Members of Gen Z are even more detached, engrossing themselves in technology. They grew up on social media and can research their way out of any predicament. This powerful consumer base is the next group of consumers that can help your business grow its revenue, as long as you take note of them now and prepare your marketing strategies to cater to their needs.

Below, 13 members of Forbes Business Development Council provide some of the best strategies for selling to the new tech-centric Generation Z. Here is what they recommend:

Council members offer strategies for targeting an emerging generation of consumers

1. Meet Them Where They Live

Gen Z is the most tech-savvy generation. They spend more time on social media. Selling strategies should start on social and mobile, and include multiple touch points, with direct, no-fluff messaging, and use various formats (video, pic posts, stories, etc.). The sales gimmicks of the past won't work here. Instead, focus on direct, individualized messaging and content with a heavy emphasis on what's in it for them. - Christopher Kingman, TransUnion

2. Leverage User-Generated Content (UGC)

There’s a whole new frontier of customers who have grown up in the Amazon era and wouldn’t think of purchasing anything without a plethora of UGC at key conversion points to help them along. Forget one or two sad reviews from some free plugin. I’m talking hundreds of reviews, user-generated photos and more. This is the new standard -- not a 'nice to have when we get big enough,' but a must. - Ali Fazal, Yotpo

3. Sell The End Game

This is a benefit and results-driven group, so don't sell the product to them. Instead, sell the success they will achieve by using it. This sales approach lets you connect the dots for them, with workflows and processes on how to maximize the use of your product. Plus, this puts you in the position to be viewed by the customer as an expert who truly understands their needs. - Julie Sokley, Autodesk

4. Get To The Point

Increasingly tech-centric, Generation Z is accustomed to making decisions quickly -- a byproduct of the shortened attention span that comes with the increased ability to instantaneously access virtually anything. When selling to Generation Z, communicate your message and value proposition clearly and quickly, or run the risk of losing your audience and the sale. - Adam Mendler, Custom Tobacco

5. Ensure Your Tech Design Is Superior

Automation and self-service are trends rising to appease this generation of technology-driven, self-educating consumers, but the key to automation is to do it correctly. Companies must ensure their technology's design is superior and meets buyer expectations, or buyers won't consider it a quality purchasing option, thus diminishing goodwill toward your brand as well as your product or service. - Christian Valiulis, Automatic Payroll Systems

6. Don't Label Them

I think one of the big mistakes is that society labels these folks. Unlike seniors, they do not want to be called out or pointed out as a group. Your question says it all: they are increasingly tech-centric so that is where they are and how you have to gear the marketing to their group -- without calling them out. They are people and very powerful consumers that just do things differently. - Wayne Elsey, Elsey Enterprises

7. Entertain Them

Gen Z has lived their entire lives online, which impacts their connected interactions. While not as advertising-averse as their older counterparts, they expect authenticity, entertaining interactions and experiences that provide what they need before they tell you. To win with Gen Z, marketers have to evolve from informing to delighting, from celebrity to authenticity and from generic to predictive. - Lisa Box, WP Engine, Inc.

8. Leverage Video Communications

Gen Z never uses voicemail and prefers text to email. They also are the YouTube/Netflix/Reddit generation -- consuming quick one to three-minute videos on their phones. If you want to engage them throughout the sales process, video should be your medium of choice. Sales organizations will be adding video-building capabilities to their toolkits, arming their sellers to better engage Gen Z buyers. - Jim Ninivaggi, Brainshark

9. Use A Mobile-First Strategy

With the Generation Z and millennial consumer, your company needs to clearly articulate their products and services through a mobile-first strategy. Goodbye, desktop web browser and emails! Hello native apps, Instagram, Facebook and Snapchat! - Adam Livesay, Elevat Inc

10. Treat Them As Individuals

Generation Z was born into a social world, unlike many who still fondly remember the miracles of dial-up. With the availability and impact of their favorite celebrities to influence them, they seek to be treated as an individual by the brands they interact with and purchase from, especially on e-commerce. This means data is key so that you can tailor their experiences. - Jared Shaner, Trellis

