How MLM Companies Are Pretending To Be Startups

0
152
MLM Start-Up
[Image via MyFrugalBusiness.com]

The MLM is the new pyramid scheme, and they’re getting tricky. This stands for Multi-Level Marketing, and it’s one of the most common types of business you see these days. In fact, they are so common that we can bet you know something involved in one of the biggest MLM companies out there.

These MLM companies love to prey on people like the standard housewife who wants to make her own money. They love to go after the college kid trying to make extra cash. Heck, they want to go after the older guy who is tired of dealing with “The Man” and wants to be his own boss.

In fact, the “be your own boss” thing is a pretty common selling point among MLM companies. However, they are all giant pyramid schemes. Some try to get ahead of this by saying they are not in their company literature. Oh no, they are. They just don’t want you to think that.

Yet many do not know an MLM right off. They have been doing a great job of changing up some business concepts that disguise their inner-BS. The big place to see this is in newer companies, however.

If you’re currently looking for work, you might have come across something fishy. Of course, there’s nothing unusual about bogus job postings. They’ve been around forever, yet in areas where startups are just now starting to boom, pyramid schemes are disguising themselves as startups.

 

Pyramid Schemes & MLM Companies

Pyramid Scheme Exposed
[Image via CNBC]
While most people are familiar with the term “pyramid scheme,” multi-level marketing doesn’t have the same infamy. Well, at least until a few years ago.

John Oliver, the host of HBO’s Last Week Tonight, aired a deep dive into the practice in late 2016. No doubt that for many of his younger viewers, this managed to shed new light on a previously unknown subject.

Among examples of modern-day MLM’s, he calls attention to Mary Kay, Rodan + Fields, Herbalife, and Amway. People do not like to relate them to the modern Pyramid Scheme. However, not only are they huge MLMs, they are among the biggest in the United States today.

“A distinction without a difference.”

These companies all bear two hallmark characteristics of pyramid schemes, despite their distinction as MLM’s. The giveaways lie within the sales model.

Oliver gives us a clear explanation:

“Generally, distributors have two main ways to make money. Sell the product itself… and earn money on those sales, and–and this is key–recruit other people into the company and get money based on their sales and the sales of people they recruit in turn.” 

The similarities are so obvious that one critic calls the difference between MLM’s and pyramid schemes “a distinction without a difference.”

It seems that the main problem with all of this is that, quite frankly, people are being fed lies and then believing the liars. While we firmly believe that a person should make better judgment calls for themselves, it can be hard to do. However, we can say that if something seems too good to be true, it often is.

Regardless of what these MLM companies tell you, they are a pyramid scheme. Beyond this, you have a problem with how they are defined within certain governmental structures. That included the U.S. Federal Trade Commission!

 

The FTC Says Pyramid Schemes And MLM’s Are Different. They’re Not

Multi-Level Marketing
[Image via Pinterest]
The U.S. Federal Trade Commission defined the difference in the 1970s through two big cases. These cases were meant to, clearly, help people navigate the waters better between the MLM companies and known Pyramid Schemes. The problem? They were not exactly terrific at doing this.

First, They Defined The Pyramid Scheme:

In 1972, the FTC invented the definition in a case against Koscot Interplanetary, a door-to-door cosmetics company. The so-called “Koscot definition” says a company is a pyramid scheme when:

  1. The company charges participants money for the right to sell a product.
  2. The company offers rewards for recruiting new participants which are unrelated to product sales.

The opinion called Koscot’s marketing plan “unfair and unlawful.” It goes on to call Koscot “by its very nature immoral, unethical, oppressive, unscrupulous, and exploitative.” You can read about the case in the FTC’s archives, here.

Then, They Defined The MLM: 

The FTC decided in a case against Amway Corp. (one of the examples from John Oliver’s list) that Amway was a legitimate MLM company, not a pyramid scheme.

Their primary justification was that Amway didn’t charge participants money for the right to sell their products. Instead, they “only required distributors to buy a relatively inexpensive sales kit.”

This hardly makes a difference. The kit is still a monetary charge that you must pay for the right to sell the product. MLM’s will even tell you that themselves. As Mary Kay puts it, it’s the privilege of starting your business for just $85!

