PinkLighthouse.com

FALSE.

Mary Kay Inc. claims that their business structure is based on a concept called “dual marketing.”

They define it as separating corporate management from independent contractors. That definition, however, is the basic definition of independent contractor. An independent contractor is not an employee of the company and doesn’t receive any of the benefits of a hired employee. Read more »

Here are some links to sites with additional information about Multi-Level Marketing (MLM).

www.falseprofits.com An expose and analysis of the MLM industry. Pay particular attention to this article, entitled “A Disguised Pyramid Scheme.”

www.mlm-thetruth.com Dr. Jon Taylor’s extensive research on the MLM industry. There is a 5-step evaluation you can do yourself to test that business opportunity you’ve been thinking about.

www.pyramidschemealert.org Lots of information about the deception and harm of multi-level marketing and pyramid schemes. Be sure to read The Ten Lies of MLM.

www.rickross.com The Rick Ross Institute is a nonprofit group that studies destructive cults and controversial groups. There is a huge databaseof articles, court documents, and essays on hundreds of groups.

www.quatloos.com An educational website run by the Financial & Tax Fraud Education Associates, Inc., a non-profit group. Lots of information here and a great forum.

www.vandruff.com “What’s Wrong With Multi Level Marketing.” Recommended reading.

www.ftc.gov The Federal Trade Commission has an entire section dedicated to educating and informing you about business opportunities and MLMs. Be sure to read The Bottom Line About Multilevel Marketing Plans.

MLM stands for Multi-Level Marketing. It is also commonly referred to as Network Marketing, Relationship Marketing, One-on-One Marketing, Face-to-Face Marketing and Dual Marketing.

MLM is a way of selling products or services through distributors. In order to become a representative for the company, you sign an agreement and are also usually required to purchase a “starter kit” which contains training materials and a limited amount of full-size and sample-size product so that you can begin getting orders.

The aspect that distinguishes MLM from other businesses is that you make money not only on the sales of the company’s goods or services, but you are also encouraged to recruit others to join the company as a distributor. You then make commissions on the sales of those you recruit.

Many MLMs come dangerously close to being blatant “pyramid schemes” On a pyramid, most of the sales of products are made to the distributors, not to consumers in general. So really, the distributors are the customers. If a MLM pays commissions for recruiting new representatives, this should be a red flag. State Laws state that a MLM plan should only pay commission for retail sales, not for recruiting.

Even so, in most MLMs, the sales of the product seem to be secondary to recruiting new reps. Why? Because the turnover rate is so high. People sign up as representatives and then change their minds. Or they try it for a few weeks and quit. Without constantly bringing in new recruits, the company would soon be out of business.

The problem for many who join MLMs is they are led to believe that they will have success as so many others have. In reality, the vast majority of representatives not only flounder and quit, but lose money. Serious flaws in the fundamental design of these companies sets people up for failure at a home business, even as the company continues to thrive off of new orders from new distributors.