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Are you looking for the meaning of MLM?
The abbreviation “MLM” stands for “Multi-Level Marketing”. Also called a network marketing company, an MLM is a company that offers a product but invites people to join the company as independent sales representatives who further recruit other people in a continuous kind of chain.
How Do You Earn As a Sales Representative?
Unlike in direct sales companies, sales representatives in MLMs earn commissions partly from product sales but a great percentage from referrals.
Referral involves convincing other people, especially friends and relatives who are more easily influenced, to join the business and become sales representatives, too.
Joining requires paying a certain amount of money. The more people that you refer (those that join under you in the scheme), the more commission you earn.
Is an MLM a Pyramid Scheme
The term “MLM” is often used interchangeably with the term “Pyramid Scheme”. While the two are inherently similar, the difference lies in the fact that in a pyramid scheme, no product is involved, while a Multi-level marketing company has a product(s) it sells.
Pyramid schemes are outright illegal in most countries. An MLM is a pyramid scheme variant. In most countries, MLMs are legal because they claim to provide products that they sell to the public.
However, these products just disguise the fact that the business is a pyramid scheme. They serve as a legal way through which money can change hands.
MLMs thrive on an exponential increase in number of people joining, who are not directly recruited by the top company officials, but by their own friends and relatives.
This structure forms something like a time-based pyramid, with the pioneer at the top who recruited other people who also went on to recruit others.
The base of the pyramid is larger and goes on increasing exponentially.
Everything to the Top.
In an MLM, most of the money is funnelled to the top as the people at the bottom (in joining time, not space) are actively losing money.
The owners of Multi-Level Marketing Companies are very rich. This is not because they work a lot. Far from that.
It is because ‘hope-driven’ people are so busy trying to make money and hit targets to raise up the hierarchy of independent sales representatives that they don’t realise that they’re making and surrendering bags of money to the proprietor.
It is creepy and a total mess. These MLM companies prey on the hopes of vulnerable groups like the desperate poor, the burnt-out working class, the gullible youth and friends that can be manipulated.
Personally, I was once, not once but thrice, invited by three different friends, unknown to each other, to attend a ‘seminar’.
One promised that this was a great job opportunity, another told me that we’re gonna learn how to make money and the third just invited me to attend a ‘talk’.
Whatever that meant, I later found out. I did not hesitate to go on all three invites because I respected and cherished them all.
I didn’t stay till the end of the ‘talks’ because I realised something crazy in all the three, and in the last two talks, I had already red-flagged such events and was a ton sceptical.
Who Doesn’t Want Financial Independence?
….Don’t raise your hand. These companies entice you to feel like by joining them, all your financial fantasies will be fulfilled, sort of like by the waving of a magic wand.
They use phrases like ‘Don’t you want to buy that dream car? Join our company and we’ll help you make that money.’
There’s an emphasis on recruitment. It may not be explicitly stated but recruitment of more ‘sales people’ is the way by which you can earn most of the commission money.
Recruitment is not an easy thing. You will have to put in a lot of time, money, energy and skill to recruit a reasonable number of people into the company.
That is good. The company is delighted to see you fail to hit that target number, because that will keep you in the company in hopes that success is just one step away.
‘We are about to reach the horizon. The mirage us just a few steps away. Hang in there!’
8 Reasons Why MLMs are the Absolute Worst.
a) Ethical Considerations.
If you’re planning on entering a Multi-Level Marketing business, you’ve got to leave ethics at the doorway if you wish to succeed in it.
I’m not saying that those that have made it in such businesses are not ethical anymore. No. Do not ring that relative as yet.
I mean, you will find the situation pressuring you to lie so as to convince that one person who is the one step away from your success.
Some mentors (those who joined before you); your uplines, will tell you to say certain things to attract recruits. Some of these may not be true.
You will be forced to testify that you are a product of the product you’re selling yet you even don’t know how it looks inside.
This business model cannot be sustained indefinitely. There is a time when recruits are no where to be found and the company collapses, taking your money with it.
Have you ever heard of a failed Multi-Level Marketing company compensating its members? Me neither.
The business can close any time and you remain in mid air.
Countless people have lost their savings by investing in these companies. The time and input required to reach the level where you’re earning a liveable pay in these companies are almost impossible.
You are deceived into thinking that the reason you’re not yet earning like the top earners in the company is because you’re not yet doing enough.
Not true. The business is fundamentally crafted to include conditions that limit progress. If progressing to high earning levels was so easy, these businesses would run into losses and deficit so quick. No sane human would start a business to make losses.
Everyone wants to profit and profit good.
c) Legal Considerations
Multi-Level Marketing businesses are variants of a pyramid scheme. The difference lies in the incorporation of a product into the basic pyramid scheme model to obstruct legal attention, generate more revenue and get more recruits.
This doesn’t invalidate the fact that the fundamental model of the business is illegal. Multi-level marketing companies where sellers make money by recruiting more sellers are pyramid schemes and that is the case with most of them.
d) Time Wastage
The time you waste running after prospective recruits and buyers could be used to save the world. Okay that’s extreme, but it could be put to more productive use.
Some prospects will waste your time showing hopes of joining, only to tell you they can’t, after months of you trying to convince them.
There’s an average time required before you can rise to the different earning levels and it is unreasonably long in most cases.
e) Lack of Professionalism.
These companies are after money and nothing like professionalism. You can become an independent consultant, selling and recommending the company’s health products, for example, when in actual sense you’re not a certified medical practitioner.
The driving force is generating more money through sales and recruits and not offering a decent service.
Many consumers have fallen prey to this. They purchase a certain product they’ve been referred to as being the best of its kind, not knowing that it is more like a placebo.
f) False Hope
These businesses exploit people’s needs and fantasies to convince them to join in promise of fulfilment.
You are given false labels to give you an empty feeling of independence and achievement for example joining the company and gaining the status of “Independent Consultant” feels so good.
But in reality are you working independent from the company? Are you a certified consultant? The company structure itself deceives you into working hard to hit those targets so as to become a top earner.
It is not as easy as they make it to sound. Some of these companies even publish books to help their sales people ‘emulate’ the reading habits of rich people and also to become ‘leaders’.
Such buzz words reinforce the lies further.
g) Spoiling Your Reputation.
Many people have come to learn of the scam-nature of MLMs and are actively anti-MLM.
If you approach such an enlightened individual to convince them to join the business, they will view you as a gullible person and/or a scammer.
You actually lose credibility before them. Not to mention, I will never see the three friends that I spoke about earlier in the same light as before.
h) Joining Fee.
To join any MLM, you pay a certain amount of money. This amount can be really high for some companies.
If you’ve been convinced and you’re really excited to join, you may end up selling everything including your clothes not to miss out on this ‘life-changing opportunity.’