Who Joins MLM Scams?

I had the opportunity to be interviewed by WZRD 88.3 FM radio in Chicago. Me and the host Robert Hansen had the chance to talk about a lot of topics related to business opportunity scams.  One of the key things we talked about is who is it that joins MLM scams?

I hope you find this interview of value.

Here is the entire radio interview:

Here are some of the questions and my notes:

A brief history of the MLM business scam.

One of the first MLM companies was Nutrilite which became a corporation in 1939.

They sold nutritional products which were promoted as effective in treating a variety of ailments, including cancer, heart disease, and depression.

The founders of Amway started in Nutrilite in 1949 as distributors (Jay Van Andel and Rich DeVos).

In 1959 Amway was founded.

At Nutrilite they learned the secret to the MLM scam.  Make your distributors your customers, but make them think they are entrepreneurs.

Highlight strategies of how people are recruited into the mlm scam.e.g. recruiting methodologies. Fees and other monetary taken from recruits.

The most common way that a person is recruited into an MLM is their friend contacts them and gives them a presentation.   

Demographics of people who join mlm? Education level of the average participant in mlm. e.g. high school level, community college, B.A. or other education background.

Correction: 84% are White/Caucasian. 78% are non Hispanic, 22% are Hispanic, and 74% are women.

Two-thirds of all network marketers have high school degrees or some college education, and 25 percent have a college degree or beyond.

As of 2016 over 20 Million people are involved in MLM. 5.3 million are active in MLM. 15.2 million receive a discount on products and services. – Source DSA

The median annual gross income for MLM representatives is $2,400. – Source DSA  After expenses, it approaches $0.

Commission structure going to the top.

If you look at any of the income disclosures, you will find that only the top few percentage points of people make a significant amount of money.

How long do most people last in a mlm?

50-90% of people drop out in the first year.

“…more than 90% of our distributors that are not supervisors turned over.” – Herbalife 2005 Annual Report

When do most people join a mlm, e.g. economic recession, economic boom, other economic trends.

People are joining MLMs at all times, but a good indication of when it is more popular is when the unemployment rate goes up more people are looking to make money and they get sucked into MLM scams.

What are some popular products offered by mlm organizations? e.g. juices, vitamins, financial services, etc.

Lotions, Potions, and pills are the most common products, but some even use gold as a product.

Where do mlm recruiters do their recruiting? Are there places they frequent, e.g. shopping malls, church, website job boards, etc.

Facebook and online websites are becoming more and more popular. Attraction marketing is commonly used online. Home events are also very popular.

What are some psychological tactics used by mlm recruiters to bring people into the business? Examples of brainwashing of recruits.

They use the people you know and trust to bring you into the MLM scam.  Then they use large stadium events to keep you locked in.  

What can family members do to aid and assist a loved one who has been caught up in a mlm? There are examples of people who I know where the mlm participant has informed me their family does not understand what they are doing. The family members disapproval of a loved one’s participation in an mlm.

When you are working with a family member it is important to not call what they are doing a scam. Let them know that you do not wish to join, but try to stay in contact with them.  Normally they will leave within a year.

The reason you don’t want to call it a scam is they are trained to cut off anyone that would be considered a “hater” of MLM.  

Possible comparisons among mlm and cult.

MLM scams have a lot in common with cults in the way that they function:

They commonly will have a “great leader” that runs the company and is almost deified.  

Deception is the foundation of  what they teach people.

They manipulate people through individual and group pressure.

They separate you from people that don’t believe in what you are doing.

It is us versus them.

They suppress anyone that does not go along with the program.

The ask you to just believe.  You don’t have to know how the compensation plan.  It just works.

Any possibility of reporting the scam to your state’s attorney general or FTC? Legal advice?

If you have lost money report them to the FTC, and then to the BBB.  The next step is to look at creating a class action lawsuit against the company.

Overall mental health and recovery and financial recovery?

Many people experience severe depression after they leave an MLM scam. I know a few that have health problems because of their experience. If you have long term depression, you should seek out professional counseling.

I had one person that contacted me that had to stop telling their story to me because it brought back so much anxiety that it affected their health.

Red flags to look for to prevent joining a mlm?

The most important red flag to look for is a focus on recruiting instead of selling products to people that are not in the business opportunity.