Aljazeera America publish “in-depth look at MLM”
This popped up on my radar in conjunction with Herbalife, but I soon discovered it wasn’t a once off.
The article in question was published as a part of a series Aljazeera America are publishing this week, titled “An in-depth look at multilevel marketing”.
It’s a four-part series, with the first three articles published over Tuesday and Wednesday. At the time of publication, a fourth article “Your Company Loves You” has yet to be published.
Below you’ll find a brief break down of the three thus far published articles:
An Army Of Recruits (Vemma)
This article opens with the story of Lena Nguyen and her recruitment into Vemma by an ex-boyfriend.
Lena Nguyen was pregnant at 14, bounced around four high schools and multiple part-time jobs and grappled with decreasing self-esteem in the face of her parents’ growing disapproval.
She dreamed of going to college without having to rely on student loans. She had been told her son might inherit her student loan debt and she didn’t want to take that chance.
Vemma seemed to offer the things she desperately wanted: a sense of community and financial autonomy.
Although Nguyen remained skeptical about Vemma, she promised to try it out for a year, signing up in late July. But she didn’t have enough money to pay for the $500 Affiliate Starter Pack, which she would need to qualify for the tempting car bonus.
All Nguyen was able to scrounge together was $150.
It then broadens out into a greater expose of Vemma.
Seeing Green With Herbalife
Kate Kilpatrick offers up an expose on Herbalife, with particular focus on the company’s nutrition clubs.
While controversy swirls around the nutrition-club system, which opponents say targets poor, often-uneducated Latinos, many of whom are living in the country illegally, here in this working-class immigrant neighborhood there are plenty of Herbalife believers.
They have small bank accounts but big American dreams.
Before opening her nutrition club, Maria earned roughly $180 a week babysitting. She won’t give exact numbers, but she makes more with her new business, she says, which is visited by about 20 clients a day.
Leonel, who used to work in construction, says his current lifestyle is more relaxed; he has no boss to report to, and his health has greatly improved thanks to changing his diet and consuming the Herbalife shakes.
But Ruth Lopez, who moved to Queens from Colombia six years ago, says it’s only a matter of time before nutrition club owners like Maria and Leonel realize they’re in a very bad business.
She, too, once ran a nutrition club in the neighborhood — until deep financial losses forced her to throw in the Herbalife towel.
She hates to see so many in her community falling for the very same “opportunity.”
This is a general knowledge article covering the regulatory side of MLM.
Alia Malek goes into a brief history of the regulation of MLM and provides insight into the roles of the FTC, SEC and State Enforcement.
The federal government’s oversight of alleged pyramid schemes is undertaken by the Federal Trade Commission and the Securities and Exchange Commission.
Extremely interesting real-world examples and thoroughly satisfying reads all three of them. Instead of covering pissing contests on the stock market I wish more mainstream media coverage of MLM was of this calibre.
I’ll update when the fourth article goes live.
Update 17th October 2014 – Looks like there’s going to be five articles published in the series, with the fifth titled “Thinking Outside the Pyramid”.
The fourth article, “Your MLM loves you”, went live yesterday. It examines the relationship between an MLM company and its affiliates.
Manipulation is an inherent part of marketing, says Dr. Claudia Gross, who studies the culture and structure of MLMs at the Institute for Management Research, part of the Radboud University Nijmegen, in the Netherlands.
But, she says, manipulation has an outsize effect with MLMs because of their organizational structure and the lax regulatory environment in which they operate.
Participants in MLMs are caught in a situation in which they are not strictly self-employed, because they are part of an existing company, whose rules they do not set.
So while they have some of the benefits of the self-employed — such as the ability to set hours and determine which markets to operate in — they also lack the support of unions or other intermediaries they can rely on for help when needed.
This makes participants in MLMs particularly vulnerable, experts say, built as they are on personal relationships and atypically structured.
Any emotional manipulation employed in this environment makes it easier for participants to believe the unbelievable, ready to silence any doubts, unquestioning of failure and unwilling to act against the company.
Update 19th October 2014 – The fifth article in Aljazeera’s series, ‘Thinking Outside the Pyramid” is written by William K. Black. Black describes himself as ‘a white-collar criminologist and former financial regulator‘ and provides readers with two rules to follow when evaluating potential pyramid schemes:
1. If it sounds too good to be true, run — don’t walk — away.
2. You don’t need to know or prove that the proposal is a fraud to have reason to reject it.
These rules are elaborated on in Blacks article, which then goes on to briefly discuss some of the thinking behind those “who get in early”.