I joined an MLM!

It all started with an email:

Dear Mark,

I was so pleased to hear on your latest podcast that you are interested in becoming a scrapbooker and/or card maker! It's a great way to preserve your memories rather than have them languish on your phone, to be lost at Google or Apple's whim.

You've picked a great time to sign up to be a Maker as for a limited time you can join for just $45- and get $45- in CTMH Cash to spend on the things that you will love immediately.

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For a limited time, you can sign up to become a Maker for just $45 and instantly get $45 back in CTMH Cash!

In addition to your CTMH Cash sign-up bonus, which you can use to purchase a variety of products of your choice, you'll also enjoy these great perks when you become a Maker:

25–45% commission on all orders, based on performance

Sneak peeks and previews for new specials and products

Performance-based product and cash bonuses

E-commerce website for collecting customer orders

Annual incentive trip opportunities

Flexibility to work your own schedule

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All sounds great right!!! When you are ready to sign up I'm happy to walk you through it! 🙂 Or take a look here (https://susanshearer.closetomyheart.co.nz/ctmh/join.aspx) for more details and I'll contact you again in a few weeks to discuss any questions you may have. Next time you are in Auckland I am happy to have you come along to one of my events, or I can hook you up with a group close to your home.

Although Craig commented that men are not at my group, there are plenty of male scrapbookers and card makers.

Cheers, happy to talk anytime,

Susan...

So, some context… If you're not a listener to our NZ Skeptics podcast, Yeah… Nah!, it will help to know that in our latest episode we talked about how Craig's wife, Susan, is a member of a scrapbooking Multi Level Marketing scheme (MLM), although apparently she focuses on selling the scrapbooking products that the company makes rather than working on her “downline” - which is what you get when you sign people up below you, in a structure that looks suspiciously pyramid-shaped.

For those who are totally new to MLMs, and aren't sure what the differences are between a pyramid scheme, a Ponzi scheme and an MLM - here's my understanding.

A Ponzi scheme is a money-making scheme where unobtainable promises are made about how much profit you can make by investing your money into a scheme. As long as enough new people sign up, the people who are cashing out can always be paid back their money, along with the promised interest. But, because it's the money from people coming in that is used to pay people leaving, there's not enough money to pay everyone, and the scheme needs to keep signing up more and more people to cope with the payouts for those who are exiting. Eventually Ponzi schemes will collapse, as famously happened with both the original scheme from Charles Ponzi, and the recent scandal with Bernie Madoff.

A pyramid scheme is similar to a Ponzi scheme, but is a little more predatory. People joining the scheme have to pay to take part, but can make their money back - and more - by being paid to sign new people up to the scheme. Like the Ponzi scheme eventually this one will collapse, as to sustain the model there has to be exponential growth, and you will inevitably get to the point where there are not enough people available who haven't already taken part in the scheme to bring in money to pay those who are out of pocket.

Finally, a Multi Level Marketing scheme is a similar model to a pyramid scheme, with people signing others up underneath them in a pyramid, but differs in that as well as there being financial incentive to signing others up, there is also an actual product being sold. An often used idea is that if the primary means of making money in a scheme is through selling products, rather than through signing up other people, then it's an MLM and not a pyramid scheme.

Many MLMs sail pretty close to the wind when it comes to differentiating themselves from pyramid schemes. USANA, for example, insists that every one of their members has to buy hundreds of dollars of their products every month in order to be allowed to make any money from those people they're signed up underneath them. Essentially this trick allows the company to technically tick the MLM box, as most of the money comes from selling products rather than from selling the opportunity to be a part of the scheme, but as their members mainly buy the product because they have to do so in order to be a part of the scheme, for all intents and purposes this one smells a lot like a pyramid scheme.

One major criticism of MLMs is that, even for the best of them, 90% or more of people will never even make back the money they invest in buying their first batch of product. Big promises are made to new members about becoming rich, but most people aren't willing to hard sell mediocre quality products to their friends and family, or find themselves with a product that either isn't as desirable as the company's made it out to be, or is being sold in an already saturated market. MLMs promise the world, but practically for all but a handful of pushy, hard-nosed sellers, this promise never comes to anything. Most people end up with a garage full of products that are useful to nobody.

Anyway, where was I? Oh yes, we'd been joking on our podcast about Craig's wife being in one of these dubious MLMs, the kind of business model that we, as skeptics, usually lambast for scamming people. We also talked about how this particular scrapbooking MLM, Close to my Heart, is mostly made up of women, and how funny it would be if I joined.

It shouldn't have come as much of a surprise to me that I received the email at the top of this article on Friday afternoon, soon after our podcast episode was published on Thursday evening. As soon as I received it, via our feedback email address podcast@skeptics.nz, Craig messaged me saying “She's calling your bluff!”, which certainly appeared to be the case - and I'm one of those people who doesn't tend to back down from a challenge…

So, yeah, I'm now a member of an MLM - not something I thought would ever happen. At $45, at least it didn't cost as much to join as some MLMs I've heard about! For example, I've just finished watching the LulaRoe documentary series, which detailed how women in the US were clamouring to join the MLM even though it cost US$5,000 just to sign up, and had a months-long waiting list. Some people would even fly to LulaRoe conferences around the country, just because they would run “lotteries” where a few lucky attendees would be chosen to jump the sign-up queue and be able to get themselves onboarded there and then.

Once I'd opened up the floodgates, that was it. Emails started coming in thick and fast: “Congratulations—You Are Now a Maker with Close To My Heart!”, “Close To My Heart Account Created”, “Close To My Heart Makers: Please Confirm Subscription”, “Welcome to the Start with Heart Program!”. Hang on a minute, I'm pretty sure I chose not to tick the box to subscribe to their mailing list. And what's this “Start with Heart” program?

