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KellyB | KellyB

Avon, Herbalife, Amway - multi level marketing success or a pyramidal scheme scam?

Oct 29th 2015 at 1:44 AM

It is a fact that not a lot of people inside, let alone outside the industry are fully aware of the meaning behind the term ‘multilevel marketing’. It may also be referred to as network marketing or direct selling, however a lot of controversy stands behind it, because businesses which implement this strategy function in a so-called pyramidal scheme; and this model is a frequent subject of criticism and lawsuits.

Companies such as Avon, Herbalife and Amway are known to operate in this manner, but what is even more curious is how they deny using this strategy, even though it is quite transparent the moment you sit on the sidelines and observe them. Naturally, they’re protecting their status, community and market position, but let’s delve deeper to see why they opt to deny things so vigorously in the first place.

We’ll begin by clarifying what a pyramid scheme implies. Emphasis is put on recruitment of others, but at a high initial entry cost, which supplies newcomers with a marketing kit and first products. This is what gets people hooked, because they get a sense of progression – new beginnings, new relationships and new goals which are equally shared amongst the members.

Salesmanship is not of the essence here, but garnering more followers which will play the role of suppliers, recruiters and primarily consumers. It is unfortunately based a lot on exploitation of personal relationships and human resources as well as often exaggerated schemes of compensation for recruiting new targets. So, the more fresh meat you enlist, the higher you rise in the hierarchy, simple as that.

What is even more fascinating are the techniques used to enhance the enthusiasm, devotion and zeal of such company’s members. The behavioral model is somewhat uniformed and suited for particular profiles of people that makes them have a cult-like feel. For instance, on Herbalife’s promotional ceremonies and seminars, all of the individual reactions, praises, compliments, speeches and thoughts are somehow the same; the entire collective behaves similarly, as if by default.

The appealing thing behind multilevel marketing is that starting requires little training, you can work from home, be your own boss and choose whether you want to do this full-time, or part-time. There is no pressure, it’s entirely up to you. The entire journey usually starts by recruiting other family members and friends to become sellers and consumers, which already augments your and their commissions and provides you all with a nice compensation, too.

Some of the largest MLM companies are household names and generate billions of dollars on a yearly basis. On the other hand, this business model is often considered illegal and unsustainable in the US, Canada and many countries in Europe and South America. So when is this strategy legitimate and when is it just an illegal pyramidal scheme, where the top makes most of the money and the bottom is exploited? Some of the harshest critics say that there is no difference, because the industry keeps all of its secrets to itself, nevertheless.

 

However, the reason why Herbalife, Avon or Amway can make things seem legitimate is because they have a tangible product – supplements, shakes, candy bars, lotions, potions, pills and whatnots. Whether you like it, or not, they are also a legal business because they do not use deceptive practices, to some extent. Scientifically their products have been analyzed and brought to question, and in some countries they are even banned, but this isn’t enough to completely bring them down, regardless of their cult-like mentality and obscure methods of sale.

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