Tune in to 20/20 on ABC on Friday October 2 for a story on the truth behind Mary Kay’s multi-level marketing “opportunity.” MLM is not a business opportunity, it’s a clever scam that has been made to look like a business. Host Rebecca Jarvis takes a look at long-time multi-level predator Mary Kay Cosmetics. Those on the side of MLM say you can make “unlimited” money on your own terms, while those who are on the opposite side have found that 99% of distributors actually lose money.
Over 9 years ago, I started the website “Pink Truth” to help educate consumers about the truth behind Mary Kay Inc. Four long-time Pink Truth members were interviewed at length for they story. They were all sales directors, and therefore part of the “top 2% of Mary Kay.” These women are part of the Mary Kay Cosmetics success story. Or are they? The truth is that the majority of the sales directors are barely making a minimum wage living, while some of them are actually losing money.
This story digs into the Mary Kay con that has been crafted and refined for over 50 years. Please take the time to watch this story. And if you have any friends or family involved in multi-level marketing, please encourage them to watch too.
Questions posed to Herbalife earlier this year by David Einhorn sent the stock price down quickly. Einhorn simply wanted to know about customers… actual consumers of the Herbalife products.
One has to assume Einhorn has done lots of research on multi-level marketing. And he knows the real deal. Herbalife’s customers are the distributors. Corporate doesn’t care much if the products get to a real customer after that. They’ve already made their sale and collected their money.
Multi-level marketing has very little to do with selling the product, and relies almost exclusively on continual recruitment of new distributors. But the product is important to make the MLMs not look like pure pyramid schemes. Continue reading
Over on my public awareness site Pink Truth, we’re often asked about whether someone can make money with Mary Kay Cosmetics. After all, they’ve got a product that you can retail, and you don’t really have to recruit, do you?
In theory, you can make money with Mary Kay. In reality, most women (upwards of 99%) actually put more money into MK than they ever get out of it. There is a tiny fraction of women (something like five one-hundredths of one percent) who make an executive income with Mary Kay. There’s another fraction of one percent that make a little money…. typically in the neighborhood of $20,000 to $25,000 a year. Continue reading
The success of multi-level marketing companies and pyramid schemes has been based partly upon favorable media coverage of the industry. The MLMs put out plenty of positive press releases, resulting in numerous fluff pieces in newspapers and magazines over the years.
Mary Kay Cosmetics encourages fluff pieces, especially whenever a new Mary Kay national sales director is appointed. The company hounds local newspapers to run these stories, and the newspapers fall for the bait that makes the stories sound compelling: only 500 national sales directors worldwide, millions of dollars of products “sold” by the teams created by these women, huge accomplishment to get to the top of the pyramid, etc.
But this article in the Salt Lake Tribune turned out a little differently than Mary Kay intended it. Thanks to the investigative reporting by Steven Oberbeck, he got readers to consider the “other side” of the Mary Kay issue. Continue reading
This is outrageous! Touch of Pink Cosmetics is a company that buys excess inventory from current and former Mary Kay consultants and then resells it to their customers. They basically help these people who were frontloaded with tons of product, purchasing it from them at a discount and then passing those savings on to consumers. It’s a win for everyone: consultant unloads useless overstock, customer gets a discounted product, and Touch of Pink makes a little money in the process.
But Mary Kay wants to stop the whole thing! Details on my consumer awareness site, Pink Truth.
Over on my consumer awareness site, Pink Truth, I have put together a few articles about Primerica Financial Services.
Like Mary Kay, Usana, and Mannatech, Primerica is a multi-level marketing company (MLM). The big difference, however, is that these other companies have a tangible product for sale, and many of the abuses come from loading participants with inventory they won’t ever be able to sell.
