Today, I want to share the top 10 reasons that MLM Industry has a bad reputation. Please keep in mind that (1) these are simply my personal opinion, and (2) I am a fan of the MLM Industry. Here they are, in no particular order.
1. Not many people make money
Our industry has a pretty high failure rate. A few get rich, lots of people make $200 to $5k per month and most make nothing. Making money in any selling profession can be tough. If you don’t believe me, study the turnover rate in any profession with 100% commission based pay.
I also realize that most businesses fail. Most entrepreneurs are strapped for cash. Additionally, most people who get involved in network marketing try it out for a couple months and then quit. To build any type of successful business you need a game plan, you must work hard, and you must put in the required time. I’d challenge that no one could build a successful business of any kind in 90 days or less.
One of the biggest issues in our great industry is the false expectations people have. They expect quick and easy money without doing much work. I tell everyone that this is not the lottery, nor is it fast or easy money.
2. The deceptive recruiting practices
This is probably the biggest problem in our industry. There are so many people doing shady things to recruit people. Don’t lie to your prospect. Don’t mislead your prospect. Don’t give them the wrong information. Doing something unethical to take advantage of your prospect will get you nowhere in the long run. Sure, you might sponsor them today. But once they find out you lied to them, they will never trust you again. And there’s a good chance they will grow to hate the industry too. So do the right thing and always be professional!
Deceptive recruiting practices include (1) promising easy or fast money, (2) telling your prospect that all they have to do is get two who get two, (3) posting your opportunity as a job listing, (4) inviting people over to your house to show them the plan without telling them the purpose of the meeting, (5) telling your prospect what you think they want to hear, (6) lying about your income and much more!
3. Most new distributors don’t understand sales, marketing or entrepreneurship
Another reason our industry gets a bad name is because most new distributors have never done anything in the sales, marketing or owned a business before. They have never been paid to produce and work solely on commission. As a result, they don’t have the right skill-set or right mind set when they first join our industry. Unfortunately, most of these folks quit the industry before they get a chance to develop the right mind set and skill set. Anyone can learn these skills, but it does take time.
4. Most compensation plans are designed for the heavy hitters
Most compensation plans in our industry are designed for the heavy hitter, not the part-timer. If the little guy can’t make a decent income by having a small team of distributors and customers, he will quit. Companies need to do a better job restructuring their compensation plan for the little guy. If lots of little guys make money, they will stick around. As a result, there will be more heavy hitters. It’s important that you find a compensation plan that is balanced and fair.
5. It’s easy to quit
Another reason our industry gets a bad name is because it is so easy to quit. Most distributors spend less than $500 to get started with their new business, so they don’t have any skin in the game. This makes it very easy to quit when things don’t go as planned. The average traditional business owner has tens of thousands or hundreds of thousands of dollars invested in their business so they will do everything in their will power to make it work. Not so in network marketing.
6. Some scrupulous distributors lie to their prospects and team members
Every business and every industry has its good apples and bad apples. In the MLM Industry there are a few shady people who do some really bad things. These are distributors who lie and steal from their downline, cheat people out of money, have an affair with someone else’s spouse, etc. One bad apple can ruin it for everyone. However, please keep in mind that most people in our industry are great people who simply want to improve their life.
7. Lots of MLM Companies go defunct
In the business world, companies come and go. Most MLM Companies eventually shut down or go bankrupt or change their business model. I’ve heard thousands of horror stories of people who built a large team of distributors, only to wake up one morning and find out the company went bankrupt and closed down. That’s why it’s so important to team up with the right company. Avoid start-ups at all costs. Try to work with established companies that have been around at least 10 years.
8. The attrition is so high
Attrition is very high in our industry. Probably 50% to 80% of the people who get involved each year will quit. Most of those folks quit within 90 days or less. It’s hard to build a large team with that many people quitting. One of the best ways to lower your attrition rate is to look for quality people, to give people realistic expectations, to train your team, and help your new team members get started right. It also helps to be product focused.
9. Many of the products are way overpriced
Many of the products in our industry are WAY overpriced. If you can get a similar product at Wal-mart for 10% of the price, not many people will keep reordering it from you month after month. Sure, some of our products are unique and competitively priced, but most of the products in our industry are way overpriced. Make sure you team up with a company that has products at a fair price for retail CUSTOMERS, people not involved in the business opportunity. If the products don’t make sense, neither will the business.
10. Social Media and the Internet
I truly believe the internet will one day wipe out the industry for good. I believe this because there is so much negative stuff about our industry online. Some of it is true. Some of it is lies. Unfortunately, it’s hard to distinguish between what is legitimate and what is not. Additionally, you can buy products from former distributors at a highly discounted price on Amazon or eBay. It’s hard to get a retail customer when your prospect can go online and buy products for a cheaper price than you can get them for as a distributor. In addition, so many people are tired of being spammed by network marketers on social media sites.
