Money Talks: Selling The American Dream
Slate Money
Deep Dive
What is the core business model of multi-level marketing (MLM) companies?
MLMs are recruitment-based businesses where participants earn money by recruiting others to join and purchase products. The focus is on building a pyramid of recruits, with money flowing upward to those at the top. Most revenue comes from new recruits buying products, not from actual retail sales to external customers.
Why do MLMs often target women?
MLMs appeal to women by offering the promise of financial independence, flexible work hours, and the ability to work from home. Many MLMs market themselves as opportunities for stay-at-home mothers or women in economically depressed areas to earn extra income, often leveraging societal expectations around caregiving and domestic roles.
What percentage of MLM participants actually make a profit?
Only about 3% of MLM participants make any profit at all, and even among those, the earnings are often minimal. The vast majority lose money due to high upfront costs for starter kits and inventory, combined with the difficulty of selling overpriced products.
How did the FTC's case against Amway in the 1970s impact the MLM industry?
The FTC's loss in its case against Amway in the 1970s set a legal precedent that allowed MLMs to continue operating. Amway introduced self-imposed rules, such as requiring 70% of products to be sold to non-participants, but these rules were largely unenforced. This case effectively legitimized the MLM model, despite its exploitative nature.
What role does Christianity play in MLMs?
Many MLMs, such as Amway and Mary Kay, are deeply intertwined with Christian values and the prosperity gospel, which equates material success with divine favor. MLMs often appeal to religious communities by framing their business opportunities as morally aligned and spiritually rewarding, leveraging the cultural and social structures of these groups.
Why do people continue to join MLMs despite the low success rates?
MLMs are marketed as opportunities for financial freedom, flexible work schedules, and the chance to achieve the American dream. The pitch is highly appealing, especially to individuals in economically depressed areas or those with limited job options. The social and community aspects of MLMs, such as parties and team meetings, also make them attractive.
What is the connection between MLMs and the American ethos of meritocracy?
MLMs capitalize on the American belief in meritocracy and individual responsibility, suggesting that success is a result of hard work and personal effort. This narrative aligns with the idea of 'pulling yourself up by your bootstraps,' even though the MLM model is inherently exploitative and rarely leads to financial success for participants.
How are MLMs adapting to modern trends like affiliate marketing?
Some MLMs are shifting away from traditional recruitment-based models and adopting affiliate marketing strategies, where participants earn commissions through online links without the need for recruitment. This trend reflects growing awareness of the predatory nature of MLMs and the declining profitability of the traditional pyramid structure.
What is the historical significance of Brownie Wise and Tupperware in the MLM industry?
Brownie Wise revolutionized direct sales by introducing the Tupperware party model in the 1950s, which combined product demonstrations with social gatherings. While initially a positive innovation for women seeking economic opportunities, her model laid the groundwork for the exploitative recruitment-based MLMs that followed.
What is the future of MLMs in light of regulatory challenges and public awareness?
While MLMs face increasing scrutiny and declining profitability, they are unlikely to disappear entirely. Instead, they may evolve into new forms, such as affiliate marketing or other online sales models. However, the core issues of exploitation and financial risk for participants are likely to persist.
- MLMs are recruitment-based, not sales-based.
- The money flows upwards in a pyramid structure.
- The success rate is extremely low (around 3%).
- New recruits are the primary source of income for the MLM.
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