Primerica sells insurance (mostly life insurance), mutual funds, mortgages, and debt consolidation services. It appears that “debt consolidation” is the cash cow for the company, and it’s questionable whether consumers are really better off with the Primerica products than without. (i.e. The representatives are incentivized to push these products, even if it may actually cost the consumer more money!) Continue reading
A fluff piece about a Mary Kay Cosmetics distributor in the Springfield News Sun this morning mentions my website, pinktruth.com. The fluff piece focuses on a woman who drives a “Mary Kay car” and reportedly has good pay. Yet at this woman’s level in the distributorship chain, she is probably making less than $20,000 a year.
Here’s the mention of my consumer education site:
The Web site PinkTruth.com, established by Tracy Coenen, a forensic accountant and former sales consultant, offers opinions and experiences from women who have been members of the sales force and opted out.
On the site, Coenen listed her major concerns about what she believes is a multi-level marketing operation. “Incomplete information given during the recruiting process, unsubstantiated earnings claims, and pushing large quantities of inventory on new recruits” round out her list.
Willa Eichelman, a division chief with the Air Force at Wright Patterson Air Force Base and Enon resident, has heard the claims, but feels every woman involved can make her own decision. Working as a sales consultant under Stevens for the past year, Eichelman said she did not feel forced to take on a large inventory she could not afford.
She decided to carry an inventory so she could fill customer orders immediately. “It’s a personal business decision. It was suggested to me when I started, but not required,” she said.
The problem with the “optional” inventory, is that so many women are strongly led to believe they cannot succeed without it. And who goes into business to fail? New consultants are frequently overloaded with too much product, and it sits on the shelves due to the very small market of actual retail customers.
In late November, I announced that I had been appointed to the Board of Advisors of Pyramid Scheme Alert (PSA). PSA is an organization dedicated to educating consumers about multi-level marketing companies and pyramid schemes. While MLMs are technically legal in the United States, the vast majority of them are nothing more than product-based pyramid schemes which depend upon an endless chain of recruitment of new members.
I bring to the Board of Advisors my expertise as a fraud investigator, as well as in-depth knowledge of Mary Kay Cosmetics, a multi-level marketing company that’s been around for over 40 years. The founder of PSA, Robert FitzPatrick, is very selective in his appointments. Those who are on the board must have expertise relevant to MLMs and the mission of the organization. I’m honored to be a part of such a credentialed group.
I’ve been working to pull together information on Mary Kay for PSA. Mary Kay Inc. has been flying under the radar for years! The company has generally enjoyed a good reputation in the business community. Mary Kay Ash was well-respected because she was a shrewd businesswoman who developed this company from the ground up. Unfortunately, that has overshadowed the abusive nature of the business opportunity. People haven’t recognized that the MLM system utilized by Mary Kay is very profitable to the corporation itself, but very detrimental to the individual business owners.
PSA never really considered Mary Kay to be a company that they should look into. It just wasn’t “out there” as a recruiting scheme or product-based pyramid scheme. That’s where I come in. I’m putting together materials on the pay plan and recruiting, as well as some of the “official” and “unofficial” materials distributed by Mary Kay and its representatives.
My website Pink Truth strives to educate consumers and potential recruits about the grim reality of this pyramid scheme. I present daily posts about realities of Mary Kay, examining the real earnings of representatives, why the plan is abusive, and how millions of women a year are conned into putting money into this losing proposition.
Additionally, I’ve been working on some other things related to MLMs, and generally enjoying playing an active role in PSA. More to come…
Milwaukee, WI November 22, 2006 . Pyramid Scheme Alert announces that Tracy L. Coenen, CPA, MBA, CFE has been named to the organization.s Board of Advisors. Her consumer education website, PinkTruth.com, which exposes and analyzes the business and recruiting practices of Mary Kay and the plight of Mary Kay salespeople, has received over 4,000 visitors a day.
Pyramid Scheme Alert is one of the most widely recognized and highly respected organizations fighting against pyramid schemes and abusive multi-level marketing companies. The organization is led by Robert FitzPatrick, author of the book False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes. Continue reading