What’s an MLM? How Does it Work?

A while ago, one of my favorite hobbies was going on Reddit and browsing r/antiMLM. There were tons of scandalous stories and hilarious messages centered around these people promoting their MLMs. Even more entertaining were the countless YouTube videos I watch on the rise, fall, and terrible business practices of various Muti-Level Marketing companies. 

While this content was entertaining, as I drove deeper into the subject, I began to feel a sense of sadness. Every day thousands of people are swept up in these MLM schemes. They lose money, friends, family, and overall quality of life. And it makes you wonder; if so many people are sacrificing their livelihoods for these companies, then what’s really going on? What exactly is an MLM? And how does one function?

The Structure

If you’ve been online within the past decade, there’s a good chance you’ve heard of the term “MLM.” However, you might not know exactly what it means. Well, I’ll put things into perspective for you. If you ever encountered cryptic Facebook or Instagram message asking you to buy some products, host a party, or join some kind of “exclusive” business, then you’ve had a firsthand encounter with an MLM. Congrats… I guess. 

These messages, creatively nicknamed “hunbots” are often sent by friends, family, or other mutuals. And if you got an iffy feeling while reading them, that’s because these users are caught up in a very common marketing scam. As mentioned before, the term “MLM” is an acronym that stands for Multi-level Marketing. You may also know it as network marketing, or a pyramid scheme.

Well-known MLM companies include LuLaRoe, Mary Kay, Avon, Amway, and Herbalife. (And there’s more where that came from, unfourtunately)

The Pyramid

I really like the use of the term “pyramid scheme” because when you look at the structure of these companies, they follow or format that is shaped like a pyramid. The higher-ups at the top are comprised of a very small number of people. Meanwhile, there’s a sh*tton of struggling workers at the bottom, all with lost Investments and broken promises.

Let’s say there’s one businessman at the very top of this pyramid. As the head of the company, he hires two more employees under him. These employees must pay an entry fee in order to join the company. Afterward, they are given products to sell, and some of the proceeds go to the big boss. These other two employees than hire their own employees to work under them. Same deal; the employees on the third level show the products, and most of that money makes its way up to the one at the top. The cycle goes on and on and on to form a pyramid. 

The Typical Experience

So how does this work from the average MLM’s employees perspective? Put yourself in the shoes of someone who just got sucked into an MLM. I know, it’s terribly cringeworthy, but bear with me. 

So you’re a new recruit. You must pay an entry fee to join this exclusive establishment. The cost may vary, but usually, the more you pay, the more benefits you receive. They may even have to your systems. 

You’ll then be given products to sell. You may have to pay a fee to get these products in your hands on them. You might have to sell them at a higher cost than their unit price. But here’s the deal; more emphasis is placed on the action of recruiting more members. You will get paid in commission for every new member that you recruit. And guess what they use new members will do? They’ll pay entry fees just like you, and go on to try and recruit new members themselves. The way the system works is that it benefits only the higher-ups and early recruits. Hence why they call it an MLM. It’s got multiple levels, and the higher up you go, the more you’ll benefit at others’ expense.

What these companies won’t tell you is that new members are their main source of income. When new recruits run low, that’s when the company starts crumbling down. And once that company crumbles, the early recruits and CEOs collect their money, while regular employees are left broke. 

The Manipulation

To most people, spotting these MLM companies is pretty easy. A job offer that charges entry fees, has a vague company set-up, or has no adequate interview process, is naturally going to raise some alarm bells. So you might be wondering; how the hell do people fall for these things?? Aren’t they obvious scams?

In truth, it’s not obvious to many demographics. And if you happen to get swept up in an MLM, it’s really hard to get out. Unfortunately, the only reason these businesses still exist is that people keep falling for them. 

Strategies

There are three strategies that MLMs use when recruiting people;

• Targeting certain demographics
• Using charisma and big promises
• Giving people a sense of belonging

Let’s circle back to the “hunbots”. Ever wonder why those MLM messages will often use this upbeat “girl boss” language? Well, that’s because most of these companies are created to appeal to young college girls and middle-aged women. Young adults sometimes don’t have enough life experience to notice when they’re being scammed. Meanwhile, some older people don’t have enough tech-savviness to notice online ploys. Many women enjoy the idea of becoming their own boss and achieving a sense of empowerment.

Of course, many men fall for this as well. Normal jobs can be sucky. Sometimes you just wanna make easy money on your own schedule. Especially when the companies in question promise big returns while working on your own schedule. MLMs will often have spokespeople who can convince you to care about their cheap leggings or mediocre supplements.

Once they get reeled into the business, MLMs will host social events that provide a personal connection to other employees and higher-ups. They’ll start to form a bond with these people, until they become almost like a family. Remember that job you wanted to quit and knew you should quit, but the people were so nice that you just…had a hard time? Well,  it’s that time 1000,  because by this point you’ve already invested so much money and time into them. 

I’ve read so many horror stories of people losing their cars, their houses, their kids, all in the name of some cheap makeup products.