The Cult Psychology Behind MLMs

The tactics they use to bait and trap enthusiastic young mothers and hopeful freelancers…

Since they were developed in the 1950’s, multi-level marketing schemes have been a controversial, hot-button topic. Anybody with a Facebook or Instagram account has probably felt the effects of MLMs — whether you’ve been pitched a product yourself or watched someone else fall down the rabbit hole.

What exactly is an MLM and how do they work?

MLMs, or multi-level marketing schemes, are businesses — and I use that term loosely — that sell their products through distributors rather than retail or online stores. Popular examples include Mary Kay Cosmetics, Herbalife, Amway, LulaRoe, doTERRA, Scentsy, and Avon — just to name a few.

In most cases, no special training or sales experience is needed to become a distributor. As long as you can pay the initial “investment” fee, MLMs are more than willing to have you.

The real trouble begins once you become a distributor. Not only do you usually have to pay an initial fee to join, but you’ve also got to buy a “starter kit” of products to sell. Depending on the MLM you join, this can run you anywhere from $50 to $5,000.

The idea, of course, is that once you sell all the inventory you’ve bought from the company, you’ll end up making more than you originally spent. Unfortunately, even if you are able to sell all your inventory (which is a challenge unto itself), you still only make a percentage of what you sell — the MLM gets a cut and every distributor in your “upline” does too. Uplines and downlines work like this: you get recruited by somebody who was recruited by somebody who was recruited by somebody — and this goes all the way to the top. Most of the time, distributors don’t make any money by selling products, but by recruiting someone else to join the MLM. The more people you have in your downline, the more potential (and passive) income you get.

There is one major problem with MLMs: you don’t actually make any money. A website, MagnifyMoney.com, surveyed 1,049 multi-level marketing scheme participants — from a variety of MLMs — and found that most people were making less than 70 cents an hour (before deducting business costs)…