I’ve often asked myself why the prospect of joining a multi-level marketing company is so enticing, even when the odds of earning any money are so low. In fact, usually less than 5% of distributors get any kind of return on their investment. So why are MLMs continually able to recruit new members? Here are 5 reasons why.
1) Everybody wants to get rich quick
Many MLMs pitch the idea that if you are willing to put in a relatively small initial investment, soon you’ll be building a downline and making enough passive/residual income that you will be able to quit your day job, take a vacation whenever you want, and cease worrying about your financial future. This is an extremely exciting prospect for people that MLMs primarily target as distributors—those who are in a bad or even desperate financial situations. Unfortunately, the reality is that the vast majority of distributors won’t be able to find enough people within their friend and family network to join, and thus will be stuck either losing their initial investment, or will continue to purchase inventory to remain in good standing. Despite this, MLMs continue to thrive because many people are looking for a quick and easy way out of their financial situation.
2) False sense of community
One of the most powerful draws for MLMs is the promise of community. Many recruiters take a very active approach to mentoring their downline through meeting at coffee shops, attending events and conferences together, and check-in phone calls. At the beginning, this mentorship includes vague business advice about how to close sales and not give up until you reach your goals, but eventually the mentorship is purely focused on keeping their recruits from stopping autoshipments and promulgating the lie that with just a bit more investment, they’ll finally see that life changing income flowing in. As former MLMers know, once you leave an multi-level marketing company you are shunned and any semblance of community quickly disappears, which can be a very strong incentive to stay in the group.
3) MLMs encourage the removal of “negative” influences in your life
Early on in the recruitment process, MLM recruits are taught that questions about “pyramid schemes” or return on investment are negative and the people asking them (often friends and family members) are trying to keep the recruit from reaching their full potential. Just like with cults, members are actively discouraged from questioning leadership or rules, and are encouraged to distance themselves from anyone who stands in the way of “achieving their dreams.” This makes it especially difficult for those who are trying to convince friends and family members not to join an MLM, since they risk losing an important relationship. Ultimately, the recruit either separates themself from people who are trying to keep them from joining a bad investment in the MLM, or those people stop talking about it in order to save their relationship.
4) Everyone thinks they are the exception to the rule
Take a look at any publicly available income disclosure statement from an MLM and you’ll find only a small percentage of people (generally less than 5%) who are seeing any kind of return on their investment. Generally, the people who are making money are the 5-10 people who joined the multi-level marketing company at the early stages. Even when presented with information about how unlikely they are to succeed, most distributors view themselves as the exception to the rule, ignoring the fact that people are failing because of how MLMs are structured, not because of any personal flaws. When pressed on these numbers, recruiters will say something like “not everyone has what it takes to be successful”, when in reality, unless you joined at the very beginning, it’s basically impossible to make any signficant return on your investment.
5) They don’t know the history of the MLM industry
A lot of first time MLM distributors have no idea that the multi-level marketing industry has been around for a long time, and all of the legal issues that the industry, and the various MLM company founders, have faced as a result of their predatory recruiting practices. Most new recruits just see a shiny new company with a “revolutionary” new product, and don’t think about the fact that most MLM leaders have a few failed companies in their past that closed due to the inevitable decline of pyramid schemes or because some sort of law enforcement agency (where local, state, or federal) cracked down on them.