What the FilAm community needs to know about Multi-level Marketing

Jessy Daing; Jen Furer: Educated and smart New Jersey housewives are network marketers. Facebook photos

Jessy Daing; Jen Furer: Educated and smart New Jersey housewives are network marketers. Facebook photos

By Cristina DC Pastor

This article was written as part of the Business Reporting Fellowship of the Center for Community and Ethnic Media and funded by a grant from News Corp.

One can tell just by looking at her that Jen Furer, mother of four, is a fitness enthusiast. Her blog, GottaLoveMom, chronicles her weight-loss journey, shows her before-after photos, and offers a clickable link to the diet products she is promoting.

Jen is a direct sales marketer, a gentle proponent of what is probably the most cutthroat form of selling. It goes by the funky name “multi-level marketing” (MLM), and because of the way many of such marketing efforts can work, they’re often dubbed pyramid schemes. The driving force behind direct sales or network marketing is its reliance on the recruitment of other people – many other people – to form an ever-growing network of sellers. Last month, Jen was able to make enough to finance a cruise she and her husband took to the Bahamas – although she says she hasn’t aggressively recruited associates or a sales team, and people come to her through word of mouth.

Jessy Daing’s rise in network marketing has been similarly phenomenal. She joined a travel marketing company that sells tour packages, and she says that all she did was to recruit people “who love to travel” to the company’s VIP Travel Club. Daing, who has a delightfully engaging gift of gab, organized intimate Tupperware-like parties to recruit VIP members, and within months of building an impressive army of sellers was rewarded with a 2014 BMW X3 by the company.

“Travel is a sexy product, and it’s easy to sell,” said Daing.

Furer and Daing are Filipino-American women, attracted to direct sales not so much by the promise of “easy money” as by the prospect of being able to create their own businesses, grow them and become successful American entrepreneurs. Both are educated and smart, suburban New Jersey housewives.

“They may see it as the American way where people from foreign countries start with nothing and become successful on their own,” said Richard Eisenberg, managing editor at Next Avenue, a PBS website catering to the Baby-Boomer population. He is also the senior web editor of the website’s Money & Security channel. “I can imagine why that would appeal to some.”

The Filipino community, much like many immigrant communities, is ripe for the recruitment of participants in network or multi-level marketing.

Filipino immigrants can be easy targets, as this Filipino-American writer can attest. They are easygoing and friendly. They blend well within any social group, and the immigrants with a college education understand English very well. The community is crawling with network marketers hawking everything from cosmetics to weight-loss coffee to insurance products, courtesy of companies that promise car bonuses and vacations, among other irresistible incentives.

Networking Times has noted the perceived ambition and determination of immigrants entering the business world: “When we look at some of the biggest success stories in network marketing, we consistently see that immigrants are often outperforming the ‘native Americans’ who were U.S.-born. Immigrants go through the same challenges and adversities that all Americans face, but for some, their journey to the U.S. was an overwhelming struggle… The biggest difference between an immigrant and someone born in this country is that they have, by default, cultivated the kind of mentality that better prepares them to build a network marketing business.”

But the casualties of some of the direct marketing schemes can be seen in many immigrant communities.

In the New York area, there have been reports of how some Latina women have fallen victim to Herbalife’s marketing program. Now the Federal Trade Commission is investigating how women who signed on as marketers were forced to recruit neighbors, relatives and co-workers to form a “nutrition club” that would sell herbal products and shakes promising weight loss.

Those immigrants at perhaps the greatest risk of being hoodwinked by particularly egregious forms of multilevel marketing are women with little education who need desperately to supplement their income.

The nonprofit Damayan Migrant Workers Association, which supports Filipino domestic workers and their families, recently held an event to educate Filipino immigrant women who might fall prey to sweet-talking MLM representatives offering the prospect of “easy money working from home.”

“MLM is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of other salespeople they recruit,” according to Spencer Cantrell, an Urban Justice Center paralegal advocate, who spoke at the event.

Cantrell explained that MLM recruits typically are required to pay a fee to join and must make an investment upfront to acquire an inventory of the company’s products.

“Salespeople also recruit their own sales force (called ‘downline’), and make money not just by selling products and starter kits, but also receiving money from their downline’s sales and recruitments,” he said.

In a typical pyramid scheme, a new recruit might be required to pay $500 for a starter kit and to recruit an additional 10 people to sell the product “downline.” A 10 percent profit on the sale of each kit, meanwhile, goes to the original recruiter or distributor up the line.

One of the realities stressed by Cantrell is that MLM salespeople make most of their money “by recruiting new members, not by selling products.”

“The scheme continuously enrolls new people as new sales associates as the true source of monetary gain, which is highly concentrated at the top of the ‘pyramid,’” he said. The scheme is “very unsustainable,” he added, because eventually it becomes impossible for salespeople at the recruitment level to ever make any money.

Pioneer direct marketers such as Amway, Tupperware, and Avon Products, don’t follow this model and do appear sustainable. Membership in these organizations does not require high upfront fees, but rather, minimal fees – $10 for an Avon kit and $20 to sign up online or a $79.99 Business Kit for Tupperware consultants, according to the websites of the two companies.

The FTC has ruled that when a marketing program does not require a hefty membership fee and makes its salespeople stock up on inventory, it is not a pyramid scheme. However, the FTC concedes that there are a lot of network companies operating in the country and it’s hard to say which are operating legally or in violation of its guidelines.

In the Filipino community, some direct marketers have felt the high pressure of some pyramid schemes and opted out.

According to one MLM marketer who has since left the industry, “ultimately, it’s all about making a sale and being very obsessive about it because you have to meet your quota.”

Direct marketers Furer and Daing say the marketing companies they’ve signed up with, and the experiences they’ve had, show the good side of MLM. Furer says no one recruited her, she just became convinced of the value of the product she’s selling, and that while she has 31 downline recruits, no one is actively hawking the product.

Daing, meanwhile, has been named “company visionary” of the travel company she recruits. Neither woman is likely to have been a mark for unscrupulous marketers.

But for many in their communities the risks remain great. With direct marketing, ‘caveat emptor’ are perhaps the best watchwords. Some marketing companies can be “emotionally manipulative,” says Cantrell, who gave the presentation to Damayan’s members, who are mostly domestic workers. Just say no and walk away, he advises. “Do not be ashamed.”

If you feel you have been a victim of a pyramid marketing scheme, the Urban Justice Center suggests you contact:

New York State Attorney General’s Office
120 Broadway, New York, NY 10271
1 (800) 771-7755

The Federal Trade Commission – Northeast Region 1
Bowling Green, Suite 318, New York, NY 10004
Consumer Response Center: 1 (877) 382-4357

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