Drawbacks of multi-level marketing

People will use almost any method to reach consumers beyond traditional door to door sales, and some are interested in making money in the most immoral and illegal methods possible. In the 1980s, an old chain letter called “Make Money Fast” promised people great fortunes if they sent a dollar to people in a list and added recruits to the bottom of it.

It spread rapidly and became one of the most popular cases of spam mail of its time. Money schemes and businesses that promise profits that can’t be provided are illegal but some companies live in a gray area. Multi-level marketing is another business model that rewards employees for selling a product but also for recruiting other employees. By signing up new recruits, people can work the way up the ladder to gain financial benefits.

One such company is Liberty Network Marketing. They sell overpriced vitamins and supplements to clients. The website looks enticing enough too. The making money page includes a confusing series of over 20 steps that show the reader how to make fast cash and learn the basics of business and indoctrinating others into the system.

After clicking a few links one can see that Liberty Network Marketing is a distributing company for Isagenix. Some pages have fancy graphics with wads of cash and large bonuses for referrals coated in all sorts of euphemisms such as leadership development. Fancy titles like crystal and golden are added to director and executive to motivate employees and recruits.

Higher employees gain money from their own sale commissions but also from sales of their recruits. This kind of business sucks for people on the bottom of the corporate pyramid structure, especially for young adults such as high school and college students.

Many of these businesses fail because people at the bottom of the ladder leave. Clients are easy to find at first but workers quickly run out of options when their personal rosters of friends and relatives have all joined. Afterwards, the employees find themselves less useful to the company, struggle to meet their quotas and resign from their positions.

Multi-level marketing has a serious issue with selling its products. Since the business is based off of recruiting employees on a ladder, there is no way to predict what the market demand for the business’ product is. When the market in a certain region buys all the product it demands, the business has no reliable method of detecting it and will promise new employees the time to sell is right even when the company is about to collapse.

There are other companies that abuse students that don’t use employee referrals for rewards. The Cutco Corporation posts job opportunities for students around schools and college campuses and lures young students to be merchants for kitchen cutlery. Employees use social media and referrals to schedule one on one demonstrations of their product during house calls. They make the students feel important by giving them their own offices, but they only get a small commission on the knives they sell.

Some multi-level marketing companies were not so honest. BurnLounge, Inc. was an online music store but made its money selling music licenses more than making music. BurnLounge was sued by the Federal Trade Commission in 2007 for conducting a pyramid scheme based on multi-level marketing. However, it took 5 years for BurnLounge to lose because they lawyered up. They didn’t care about the way they earned money.

It’s terrible that companies recruit people under the premise of success when there is no such guarantee for it. It hurts the reputation of industries in the same market and leaves lower level employees in a bad situation afterwards.