How To Spot an MLM Scam

Multi-level-marketing or MLM is method of business where the products of a company are sold directly to consumers through agents or individual sales officers. Such method of selling is also known as direct selling and there are already a number of prominent direct selling organizations that you may have heard of such as Amway, Herbalife, Tupperware, May Kay and others like these.

Aside from selling their products, these agents also recruit more people to join their company as sales agents for the products. Any existing agent or member that successfully manages to recruit a new sales agent, commonly known as ‘downline’, will continuously receive part of any sales generated by that particular downline. This is where the hierarchical earnings come in.

But, MLMs aren’t actually scams, they are legitimate businesses that focus on selling their products to the consumers by way of a non-conventional method. The scams actually lie in schemes that mimic the hierarchical structure of earnings within MLM and create a sort of pseudo-business that tricks people into paying huge amounts of money with the promise of bigger gains, when in actual fact, the returns are next to nothing.

Although these differences can be tricky to spot due to their striking similarity, there are a few key characteristics that will instantly give away the MLM scams, also known as pyramid scams.

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#1 Their Selling Focus

This is the biggest give away when you’re trying to differentiate between an MLM business and a pyramid scheme. MLMs commonly have actual product ranges that you will need to market, which then becomes your main source of income. Adding on to your network is a secondary earning method and functions to build your selling community, rather than being a monetarily driven pursuit. Pyramid schemes, however, are focused on recruiting more people, a clear sign that someone at the top is only interested to make the money for themselves.

#2 Product Quality

Any true MLM company always puts more effort into providing their customers the best products or services, in order to keep their customers coming in for more of such premium quality, despite a slightly higher price. This keeps their business running for the long-term and builds a brand rapport with their customers, which then, indirectly lead to recruitment of more selling agents, who further expand the business. Pyramid scams, on the other hand, offer low-quality products, which acts as a convincing point to get more members into their devious schemes. Such products usually don’t sell well because their ‘selling agents’ are not busy selling the products, instead are more focused on recruitment.

#3 Vague Company Policies

MLMs are actual businesses that work like any other company out there, hence, they have a set of clear rules and policies that they need to adhere to when soliciting people in regards to their products. If it’s an MLM-like pyramid scam, however, there will be no set rules on how you need to be selling the products or any policies that you will need to use as a guideline when promoting the company’s product. That itself is a clear sign that the company isn’t interested in building its brand but is just out for a quick buck.

#4 Near-To-Zero Training

Actual MLM businesses would send their brand new recruits to a full-scale training program, which would give them insight on the actual products, the different ranges there are, some background on the company as well as the founders and methods on how to effectively sell their products, based on tips and tricks by more seasoned direct sellers. The scammy versions have none of that. The moment you sign up and pay a fee, you’d be left to fend for your own and recruit or sell by your own rules.

#5 Pay For Everything

Pyramid schemes always try to milk more money out of their recruits by forcing them to pay for more ‘exclusive’ recruiting packages. They would offer ‘business kits’ full of items you wouldn’t even be using and even ‘product kits’ for each product that they have, despite the product not being a focus. These ‘kits’ are shoved down your throat with the promise of helping you find more buyers and recruit more people, which is most likely not going to happen. Actual MLMs also require paying for a few things but minus the pressure. These would be optional add-ons that members can choose to have, depending on their selling needs.

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MLM scams are a huge issue and may be lying in wait for you in just about any meetup, especially with acquaintances that you have never heard from in a long time. If you have your suspicions about the latest MLM company that you’ve just joined and want to find out if they actually do have that ‘headquarters’ in a remote area on New Mexico, our address lookup would be able to tell you for sure.