11. Provide Them With Information

Generation Z like to be informed consumers and want to know who they are doing business with. Share your company message, be transparent in your products and be precise. Their buying power isn't different than any other group, they just do their homework. Ensure your online message is that of other selling vehicles, and that the format is viewable on a mobile device. - Emily Hauptvogel, H&H Products Company

12. Focus On Customer Experiences

Advertisers are silly to think selling works anymore. Currently, it's all about persuading and referring. Let's disarm the upcoming generation by hitting the breaks on the too-tired 'flash sale,' 'one-time offer,' and other tried-and-failed marketing campaign tactics. Instead, let's market to Generation Z by providing quality customer success efforts and beautifully elegant customer experiences. - Andrew J. Herkert, M.A., TruScribe

13. Highlight Company Values On Their Preferred Platforms

Gen Z grew up with an instant source of data at their fingertips that they can use to respond to your sales tactics. To create powerful marketing messages that resonate well with them, highlight your company’s values and the social good you provide. Tailor your messaging on each social media platform they use and provide quick but meaningful information to capture their attention. - Joey Holt, Amerisleep

Multi-level marketing (MLM), also called pyramid schemes,^[1][2]network marketing,^[2][3] and referral marketing,^[4] is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company's products/services, while the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.

Although each MLM company dictates its own specific financial compensation plan for the payout of any earnings to their respective participants, the common feature that is found across all MLMs is that the compensation plans theoretically pay out to participants only from two potential revenue streams. The first is paid out from commissions of sales made by the participants directly to their own retail customers. The second is paid out from commissions based upon the wholesale purchases made by other distributors below the participant who have recruited those other participants into the MLM; in the organizational hierarchy of MLMs, these participants are referred to as one's down line distributors.^[5]

MLM salespeople are, therefore, expected to sell products directly to end-user retail consumers by means of relationship referrals and word of mouth marketing, but most importantly they are incentivized to recruit others to join the company's distribution chain as fellow salespeople so that these can become down line distributors.^[3][6][7] According to a report that studied the business models of 350 MLMs, published on the Federal Trade Commission's website, at least 99% of people who join MLM companies lose money.^[8][9] Nonetheless, MLMs function because downline participants are encouraged to hold onto the belief that they can achieve large returns, while the statistical improbability of this is de-emphasised. MLMs have been made illegal or otherwise strictly regulated in some jurisdictions as a mere variation of the traditional pyramid scheme, including in mainland China.^[10][11]

• 1Business model
• 6Legality and legitimacy
  • 6.1United States

Business model[edit]

Participant profits and losses[edit]

The overwhelming majority of MLM participants (most sources estimated to be over 99.25% of all MLM distributors) participate at either an insignificant or nil net profit.^[12] Indeed, the largest proportion of participants must operate at a net loss (after expenses are deducted) so that the few individuals in the uppermost level of the MLM pyramid can derive their significant earnings. Said earnings are then emphasized by the MLM company to all other participants to encourage their continued participation at a continuing financial loss.^[13]

Participant financial loss, company financial gain[edit]

The end result of the MLM business model is, therefore, one of a company (the MLM company) selling its products and services through a non-salaried workforce ('partners') working for the MLM company on a commission-only basis while the partners simultaneously constitute the overwhelming majority of the very consumers of the MLM company's products and services that they, as participants of the MLM, are selling to each other in the hope of one day themselves being at the top of the pyramid. This creates great profit for the MLM company's actual owners and shareholders.

Many MLM companies do generate billions of dollars in annual revenue and hundreds of millions of dollars in annual profit. However, the profits of the MLM company are accrued at the detriment to the majority of the company's constituent workforce (the MLM participants). Only some of said profit is then significantly shared with individual participants at the top of the MLM distributorship pyramid. The earnings of those top few participants is emphasized and championed at company seminars and conferences, thus creating an illusion of how one can potentially become financially successful if they become a participant in the MLM. This is then advertised by the MLM company to recruit more distributors to participate in the MLM with a false anticipation of earning margins which are in reality merely theoretical and statistically improbable.^[14]