Final Thoughts
Overall, the MLM Industry does have a bad reputation with a lot of folks. Some of that bad reputation is deserved, but a lot of it is incorrect. If you are currently involved in the network marketing industry, I challenge you to always be a network marketing professional. Remember, that you are an Ambassador to our industry. People will watch what you say and do. So always be professional and do the right thing.
You can’t control what everyone else in our industry does, but you can control what you do! Just do the right thing and you have nothing to worry about.
What are your thoughts? Why do you think the MLM Industry has a bad reputation? Leave a comment below to let me know what you think. I look forward to hearing from you.
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Hi Chuck
It’s refreshing to see an MLM advocate make a brutal assessment of the industry.
I will be honest, I do not like the industry for the reasons you have listed.
What do you make of the many digital MLM companies that seem to pop up every few months?
I think they keep popping up because so many people are actually looking to “get rich quick”. These ads and opportunities appeal to people’s greed.
I own several types of online businesses and all of them took me several YEARS to master. None were fast or easy.
My traditional businesses that I own were the exact same thing, at least several years to get profitable and really figure things out.
Great thoughts and points. I would add one thought. Most people in North America have been programmed to go to school and get a good job making them employees for life. Can we see the problem with that and the MLM model? Most people can’t think of making other sources of income including their employee income. To be financial independent in the real world you have to think of different sources of income whether its a part time job, business or investment. MLM, Network Marketing, and Direct Sales is a great way to do that BUT it seems that people who are more sales minded and don’t have a hate on the profession or think with a business mind do very well and get the model. The numbers don’t lie either in North America with this fact. And lastly, I really believe the training for most companies are horrible and don’t teach you the skills and mind set needed. Training is everything along with good people, business, and sales skills. People hate sales so that will back up the stats to why most people fail at this business. Its an 81 Billion dollar industry so someone is doing it right. Just my thoughts.
I agree that most people have been programmed to be employees. There is nothing wrong with that, but it can make it hard to think outside the box.
One of the many challenges I have faced in advertising AmeriPlan has been the negativity and stigmas that most MLM companies face. When I try to share helpful work from home tips or advertise Network Marketing on Reddit, people treat me like I am the devil.
A lot of people immediately assume that if you have to pay to work its a scam. What they fail to understand is, what business opportunity can you do that doesn’t require startup fees? I think about jobs like Insurance Agents or Home Realtors…sure they can be part of a corporation but the agency or selling a home is ultimately up to them, they will most likely spend money out of pocket for advertising materials to get their insurance or their houses sold.
Another thing is that some people who don’t have what it takes to be successful would rather look for someone or something to blame rather then placing faults on their own failures. That is just the society that we live in today. I would love to work with people to change the perspective and way people think when it comes to genuine MLM companies like AmeriPlan who actually have great products that do help people out. It’s a shame that someone who can’t afford to go to the doctor would pass up on an opportunity to save money with AmeriPlan due to the negativity that surrounds the company.
A lot of folks advertise our opportunities as a work from home job. I personally think that should be illegal, since this is a business, not a job.
Any legitimate business does have some type of sign up cost.
Good insight, thanks for the reply!
I agree that the cost of products for many MLM companies is a major turn off. The jewelry, for example, with the exception of perhaps Silpada, is usually stuff that you could get at a department store for much less. Return policies are difficult: tracking down the representative, or mailing the broken or defective back to the company can be burdensome, and usually it is for an exchange, not a refund. The food MLMs (Tastefully Simple, for one), are better. Those are consumable goods that I have usually been fortunate enough to get to sample before purchasing. But even then, the costs of those foods are usually higher than I would pay even at local specialty food boutiques. I have to really like those consultants.
The food companies are good. While a lot of products in our industry are more expensive that what you might find in the market place, others aren’t. You do have to shop around. And some MLM Products are very unique or high quality, so the price is justified.
I guess what it comes down to is if you are going to be involved in MLM you have to do your research. Knowing the company, their integrity, policies, training practices, and reputation are very important. I know of several people who are involved in MLM companies and are very satisfied with what they get out of it. I also know a lot of people who have had bad experiences. Research, research, research. Thank you, chuckholmes for providing us with a lot of information!
Yes, you should do your homework before you join any type of business opportunity. Do your due diligence and educate yourself.
It is sad that all of MLM gets a bad reputation because of some. The fact is: that is how the world is. No matter the business, if one person does something deceptive or wrong, many innocent parties pay the penalty.
MLM has in its favor people like yourself that are using the internet to give a better reputation. I commend you for that.
I must admit that when I am approached over any MLM, I am highly reluctant. Why? Because I have been deceived and manipulated by bad practices of some. I know of some individuals who have done quite well in their MLM networks.
#9 on your list seems a major factor for many. If the companies could find ways to make products more inexpensive, I believe it would help. A good example is Avon; sure, representatives don’t make as much profit on one sale, but personally, I would rather make less profits and gain more sales.
Hopefully MLM companies will take a hard look at this post and make changes accordingly.
The price point for many products is a big turn off, especially in this bad economy. No one spends $40 for shampoo or $80 for a multi-vitamin. You need something of good quality that appeals to the masses if you want to make sales.