How to Spot MLMs

Is the business they’re pushing you to start legit or an MLM?

Everyone wants luxury, free time, and passive income. Unscrupulous companies exploit this. They are very, very good at using human nature as a fishing hook to bait you, hook, you, and keep stringing you along as they drain you of time and money without giving you much of anything in return. And their victims can stay on their hook for YEARS. Because these companies feed your emotions and inflate your dreams instead of feeding your wallet or career.

Here are some of the tactics that I’ve seen network marketing companies use

Here are a few red flags to watch out for:

• They can’t easily, concisely, and effectively describe what they or the business does in a few words.
• They avoid giving you much information in text and, push for a meeting instead.
• They focus on “success stories” from owners of the business schemes and a select few people. Show yachts, photos on the beach, group photos of happy people, etc.
• They focus on retiring early, having a passing income, and buying luxuries, unrealistic earnings claims instead of a business strategy.
• Everything (especially meetings and videos) is too flashy and contains lots of hype (like a coach trying to hype up his football team before the game)
• In meetings, they talk a lot without saying much.
• They try to make you feel special about being accepted into the program. “finding the right person with the right values and work ethics”
• “Work your ass off for 4 years then you can retire for life!” That way if you’re not making a profit, they can say you’re not working hard enough.
• The person you are talking to is trying hard to recruit you even if they are not in HR or the owner of the business.

They don’t tell you what they really do when you ask

… or they seem to answer the question but in a vague way that doesn’t really answer the question. This is a huge red flag. You ask them what they do and they give you something like: “I’m my own boss”, “I run a small business”, or “I run a successful business/side hustle” When you ask them to clarify what they actually do in their side hustle, they are extremely vague, like: “I help people follow their dreams/save/invest” Or my all-time favorite (told me verbatim by a co-worker of mine when I asked what the side hustle he was trying to get me to go to a demo meeting for was: “It’s about changing the way people do things”

In contrast, if you ask a person in a legit business what they do, they can tell you easily and exactly with no room for vagueness: “I’m an accountant/bookkeeper/software engineer/etc” or “I fix roofs, create marketing campaigns for companies/etc”

Simple and direct answers are revealing. Pyramid scheme recruiters avoid them.

MLM companies know that if you summarize the essence of what they have their workers do, that’s gonna raise the flags right away. So when they train their workers to do recruiting for their pyramid scheme, they have them avoid this question.

Why avoid the question? Because the straightforward answer is objective and it’s easier to evaluate text on a logical basis. They need to hook you emotionally for you to buy into their scheme. And the only way to do that is by having you attend meetings and conferences, and getting you to watch presentations that use human psychology to manipulate you emotionally.

MLM companies entice you with “Success stories”

Emotional and aspirational bait is key. High-pressure sales tactics your average pyramid scheme relies on work by manipulating emotions.

They will always tell you first how the person who started this business got suddenly rich, bought a yacht, retired at 30, and now travels the world full-time BEFORE they go into the proposed business model. They’ll give you cherry-picked (and probably false) success stories that they themselves were fed by the company in the hype meetings they attend.

They need you to visualize your dreams coming true and dangle that vision in front of you to distract you from the fact that they haven’t yet gone into any details about this “business opportunity” they are supposed to be telling you about. They’ll talk around your questions and try to get you emotionally invested in the idea of being your own boss and making unlimited income.

Pictures of smiling people are not proof

Another form of this is showing you slide shows with lots of pictures of groups of smiling people (presumably ones who are members of this particular network marketing scheme) on tropical beaches holding celebratory posters and written inspirational quotes. They dangle buzz-words like “financial freedom” in front of you.

“We’ll tell you what we do in a second. But first, imagine yourself retiring early. What if you could quit your job in just 6 months? Look at Jennifer here: (insert picture of “Jennifer” on a tropical beach in front of an expensive house) in just a few months she quit her job and now lives in the Bahamas!”

Watch for the flashy visual style

If you are actually goaded into coming to a meeting, going to a conference, or watching some sort of presentation, another red flag to watch out for are the following stylistic elements:

The stage is flashy with a large screen. There might be smoke machines and spotlights.

When the speaker comes on the stage there aren’t just applause, but loud cheering, whistling, music, and sound effects.

Awards to participants are a thing. Part of the presentation will be handing people ribbons, certificates, and other types of awards for their performance. This is to show you “what’s possible”. Just think: next year it could be you on stage! Wouldn’t you like that? Wouldn’t that make you feel special?

The pretense at strict criteria when it comes to your acceptance into the program (how multi level marketing companies make you feel special)

If something is easy to get or to get into, humans don’t value it much. Another tactic multi level marketing companies use is telling you things like “We only accent extremely hard-working people”, or “First, we need to see if you’re a good fit. You must have great ambition and work ethic to do what we do. We only accept very special people”.

What does this do?

1. It makes the “opportunity” seem more valuable because it sounds harder to get.
2. It, indirectly, issues you a challenge to prove that you are “worthy”. Now saying “no” to this MLM scheme is like admitting you are not good enough, and your ego doesn’t like that.
3. When they finally “graciously accept” you, you are less likely to leave, because now your self-confidence depends on your being successful in this endeavor.

Your ego is a tool for them. And they are trained to use this tool masterfully.

