A friend of a friend of a friend is a phrase that perhaps best encapsulates the target market for a multilevel marketing (MLM) strategy. This sales model relies on independent contractors selling products (which they sometimes must pay to purchase upfront) to their own networks of friends and acquaintances, in return for commissions. They also have financial incentives to recruit others to work in similar roles. Reflecting ongoing controversy and negative press surrounding the sales model though, some well-known MLL companies are turning away from the practice. Rodan + Fields, which specializes in skincare, and Bodi, a fitness company, are two of the most high-profile examples.

Rodan + Fields plans to eliminate bonuses for further recruitments of additional sales representatives, in an effort to streamline operations and expand its appeal to a wider audience, according to company reports. The brand also plans to invest more in traditional advertising, including social media.  

Meanwhile, Bodi announced plans to switch to a traditional affiliate marketing program, such that each contractor will receive full commissions on future sales but will no longer receive a portion of the commission made by their recruits. In explaining the shift, the company asserted that the move would allow it to optimize its omnichannel model, by reducing costs and widening the reach of distribution.

But the rationales offered for these changes seem like only part of the story. The shifts are following years of scrutiny of MLM practices. High-profile documentaries have accused companies that engage in MLM of exploiting their sellers. Likewise, the Federal Trade Commission increased its oversight and sent warnings to companies that have made, through their often minimally trained sales representatives, dubious claims about the efficacy of their products.

Furthermore, Rodan + Fields is dealing with a class action suit in California, based on allegations that the company purposefully misclassified employees as independent contractors, in an effort to avoid distributing the commissions that the sellers were owed. Bodi instead has faced steadily declining revenue, after the company went public in 2021. In shifting its sales models, it seemingly is looking for a way to lower its supply-side costs and reduce its net losses to achieve a break-even point in its revenues.

Regardless of the rationale, these decisions reflect changing conditions in the marketplace. Today’s consumers seem to rejecting MLM and demanding different sales techniques; the sellers who once might have flocked to work for MLM companies seem to be demonstrating reduced tolerance of recruitment-based pay structures.

Discussion Questions 

1. What seems to be the biggest motivation to change the sales model? Is it the same for Rodan + Fields and Bodi? 
2. Are all multilevel marketing models inherently predatory? Should the practice be eliminated completely? Why or why not?

Sources: Kaarin Moore, “Rodan + Fields Announces New Business Model, Cuts 100 Jobs,” Retail Dive, July 17, 2024; Megan Graham, “Companies Like Tupperware Made Multilevel Marketing Famous. Now Some Newer MLMs Are Ditching It,” The Wall Street Journal, October 24, 2024; “Bodi to Transition from Multi-Level Marketing to Single-Level Affiliate Model,” Direct Selling News, October 1, 2024.