You've probably heard of NXIVM because it's made major headlines recently. It inspired productions like the Vow, Seduced: Inside the NXIVM Cult, and others.
But, how did NXIVM fail as an MLM company? What happened? Let's go through what NXIVM was, and what caused its downfall.
Keep reading to find out what you should know.
What Was NXIVM?
NXIVM was a multilevel marketing company, founded by Keith Raniere. He had previously started several pyramid schemes, including Consumers’ Buyline Inc and National Health Network, but none of them succeeded. He had previously been involved in multi-level marketing businesses such as Amway.
Raniere eventually stumbled on the idea for NXIVM, which provided executive success programs to entrepreneurs and the elite. The program was founded in 1990, as the Executive Success Program. NXIVM was a self-improvement program, that meant to help people achieve their goals and overcome their fears, among other goals.
How Did NXIVM Work?
Many members were recruited into these programs, and people gave large amounts of money to support NXIVM and allow it to expand. Because the group was invitation-only, it gave off a feeling of exclusivity that allowed it to attract more people. Once a person began taking courses, they would recruit their friends or influential people they knew to take courses as well.
The more classes you took as a part of NXIVM, the further you moved up in their rankings. The group distributed different colored sashes, based on the level you achieved at the company.
You could also get stripes between sashes, as you would as a child taking karate classes. The levels possible were student, coach, proctor, senior proctor, counselor, and senior counselor.
Of course, you had to pay to take the classes, which is a major part of how NXIVM made its money.
NXIVM also offered intensive programs, which could last five days, eleven days, a week, or two weeks. At these programs, days would last around 13 hours each day. NXIVM classes were held all over North America, including in various different cities in Mexico and Canada.
As people went through the program, they would be able to coach other people below them in the hierarchy — for a price, of course.
That makes it distinct from more successful multi-level-marketing companies, such as Tupperware, which recruit anyone regardless of their status and use affiliate marketing to produce more awareness of their products.
How Did NXIVM Fail?
NXIVM's problems weren't so much based on its business plan. NXIVM has powerful financial backers such as Seagram's heiresses Clare and Sara Bronfman. In fact, NXIVM probably would have lasted much longer, if it hadn't been for its major criminal and legal issues.
NXIVM is actually rather unique when it comes to multi-level marketing disasters — to put it bluntly, most MLM companies aren't also sex cults. Within NXIVM, there was a secret, exclusive sub-organization called DOS (otherwise known as the Vow) that only young women were inducted into.
Members of DOS were abused by NXIVM's leadership, which ultimately lead to NXIVM'S downfall. To put it bluntly, many members were coerced into sexual relations with Keith Raniere and/or other members of NXIVM's leadership.
DOS was just one of the sub-organizations of NXIVM. There were also men's-specific groups, groups for yoga, and the like. DOS was notable for the abusive conduct it entailed, which has been detailed in various articles, documentaries, and court documents.
Lessons to Learn From NXIVM
The main lesson people should learn from NXIVM is pretty obvious: don't start a sex cult within your multi-level marketing business. While you may want to work with people from other countries, it's important not to commit visa fraud in order to do so.
However, there are other lessons you can learn from NXIVM which may be more applicable. Casting a wide net and allowing lots of different people to be a part of your business tends to be a more sustainable business model, in the long run.
Professional image production was an important part of NXIVM. But, you need the substance to back up the style. Make sure that you always have a strong business plan when you're putting together your business, with backup options should you run into any problems.
NXIVM also used various forms of immigration fraud to subvert the laws and manipulate its members. While that may be a good way to cut costs, it's certainly very illegal to lie on the visa paperwork. So, no matter how much you want to save money, you'll probably want to stay away from committing crimes.
Where Is NXIVM Today?
NXIVM founder Keith Raniere, along with members Allison Mack, Nancy Salzman, Clare Bronfman, Kathy Russell, and Lauren Salzman, were all charged with crimes in association with their NXIVM involvement.
In October of 2020, Raniere was sentenced to life in prison for sex trafficking, conspiracy, and other charges. Clare Bronfman was sentenced to six years and nine months in prison for her crimes. Other members have pleaded guilty and are currently waiting for sentencing.
While some members of NXIVM remain, the group has mostly disintegrated, and its major financial and multi-level marketing activities have ended.
How Did NXIVM Fail as an MLM Company? Now You Know
Clearly, NXIVM had some major issues that caused it to fail as an MLM company. But, it still works as a great cautionary tale when you're trying to get your own business off the ground.
In order for you to develop your skills, you should consider taking a free or paid marketing course. There are a variety of digital marketing courses you can take from businesses that can help you enhance your skills. As of writing this, over 80,000 new marketers have taken the Online Business Builder Challenge (only $7), and that might be a good starting place for you as well.