Many organizations and individuals have very strong opinions about the direct selling industry or multi-level marketing (MLM) companies. Unfortunately, many of these opinions are based on common misconceptions or misunderstandings.
So what is multi-level marketing? Simply put, it’s when participants sell goods or services on behalf of a company and receive a commission based on their sales and the sales of other participants they enroll. It’s a legal marketing strategy, not an illegal pyramid scheme or scam.
Multi-level marketing is a legitimate, safe, and often beneficial form of doing business, both for the company and participant. The direct selling industry is successful and growing, and many companies—such as USANA Health Sciences, Coway, Tupperware, and Vorwerk—are making positive contributions through research and development, sustainability initiatives, and market research.
These innovative and ground-breaking advances display a company’s trust in what they do and their dedication to leadership and communication. When it comes to developing trustworthy products, USANA Health Sciences leads the way with their global team of world-class scientists and researchers. Science has been at the heart of USANA since the very beginning—over 30 years ago when their founder began to understand the benefits of cellular nutrition.
For many people, joining a growing and successful direct selling company is a relatively low-risk way to supplement their income through extra effort, salesmanship, and networking. But before you sign up, it’s wise to do plenty of research. Take a look at the differences between a legitimate MLM company and an illegal scheme, including positive signs to pursue and red flags to avoid.
Signs of a Legitimate Direct Selling Company
Legitimate direct selling or MLM companies use a legal marketing strategy to sell competitive, high-quality products and offer a supplemental income to those who participate.
Authentic Company Behavior
Any legal company is interested in customer service, consumer demand, public relations, and market research. Management communicates well with the company’s employees, participants, and customers. Publicly traded companies often fit these attributes.
Set Their Participants Up for Success
Good MLMs want their participants to succeed and allow them to join and sell products easily and with low start-up costs. They don’t encourage distributors to keep a large stock of inventory and they have refund and buyback programs to reduce the risk of financial loss.
They Trust What They Sell
A legitimate direct selling company is successful only by selling quality products or services. They invest a lot of money and effort into developing new products so they can confidently offer things their customers will enjoy. They compensate their distributors for selling these products, rather than for recruiting others.
Realistic Product and Income Claims
An MLM worth looking at will not make wildly exaggerated claims about its products or the financial benefits of joining. Their product claims will comply with regional laws and often be backed by research or citation. When talking about the possibility of extra income, they will be honest and transparent about the amount of work and time required to be successful.
A company that behaves honestly and treats its customers well will typically have a good reputation. They will have won industry awards or have partnerships with academic institutions and other businesses. Likewise, their customer reviews and rating with the Better Business Bureau should be favorable at the very least.
Warning Signs of an Illegal Pyramid Scheme
The primary purpose of a pyramid scheme or scam is not to sell products or deal openly and honestly with the public, but to defraud and take advantage.
Odd and Concerning Company Behavior
It may be hard to tell at first, but illegitimate businesses are typically very disorganized and unconcerned with proper communication. They don’t earn money by operating within the normal limits of a business, and they won’t commit time or effort to developing good management, leadership, customer service, or research and development.
Set Up Participants for Failure
An illegitimate direct selling company or MLM is not concerned with the long-term success of their participants. They will require high fees to join, continue participating, or for trainings. These companies will pressure their sellers into buying and stocking large amounts of product and offer limited to no form of refund or buyback.
Promising the Moon
Any scam or illegal business will promise anything to hook potential customers or participants. Their products are touted as “life-changing” or “miracle cures” without any research or evidence to back up their claims. And they’ll often promise extraordinary wealth with minimal effort or skill.
Trust Only in Recruitment
An illegal pyramid scheme has no reason to research, develop, and sell high-quality products or services—that’s an expense only long-term legitimate companies will accept and invest in. Instead, they’ll pressure their distributors to grow the business primarily through recruitment or enrollment and will provide financial compensation for doing only that.
Do the Research
Many energetic and outgoing people enjoy the benefits of joining a direct selling company or MLM business. It allows them more time and freedom to follow their goals, learn new skills, and network with like-minded individuals—all while earning a modest supplemental income.
Social media stories, documentaries, and news articles can sometimes be sensationalized or misleading to attract extra attention. And it can be hard to tell fact from fiction. If you’ve ever considered joining a direct selling company, use this information to conduct your own research and make a decision that is right for you.