Although an MLM company holds out those few top individual participants as evidence of how participation in the MLM could lead to success, the reality is that the MLM business model depends on the failure of the overwhelming majority of all other participants, through the injecting of money from their own pockets, so that it can become the revenue and profit of the MLM company, of which the MLM company shares only a small proportion of it to a few individuals at the very top of the MLM participant pyramid. Participants, other than the few individuals at the top, provide nothing more than their own financial loss for the company's own profit and the profit of the top few individual participants.^[15]

Financial independence[edit]

The main sales pitch of MLM companies to their participants and prospective participants is not the MLM company's products or services. The products/services are largely peripheral to the MLM model. Rather, the true sales pitch and emphasis is on a confidence given to participants of potential financial independence through participation in the MLM, luring with phrases like 'the lifestyle you deserve' or 'independent distributor.'^[16] Erik German's memoir My Father's Dream documents the real life failures of German's father as he is lured into 'get-rich-quick' schemes such as Amway.^[17] The memoir illustrates the multi-level marketing sales principle known as 'selling the dream'.^[18]

Although emphasis is always made on the potential of success and the positive life change that 'might' or 'could' (not 'will' or 'can') result, it is only in otherwise difficult to find disclosure statements (or at the very least, difficult to read and interpret disclosure statements), that MLM participants are given fine print disclaimers that they as participants should not rely on the earning results of other participants in the highest levels of the MLM participant pyramid as an indication of what they should expect to earn. MLMs very rarely emphasize the extreme likelihood of failure, or the extreme likelihood of financial loss, from participation in MLM. MLMs are also seldom forthcoming about the fact that any significant success of the few individuals at the top of the MLM participant pyramid is in fact dependent on the continued financial loss and failure of all other participants below them in the MLM pyramid.

Comparisons to pyramid schemes[edit]

MLMs have been made illegal in some jurisdictions as a mere variation of the traditional pyramid scheme, including in China.^[10][11] In jurisdictions where MLMs have not been made illegal, many illegal pyramid schemes attempt to present themselves as MLM businesses.^[7] Given that the overwhelming majority of MLM participants cannot realistically make a net profit, let alone a significant net profit, but instead overwhelmingly operate at net losses, some sources have defined all MLMs as a type of pyramid scheme, even if they have not been made illegal like traditional pyramid schemes through legislative statutes.^[4][19][20]

MLMs are designed to make profit for the owners/shareholders of the company, and a few individual participants at the top levels of the MLM pyramid of participants. According to the U.S. Federal Trade Commission (FTC), some MLM companies already constitute illegal pyramid schemes even by the narrower existing legislation, exploiting members of the organization.^[21] There have been calls in various countries to broaden existing anti-pyramid scheme legislation to include MLMs, or to enact specific anti-MLM legislation to make all MLMs illegal in parallel to pyramid schemes, as has already been done in some jurisdictions.^{[citation needed]}

The legal distinction between MLMs and traditional pyramid schemes has been characterized by many authorities as a legal fiction. Jurisdictions that retain a legal distinction between MLM pyramid businesses versus illegal pyramid schemes retain said distinction on two key distinguishing features: 1) that MLMs always encompass the sale of actual products/services, while traditional illegal pyramid schemes ordinarily do not (though sometimes they do), and 2) that climbing an MLM pyramid is overwhelmingly statistically improbable (especially to its highest participant levels) but not theoretically impossible, whereas climbing a traditional illegal pyramid scheme is both statistically and theoretically impossible.^{[citation needed]}

Employment law[edit]

MLM salespeople are not employees of the MLM company. Participants do not derive a salary/wage, nor do participants receive remuneration from the MLM company for their invested labor and expenses in their MLM 'independent business'. The income of participants, if any income is made at all, is derived only from commissions on their personal sales or their share of the commissions on the personal sales of their downlines (the MLM compensation structure).

As non-employees, participants are not protected by legal rights of employment law provisions. Instead, salespeople are typically presented by the MLM company as 'independent contractors' or 'independent business owners'. However, participants do not possess a business in the traditional legal sense, as the participants do not hold any tangible business assets or intangible business goodwill able to be sold or purchased in a sale or acquisition of a business. These are the property of the MLM company.

