MLM stands for Multi Level Marketing, but you and I probably know it better by the brands that utilize this particular sales technique. Avon, Amway, Mary Kay, Tupperware, Scentsy, The Pampered Chef, Thirty-One Gifts, Arbonne and many, many more. The idea behind this marketing strategy is that independent sales associates promote and sell their wares through their contacts or by organizing "parties" to shift the product.
The problem is that after a new contractor has hit up all their friends and family a few times, they often find it difficult to make their sales targets -- and that's when the parties start.
Video of the Day
You probably have been invited to one of these events. Perhaps you thought it was an actual social event until the products came out and you realized there was an assumption that you would buy something. That doesn't sound like much of a party, does it?
A party by any other name
That is one of the reasons your friends will end up hating you if you start an MLM business. What is normally a chance to socialize and get together now becomes a business transaction. It can seem phony and exploitative. Especially if your pals have had to put their hands in their pocket before. People who end up working from this model seem to go through a few different companies who all practice the same philosophy: Start with your inner circle. So whether it's leggings, kitchenware, candles, or sex toys, your friends are quickly going to tire of being on the hard end of an aggressive sales pitch.
Soliciting business from family and friends can feel manipulative. They know your personal situation well, especially since most MLM sales people are stay-at-home-parents trying to make a little extra money. It's essentially a sympathy sale and you can't sustain that model as a business. Once your friends buy the cheapest thing your company offers they'll start to feel like they are funding you -- would it be easier to directly give you a handout rather than being saddled with some useless doodad?
Of course, some people do make a successful career from an MLM strategy. There are those Mary Kay ladies on their tropical vacations or in pink cars won from reaching national sales targets, but they really are the minority.
Business Insider asks whether these opportunities offer a real 'entrepreneurial' experience at all.
"The essence of an entrepreneur is creating something new and innovative, whereas an MLM is a traditional formula on an existing product with a high premium on pyramiding."
Being asked to buy a one-off product is really the thin end of the wedge when it comes to the true evils of MLM. One of the main tenets of this strategy is that independent contractors recruit more sales people and they then make a profit off of their sales. This creates a pyramid system where only those at the top truly benefit. To have any hope of making money you have to drag more people into the company, and that's where you will really lose friends. Constantly posting social media posts about "great opportunities" and trying to get your friends and family to also become consultants just to boost your own sales percentages is a very murky business.
Many supporters of this business model defend it as an excellent opportunity, for women especially, to launch their own business and become entrepreneurs. Forbes even suggests that these companies offer a better opportunity than most other enterprises as:
"Most MLM organizations provide a very robust infrastructure and great training as well as impeccable rewards (hello free cars and trips!)."
Many novice associates get saddled with debt when they first launch one of these from home businesses. They are often required to purchase starter kits with products and marketing materials that can set them back hundreds of dollars. If they don't quickly make sales, they'll turn into a money burner instead of a money earner. Which explains why many new recruits can seem a bit desperate.
If you happily (and profitably) get your side hustle on by selling products and recruiting more consultants through an MLM model, good luck to you. Just be warned, if your customers are your friends they probably secretly hate you, just saying.