How do Multi-Level Marketing (MLM) and Direct Sales companies persuade so many people to join?
I will explain which 6 Principles of Persuasion were used to lure me into signing up… twice! …and what you can do to recognize the signs of a predatory company.
My MLM Story
My experience with Multi-Level Marketing started when I was a naïve 19-year-old college student. The woman who signed me up was a friend of one of my fellow students, and she enthusiastically invited me to be part of her team.
I didn’t realize that she had zeroed into my “pain points”:
- A busy, stressed college student
- with an introverted personality,
- living far from home,
- few friends, and
- no extra spending money.
Promises of Success
Over a 2-day period, this woman used a variety of persuasion methods. Her subliminal influencing tactics eventually made me feel convinced that joining her Multi-Level Marketing team was a great idea.
She said I could do it in my spare time.
She assured me that I would earn endless residual income.
She showed me the gifts and prizes that were possible as I went “up the ladder” in the company.
She talked about how many new friends I would make, and how good it would feel to have more control.
And best of all, she promised to be there to support me every step of the way.
The opportunity was irresistible. That weekend, I joined her at a regional convention. We were bombarded with a bevy of confident, successful, exuberant women wearing expensive designer clothes and shiny jewelry. The speakers gave powerful presentations and explained the benefits of their products. We were shown charts and graphs filled with data of the company’s huge sales numbers and our earnings potential. The highest earners were paraded across stage with great fanfare and received over-sized bonus checks while the audience clapped and cheered.
“Wow, I would love to be on that stage someday,” I thought.
An Irresistible Offer
By the end of the evening, the top-level leaders presented us with a special offer: If we signed up that night, the signup fee would be reduced by half.
Caught up in the emotional excitement and a strong desire to be accepted and not miss this opportunity, the 3 of us who had come as guests all agreed to write a check for $97. You are your own boss now, we were told. The journey to financial freedom and independence has now begun… or so they promised.
As I left the event with a big case of product samples, I felt convinced that my success was inevitable. These women believed in me. I have what it takes to make it as a sales rep.
But in reality, I had just joined the very, very bottom of a business that preys on its new recruits. If you look at the picture below, I was one of the individuals whose sales would benefit every level above me. The only way to recoup my initial investment (and the hundreds of dollars I would be pressured into spending on additional inventory) was to sign up more people in my downline.
Check out a detailed review of the 10 kinds of business models in What’s the Difference Between Brick-and-Mortar, Franchise, Direct Sales, and MLM?
Within a few days, reality hit me. Instead of selling itself, I discovered that the Health and Beauty market was over-saturated. Most of my college friends already had access to these products through their mothers, aunts, or friends’ mothers.
To my horror, I also discovered that I was allergic to some of the “all-natural” creams and other products. My skin started to develop a rash. During demonstrations, I felt guilty for promoting products that didn’t have the greatest quality.
It also became clear that my personality was not a good fit for the constant face-to-face selling process that MLM companies require. If you don’t enjoy talking to a large number of people, presenting products enthusiastically, encouraging up-sells (the purchase of additional items), and closing the sale day after day, then you will not get much support from your MLM team leader.
For more insights about why it may be hard for you to sell, I recommend taking the StrengthsFinder assessment. Read about it here:
My upline (the woman who recruited me) told me to read from a script. This felt very mechanical and inauthentic to me. The company didn’t give me adequate training on how to sell, how to track my sales and expenses, what a profit margin is, or why reinvesting all my revenues (instead of budgeting) would come back to bite me at tax time.
Nobody warned me that to be a successful MLM representative, you must have SALES skills. These abilities don’t come naturally to everyone; they certainly were not easy for me. But instead of questioning the decision to join, I felt pressured to double down by purchasing more products and initiating more sales conversations.
I hated pressuring my friends to join my parties.
I hated talking to strangers and turning every conversation into a discussion about the MLM products.
I hated handing out samples at every opportunity.
I hated the constant follow-up to ask whether a prospect was going to buy or not.
The constant grind of selling products that I couldn’t even wear myself (due to the allergic reaction) was torture. But instead of giving me objective advice, my upline did not want to hear about it.
“Just keep going. You’re doing great!”
“Don’t worry; if you keep buying the products and showing them to people, everything will be fine.”
“Are you telling your friends about the opportunity? That’s the way you’ll move up the ladder!”
To add insult to injury, once I started running into problems, my upline stopped returning my calls. I had no way to get a hold of her.