Lawsuits[edit]

Companies that use the MLM business model have been a frequent subject of criticism and lawsuits. Legal claims against MLMs have included, among other things:

• their similarity to traditional illegal pyramid schemes
• price fixing of products or services,
• collusion and racketeering in backroom deals where secret compensation packages are created between the MLM company and a few individual participants, to the detriment of others
• high initial entry costs (for marketing kit and first products),
• emphasis on recruitment of others over actual sales (especially sales to non-participants)
• encouraging if not requiring members to purchase and use the company's products,
• exploitation of personal relationships as both sales and recruiting targets,
• complex and exaggerated compensation schemes,
• false product claims
• the company or leading distributors making major money off participant-attended conventions, training events and materials, advertising materials, and
• cult-like techniques which some groups use to enhance their members' enthusiasm and devotion.^[4][22]

Direct selling versus network marketing[edit]

'Network marketing' and 'multi-level marketing' (MLM) have been described by author Dominique Xardel as being synonymous, with it being a type of direct selling.^[6] Some sources emphasize that multi-level marketing is merely one form of direct selling, rather than being direct selling.^[23][24] Other terms that are sometimes used to describe multi-level marketing include 'word-of-mouth marketing', 'interactive distribution', and 'relationship marketing'. Critics have argued that the use of these and other different terms and 'buzzwords' is an effort to distinguish multi-level marketing from illegal Ponzi schemes, chain letters, and consumer fraud scams.^[25]

The Direct Selling Association (DSA), a lobbying group for the MLM industry, reported that in 1990 only 25% of DSA members used the MLM business model. By 1999, this had grown to 77.3%.^[26] By 2009, 94.2% of DSA members were using MLM, accounting for 99.6% of sellers, and 97.1% of sales.^[27] Companies such as Avon, Electrolux, Tupperware,^[28] and Kirby were all originally single-level marketing companies, using that traditional and uncontroversial direct selling business model (distinct from MLM) to sell their goods. However, they later introduced multi-level compensation plans, becoming MLMs.^[23] The DSA has approximately 200 members^[29] while it is estimated there are over 1,000 firms using multi-level marketing in the United States alone.^[30]

History[edit]

The origin of multi-level marketing is often disputed; but multi-level marketing style businesses existed in the 1920s,^[31] 1930s California Vitamin Company,^[32] (later named Nutrilite) or California Perfume Company (renamed as 'Avon Products').^[33]

Setup[edit]

Independent non-salaried participants, referred to as distributors (variously called 'associates', 'independent business owners', 'independent agents', etc.), are authorized to distribute the company's products or services. They are awarded their own immediate retail profit from customers plus commission from the company, not downlines, through a multi-level marketing compensation plan, which is based upon the volume of products sold through their own sales efforts as well as that of their downline organization.

Independent distributors develop their organizations by either building an active consumer network, who buy direct from the company, or by recruiting a downline of independent distributors who also build a consumer network base, thereby expanding the overall organization.

The combined number of recruits from these cycles are the sales force which is referred to as the salesperson's 'downline'. This 'downline' is the pyramid in MLM's multiple level structure of compensation.^[6]

Assuming the blue individual recruits five, and those five recruit their own five, and so on, the maximum theoretical cycles of recruits possible in the 'downline' of the blue individual is 14 cycles (5¹⁴ = 6.1 billion people), after which point the total human population is exceeded.

Income levels[edit]

Several sources have commented on the income level of specific MLMs or MLMs in general:

• The Times: 'The Government investigation claims to have revealed that just 10% of Amway's agents in Britain make any profit, with less than one in ten selling a single item of the group's products.'^[34]
• Eric Scheibeler, a high level 'Emerald' Amway member: 'UK Justice Norris found in 2008 that out of an IBO [Independent Business Owners] population of 33,000, 'only about 90 made sufficient incomes to cover the costs of actively building their business.' That's a 99.7 percent loss rate for investors.'^[35]
• Newsweek: based on Mona Vie's own 2007 income disclosure statement 'fewer than 1 percent qualified for commissions and of those, only 10 percent made more than $100 a week.'^[36]
• Business Students Focus on Ethics: 'In the USA, the average annual income from MLM for 90% MLM members is no more than US $5,000, which is far from being a sufficient means of making a living (San Lian Life Weekly 1998)'^[37]
• USA Today has had several articles:

