Multi Level Marketing generally differs from traditional business models. MLM has ‘independent contractors’ that buy the products and sell it to make a profit for the company. They often spend a lot of their own money on products to meet targets necessary to earn commissions. They pay fees to be members of the company and pay for ‘conferences’ and ‘trainings’, again, making money for the company.
It is common to find these MLM companies saying that they are cash rich and debt free. Of course they are, they have very little overheads as they leave the marketing and selling to these ‘independent contractors’. These MLM companies can sell products at an inflated price because it doesn’t matter that it is essentially an unmarketable product on the open market. They know the people caught up in these schemes will buy the products anyway. The product becomes just a way for the reps to earn a higher position in the pyramid.
We are used to seeing poor or average quality products being sold in MLMs. Which is why it can be puzzling to see a traditional business with well known, or even loved, products in an MLM way. Let’s have a look at some examples. Here, I attempt to research what the reasons are behind the MLM decision. Ultimately, this is an opinion piece as I attempt to draw conclusions from the evidence.