Apparently I can “get a $200 CTMH Cash reward by earning 2,000 points in your first 90 days as a Maker” - aha, so if I can get other people to buy products through my shop, or sign people under me who sell products, I can start earning points. As is usually the case with MLMs, they tell you their commissions scheme is “simple”, but it turns out it's anything but:

This “CTMH Cash” currency they're talking about is just credit for their store, so sadly I can't make actual real money by convincing my friends to buy scrapbooking materials from me, but maybe there's $200 worth of scrapbooking stuff I need in my life, and I just don't realise it yet.

Okay, so what about my benefits when I sell scrapbook stuff to my nearest and dearest? Let's have a look at what I can earn when I sell to my friends, as detailed in the company's Compensation Plan for NZ:

Okay, so that's not bad - I'm guessing these things must be pretty overpriced if I can make a 45% commission on them. Especially as the people running this company will presumably be making good money out of the transaction as well, in addition to my “upline” (the person who signed me up, and person who signed them up, etc). Speaking of which, if I can sign people up as my downline, there's more money to be made:

But what good's money without recognition? Apparently I'm currently considered a “New Maker”, but that doesn't sound very cool. I want a cool name. What does the Performance Rewards Program offer me in terms of awesome sounding titles?

Whoah, I really want to be a Presidential Founder - but I have to earn 600 points to get that, which means I need to sign up a whole bunch of people - “20 points for each new Team Member added to your first Downline”, and “100 bonus points for every 5 new Team Members added in a calendar year”. And this table contradicts the one in the Compensation Plan document, which says:

And things just get more confusing when I read the text accompanying these tables:

In order to earn the points for the Premier title promotions, you must meet the premier title requirements. It is possible to earn promotion points all the way up to Founder without earning the promotion points for the Premier Advocate title, however, earning a Premier title promotion will automatically qualify you for the promotion points for the equivalent non-premier title promotion. For example, if you promote from Influencer to Premier Specialist, you will automatically qualify for the promotion points for Specialist as well as for Premier Influencer.

All Level 1 Downline must submit an initial $200 in personal sales before they are counted toward the Upline's title. This qualifying sales total does not need to be submitted in a single order, but it must be from personal or customer orders and not from the Upline. While new Makers do not count toward Team size, incentives, recognition, or awards until this initial qualifying sales level is reached, the Upline does receive override commissions from any sales they submit before reaching the qualifying level.

For the purpose of Team size, three Enthusiasts in your first level of Downline count as 1 Downline. For example, if you have three Enthusiasts and two Makers in your first Level of Downline, you qualify for the title of Advocate.

There might be some clever accounting trick to get myself to “Presidential Founder” without annoying anyone, but the more I read the more complex and confusing it all gets. Where's Bronwyn when you need her, with her excellent breakdowns of MLM compensation plans? I desperately need to know if it's worth my while signing people up as “VIP Customers”, or exploring the “Rewards Your Way” scheme. Maybe I should try to become a “Straight To The Top” achiever, get myself featured on “The Ribbon” page of their website, or become a “Sticky Girl”. I'm starting to feel overwhelmed already!

What I can figure out without Bronwyn's help, though, is that any title I earn is only mine for the month in which I earn it, and the month afterwards. So even if I reach the ungodly heights they want from me, I imagine my fall from grace will be just as swift as my meteoric rise. There's no way I'm going to be able to sustain my friends' interest in scrapbooking for more than a little while. People tend to drop hobbies as they get bored or find something new and shiny, so I'm going to have to figure out a way to keep pulling new people into my scheme if I want to hold on to my rank.

And it turns out that even my lowliest of ranks, that of Maker, is under threat if I can't deliver the goods. Point 6 of their FAQ states: “To maintain Maker status, you are required to submit $500 AUD/NZD each calendar quarter”. This is not good - I don't think my friends will be able to help me hit this milestone, and there's no way I need $500 of scrapbooking stickers every 3 months. Sadly, buying products for yourself in order to maintain status is a trap that many an MLM subscriber falls into. I've had friends who have spent hundreds of dollars each month on vitamins just to make sure they are able to partake in an MLM scheme. Through the MLM's marketing efforts they had been convinced into believing that they were risking their health and wellbeing, as well as their ability to earn money from their downline, if they didn't spend this money each month on multivitamin tablets, immune boosters and brain enhancing nootropics.

As far as my $45 “investment” is concerned, given that the introductory offer is that I get $45 of store credit for my money, it doesn't seem too bad. At first I thought that if I just bought $45 worth of googly eyes, I will have gotten my money's worth - but it turns out that googly eyes aren't really a scrapbooking thing, they're probably considered more of a “crafting” material. Damn, I joined the wrong MLM!

What Close to my Heart does have is a lot of stickers, paper and stamps - it all seems a little pricey, but given the markups I mentioned earlier this isn't too surprising. A lot of the items seem very generic and cheesy, bringing to mind the “Live, Laugh, Love” wall transfers and other products that always make me groan when I see them in someone's house.

Given that I'm Susan's only ever signed up one downline - me - and that she's not interested in that side of the business, I'm guessing there's going to be no pressure from her as my upline to sell products to customers or sign up people under me in the pyramid. Maybe I'll have to find another MLM, and sign up under someone I don't know, to experience the pressure of the hard sell. I wonder if there are and MLMs geared towards men - certainly most of them seem to target stay-at-home mums, but there's got to be some out there that are aimed at people like me. Well, not quite like me - presumably there's no MLM on the planet that will find fertile ground with skeptics. But maybe there's a male-orientated MLM that would work for middle-aged men who aren't into personal grooming or health and wellness, and don't care for fast cars or sportball. I wonder if there's a craft beer MLM out there just waiting for me, or maybe something selling interesting technology.