Introduction
Origins of Multi-Level Marketing: A Historical Overview
There is often a significant dispute on when multi-level marketing businesses started. However, the concept is initially linked to Nutralite, formerly California Vitamin Company (Penrod, 2021). The concept’s background is pinned to the 1920s and the 1930s when the company integrated the marketing style into its overall strategy (Penrod, 2021). Over time, various businesses have adopted the approach, leading to growing concerns about its effectiveness and effects.
Despite such a rich history, most of these businesses have come under heavy criticism regarding their negative impact on young people. In fact, in 2016, Vemma Nutrition was shut down by the Federal Trade Commission (FTC) for operating a scheme that exclusively targeted young adults and college students (Penrod, 2021). This shows how much the young generation is the primary target for this booming business.
Vulnerabilities and Consequences for Young Participants
The younger generation has been seen as an easy pick for these firms due to their thirst to make quick money, energy to network, and overall drive. Furthermore, they are more vulnerable to these because they lack financial literacy and are easily exploited and misled by the easy money promises and financial freedom these firms sell.
As a result, as revealed by Nadlifatin et al. (2022), out of the 90% who participate in these networking opportunities for money, 73% lose money or make none at all. Of these, 57% are young people, and considering that most lack stable jobs and are still wholly dependent on their parents, this leaves them distraught and depressed (Nadlifatin et al., 2022).
Additionally, these schemes lead some individuals to commit crimes to source the money required to invest or to recoup whatever they might have lost in the system. Worse still, these schemes lead to strained relationships mainly because most young individuals often recruit their friends and family with the promise of money (DeLiema et al., 2018). When those they recruit do nothing, they always bear the weight, which can be frustrating, leading to strained relationships.
Proposed Solutions and the Role of the U.S. Small Business Administration
Considering the range of mental, financial, and even physical issues that young individuals deal with from these schemes, finding credible and reliable solutions without hurting the firms while ensuring that the negative impacts are not translated to their target clients is critical. As such, the U.S. Small Business Administration (SBA) must invest in proper research to solve this ongoing puzzle and ensure that the young do not have to endure the problems these companies bring.
Through its investment, the SBA will automatically meet its mission of supporting and empowering the youth in small businesses. Additionally, it will be viewed as a more credible institution with great trust from the larger U.S. population. This research will serve as a consumer protection initiative, and ethical business practices will also be promoted. Moreover, such research will help promote fair competition, which will help SBA promote better access and serve its target population better.
Project Focus: Regulating Multi-Level Marketing and Protecting Youth
In this regard, this project focuses on finding the various pathways that SBA can apply to save the youths from exploitation and the multiple vulnerabilities they are exposed to as they engage with multi-level marketing businesses through a thorough analysis of these businesses and an evaluation of this style. In this way, the SBA will find a way to regulate such companies while prioritizing the needs of the young generation, who form a critical part of the creative and innovative force that the SBA looks to fund. Further, by identifying these initiatives and programs, SBA will be in less legal trouble with the FTC and the Securities Exchange Commission (SEC) for funding such multi-level marketing businesses without proper regulation.
Research Methodology
To satisfy the primary objective of this project, the central methodology will be a review of all relevant and credible literature on the operations of multi-level marketing businesses. This will then be narrowed down to why the youths are primarily victims of these businesses. By understanding these aspects of these firms and their relativity to the younger generation, it will be easier to identify a proper solution to these issues and develop a technique that will reliably help to solve the problem and meet the requirements of the research topic. Besides, it will be easier to identify why only a few benefits and find a way of bridging this gap. The sources will be drawn from Google Scholar, the Utah Business website, and the Montgomery College Library website.
Undoubtedly, multi-level marketing businesses are in it for profitability and must identify the best target audience to deliver the most outstanding profitability at a relatively low investment. However, these companies must reflect on the ethical side of their operations and their overall impact on the 99% of the youth that gets little to no return on the time and money that they invest in these companies. Through the research, the SBA will identify some of the techniques it can use to achieve its vision and objectives to ensure that the young are not left entirely disadvantaged by these businesses.
