MLMs with at least 4 of the 5 red flags
of a recruitment-driven MLM*
After the most extensive research ever done on MLM as a business model, Dr. Taylor has identified five causative and defining characteristics, or “red flags,” in MLM compensation systems that lie at the root of the deceptions and horrendous loss rates suffered by MLM participants. Where data is available, for those MLMs with at least the first four of the five "red flags," approximately 99% of all participants are found to lose money, after subtracting incentivized purchases and minimum operating expenses. (For the brief explanation at the bottom of the page for the fundamental flaws in MLM as a business model.)
But before we share our list of over 400 MLM* programs we have evaluated, it is important that you do your own evaluation. We will not be responsible for the consequences of a decision that is ultimately yours to make. (See Disclaimer.) But we are confident that here you will receive the best advice available on how to make that decision.
To begin, obtain the compensation plan of the MLM program you are considering. Then answer the questions for each of the five steps and follow the links to its conclusion. You might also want to review some of the feedback we have received.
If you have not already done your own evaluation, go to –
"5-step Do-it-yourself Evaluation"
List of recruitment-driven MLM'S*:
(MLM's come and go, so a few may now be defunct.)
MLMs Evaluated A – D
NOTE: This list includes only those MLMs for which we have obtained and evaluated compensation plans. Most of the MLMs were listed following requests for information by website viewers.
As a business model, MLM is an unfair and deceptive practice.
After over fifteen years of research on over 400 MLMs (MLM programs) such as this one, and the receipt of thousands of emails and other communications from all over the world, some generalizations can be made about MLM as a business model:
All of the hundreds of MLM compensation plans we have analyzed allow – and even encourage – unlimited recruitment into a whole network of endless chains of participants. They assume infinite and virgin markets – neither of which exists in the real world. They are therefore inherently flawed, deceptive, and unfair – profitable only for those at or near the top of a pyramid of participants – who are usually the first ones in the chain of recruitment. MLMs are also extremely viral and predatory, taking advantage of the most vulnerable of prospects.
Again, MLMs are rarely profitable for new recruits – who are being sold a ticket on a flight that has already left the ground. In fact, available data (from company reports of average earnings and in surveys of tax preparers) demonstrates a loss rate of at least 99.6% in recruitment-driven MLMs. That means that at best one in 250 earns a profit after all expenses, including purchases necessary to qualify for commissions and advancement in the hierarchy (pyramid) of distributors. Those who do profit are those few who got in at the beginning and who are positioned at or near the top of the pyramid of participants. We call them TOPPs, for top-of-the-pyramid promoters.
Many compare the pyramidal pay structure of MLMs to corporations, in which the top management gets huge salaries. But at least a minimum wage is earned by all company workers. Conversely, in MLMs or chain selling schemes, almost everyone loses money – except for TOPPs.
“Recruitment-driven MLM's*” are dependent on a whole set of misrepresentations.
We have compiled a list of typical misrepresentations used in MLM recruitment. The primary deception is the presentation of MLM as a "business" or "income opportunity." In most cases, MLM is no more a business than betting on the roulette wheel in Las Vegas is a business. In fact, the odds for many games of chance are much greater than the odds of succeeding at MLM. (See “MLM’s Shocking Statistics.”) And you don't risk jeopardizing your "social capital." After all, your relationships are some of your most valuable possessions – worth too much to exploit for personal gain.
Are there "good" MLM's – which are not like typical MLM's?
Probably not – the notion of a "good MLM" may be an oxymoron.
In studying the compensation plans of over 400 MLMs, I have not seen one with a compensation plan that would not be considered a "recruitment-driven MLM." The compensation plan of a "good MLM", if such existed, would be very different from typical MLMs that incentivize an endless chain of recruitment of participants as primary customers.
We also see MLM companies that were once focused on legitimate direct sales to end users. However, perhaps because of unfair competition posed by recruiting MLMs, they begin to make tradeoffs that take away from what was once a great program. Some engage in "channel stuffing," or pressuring participants to buy products they have a hard time selling, leaving them with out-of-pocket costs that are difficult to justify in conducting a profitable sales operation. Or they have steep "pay to play"(minimum quota of purchases) requirements that make them marginally if not technically recruitment-driven MLM's. Or they may have excessive levels of distributors that give leverage to those at or near the top of their hierarchy of participants, but make it very difficult for those at the bottom to profit except through aggressive recruitment. Or they may actually pay more per sale to up-line participants than to the person selling the products, again creating excessive incentive to recruit and inadequate incentive to sell to the general public. All MLMs we have studied have at least some of these features.
For more information
You should find on this web site the answers you seek to questions about MLMs like the ones you may be considering. For a more thorough analysis of MLM as a business model, read Chapter 2 of the eBook by Dr. Jon Taylor titled The Case (for and) against Multi-level Marketing – which can be downloaded free of charge [insert link] from our web site at – mlm-thetruth.com. Other chapters explore typical misrepresentations, statistics on average earnings of participants, legal issues, etc.
Also, for a brief analysis of the inherent flaws of multi-level marketing, read the article by Dean VanDruff titled "What's Wrong with Multi-level Marketing" – available at vandruff.com. And some excellent reports and information can be found at the following web sites: pyramidschemealert.org and mlmwatch.org.
Aside from the standard job market, there are many satisfactory alternatives for earning an income. Almost any of them are superior to MLM. Read more about them in the article "1,357 Ways to Make a LOT More Money than in MLM/Network Marketing."
**A recruitment-driven MLM, or product-based pyramid scheme, is an MLM with a compensation system that rewards recruitment more than actual sales of products to persons outside the network of participants. So significant income is unlikely without recruitment of a large downline, which requires deceiving recruits into believing it is a legitimate "business opportunity – and persuading them to invest in inventory (front-loading) and/or to subscribe to ongoing monthly product purchases or payments to "do the business," to "be a product of the products," etc. For purposes of analysis, a recruitment-driven MLM could also be considered a "product-based pyramid scheme;" i.e., a pyramid scheme that requires purchases of products to participate in commissions or advancement in the scheme, rather than a cash investment such as those required for no-product pyramid schemes.