• 'While earning potential varies by company and sales ability, DSA says the median annual income for those in direct sales is $2,400.'^[38]
• In an October 15, 2010 article, it was stated that documents of a MLM called Fortune Hi-Tech Marketing reveal that 30 percent of its representatives make no money and that 54 percent of the remaining 70 percent only make $93 a month, before costs. Fortune was under investigation by the Attorneys General of Texas, Kentucky, North Dakota, and North Carolina with Missouri, South Carolina, Illinois, and Florida following up complaints against the company.^[39] The FTC eventually stated that Fortune Hi-Tech Marketing was a pyramid scheme and that checks totaling more than $3.7 million were being mailed to the victims.^[40]
• A February 10, 2011 article stated 'It can be very difficult, if not impossible, for most individuals to make a lot of money through the direct sale of products to consumers. And big money is what recruiters often allude to in their pitches.'^[41]
• 'Roland Whitsell, a former business professor who spent 40 years researching and teaching the pitfalls of multilevel marketing': 'You'd be hard-pressed to find anyone making over $1.50 an hour, (t)he primary product is opportunity. The strongest, most powerful motivational force today is false hope.'^[41]

• A 2018 poll of 1,049 MLM sellers across various companies found that most sellers make less than the equivalent of 70 cents an hour. Nearly 20 percent of those polled never made a sale, and nearly 60 percent earned less than $500 in sales over the past five years.^[42][43] Nearly 32 percent of those polled acquired credit card debt to finance their MLM involvement.^[44]

Legality and legitimacy[edit]

United States[edit]

MLM businesses operate in all 50 U.S. states. Businesses may use terms such as 'affiliate marketing' or 'home-based business franchising'. Many pyramid schemes attempt to present themselves as legitimate MLM businesses.^[7] Some sources say that all MLMs are essentially pyramid schemes, even if they are legal.^[4][19][20]

The U.S. Federal Trade Commission (FTC) states: 'Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people—except perhaps those at the very top of the pyramid—end up empty-handed.'^[45]

In a 2004 Staff Advisory letter to the Direct Selling Association, the FTC states:

Much has been made of the personal, or internal, consumption issue in recent years. In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme. The critical question for the FTC is whether the revenues that primarily support the commissions paid to all participants are generated from purchases of goods and services that are not simply incidental to the purchase of the right to participate in a money-making venture.^[46]

The Federal Trade Commission warns 'Not all multilevel marketing plans are legitimate. Some are pyramid schemes. It's best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.'^[21]

Criticism[edit]

The Federal Trade Commission issued a decision, In re Amway Corp., in 1979 in which it indicated that multi-level marketing was not illegal per se in the United States. However, Amway was found guilty of price fixing (by effectively requiring 'independent' distributors to sell at the same fixed price) and making exaggerated income claims.^[47][48] The FTC advises that multi-level marketing organizations with greater incentives for recruitment than product sales are to be viewed skeptically. The FTC also warns that the practice of getting commissions from recruiting new members is outlawed in most states as 'pyramiding'.^[49]

The maze runner 3 release date. In April 2006, the FTC proposed a Business Opportunity Rule intended to require all sellers of business opportunities—including MLMs—to provide enough information to enable prospective buyers/participants to make an informed decision about acquiring/joining a business venture with information disclosed about the average likelihood of monetary profitability (and the extent of monetary profitability, if any) of acquiring/joining the business venture. In March 2008, however, the FTC removed 'Network Marketing' (i.e. MLM) companies from the proposed Business Opportunity Rule, thus leaving MLM participants without the ability to make an informed choice of entering or not entering MLMs based on the disclosed likelihood of success and profitability:

The revised proposal, however, would not reach multi-level marketing companies or certain companies that may have been swept inadvertently into scope of the April 2006 proposal.^[50]

