Why multi-level marketing works for some and not others

Posted on 8 February 2018 at 8:20pm

JEFFERSON CITY - There’s a social media trend blanketing everyone's Facebook feed - women calling themselves “Boss Babe,” “Mom-preneur,” or selling their “side hustle.” There are companies galore - Rodan and Fields, It Works, Lip Sense - the list goes on. Multi-level marketing seems to be everywhere.

The Better Business Bureau defines multi-level marketing as a company that encourages distributors to build their own sales force by recruiting. Distributors then earn a percentage of the sales from their sales force. If it’s reputable, a multi-level marketing set up can be a great secondary income; if it’s not - it could be a pyramid scheme.

Erin Clark, a Jefferson City resident who quit her corporate job five years ago to start an It Works business, said the business has "tons of moms."

"It’s a ton of women," she said. "What a cool way to make an extra income with your kids.”

Clark said the freedom that comes from running her own business was a really attractive quality. Her husband, Aaron Clark, said he was supportive when she started her business, but he had no plans of joining her until he saw how successful she’d become.

Aaron Clark stepped away from his job as an undercover police officer for the Kansas City Police Department once he saw the success.

“I saw that we didn’t really have to have our full-time jobs anymore,” he said.

The Clarks had some years of success with It Works, but their business flat-lined.

“It was no longer growing even though we were working harder,” Erin Clark said.

After dabbling in a few other multi-level marketing companies, the Clarks have transitioned out of that business model.

Erin Clark said, “It wasn’t ever the product that’s the problem. For people like us, this is what we do for a living so we have to be able to build a sustainable income on product sales, not on your team of people religiously ordering - that is a pyramid scheme.”

The Clark's big beef with multi-level marketing is how misleading the hype is.

Erin Clark said some people may have earned a $100,000 bonus, but they may have spent $30,000 to get it.

"What do you do with $30,000 of vitamins or face cream or wraps?” she said.

Aaron Clark said it's not the easy work some people might think.

“The image that most people in this industry paint for those who are not in it makes it seem like it’s a dream. It is a lot of work. In my opinion, you don’t have more time because it’s not a traditional 9-5.”

Sherry Mariea, a business law and ethics professor at MU, said multi-level marketing models could easily be mistaken for a pyramid scheme.

“The main thing you’re looking for is - how much of the independent agent’s revenues comes from the direct sales of product vs. how much comes from their recruitment and commissions of the sales of those you recruit,” she said.

Mariea said Missouri has taken steps to regulate multi-level marketing companies by modifying existing deceptive practices laws.

Mariea thinks the model can work, if done correctly. 

“I think because we have such a high percentage of the workforce looking for better work/life balance that these types of models have some value to them,” she said.

A few weeks ago, KOMU 8 News posted to Facebook asking if any local moms have started selling products. Within about 12 hours, we received almost 100 responses and only a handful were negative.

A significant number of positive responses referenced Rodan + Fields. According to a company press release, R+F has become the #1 skincare company in the United States. Forbes reported the company boasted $1 billion in sales in 2016.

Most people responding said a key reason for taking on a multi-level marketing enterprise is a need for work/life balance.

While the Clarks aren’t working within a a multi-level marketing company anymore, Erin Clark said she still wants to empower other women. She and her mentor do a Facebook Live on Sunday nights called #mlm-exposed.

“It has to be a legitimate company that already has its kinks worked out, that has a plan that takes care of its customers, isn’t built on hype, doesn’t always dangle that next carrot that gets you through the next month,” she said.

Mariea suggested people resist the temptation to get in on the ground floor of a new company. The safest bet is to join a multi-level marketing company that’s been around for awhile and has proven it's making money off sales, not its people.