Peer-Reviewed Research Studies
Bosley, S. A., Greenman, S., & Snyder, S. (2019). Voluntary disclosure and earnings expectations in multi‐level marketing. Economic Inquiry, 58(4), 1643–1662. Web.
This article investigates the impact of voluntary disclosures made by multi-level marketing companies on the earnings expectations of their distributors. The authors note the sales model these firms use involves distributors earning money through their sales and those of other people recruited into their network. The study establishes that voluntary disclosures, including information on income and the products involved, positively affect the expectations of distributors and put them in a better position not to suffer extensively in case of loss. The study also establishes that such voluntary disclosures are made in easily understandable and salient formats that are far-reaching and comprehensive. In this regard, the authors suggest that such firms can use this technique to strategically influence distributors’ behavior and expectations while encouraging regulators to consider it a requirement.
DeLiema, M., Shadel, D., Nofziger, A., & Pak, K. (2018). AARP study of multi-level marketing: Profiling participants and their experiences in direct sales. AARP Foundation. Web.
The article discusses the results of a study by the AARP Foundation to investigate the experiences of multi-level marketing (MLM) program participants. The research aimed to identify the demographics, motives, experiences, and financial results of MLM members. Participants were questioned about their MLM experiences, including their motivations for joining, the items they sold, the amount of time and money they committed to their company, and their overall happiness with the MLM opportunity. It was determined that most MLM participants were females, averaging 58 years. They were inspired to join MLM programs by the possibility of earning more cash, the ability to work from home, and the chance to interact with others.
In addition, health and wellness items were the most popular products sold by MLM members, followed by beauty and personal care products. The authors discovered that these individuals spent a significant amount of time and money in their enterprises, with the majority earning far less than anticipated. 40% of participants reported feeling pushed to purchase items or recruit new members, while 37% reported not receiving sufficient training or assistance from their MLM organization.
Nadlifatin, R., Persada, S. F., Clarinda, M., Handiwibowo, G. A., Laksitowati, R. R., Prasetyo, Y. T., & Perwira Redi, A. A. (2022). Social Media-based online entrepreneurship approach on millennials: A measurement of Job Pursuit intention on multi-level marketing. Procedia Computer Science, 197, 110–117. Web.
This article explores social media’s impact on millennials’ job pursuit intention, specifically in the multi-level marketing context. As such, a survey involving 186 respondents was conducted to determine the factors influencing millennials’ job pursuit intention and social media’s effect on multi-level marketing. The findings suggest that social media positively impacts millennials’ job pursuit in these businesses. The platform offers a low-cost approach to establishing a business and providing a massive customer base. The factors identified included trust, self-efficacy, social media usage intensity, and entrepreneurial orientation, which were critical for such businesses in selecting millennials as distributors.
Pavelko, R. L., & Barker, C. (2022). It really works! Qualitative content analysis of multi-level marketing organizations’ online promotional messaging and recruitment strategies. Women’s Studies in Communication, 45(3), 399–421. Web.
This study examines multi-level marketing organizations’ recruitment strategies and promotional messaging. The study found that these firms use multiple methods for their product promotion and recruitment of new members. One of the critical themes identified was financial success emphasis, followed by testimonials and personal stories. The study also found that these firms look at exploiting social norms and expectations centered on family and gender roles with imagery and language that reinforces heteronormativity and gender stereotypes also a critical point. The authors argue that these techniques can be problematic considering these programs’ associated high financial rates and risks.
Penrod, E. (2020). Only 6% of MLM consultants sell full-time. Utah Business. Web.
This article provides an overview of multi-level marketing and discusses its legal status and some criticisms of it as a pyramid scheme. Challenges such as negative industry perception and high turnover rate of salespeople are also identified. The article also includes interviews with those with negative and positive experiences and the financial aspects involved. Ethical considerations of these businesses are also discussed, including the need for transparency in the industry with an emphasis on complete information and greater regulation.