The FTC’s logic is tantamount to arguing that because it’s currently raining outside, it is therefore not raining outside. It fundamentally transcends basic reasoning.

Nevertheless, that’s what it comes down to. A pyramid scheme requires a “buy-in” and offers rewards for recruiting new participants. So does an MLM. The only thing that both the FTC and critics agree on is that pyramid schemes are illegal because they are, by their very nature, doomed to fail.

 

Why MLMs Are Disguising Themselves As Startups

Start-Ups Image
[Image via communalbusiness.net]
Thanks to social media, MLM awareness is generally high. However, for the MLM owner or promoter, this awareness is a serious problem. It doesn’t matter if the MLM is legal if they can’t recruit anyone, so they’ve adopted new strategies of deception.

The old face of the MLM companies has grown so infamous that it’s achieved meme status. We feel this is the ultimate sign that the cat’s out of the bag. That means modern MLM companies need a disguise to avoid detection. Its target talent pool (very often people under 25) has learned how to spot them. 

Why Startups?

What better place to lure in young recruits than a company famous for hiring young people? To answer this question, let’s take stock of what startups are known for.

Stereotypical startups are run by young entrepreneurs, usually people in their 20’s. They’re popular choices for college grads with little experience. Most importantly, they attract applicants who are already drawn to the entrepreneurial spirit startups love to invoke.

These are people are bound to respond well when told they can “be their own manager.” They also love when they are told that they can “think outside the box,” or that they’ll get to work in a fun, open-concept offices with fancy modern architecture and lots of amenities.

Just as the angler fish dangles its blue light in front of its invisible jaws, so does the MLM lure ambitious kids into its maw. They love using promises of high salaries, tons of commissions, and a competitive starting salary.

However, most of this is rare to see. There are some who excel in this field and end up making great money, you may even know of someone who did this. Yet the problem with it is that it is incredibly rare to see.

Many see the success of others and thus assume they can also achieve it. Yet like with anything in life, it’s not as easy to get here as it appears. It seems like it could be because others did it, right? Thus, if others could…why can’t you too? This is a lure to get a fish to grab the bait of the MLM.

It is not worth latching onto, but others do not figure this out until it’s too late.

 

How MLM’s Make Themselves Look Like Startups

 

Modern MLM companies can pass as a startup by making adjustments in its voice, branding, and sales models. They do this by trying to stand out, especially to younger people, with things that catch their eye. It may be subtle to some but to others, it’s downright pandering!

We were able to find a few businesses that actually did this. We found what they did to be clear pandering or desperation to connect to the young people of the world.

Here are a few ways MLM companies are making adjustments in order to catch a new wave of unsuspecting people:

They Choose Trendy, Quirky Names

MLM Logo 1
[Image via 1stClassMillennial.com]
In Southern California, a few companies have popped up whose names show where MLM’s are getting their inspiration. Their general strategy borrows from branding trends that have emerged over the last ten years.

1st Class Millennial, for example, uses the numerical “1” instead of the word “First.” This is an attempt to mirror how people abbreviate when they text. “Millennial” serves a similar purpose, albeit with an extremely on-the-nose approach.

By doing this, they are attempting to connect to a certain audience. We’re pretty sure you know which one. The concept with this is that it stands out to the average young person too. “A 1 where First should be? That’s not normal,” one may ponder to themselves. Yet that is the entire idea.

 

They Have Modern Looks

MLM Modern Style Website
 [Image via truevisionenterprisesinc.com]
Another company, True Vision Enterprises, avoids using a trendy name. Instead, they put their eggs into the design basket and establish trust by presenting a very modern-looking website.

Large banner images and scrolling animations are trends made popular by big tech companies like Apple and Google during the early 2010s and are now easy to reproduce thanks to advances in DIY website kits.

 

Their Websites Are Just Photos Of People Under 25 Having Fun

MLM Photo of Young People
 [Image via sacramentomarketinginc.com]
For this one, I just have to include Sacramento Marketing, because I feel like they’re not even trying. They don’t just flood their website with these photos. They have a 50 inch TV in their 10×10 foot lobby which loops constant footage of employees at bowling parties, ropes courses, and leadership conferences.

I visited because I just had to know what their interview process was like.