Work Hard to Earn Money!

People have heard a thousand times that “hard work is key to being successful” and “There’s no such thing as easy money”. So the MLM scam will often avoid claiming they can get you easy money. Plus, emphasizing “hard work” will give them the following advantages:

1. It gets you to agree with them because they are presenting a commonly-known true statement.
2. It gives them a tool to create excuses down the line for why their pyramid scheme is not working for you: you must not be working hard enough!

Complain that you constantly lose money and you’ll be told it’s all your fault. It couldn’t possibly be that the business model they gave you is designed to make them money and not you!

They may imply that they are giving you a way to easy money indirectly (by giving you short timeframes to retirement and quoting “success stories”). And these implications are designed to appeal to your emotions and desires while bypassing the logical mind. But then they pacify the logical mind underscoring “hard work” and appealing to truths you already know.

Thus, your emotions are hooked but your reason is satisfied.

Does the person you are talking to seem a little TOO eager to recruit you?

When was the last time a doctor, a lawyer, a banker, or a store owner went out of their way to get you to do what they do? Unless you are talking to an HR recruiter or a business startup owner, the person you’re talking to should not have a vested interest in you joining their company.

If they seem like they do, if they go out of their way to invite you to meetings, listen to a presentation, and sing loud praises to the “life-changing” business opportunity they were lucky to find, that’s a sure way to spot a multi level marketing schemes from a mile away. That’s what MLM schemes do: they give their members perks for recruiting new MLM participants and train them on tactics to do that effectively. It’s multilevel marketing in a nutshell.

“Got a family member? Why not get them recruited? We’re sure you know enough people who want to be a ‘boss babe/girl boss’ or an owner of a successful company.”

But what if actual selling products is happening? That’s legit, right?

Multi level marketing companies do often sell products or services. Selling products to their members is their key business tactic. The members are encouraged to sell products they buy to their friends, family, contacts on social media sites, and various groups they are involved in. (you can probably think of some cosmetics companies like this. I don’t want to mention the company name, but I’m sure you know what I’m talking about) In addition to that, multilevel marketing members are told they can make extra money by recruiting even more members and often making extra on what the people they recruit sell.

The result? Multilevel marketing members end up losing money, but they don’t always notice that because of the emotional manipulation most companies that a pyramid scheme utilize. And if they do notice that they lose money, that they’ve made only a handful of sales on social media in the past month or six, that must mean they are not “working hard enough!”

Aren’t multi level marketing pyramid schemes illegal?

Sort of, but there are easy loopholes that multilevel marketing companies abuse. Just because something is not an illegal pyramid scheme, doesn’t mean it doesn’t operate in a similar way to pyramid schemes. It’s possible to structure multilevel marketing efforts in a way Federal Trade Commission won’t come after you for.

If the only thing a multilevel marketing company does is recruit new members and has little to no products or services to sell, that’s pretty Federal Trade Commission will definitely come after them. But if their primary claim to profit is making sales of their products and not just recruiting people, there’s a good chance Federal Trade Commission won’t be able to touch them. Like I said earlier, many MLMs do sell some products and services. They just make sales to people they recruit, not the general public. The legality of multi-level marketing, also known as network marketing is lobbied for by the direct selling association, a trade organization specifically designed to support MLM businesses.

Summary:

Watch out for the following red flags that could signify an MLM scam:

• “No, I can’t tell you what I do in a few words. Come to this meeting to learn more.”
• Appeals to emotion and your ego.
• Dangling luxury, passive income, and early retirement in front of you.
• The company who says it’ll pay you to recruit more members.
• Direct sales they encourage are primarily to your friends, family, or on social networks.
• No compensation plan to speak of, you’re just told to make direct sales and recruit people.
• Google: “Company Name MLM” (without quotes). If there are a lot of results with people saying the company has an MLM business model or is based on recruiting or person to person sales, it’s probably true.
• The company hosts lots of flashy conventions and relies on a lot of hype.
• If someone who is not in HR seems a little too eager to recruit you into their company.
• Also: any company that asks you for money while recruiting you to work for them is automatically sus.

To wrap up:

Millions of people are duped into thinking they can make money by selling products and services. Pyramid schemes are very good at enticing smart, ambitious people who are interested in starting their own businesses. They are told to promote these pyramid schemes by recruiting more people, buy products, host parties to increase direct sales. They encourage selling to your friends and family.

MLM products range from health products, to cosmetics, to financial consulting services. Sometimes you even have to pay for on site training.

Sales is a tough business, much harder than what MLM companies want you to thing. Even sales to your family can be challanging.

An MLM company or anyone who’s currently involved with it will never admit that it’s MLM. The golden rule of good companies is that it doesn’t need a lot of hype to recruit you.

It’s a scam, at the end of the day, but a covert one. People who run MLM pyramid schemes follow legal advice and frame their businesses in a way that is not, technically illegal. They have a trade organization that lobbies for them.

I encourage you to do a search on google for more information on MLM is, the tactics they use, how to spot them and how hard person to person sales they encourage are to pull off.

Terrestrial Origin is a software development company specializing in creating web and mobile apps for small businesses and private individuals who have an app idea. If you have an app idea and need guidance on how to make that happen, please don’t hesitate to contact us.

Want a legit way to start a business? Check out the lean startup methodology.