Multi Level Marketing (MLM) is based around the principle of a pyramid – those at the top recruit people beneath them who likewise do the same, thereby continually growing the lower levels.
Pyramid schemes (see Charles Ponzi’s postal coupons) are illegal.
MLMs on the other hand, stay on the right side of the law because there are one or more products or services being sold through them.
Whilst some MLMs offer good money making opportunities to the right people, many are pure MLM scams.
Here’s 17 things to look out for when determining if a MLM is a scam –
1. Is there a product or service involved or are you likely to be simply recruiting others?
2. Do payments favour making sales rather than recruitment?
3. If there is a product, is it one that is realistically saleable?
4.Would the product or service sell well on the open market, irrespective of the style of marketing it received?
5. If you are required to buy inventory, is there a money-back or buy-back guarantee?
6. When customers purchase the product does the company supply good levels of service?
7. Is the product or service competitively priced such that you can expect to earn a fair income purely from your own sales?
8. Do the company market the product or service fairly or do they make exaggerated claims?
9. Do the company claim that they, or their products, are approved by official bodies? If so, can this be verified?
10. Are start-up costs reasonable? Do you have to purchase excessive amounts of stock each month to receive a commission?
11. Do people far above you in the chain earn as much as, or more than, you do for your sales?
12. Does the company clearly publish the amounts it pays it’s distributors or are the only income figures available wild and unsubstantiated ones found online, from other distributors?
13. Were you recruited ethically, i.e., without any high pressure tactics?
14. Is there free, or inexpensive, training and support available to aid in your development?
15. On the company’s website can you find comprehensive contact information, including telephone numbers, email and physical addresses?
16. Is the company well established or have they just appeared and without any kind of track record?
17. Do the company communicate well with their members or do they just get people to sign up and then leave them to flounder?