers. Further, they carefully hide the truth from representatives and distort the facts about what it actually takes to achieve financial goals. MLM schemes are predatory in nature: they use lies and manipulations and choose gullible, lonely, and naive individuals in need of support.
References
The AARP Foundation. (2019). What is Multilevel Marketing (MLM)?. Web.
Bond, C. (2019). How MLMs and cults use the same mind control techniques. Web.
Corrigan, C. P., Kwasky, A. N., & Groh, C. J. (2015). Social support, postpartum depression, and professional assistance: A survey of mothers in the Midwestern United States. The Journal of perinatal education, 24(1), 48-60.
MagnifyMoney. (2018). Survey: Vast majority of multi-level marketing participants earn less 70 cents an hour. Web.