CAI

Consumer Awareness Institute

Non-profit Corporation

MLM - Network Marketing STATISTICS – the Odds of Success – vs. No-product Schemes & Gambling 

Here's a GREAT idea that could save you a lot of money and help you preserve your most precious relationships:
When someone invites you to an MLM meeting or otherwise attempts to recruit you into an MLM, hand them a $20 bill and tell them that is your payment for him/her leaving you alone. This idea came from Karl Heinz Krieter, who suggested paying a one-time tribute to MLM recruiters. His analysis of worldwide losses from MLM is enlightening.

Readers' comments:  

""Thank you so much for your time and efforts.  I have a partial MS in Economics, and my intuition was screaming at me that this [MLM] is a hoax.  You validated my intuition and have put my mind at ease."  —J. D. York 

1. Disturbing revelations from MLM tax returns: Tax professionals know who is making the money in MLM/network marketing. It's not the new recruits that are buying up products and sales tools to "play the game." See "Survey of Tax Preparers". [Click here to download PDF file.] Conclusions from this survey are strengthened by household surveys on MLM participation. As further support of these findings, a much earlier investigation by the State of Wisconsin documented evidence, from tax returns, that Wisconsin Amway Direct Distributors (the top 1%) had annual net incomes of minus $900.

2. Gambling beats MLM! Where data was available, the rate of success for recruiting MLM's is abysmal. In fact, MLM makes gambling in Las Vegas look like a safe bet in comparison. Even clearly illegal no-product pyramid schemes do far better. Read "Some Shocking Statistics" to compare the likelihood of realizing a profit from twelve MLM programs, as compared with gambling and with no-product pyramid schemes. You will also get some great pointers on how you can do your own calculations of likely profitability of an MLM.

For a general graph comparing MLM to no-product schemes and to gambling, see "Which Does the Greater Harm?" [PDF]  For an interesting graph comparing loss rates of 12 specific MLM's with direct selling, no-product pyramid  schemes, and gambling, click here. [PDF] 

In fact, a good way to illustrate the abysmal odds of success in MLM/network marketing is to throw a pair of dice three times, betting on snake eyes each time. Based on the research cited above, the odds of profiting to the extent promised in typical MLM opportunity meetings are less than the odds of throwing snake eyes three times in succession.

3. Review of Average Income Reports by  Pyramid Scheme Alert also shows MLM/Network Marketing Programs to be Unprofitable. Robert Fitzpatrick, President of Pyramid Scheme Alert, examined reports of average incomes of participants in several MLM/network marketing programs, using somewhat different assumptions than those used by Consumer Awareness Institute. He accepted their numbers without attempting to debug the deceptions in their reporting. Still, he came up with essentially the same conclusion – Their loss rates were horrendous. Read "The Myth of 'Income Opportunity' in Multi-level Marketing."

4. Analysis of sales figures supplied by the World Federation of Direct Selling Associations (WFDSA) shows increasing losses by participants as MLM grows world wide. Karl-Heinz Kreiter has done an incredible job of showing how unprofitable direct selling is when the number of MLM participants is factored in - using statistics supplied by the WFDSA. They are condemned by their own numbers! Read the full report – "Outstanding unlimited growth potential for MLM?" at – http://www.mlm-beobachter.de/mlm/mlmwachstum_e.htm

5. Nu Skin's  Naughty Numbers: Olympics officials just wanted the money – forget the morality! When the Salt Lake Olympic Committee (SLOC) accepted Nu Skin as a sponsor of the 2002 Salt Lake Winter Olympics, a  report entitled "Nu Skin's Naughty Numbers" was sent as a petition to them and the local press to discourage SLOC from allowing Nu Skin to exploit its Olympic connection. SLOC, USOC (US Olympic Com.), and IOC (Int'l Olympic Com.) ignored the petition; and the Olympic rings were displayed at Nu Skin "opportunity meetings" (recruitment rallies) world wide and on recruitment and product literature. (The Olympics still accepts Nu Skin as a sponsor.) The same information from the NNN report is included in the updated "Report of Violations" [ PDF] of the FTC Order for Nu Skin to stop its misrepresentations of distributor earnings. 

6. More research confirms these abysmal numbers for MLM success rates. Go to the MLM Research page and download additional reports from investigations by the State of Wisconsin on tax returns reported by Amway distributors and other investigations by Consumer Awareness Institute. All these studies point to the same conclusion - that recruiting MLM's are not income opportunities, but loss certainties - for all but a few at the top of their respective pyramids.

Return to Home Page for a starting index to reports explaining the truth about all aspects of MLM – based on 12 years of solid independent research.