When ‘Multi-Level Marketing’ (MLM) is mentioned, what comes to mind is the sight of pushy sales people. With the highest unemployment rate of youth in East Africa and the cost of living ever rising, many Kenyans are looking for creative ways to generate income or to supplement their monthly income. Joining a direct sales company or a multi-level marketing company is often considered a viable option but choosing the right company is often a challenge and can hold some risk since the differences between direct sales or Multi Level Marketing (MLM) companies and the dreaded and illegal Ponzi and Pyramid schemes can be hard to see.
Direct sales companies, however, are not going anywhere. According to a report released by the World Federation of Direct Selling Association (WFDSA) in 2015, sales volumes generated by member countries totaled $184 billion with 103 million individual sales people contributing to this number representing a 7.7% growth from 2014.
Here’s how to determine whether an opportunity is an illegal Ponzi or Pyramid scheme or a legitimate Direct Sales or Multi-Level Marketing Company:
A Ponzi scheme is a fraudulent operation where the investment organisation uses new investor money to pay existing investors their dividends. Existing investors in turn believe that the investment organisation is making money and are happy to leave their money invested when the organization, in fact, isn’t making money; it’s simply rolling investment money from one investor to the next.
A pyramid scheme shares many similar characteristics to a Ponzi scheme. The Pyramid scheme, as the name suggests, is a hierarchical organisation where new members form the base of the pyramid and provide returns for the members higher up in the pyramid. The objective is to recruit new members below you to begin making money instead of selling something or investing money in something (like the Ponzi scheme).
The more people you recruit; the more money you make. In reality, however, very few people closer to the base of the pyramid ever really make any money. Pyramid schemes may offer products and services but in reality they are relying mostly on their money from the recruitment of new people into the organization.
Pyramid schemes can be spotted by realising that recruiting new people to the company is more important than selling a product or service.
“Multi-level marketing is a sales strategy that some direct sales companies use in order to increase the sales of the products or services,” says Mr Kemble Morgan, WorldVentures General Manager Africa. “ This is done through incentivizing their sales force by offering them a commission on product or service sales generated through new and existing members that are part of the Direct Selling or MLM Company. The sale of the product or service is the key focus with a second objective of increasing the size of the sales force to sell more products.”
WorldVentures is a good example of a direct sales organization. The sales people are selling memberships to a vacation network called DreamTrips. The membership presents members with over 11,000 DreamTrip destination packages to choose from throughout the year. These packages are exclusive to members and are offered at affordable rates.
Being the largest curator of group travel, WorldVentures encourages families to take trips together to create life-long memories. It also gives members the option of becoming part of the sales team enrolling new members to sell memberships. The added benefit of this particular organisation is the incentives associated with it. “Successful salespeople are rewarded with points to put towards their own holidays as they enroll new members and eventually find themselves travelling with their own families for free”, adds Mr Morgan
For the more driven and self-motivated entrepreneurs, what was supplementary income can become their sole income stream as they continue to build the network of sales people below them, providing them with a lifestyle that their previous careers simply didn’t.
In spite of the challenges, MLM companies persist and the business model has proliferated. MLM, to get away from the negative connotations, have started using other phrases to describe their business model: networking marketing, direct sales, word-of-mouth marketing, and referral or relationship marketing.
Mentorship is key
Others like WorldVentures have incorporated charitable causes into their businesses to give back to the society. Other organizations put a lot of effort in development, training and mentorship which is often where most multi-level marketing companies fall short.
“Our people are our business and we understand and value the importance of developing, supporting and joining them on their business journeys”, notes Mr Kyle Lowe, Senior Vice President, Global sales and Intenational Expansion at WorldVenttures.
The company held one of its regional events in Nairobi, at the Panari Hotel on 5th November, which attracted over 1,500 people. Similar events ran concurrently in other countries. This is an indication that people in the networking marketing need mentorship and guidance on how to grow their businesses.
Multi Level Marketing is the new wave of the future. It is an equal opportunity opportunity.