Myths about social selling, busted! (part 1)
Before we get into the nitty gritty, let’s all just appreciate this clip from Schitt’s Creek.
[youtube=://www.youtube.com/watch?v=lU9t47bdExE&w=854&h=480]
Okay. So now that we all laughed and snorted at that, let’s be honest.
I know the preconceived notions about direct sales, how could I not? But, even so, I’ve never been one to scoff at the business model. I was the 12 year old spending babysitting money on Mary Kay, the young mom buying Satin Hands from Avon for everyone for Christmas, and the first girl to try the mascara from Younique. I don’t know how it became engrained in me, but I’ve always been so passionate about supporting the small business owner, and I never saw the reason to hate on it. I loved sitting at the nurses station or at my mom’s house and finding an Avon catalogue laying around to peruse. I never had a negative experience, and that rings true today.
However—let’s go to the dark side and play devil’s advocate for a second. Bad experiences. Bad reviews. A friend told you not to try it. Your family didn’t support you. The FTC says you can’t make money. We’ve all heard all the things, right? And the haters.Oooooh Lordy, the haters. They seem to be everywhere these days, huh?
So. I thought the time was now to shed a little impartial insight into the things you may have heard about direct sales. My goal is to not turn a hater into a believer. My goal is to share some factual information because I believe knowledge is power. Here we go.
Myth 1: It’s a pyramid scheme.
Have there been some direct sales companies that have been fined by the FTC for having “pyramid scheme” practices? Absolutely! Just like anything else, all companies aren’t created equally. But let’s dive deeper into this.
pyr·a·mid scheme.
noun: pyramid scheme; plural noun: pyramid schemes
a form of investment (illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.
Direct sales companies are regulated by the FTC, so I pulled this from the FTC’s website:
How does the FTC distinguish between MLMs with lawful and unlawful compensation structures?
At the most basic level, the law requires that an MLM pay compensation that is based on actual sales to real customers, rather than based on mere wholesale purchases or other payments by its participants. In evaluating MLM practices, the FTC, in accord with established case law, focuses on how the structure as a whole operates in practice, and considers factors including marketing representations, participant experiences, the compensation plan, and the incentives that the compensation structure creates. The assessment of an MLM’s compensation structure is a fact-specific determination that the FTC makes after careful investigation.
Wikipedia defines pyramid schemes as “a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal. Pyramid schemes have existed for at least a century in different guises. Some multi-level marketing plans have been classified as pyramid schemes.[1]
Let’s focus on the word “products” first, because that’s important. Traditionally, illegal pyramid schemes are a promise of wealth based off nothing other than recruiting people to invest with no promise of investment or product. That’s where pyramid schemes become illegal.
The difference between an illegal pyramid scheme and a legal direct sales company lies with two important parts, the customer base and product.
A direct sales company is a direct to consumer business model that offers product to a customer base. When the focus becomes more about recruiting other distributors and the promise of income and less about providing a product or service to a customer, that’s where things can get hair, and that’s when the ears of the FTC perk up and start investigating. They’re saying “Hey listen, you can’t recruit people with the promise of success and wealth because you don’t know how much money they’ll make or how successful they’ll be, it’s dishonest and unethical.” I agree. Empty promises of wealth is a slippery slope. If the FTC decides that a direct sales company is sliding down that slope, that’s when they swoop in, shut things down, investigate, set forth fines, shut the company down, etc.
What I love about the direct sales company I partner with is that it’s customer-centric. The focus is always on providing quality products to the customer at a reasonable price. The focus is not on recruitment of distributors or partners with a promise of wealth (ie. “Sign up with me, and you’ll make a million dollars a year!). That assumption is dishonest and unethical, and that’s why the FTC is in place, they protect the consumer even at the expense of quality, customer-centric direct sales companies, and that’s okay—because quality, direct sales companies are customer-centric and want the customer to be protected, too!
These FTC regulations are why those who partner with a direct sales company can’t share their paychecks or promises of vacations, perks, cars, or paychecks.
Back to the myth that all direct sales companies are pyramid schemes. If you’re thinking of becoming a customer, buying product or partnering with a direct sales company, ask yourself a few questions first.
Are they customer-centric? (the answer should be “yes”)
Do they provide actual product to purchase? (the answer should be “yes”)
Can I purchase as solely a customer? (the answer should be “yes”)
Do I have to be a distributor to purchase products? (The answer should absolutely be “No”).
So, myth busted? Yes and no. Not all businesses (direct sales or otherwise) are created equally, so be sure to ask the right questions before screaming “All MLMs are pyramid schemes!!!” because that statement couldn’t be further from the truth.
Myth 2: “Only the people who started at the beginning make any money.”
Okay, so this one is tricky because I can’t speak for all direct sales/social selling companies in the world. I’ve only partnered with one, so I’m speaking from my past three years of experience with this particular company. Because again (it’s a running theme), not all businesses are created equally.
I can say with resounding certainty that this couldn’t be further from the truth. It’s simply not true based off the compensation plan and the focus on personal business with your own customer base.
I joined my company three years after it launched.
There were a lot of people who came before me and a lot who came after me.
Some of those people who came before me are more successful.
Some of the people who came after me? Also more successful.
And on the flip side? I’m more successful than many who came before me.
And the next person to join this business and crush it? It’s possible they haven’t even joined yet!
As I said before, customers are more important than distributors, always. Everyone who partners with my company builds their own personal business comprised of both customers and distributors. The sky is truly the limit and no one is blocking your path to the top. If you want to make money, you build a successful business with consistency over time. Your time of joining has absolutely no bearing on how unsuccessful or successful you’ll become, it’s up to you.
Where this becomes a perceived belief starts with the abundance mindset vs the scarcity mindset. If someone has told you that it’s “too late” and not worth your time, they practice a scarcity mindset. I love this description from thesimpledollar.com:
“Most people are deeply scripted in what I call the Scarcity Mentality. They see life as having only so much, as though there were only one pie out there. And if someone were to get a big piece of the pie, it would mean less for everybody else. The Scarcity Mentality is the zero-sum paradigm of life. People with a Scarcity Mentality have a very difficult time sharing recognition and credit, power or profit – even with those who help in the production. The also have a a very hard time being genuinely happy for the success of other people.
… The Abundance Mentality, on the other hand, flows out of a deep inner sense of personal worth and security. It is the paradigm that there is plenty out there and enough to spare for everybody. It results in sharing of prestige, of recognition, of profits, of decision making. It opens possibilities, options, alternatives, and creativity.” (read the article in it’s entirety here.)
So. Myth busted? I can’t speak for every company, but I can say that this absolutely is a myth based off mindset and not facts. And due to the FTC regulations on income claims, I can’t legally elaborate (trust me, I wish I could!), but you can absolutely be successful even if you didn’t join at ground level.
I know there is a ton of info here, so I wanted to break this topic dowN into a three-part series.
Stay tuned for part 2, coming soon…