So I soldiered on, holding onto the hope that my constant spending would eventually result in the glorious success that had been promised. Instead of realizing my mistake and cutting my losses, I doubled down in the scheme and convinced myself that eventually, it would work out… regardless of the warning signs all around me.
Although I did manage to make a few sales (and even achieved Top Seller of the Month in our region), it didn’t last. After just 8 months as an MLM sales rep, I finally called it quits.
But “failure” caused me to doubt myself and my abilities. For many years, I wondered…
Where did things go wrong?
Why was I unable to succeed as an MLM sales rep?
If you take a look at social media, you will see the glitz and glamour that Multi-Level Marketing companies present to the world. They love to portray extremely successful MLM stars with large cash bonuses as the standard everyone hopes to become. Maybe you received a message from a long-lost friend, inviting you to coffee… so they could tell you all about how their new company has changed their lives.
The truth is that a majority of people who sign up with this type of business model will barely break even. (Check out these Income Disclosures Statements for more detailed information). Most us even will go into debt or spend hard-earned savings in an attempt to make it big. (A Vice video about LuLaRoe’s disastrous downfall explains it well).
When I tried to get answers on why my MLM attempts weren’t working, I was told that the failure was all my fault.
The sneaky message that is built into the fabric of every MLM company is this:
If you fail, it’s because you didn’t try hard enough.
Yes, it’s true that I didn’t do everything needed to promote overpriced products.
It’s true that I didn’t talk to every single person in my circle of friends about the “amazing opportunity” to join the company.
But the blanket statement that my lack of success in an MLM company is 100% due to my inabilities… is incorrect. As I later learned, the MLM model is designed to continuously recruit new people in a non-stop cycle of buying and recruiting. Although not considered illegal (yet… ongoing lawsuits are a constant plague), the Ponzi/pyramid scheme cannot be sustained indefinitely.
At some point, every MLM company will crash and burn.
All of this changed for me after I discovered the classic work of psychologist Robert Cialdini called Influence: The Psychology of Persuasion.
In it, Dr. Cialdini provides some scientific evidence of why we make decisions, and what makes us susceptible to being duped. Although his stories are from the 1960’s and 1970’s, I love the way he demonstrates the reasons we are convinced to do things.
He shares 6 principles of persuasion:
The desire to give when something is received
In my MLM experience, the person who signed me up was very generous in the beginning. The free gifts she gave and the time she spent supporting me were, unfortunately, part of the scheme to sign me up.
The desire to remain consistent with what you’ve already agreed to do
When I signed up as a rep, the whirlwind onboarding process was quick and effective at getting me deeply entrenched in their verbiage, decision-making, and cultural mindset. One of the things that most impresses me about MLMs is their incredible ability to make sure reps are pulled into the dream as fast as possible. After a rep joins, it is very hard for them to leave.
3. Social Proof
The desire to copy what others do
When we see our peers making a decision that brings a positive outcome, we are more likely to follow their lead. This principle also relies on our need to be accepted (the fear of Separation). The group that first invited me into their circle as an MLM rep were supportive and embracing… until I decided to leave. After that, I never heard from them again.
The desire to act the same as those who are similar to you
We also tend to be around people who share our values, interests, and cultural background. I quickly realized that the MLM rep who persuaded me to join was using our shared experiences as a way to create artificial trust; but in reality, we had very little in common.
The desire to trust “experts”
Every MLM uses this principle, and in both of the ones I joined there were several experts who were revered. In some cases, the hero worship can actually take on a cult-like feel.
The desire to have something that is in limited quantity
Why did I decide to dip into savings and order hundreds of dollars’ worth of products? It’s because my upline convinced me that it was a once-in-a-lifetime deal. The best products would be sold fast. Time is running out!
We are all susceptible to the Fear of Missing Out, and we often believe that a deal that sounds too good to be true will actually turn out in our favor, despite evidence to the contrary. MLMs leverage this human need by convincing reps to buy lots of products, even if they can’t be sold to end consumers.
Here is a summary of the principles outlined in Dr. Cialdini’s book:
In a future post, I will explain each of these principles as they relate to the tactics used by MLM and Direct Sales companies.
Want to learn how to design a successful Niche Marketing Strategy for your business? Check out my services.
Grace LaConte is a Strategic Niche Marketing Expert who helps healthcare practice owners to develop a high-profit specialization in a crowded market. Using her experience as a Risk Officer and Marketing Director for hospitals and IT services, Grace shares a refreshingly honest approach to uncover hidden risks and opportunities. Learn more at laconteconsulting.com, or connect with her on Twitter @lacontestrategy.