The number of "Network Marketing," or so-called Multi-Level Marketing businesses is on the rise in Texoma. With so many people getting involved, Newschannel 6 Anchor Brittany Glas found out if the investment is worth it.
Multi-Level Marketing businesses, or MLMs, have a business structure set apart from their industry counterparts. MLMs are comprised of a pyramid structure model, but are not pyramid schemes. MLMs are legal.
While some Americans may be familiar with popular MLMs, including Mary Kay, Pampered Chef, Thirty One, and Vemma; most Americans have not seen television commercials that endorse their products.
Vanda Wright, the director of the Small Business Development Center in Wichita Falls, told Newschannel 6, "The intent is to use people – word of mouth – to spread the message, rather than spending thousands of millions of dollars on an ad campaign."
Typically, Multi-Level Marketing distributors earn commission, not only for their own sales, but for sales made by people they recruit.
Sandra Trevino is a zumba instructor in Wichita Falls. She entered the world of Network Marketing nearly four years ago as a Team Beachbody Coach selling Shakeology fitness drinks. When Trevino entered the business, she was a wife and new mom. She had a full-time job then, and still does.
As an instructor at Geared Up Fitness Studios, Trevino interacted with prospective clients on a daily basis.
"Since your doors are already open to all these people, it's a good thing to have these products… not only for your benefit, but to also pass it on to other people… and you can also make money off of it," said Trevino.
That's not all, however. As a Shakeology customer herself, Trevino said the business of Multi-Level Marketing is less about pressure to sell, and more about promoting a desirable product; a product she personally uses. She said, as she sold products, she told her clientele about the opportunity to pay for products at discounted prices which turned out to be her driving force behind the business.
Cheyenne Patnode has a similar story with Multi-Level Marketing business Scentsy. Patnode began selling the wickless candle burners 6 years ago when her cousin approached her about testing the product. Since then, she has become a "Superstar Director," and experienced great success.
As a newly-wed and recent college graduate, Patnode soon learned selling Scentsy products was just the thing she needed to make a little extra money on the side to pay off her student loans.
84% of Direct Sellers found the business venture met or exceeded their financial expectations. 91% of Direct Sellers said Direct Selling meets or exceeds their expectations as a business where the harder they work, the more money they can make.
Although a large part of seeing success in Multi-Level Marketing business ventures is about putting the time and effort in to see the best results, consultants in Texoma said although the work can be difficult, networking online through social media (i.e. Facebook, LinkedIn, Pinterest, etc.) can make the process easier for consultants. Area representatives told Newschannel 6 it allows them to create their own schedule.
"You can schedule as many parties as you want… The amount of parties you do is all dependent upon you – on how many you want to do and how much money you want to make," Patnode said.
While Sandra Trevino and Cheyenne Patnode's stories are successful, the business model does not always work out well for everyone.
Leslie Hicks was involved in Network Marketing businesses for about 7years. Hicks moved up in the ranks of an MLM. She became a regional vice president, sold and recruited people to the company across the nation, earned a car, and along with it, a great deal of recognition.
Hicks is no longer involved in MLMs. While she experienced phenomenal success in the industry and would not change her experience with it, she said it got exhausting over time.
"The thing that they tell you about time flexibility… is a little bit misleading because, if you're going to do it right, there's no way you cannot work 40 hours per week or more. The business model makes a lot of sense, but gets exhausting," said Hicks.
Other Texomans have more reservations about the model.
Greg Thomas is a former MLM distributor. He has been involved with numerous MLM companies but never experienced the success he would have liked.
"I guess you can make money if you get in at the right time and are able to get enough people involved under you… I always seemed to get in at a time that was late in the system and therefore, didn't ever realize any profits… I mainly lost money," Thomas said.
Thomas is one of many who experienced concerns about potential pyramid schemes. Knowing the difference between a legitimate MLM and a pyramid scheme looking to take your money is the first step to making sure you are about to venture into a legal, and potentially profitable business.
When distinguishing the difference between a Multi-Level Marketing business and a pyramid scheme, it's important to remember that profit goes hand-in-hand with pyramid.
When defining a pyramid scheme, Vanda Wright, the director of the Small Business Development Center on Midwestern State University's campus in Wichita Falls said, "The focus is going to be on bringing others into the organization and them paying an up front cost."
Business experts told Newschannel 6 a target audience is clearly defined within pyramid schemes. The audience of people can often quickly become victims to a costly scam.
The President of the North Central Texas branch of the Better Business Bureau, Monica Horton said, "Typically, the pyramid scheme promoters concentrate and exploit people with limited business knowledge, and they will specifically work themselves into church groups… gaining the trust of groups so then they can turn around and promote it more."
Horton said, "You'll have one trusted person promoting it, and so, everyone falls in line."
While profit is the primary focus of a pyramid scheme, the product is usually the primary focus of a Multi-Level Marketing company.
"Are they selling the down line and promoting the fact that you can make more money the more people that you recruit under you, or are they actually selling and promoting a product?" asked Horton.
Another important difference between MLMs and pyramid schemes is that if a company is a legitimate Multi-Level Marketing business, individual consultants can move up and ultimately make more money than their recruiter. The MLM business model can literally become an inverse pyramid.
A pyramid scheme, however, maintains its shape. Those people at the top of the pyramid – often, its founders – will always make the most money. Those recruited below the founders will never make more money than the founders themselves.
Consumer experts advise members of the public who may be considering buying into a Multi-Level Marketing business plan to get the details.
The Federal Trade Commission recommends prospective investors to:
1. Consider the products.
2. Learn about the company.
3. Evaluate the plan.
4. Learn what the investment is, and find out if you can get a refund.
5. Consult with a professional.
6. Ask yourself if the business suits your talents and goals.
Representatives with the Better Business Bureau encourage anyone looking to invest in Multi-Level Marketing business opportunities to call their office at (940) 691-1172, or visit their website at www.bbb.org.
Officials with the North Central Texas BBB and the SBDC said it all comes down to research. While there are a number of good MLM companies out there, it goes back to the potential investor. Some consultants will inevitably have a positive experience with the model, while others have a negative one.
In the end, you decide… Network Marketing: Bang or Bust?