Walter J. Carl stated in a 2004 Western Journal of Communication article that 'MLM organizations have been described by some as cults (Butterfield, 1985),^[51] pyramid schemes (Fitzpatrick & Reynolds, 1997),^[52] or organizations rife with misleading, deceptive, and unethical behavior (Carter, 1999),^[53] such as the questionable use of evangelical discourse to promote the business (Höpfl & Maddrell, 1996),^[54] and the exploitation of personal relationships for financial gain (Fitzpatrick & Reynolds, 1997)'.^[52][55] In China, volunteers working to rescue people from the schemes have been physically attacked.^[56]

MLMs are also criticized for being unable to fulfill their promises for the majority of participants due to basic conflicts with Western cultural norms.^[57] There are even claims that the success rate for breaking even or even making money are far worse than other types of businesses:^[58] 'The vast majority of MLMs are recruiting MLMs, in which participants must recruit aggressively to profit. Based on available data from the companies themselves, the loss rate for recruiting MLMs is approximately 99.9%; i.e., 99.9% of participants lose money after subtracting all expenses, including purchases from the company.'^[58] In part, this is because encouraging recruits to further 'recruit people to compete with [them]'^[4] leads to 'market saturation.'^[22] It has also been claimed '(b)y its very nature, MLM is completely devoid of any scientific foundations.'^[59]

Because of the encouraging of recruits to further recruit their competitors, some people have even gone so far as to say at best modern MLMs are nothing more than legalized pyramid schemes^[4][19][20] with one stating 'Multi-level marketing companies have become an accepted and legally sanctioned form of pyramid scheme in the United States'^[19] while another states 'Multi-Level Marketing, a form of Pyramid Scheme, is not necessarily fraudulent.'^[20] In October 2010 it was reported that multilevel marketing companies were being investigated by a number of state attorneys general amid allegations that salespeople were primarily paid for recruiting and that more recent recruits cannot earn anything near what early entrants do.^[60] Industry critic Robert L. FitzPatrick has called multi-level marketing 'the Main Street bubble' that will eventually burst.^[61]

China[edit]

Multi-level marketing (simplified Chinese: 传销; traditional Chinese: 傳銷; pinyin: chuán xiāo) was first introduced to China by American, Taiwanese, and Japanese companies following the Chinese economic reform of 1978. This rise in multi-level marketing's popularity coincided with economic uncertainty and a new shift towards individual consumerism. Multi-level marketing was banned on the mainland by the government in 1998, citing social, economic, and taxation issues.^[62] Further regulation 'Prohibition of Chuanxiao' (where MLM is a type of Chuanxiao) was enacted in 2005; clause 3 of Chapter 2 of the regulation states having downlines is illegal.^[11] O'Regan wrote 'With this regulation China makes clear that while Direct Sales is permitted in the mainland, Multi-Level Marketing is not'.^[10]

MLM companies have been trying to find ways around China's prohibitions, or have been developing other methods, such as direct sales, to take their products to China through retail operations. The Direct Sales Regulations limit direct selling to cosmetics, health food, sanitary products, bodybuilding equipment and kitchen utensils. And the Regulations require Chinese or foreign companies ('FIEs') who intend to engage into direct sale business in mainland China to apply for and obtain direct selling license from the Ministry of Commerce ('MOFCOM').^[63] In 2016, there are 73 companies, including domestic and foreign companies, that have obtained the direct selling license.^[64] Some multi-level marketing sellers have circumvented this ban by establishing addresses and bank accounts in Hong Kong, where the practice is legal, while selling and recruiting on the mainland.^[10][65]

It was not until August 23, 2005 that the State Council promulgated rules that dealt specifically with direct sale operation- Administration of Direct Sales (entered into effect on 1 December 2005) and the Regulations for the Prohibition of chuanxiao (entered into effect on 1 November 2005). When direct selling is allowed, it will only be permitted under the most stringent requirements, in order to ensure the operations are not pyramid schemes, MLM, or fly-by-night operations.

See also[edit]

References[edit]

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   Mendelsohn, Martin (2004). The guide to franchising. Cengage Learning Business Press. p. 36. ISBN1-84480-162-4.
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