In a nutshell, I had a five-minute interview with a guy with bloodshot eyes who could not for the life of him stop sniffing. Apparently, I made a phenomenal impression. After only five minutes, he informed me I passed the first round and qualified for the second, which would be taking place in 5 minutes.

What a coincidence!

The second round was a group interview where I sat at a desk with one other candidate, who seemed just as confused as I was. Our new interviewer never told us her name and asked us both “how are you?” This happened no fewer than four times in the course of fewer than ten 10 minutes.

When the interview concluded, they had us leave through the back door. They brought in the next candidate before I’d even reached the doorknob.

 

How MLM Business Models Have Evolved to Avoid Detection

Pyramid Scheme Spotting
[Image via YouTube-TEDx]
Modern MLM companies have discovered that they can hide by simply selling other companies’ products instead of their own. When they’re dangling brands like AT&T, Facebook, and Google in front of you, they piggyback off the credibility of those brands.

What companies like 1st Class Millennial, Sacramento Marketing, and True Vision Enterprises do is set up small offices in towns all over the country so that local teams can recruit sales reps to go into big box stores like Costco and Sam’s Club to sell their client’s stuff.

You go in expecting to work in their office, only to discover that before you can become a manager, you have to sell AT&T subscriptions or Google Home devices until you hit a certain profit threshold.

 

They Lie About What The Job Opening is For

Often, the job postings will explicitly describe these sales rep roles as “Marketing Manager.” Labels like that are what take you from misleading to downright fraud.

Of course, as Sacramento Marketing would put it, the reason it’s not fraud is that they are looking for marketing managers. You’re just required to start as a sales rep first. They ultimately want you to take over your own district, of course.

It’s just company policy that everybody starts at the bottom so they can learn how the business works from the ground up!

 

They Make Every Manager Open A New Office Under A New Name

Now, we can see the full picture of their parasitic reproduction process. The parent office recruits sales reps, and eventually, one of them sticks around long enough to be promoted to a manager role. When that happens, they leave the parent office and start their own in a new town.

This next part is vital: the new office starts under a different name than the parent office. 

As a result, these branches of the same company give the impression that they’re organic startups. 

1st Class Millennial, for example, started as the parent branch in D.C. named Blue Millennial. Later, its first subsidiary budded off and became Purple Millennial, based in New Jersey.

It’s ironic, too, that they find these logos “youthful,” because they’re just ripoffs of an old George W. Bush bumper sticker. It makes me wonder what boomer thought this would be a good idea.

It’s also impossible to trace who the real parent company is.

Sacramento Marketing, for example, uses the exact same check-in and application documents as True Vision Enterprises. When asked why that’s the case, they declined to give me an answer.

 

This Trend Is Likely To Continue, So Be On The Lookout

MLM Chart
[Image via Technoloader]
Luckily, the iterations I’ve discovered in my local region of Southern California don’t do much to disguise the facts of their business besides, you know, who’s actually calling the shots.

The tops of these pyramids are invisible, and by rebranding each new branch as a separate business, these pyramid schemes effectively disguise their pyramid shape as a linear one. They’re not building a downline, they’re just expanding.

Luckily, increased MLM awareness has led to increased pressure against their practices. If the future’s kind to us, we may see this translate into social or political pressure against the FTC to reevaluate its attitudes regarding MLM legitimacy.

After all, although these companies don’t require a financial buy-in, they do cost their recruits quite a lot. Their interviews always require business professional attire, which candidates may not already have. They demand your time as an entry-level sales rep, which is not a guaranteed role.

My interviewer at Sacramento marketing straight up confessed that if they don’t think someone’s going to make manager, they fire them after four months. Thus there’s no option to simply earn your wage and do your job well. Finally, they cost you the time that you could be spending looking for legitimate employment with a different company somewhere.

If you do come across a business you think may be operating illegitimately, you should always feel encouraged to report them to the job board’s moderators.

It’s anonymous and it doesn’t hurt your chances with future employment. Plus, job boards depend on user feedback to help them identify fraudulent posters.

Otherwise, stay vigilant, and remember that an MLM will do more damage to your career in the long run than the time spent waiting as you search for an actual job.

LEAVE A REPLY

Please enter your comment!
Please enter your name here