Multilevel marketing companies (also known as MLMs, social retail, network marketing, pyramid schemes, or pyramid selling) have become the norm in our society, marketed to the general public as a way to "make money from home." It's a way of selling products through nonsalaried workers, and those workers earn a commission off of the product and by bringing on other people into their downline, however, the majority of commission is not earned from selling the product but rather from recruiting and creating a downline, whose portion of sales are commission to their upline.
We all have either joined an MLM or know someone who's in one. The promises sound so hopeful: moms can stay home with their babies and make a full-time income, women can retire their husbands, pay for homes and vacations, earn free cars and vacations from the company, use that extra money to make payments on things, the possibilities seem endless.
But are there severe prices to pay for joining an MLM, beyond what the public eye can see? Are we being told the truth about what's at stake when you join an MLM and the probability of making the amount you're told you will when you join? Who do MLMs target, and what are the psychological implications of joining one? And are they cults?
The Money
We see it all over social media: people flaunting a lavish lifestyle inside of their high end car that they claim their company paid for, or on luxurious "free" vacations with their companies. They share with us that it's possible for us to have this lifestyle too, all while staying home and working from our phones. But...is that the truth?
First, when someone joins an MLM, they'll be encouraged to call it their "business". You might even see people talking about "support my small business!" A distributor joining an MLM is not a small business. They are 1099 contracted employees selling a product for a massive corporation.
According to the Federal Trade Commission (FTC), approximately 99% of people in MLMs actually lose money. That means only 1% of people in MLMs are making a profit. But why are so many claiming that they're actually making money? Let's dive into this:
To join an MLM, there's a start up cost that can range anywhere from $200 to $6,000 depending on the MLM. MLMs will encourage you to purchase the most expensive package, telling people that it will set them up for success more than a cheaper starter pack will and you'll easily make your money back once you start selling the product. There's a certain percentage you'll make on commission that varies depending on the MLM, but regardless of the MLM, the commission is small compared to the amount of money you'll make recruiting people to join your downline, which is where the real money is in all MLMs. You're also required to purchase a certain amount every single month, depending on what rank you're at, in order to advance rank or keep your current rank. The customers of most MLMs are actually the distributors because they're required to buy product each month. Many distributors are operating at a loss, but because they might not be calculating how much they're spending monthly on purchasing products or buying back into the MLM business, they believe they're making money. We'll get into this in greater detail in the next section, but distributors are also encouraged to falsely advertise on social media how well they're doing in their "business", which leads people to believe that distributors in MLMs must be making money.
The "free" cars seem like an added bonus, but there's something these companies are not being transparent about: once you hit the rank to earn a the car from the MLM company, the company takes out a loan in your name for the newest version of whatever car the company is associated with (Mary Kay = Pink Cadillac, MONAT = White Cadillac, Le-Vel = Lexus, etc). You are required to maintain that rank or advance rank in order for the MLM company to keep making payments on your car. If you drop rank, the company will continue paying for your car for 3 months. If you are unable to make the required rank after 3 months, the car payment is now your responsibility. And we're talking super high payments because the versions of these cars are usually the newest. Advertising these cars as "free" is misleading, deceptive, irresponsible, and false. Ultimately, the distributor is responsible for making payments on the car.
Another common MLM tactic is "earning free vacations." These vacations are not free, and they're usually earned after you've recruited a lot of people and spent a lot of money on the business, meaning that you're just paying for the vacation without knowing you're paying for the vacation. For these vacations, the MLM company usually covers lodging. The distributor is responsible for paying for airfare and their food. Therefore, "free" is, once again, misleading, deceptive, and false.
Also, ever wonder why MLM products are so expensive? It's not because it's high quality. The products are marked up so that the distributor can be paid...and so can the people in their upline.
The Psychological Manipulation
More concerning than the deceptive financial promises is the psychological manipulation that exists within these industries. To understand how MLMs operate and why so many people fall for their tactics, we have to view them from a cult perspective. While they use recruitment tactics, the promise of making a lot of money, and financial exploitation, they also use thought stopping, self-blame, and magical thinking: all tenants of cults.
In MLMs, you're the problem if your "business" is failing. You'll be told you're not working hard enough, attending enough online trainings, working in your "pockets of time" throughout the day, recruiting enough people, etc. Questions and criticisms of the system or leaders is not allowed, and its common for leaders to turn others against you if you speak out. There is no accountability for the leaders in these groups, and because the leaders are usually making the MLM a solid amount of money, these leaders escape consequences for inappropriate, abusive behavior.
When recruiting, leaders tell their downlines to not take "no" for an answer because eventually, people will be wore down and want to join your team. Leaders provide scripts for their downline to send to potential recruits. Leaders encourage their downline to falsely advertise a lavish lifestyle that their MLM company has given them to create a fear among other people of potentially missing out.
Toxic positivity is what makes MLMs thrive. Speaking truthfully about the company or other people within the company is viewed as "negativity", and it is not tolerated. It can lead to suspension or termination of your account. Distributors are encouraged to manifest what they want out of their "business" and make it happen; no negative thinking allowed. Toxic positivity is dangerous because it clouds people's ability to think critically and make logical decisions.
MLM companies control how their distributors behave, the information they receive from the outside, (distributors in MLMs are told to stay away from listening to, reading, or watching videos from individuals within the antiMLM movement), how they think about themselves and their life in and outside the MLM, and manipulate and control their emotions by hosting weekly MLM calls that "hype" up the distributor, as well as yearly conferences that provide an emotional high. According to this, MLM's follow Dr. Steven Hassan's BITE model:
- Behavior Control
- Information Control
- Through Control
- Emotional Control
Because MLM companies hit all 4 categories, they have been psychologically classified as commercial cults. For more detailed information about the BITE model, click here.
Why Does This Matter?
More than anyone, MLMs target moms and women; women who desire to stay home with their children, women who are single moms needing more money, women who desire to be in control of their finances and make more money, women in poverty, women who want to rise to the top and make a name for themselves, women who are vulnerable. MLMs target and prey on vulnerable people.
99% of people lose money in an industry that's promoted to the general public as a way to become financially free. That means 1% of people are profiting off of the backs of the 99% of people who are losing money. The abusive, emotionally and psychologically manipulating behavior that exists within the walls of every MLM affect every facet of that person's life, causing family strife and even divorce in a lot of cases, because distributors are encouraged to cut out anyone in their life who doesn't support what they're doing. If your spouse doesn't support you, he/she has to go.
Before supporting or joining an MLM, I encourage you to do your research, look at the compensation plans, and listen to the voices of people who have left MLMs.
Anyone is susceptible to joining a cult at any time, especially when we're vulnerable. Having the knowledge of what makes an MLM a commercial cult can help us be more aware and less likely to join these schemes, as well as help friends and family get out when they're ready.
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Abi has done extensive research and training on cults, cult-like behavior, and trauma associated with being apart of cults & learning how to deprogram. Our therapists at Root Counseling believe in the importance of walking beside people in their journey, free of judgement, as they learn who they are apart from systems and structures in their lives. If you're interested in scheduling an appointment, you can visit our therapists here.