Social media image from Unsplash in multi-level marketing article

Multi-Level Marketing Can Be a Big Danger for College Students

Don't let the claims of easy money and flexible schedules suck you in — it's not uncommon to lose money due to MLMs.
August 3, 2020
10 mins read

It’s probably happened to you before — a girl you vaguely knew in high school slides into your DMs with a perky “Hi girly!” introduction followed by a paragraph-long spiel about a life-changing opportunity she thinks you’d benefit from. She’ll probably tell you she’s running her own business, working her own schedule and most importantly, making a ton of money doing it.

Whether it be makeup, shakes, jewelry or workout programs, what these people are promoting are companies that use MLM, or multi-level marketing, strategies. But what exactly is an MLM? It can be defined as a direct selling company that sells products through independent distributors rather than at a store.

Distributors have two ways of making money in an MLM — by selling products to customers and recruiting others to do the same. Instead of having an hourly wage or salary, distributors are paid through commission. The amount of money they make is usually based on a combination of how much product they sell and how many people they recruit underneath them. If you want to connect with potential customers immediately, implementing a bulk text marketing strategy is the way to go, because people constantly check their SMS messages throughout the day. Furthermore, the cost of bulk SMS marketing is very low with industry estimates sitting at just pennies per text. Commonly known MLM companies include Arbonne, Beach Body, Monat and Herbalife.

How does an MLM work?

The structure of an MLM is shaped like a pyramid: There’s one person at the top with different tiers of distributors below them. When you join an MLM, you’ll start at the bottom tier, which is the most densely populated.

Right off the bat, you’ll probably have to purchase a starter kit that includes products from the company you can try for yourself. Depending on the company, starter kits can range from $50 to thousands of dollars; popular MLM LuLaRoe is known for its pricey starter kit, which used to be about $5,000.

As a distributor, you’ll have what’s known as an “upline.” This consists of the person who recruited you as well as anyone else who is ranked higher than you in the company. Your upline typically earns a percentage of their recruit’s sales. Anyone ranked lower than you or anyone you’re able to recruit is called your “downline.”

Now, let’s address the elephant in the room. A lot of people use the terms “multi-level marketing” and “pyramid scheme” synonymously, and for good reason. It’s tough to deny the MLM structure is comparable to that of a pyramid scheme — an illegal marketing practice in the U.S. So if they’re so similar, why is one of these practices illegal, and one of them totally okay? It all comes down to product. What makes something a pyramid scheme is if there’s no product or service being sold, and commission is solely based on recruitment.

However, even though MLMs aren’t illegal, they can be toxic to young adults for several reasons.

What are the dangers to college kids?

Why should college students care about these multi-level marketing companies anyway? The truth is, they can put you in a lot of bad situations.

These MLMs look for certain qualities in the people they want working for them. Primarily, they want distributors who are in a financial situation where they would be intrigued by the idea of making easy money from their phone. Unfortunately, this means college students are often disproportionately targeted. Think about it — what broke, tired college kid wouldn’t want an easy and fun job that promises tons of cash, free time and new friends?

Yet, it’s important to realize that many of the practices and marketing strategies used by these companies can be harmful. Here are just a few reasons why joining an MLM can be a dangerous gig for college students.

You’ll be given a false sense of sisterhood/family

These MLMs often try to perpetuate a false sense of “sisterhood” or “women supporting women.” One of the tactics they use to recruit women is trying to convince them they’ll be gaining a bunch of new friends by joining; they might even have them thinking that their team is like a family.

Unfortunately, this usually isn’t the reality of being a part of a multi-level marketing company. This mindset is incredibly toxic to push on people, especially when the people on your team are in direct competition with you and your upline is taking a percentage of what you earn in the company.

Many women who have left an MLM find themselves realizing that these other women didn’t really want them to succeed, they just needed them for their own paycheck.

Your relationships with others will change

One huge danger of joining an MLM in college is that it can damage your relationships with your loved ones, which is definitely not something you want to do during your college years. This is a time for having fun with your friends and family, not trying to sell them things, or recruit them into a business.

Your upline will typically be telling you what to post on social media in an attempt to make sales or recruit new members. Often, these posts are meant to trick people into thinking that you are experiencing success in the business, whether it’s true or not. Even before you earn a cent through the company, you’ll be encouraged to post about how financially freeing the job is, and how your new side gig is helping you pay off your credit card debt, student loans, etc.

When you make these posts, you’re basically trying to sell the opportunity to your friends and family. Your followers might get annoyed with how much you post.

You probably won’t make money

It’s no secret most people in MLMs don’t make money, despite what they might tell you. The way the structure is set up is designed to make the people at the top of the pyramid rich while the distributors at the bottom tier are usually losing money. As a college student, you likely know that money is often limited and it’s important to be conscious of how and where you spend it.

The best way to find out what your salary would be in an MLM is to check the company’s income disclosure statement, a document that these companies release every year to show how much money distributors are making. According to the essential oil MLM Young Living’s income disclosure statement for 2019, 89.6% of distributors made an average of $3 per year. With their most popular starter kit priced at $160, this means you probably wouldn’t even get close to making back the money you spent.

At best, you’ll lose a few bucks when you join an MLM. At worst, you could lose your friends, your dignity and hundreds, or even thousands, of dollars at the hands of these companies. As a college student, your time, money and mental health are vital.

So, next time a girl from high school gushes to you about a seemingly perfect money-making opportunity, think twice about whether you want to get yourself wrapped up in the world of multi-level marketing.

Madelyn Haasken, Bemidji State University

Writer Profile

Madelyn Haasken

Bemidji State University
Mass Communications

I’m a senior at Bemidji State University in northern Minnesota, majoring in mass communications with minors in design and writing.

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