Social media has not only given people platforms to connect with family and friends more regularly, but it’s also opened up more opportunities for entrepreneurs to build their networks.
Unfortunately, networking has also given rise to multi-marketing scams. At this point, you may have already heard about it happening to someone you know, or you’ve been contacted by someone with an opportunity that made you speculate whether it was legit.
Before you can protect yourself from marketing scams and other fraudulent ventures, you need to know what they are and how they work.
What is Multi-level Marketing and How Does it Work?
Multi-level marketing (MLM) is often referred to as direct sales or network marketing. Multi-level marketing has been around for decades.
It’s important to mention that there are legitimate MLMs; they’re not all scams. The types of MLM that are illegal are called pyramid schemes. The MLM strategy involves selling products by word-of-mouth or networking. Here are some red flags to watch out for if you suspect that the business opportunity presented to you may be a scam.
Warning Signs a Business is an MLM Scheme
1. No product or service to sell
Legitimate MLMs have a product or service to sell. If there isn’t, then the chances are that the MLM’s business model is to recruit people. This is a red flag that the MLM is a pyramiding scheme that makes its money from recruiting people who pay “entry” or “membership” fees.
2. Unrealistic and exaggerated product claims
Legitimate businesses are built on the foundation of quality products. Be cautious if the MLM makes outlandish claims about their product’s performance or results. Remember, if the products’ advertising is deceptive, the MLM is already engaging in illegal practices.
3. High-pressure to recruit for your sales network
If it were a legitimate MLM, selling the product should be enough for you to earn. A real MLM shouldn’t leave you with no choice but to harass your family and friends to join your team.
4. Claims that stocking up on inventory will fast-track earnings
If the MLM tells you that purchasing more inventory and stockpiling them is the way to corner the market and secure your earning potential, it’s a scam. This tactic tells you that the so-called MLM makes the bulk of its money from its people purchasing and stockpiling inventory. Also, successful MLMs shouldn’t be asking you to purchase inventory in the first place.
5. Deceptive practices to lure recruits
Many MLM scams are disguised as job opportunities. When there are so many desperate for work, many fall for the pitch that the opportunity is not just a job but the chance to become your own boss.
Another sign that the MLM is a scam is if the training includes how to pitch the business for others to join. Some of these recruitment tactics may be to treat your family and friends to fancy dinners where you can casually but strategically boast about your earnings.
Trust your gut. If you have a bad feeling about an MLM, you shouldn’t continue with the program – potentially a scam or not. I’d love the opportunity to talk to you more about how to spot MLM scams. Let’s talk more about business opportunities to look out for in 2021. Contact us today!