Research Source Synthesis
The sources show that SBA can implement various solutions to ensure that young people’s vulnerabilities in dealing with multi-level businesses are covered and prevented. Per the study by Bosley et al. (2019), one of the best ways to preserve the interests of primarily youthful distributors is through voluntary disclosures of the expected incomes and information on products in a salient and understandable manner. This ensures that these individuals know what to risk and expect from their dealings so that cases of people losing all their money are prevented (DeLiema et al., 2018).
This calls for regulators and bodies such as SBA to ensure that businesses are tasked to disclose such information to clients without using emotional manipulations and promises about money-making that are often unbacked. As such, SBA might have to engage in thorough financial literacy education and empowerment targeting the younger generation and these firms to ensure a proper understanding of what is expected. This aligns with the need for transparency recommended by Penrod (2020). With these, these young individuals have more excellent knowledge and financial awareness of what to expect and make their investment decisions with more rationality.
It is also critical to consider regulating the recruitment strategies and promotional messaging utilized by multi-level marketing organizations, as identified by Pavelko and Barker (2022). The authors note that the techniques used are pretty unorthodox and require regulation to prevent the firms from exploiting their distributors through emotional and gender based-manipulation techniques. This is why Nadlifatin et al. (2022) talk of the need for increased consideration of trust, self-efficacy, social media usage intensity, and entrepreneurial orientation when this generation and these businesses are involved. With an emphasis on these areas, the SBA can restore sanity to these businesses and ensure the youth are protected.
Plan for Work
Research Team
The execution of this project will require five key individuals. The first will be the project manager, who is responsible for planning the research project and assembling and managing the research team. This individual will also be essential to data collection, analysis, developing recommendations, and communicating findings. The other will be a researcher who will develop research questions, design the research techniques, and the data collection and analysis process.
There will also be a principal investigator and co-investigator who will work hand in hand to evaluate and assess the successes and failures of these businesses and find credible pathways to ending the exploitation of these firms. A professional volunteer in this marketing style will also be a pivotal addition to the team to ensure that everything provided is credible. Through salaries, data collection, and survey costs, the project will cost about $250,000. This will also cover transportation, internet costs, incentives to young people involved, and other general hidden research costs.
Research Timeline
Additionally, the project will require about 14 weeks to be completed. The first two weeks will be for the preparation and the initial briefing. This will be followed by a week of identification of methods to solve the problem in question. In week 4, a preliminary of what is discussed will be presented to the funder to prepare them for what to expect from the project. Between weeks 5 and 9, data collection will include a review of all relevant literature. The next three weeks will involve data analysis and preparation of the final proposal document. Week 14 will present the report and its findings to the funder. A detailed report of this plan is provided in the attachments section.
Description of Deliverable Document
The final study report on the many paths that SBA may employ to safeguard youngsters from the exploitation and vulnerabilities connected with multi-level marketing firms will give a complete analysis of these businesses and assess the efficacy of recommended techniques. It will contain both qualitative and quantitative data to support the results. Statistical data will be supplied in the form of comparative charts, tables, and graphs to highlight the effect of the recommended strategies on minimizing the exploitation and susceptibility of youngsters working in multi-level marketing firms (Busetto et al., 2020).
Moreover, the research will show the success rate of these strategies in reducing youth exploitation and improving awareness about the hazards connected with these firms. In this regard, the statistics will indicate how the recommended ways may help prevent youngsters from the harmful influence of these firms and will show the amount of money that can be saved by applying these strategies. As such, the research project will be a significant resource for groups striving to safeguard the young and improve their well-being.
Conclusion
SBA is one of the few firms that look into protecting the interests of small businesses and addressing any concerns linked to them. As such, the youth constitute a significant population that it deals with as they are the ones that won most of the small businesses. Furthermore, most multi-level marketing businesses are minor, and thus, their role in looking at the concerns raised by these firms is critical.
The funding and the opportunity that it provides through this project shows that it has the interests of all parties involved while also ensuring that the youth are not exploited and while also keeping these businesses in check to remain within the requisite regulatory framework that is grounded in law and the requisite business ethics.