The World of Multi-Level Marketing: How to Spot It & Why You Should Avoid It

This past week, I devoted some time exploring the bizarre concept that is multi-level marketing. I was fascinated by something that regularly popped up on my Facebook, a company called It Works! and just had to learn what it was all about.

Distributors are constantly posting to social media, showing off all the money they are(n’t) earning, alongside #bossbabe quotes and photos of freshly wrapped tummies.

It Works! is a direct sales company, with over 100,000 distributors, hungry for new recruits to join their team. They sell what they claim to be health products, their best selling one being “that crazy wrap thing.”

However, It Works! distributors are not so concerned with selling 9.3 ounce bottles of Keto Coffee Creamer at $65 retail, but rather, maintaining a constant flow of new distributors to join their downline.

The startup fee is $99 for a box of four wraps and marketing material.

It isn’t until after signing up you learn that the only ways to be eligible to earn commission is through either two options:

  1. Personally buy at least $80 worth of product each month
  2. Sell at least $400 worth of products to customers

Basically, if you sell just $300 in product, you wouldn’t receive the 10% commission cut. She would then have to order $80 of product for yourself if you wanted your $30 check.

The immediate goal is to find people to sell under you, so that you can receive 10% of any of their sales, and eventually 10% of any of their downline’s sales and so on (while still having to meet the $400 sale minimum/$80 personal charge per month).

This usually involves reaching out to complete strangers. Messaging people about this life-changing weight loss product, although you likely don’t notice any results from using the products yourself.

You’ll be lucky if you can get some friends and family to agree to become a “Loyal Customer.” This means they commit to buying $30 in product for 3 months. A common tactic to draw out a lengthy commitment is to ask someone to be a model for a 90 Day Hair, Skin and Nails Challenge.

The marketing is genius. It plays perfectly into the pleasure of posting a good selfie and gives purpose to indulging in the vanity of it all. Calling the customers “models” makes them feel special in exchange for unpaid advertising to all of their Facebook friends.

In their 2016 Income Disclosure Statement, It Works! published that 78.73% of the company made just $51 per month, not factoring in expenses or the $80 in personal product they may have bought to become commission qualified. Somehow, thousands of people see past that statistic and focus on the 0.03% that averaged $33,882 per month. They heavily publicize their top earners going on gorgeous company retreats in Florida. Many of the social posts corporate asks them are laced with buzz words like “residual income” and “extra spending money.”

It Works! markets themselves as the quintessential American Dream, relying on those who join to believe that they can work hard and become a top salesperson. From a young age, we’re taught to think “why couldn’t that be me?” We’re taught to believe we can achieve anything.

And it’s a hard pill to swallow when we fail.

But what if the cards are stacked against us in the first place? After all, it’s not easy to half-heartedly push $99 vanilla protein-shake on the ones who love and trust you and it’s certainly harder to recruit them to be one of you.

Photos on social media give the illusion that every seller of It Works! is living a happy, healthy, wealthy life. In turn, this makes it tougher to notice it’s deceitful marketing and that it truly is a pyramid scheme.

Here’s a few warning signs that can help you identify a multi-level-marketing scam:

  1. You have to pay a fee to join the company
  2. You are required to buy lots of the product, whether or not you already have enough inventory
  3. Your income is based off of finding new recruits rather than sales
  4. The commission structure is not straightforward or easily understandable
  5. It looks too good to be true

A perfect example is the company Herbalife, a similar company that sells health products, which settled out of court with the Federal Trade Commission (FTC) in 2016 for a whopping 200 million dollars.  The FTC mailed checks last year to over 350,000 people who lost money in the scam.

I wanted to see for myself, so I posed as both an interested customer and a prospective distributor.

Out of the blue, a 40-something-year-old woman from 300 miles away messaged me on Instagram, asking me if I was interested in making more money.

We continued messaging and she told me that It Works! was a Fortune 500 company, an obvious and easily fact-checkable lie.  I was startled by her blatant disregard for honesty the truth. I pushed back. She offered $250 worth of free product. I ignored her for a couple days.

“If you join my team before the end of March, you’ll be eligible for a $5000 bonus,” she wrote. How tempting would that have been if I had never heard of the company? If I didn’t know the facts, would have I jumped in with both feet?

She and I talked more about the process of adding members to my team and getting Loyal Customers to buy from me. She really made it sound so easy. There was no professional jargon and it felt like a conversation between friends. 

Unfortunately for her, I told her I’m not interested and we parted ways. I wondered how many people she had the same friendly conversation with that day, amounting to nothing.

My encounter with It Works! was a brief reminder of why I’m thankful for my traditional 9-5. I praise these men and women for their entrepreneurial spirit and I do hope that they reach the dream that they’re chasing.

It is my recommendation that you stay far away from any multi-level marketing schemes, as they will probably rob you of hundreds, even thousands of dollars. Start your own business, don’t buy in to someone else’s.

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