New Survey Reveals 73 Percent of People who Participate in Network Marketing Opportunities Lose Money or Make No Money
AARP Foundation Launches Consumer Education Campaign Revealing the Risks and Rewards of Multilevel Marketing ~
WASHINGTON (Oct. 9, 2018) – Among the more than 20 million Americans who participate or have participated in multilevel marketing (MLM) organizations, 90 percent say they got involved to make money. However, nearly half (47 percent) lose money and a quarter (27 percent) make no money, according to a new study released by AARP Foundation.
The AARP Foundation report, “Multilevel Marketing: The Research, Risks and Rewards,” explores the mindset, expectations and experiences of Americans who participate in MLMs, or network marketing programs. Two-thirds of participants said they would not join the same or another MLM organization again, indicating a need for interested individuals to become as knowledgeable as possible before they sign up. Today, AARP Foundation kicks off an educational campaign to help people learn more about the advantages and pitfalls of MLM opportunities, with information available at www.aarp.org/MLMaware.
“Multilevel marketing is a $36 billion industry. People are intrigued by the opportunity to make money, but our research shows that they often do not. In fact, many lose money,” said Amy Nofziger, director of fraud programs, AARP Foundation. “We have witnessed many of our constituents joining these organizations, sometimes to their financial detriment. We want consumers to become better educated about MLMs before they invest valuable time and resources.”
AARP Foundation offers the following tips to consider before approaching an MLM opportunity:
Set your expectations and understand the costs. Recognize that MLMs require patience, persistence, and an investment of time and money. Make sure that you are clear on what you expect to get out of participating in an MLM, as well as what is expected of you from the MLM.
- Sixty-three percent of participants join MLM companies to make money by selling the product or service to others.
- One-quarter (25 percent) made a profit. Of those that made money, more than half (53 percent) made less than $5,000.
Do your research.
Thoroughly investigate the company before pursuing the opportunity. Visit the websites of the Better Business Bureau and Federal Trade Commission to see if there are any complaints about the MLM company. Speak to current representatives, in addition to your contact, and recent participants. Conduct an online search of the company name featuring keywords such as, work hours and incentives to see what others are saying. This will help provide a more realistic picture of what participating in that particular MLM is really like.
- Two-thirds of participants said knowing what they know now, they would not join the same MLM company again and 62 percent said they would not join another one.
- Four out of 10 (41 percent) respondents reported that the company misled them in describing their chances of achieving financial success.
Get comfortable with selling.
A big part of MLM is reaching out to your network. Do some self-inventory and make sure you are comfortable having sales and business conversations with close friends and family. Most MLM companies advise direct sellers to target their friends and relatives first as potential customers and prospective recruits.
- One-third (34 percent) of MLM participants were recruited by a friend and 12 percent were recruited by a family member.
- Also, 39 percent stopped participating because it felt awkward to pitch to friends and family.
Consumers can visit AARP Foundation’s website at www.aarp.org/MLMaware to review an executive summary of the research and gain more information on multilevel marketing opportunities. Additionally, individuals and groups can download materials from an educational toolkit designed to help make informed decisions about MLMs.
“Just like an entrepreneur starting a new business, one has to invest significant money, time and energy to grow a direct sales business,” Nofziger added. “However, even with hard work and dedication, income or success is not guaranteed. We encourage individuals to do some homework first to ensure this is the right opportunity for them and their families.”
The AARP Foundation commissioned GfK to conduct qualitative and quantitative research to understand the demographics, psychographics and behaviors of adult Americans who have participated in at least one multilevel marketing organization during their lifetime. The study used both qualitative and quantitative methods. Four focus groups were conducted, including men and women who worked as MLM direct sellers either presently or within the past seven years. Analysis of focus groups transcripts informed the development of an online survey that was administered to more than 1,000 participants. The survey included 1,016 respondents, encompassing 601 Americans who were direct sellers for an MLM organization sometime in the past and 415 who never participated in an MLM before.