If there is one business model that generates a lot of excitement and controversy in equal measure is the network marketing business model.
I suppose you might be thinking of going for that meeting or party where you will be shown the big picture of the business that you may be thinking of joining. Or perhaps you are already in and maybe you are not sure whether you are in the right place or just what the buzz is all about.
First, let me put your mind at rest. Network marketing as a business model is NOT a scam. According to Direct Sales Association, in 2017, 18.6 million people were involved in direct selling in the United States alone.
It does, however, suffer a very mixed reputation partly because numerous other companies have taken advantage of the business format to form illegal structures that operate as network marketing companies but offer no real products or services.
What is network marketing?
Network marketing, sometimes referred to as Multilevel marketing (MLM) is a business model that allows members who are affiliated to a particular company earn commissions on the sales made from a company’s services or products. Commissions are also paid for recruiting others to join the company.
Those who join your team are referred to as your downlines while the person whose team you join is your upline. Distributors are sometimes referred to as consultants, agents, IBOs- Independent business owners, affiliates or whatever fancy name the company wants to give them.
The origins of network marketing can be traced back from a California-based multiVitamin company called Nutrilite in the 1920’s. It’s now called nutriway and its part of the Amway corporation. The other company that features prominently from that era is Avon.
So, how does it all work?
Think of your local supermarket where you buy all your groceries. You walk in, pick the products you go to the cashier, pay and go home. Your supermarket will need to have a premises where they operate from. They will need to spend money on advertising and other expenditure so that the community knows of their presence.
So, they decide why not make a deal with the customer. Become part owner of the supermarket. Whenever you buy products from us we will pay you a small commission. Tell your friends about us and if they become customers you get a commission every time they buy from us.
If the friends of your friends join to customers as well, you still earn commissions for the sales they too generate. And the list goes on.
Sounds like a pyramid scheme. Sure does. You may want to call it pyramid selling.
The supermarket is paying you commissions because they don’t need to hire expensive premises or even advertise their products. You are doing all the advertising and distribution for them.
Early network marketers coined the word prosumer meaning product to the consumer. Technically you become a part owner of the business.
The term pyramid scheme was born out of popular culture and it’s not necessarily a scammy word like most people believe. The network marketing structure does indeed resemble a pyramid, given that one person is at the top and then there are those who join in under (downlines).
Many multi-level marketing companies are legitimate and operate within the law. Companies lie the Amway corporation has been around for close to eighty years and it grows bigger every year. It wouldn’t have lasted that long if it was some fraudulent company.
An interesting question by critics of the system that is always asked, So what happens when everybody joins in and there is no one else left to recruit?
Mary Kay, owner of a very successful multi-level marketing company once described the business as trying to fill your bath tub with the sinkhole open.
The truth is, not everyone will join and even for those who join, the majority will will drop out along the way. As a network marketer, it helps to understand that majority of the people you contact and invite will NOT join your business.
In fact, they say that probably 1 in 10 will join and there is no guarantee that they will stay or be active in the business.
The truth is as long as there is a demand for products and services, there will always be people to buy. People are like dust. They are everywhere. You are looking for those who will say YES. The YES’s eventually add up. You can never saturate the business.
Let Dave Ramsey will break it down for
There you go. Need I say more!
Ponzi Schemes, Illegal pyramid schemes
This is where the rubber meets the road. The network marketing structure is easy to duplicate and so some people have taken advantage of that and come up with companies that sell fictitious or downright useless products or services that offer no real tangible value and in the process ended up scheming millions of dollars from its members only for the top members to disappear when the structure finally crumbles.
Ponzi schemes always fizzle out and unfortunately not without casualties.
Do people succeed in network marketing?
YES, they do? In fact, there are millionaires many times over in the network marketing industry. However, success in network marketing is not just a walk in the park. It’s a numbers game. You will need to eat, sleep, walk, talk, the business when starting off before you start seeing the money. The idea is to contact and invite as many people as possible as you can to take a look at the business.
What you will looking for are people that will duplicate what you are doing and help you grow the business. Your business will not grow if you have signed in ten people on your team who are doing nothing.
How long does it take to succeed?
Many companies talk of a two to five-year plan. They advise you to contact at least 2 people a day spend at least 5 to 10 hours a week building the business.
Do you really want to succeed in network marketing? You need to go way above those parameters. As I said earlier, it’s a numbers game. You will need to meet and talk to as many people as you can. There is no shortcut to that.
With the growth of social media, network marketing has taken a new approach. The fundamentals of the business however remain the same. You might know somebody either on Facebook or Instagram who might have sent you a message to check out this new exciting business. Even though it might be more effective than calling everyone on your address book, I still like my friends when they share their social aspect of their lives.
Most companies will tell you to use social media contacts as prospects. You can use social media to grow your business but don’t ruin your friendships in the name of making a quick buck.
The good and bad side of the network marketing business model
Normally, every business opportunity has the bright and dull side that everyone involved in has to come to terms with. For the good, this is a plus while the bad is what determines whether to remain in the game or call it a day. Here are the two sides of the coin when it comes to the network marketing business.
People in the industry describe the business as SIMPLE, not EASY.
When you join the network marketing company, the first thing they teach you is personal development. You are encouraged to read books and listen to audio, from the top level members of the business so as to relate to their journey.
The idea being that if you are not good at approaching people or building relationships then you will need to learn how. It’s integral for the growth of your business.
Once you learn that, then you learn how to sell the business idea. This is where SIMPLE comes in.
If you have ever listened to a sales person on the phone, they always seem very confident and sure in whatever they are selling. You will buy the product if they manage to convince you. What you don’t know is that the same thing they tell you in their sales pitch is the same thing they tell to hundreds of other people.
They follow a script. It’s all about numbers.
If you do something over and over again, you get pretty good at it. At some stage, your confidence goes up and your presentation becomes flawless. The more convincing you are the more likely people will join your business. It’s called duplication. When you are selling the business, it’s almost like you are making photocopies of yourself.
Duplication is repeated in every meeting and association you attend. Its marketing fellas, the numbers system work. The group mentality pays off eventually.
You also need to believe in what you are selling. Many companies have good quality products so it becomes easy to convince someone why what you are selling is better than the rest. The minute you pick up momentum, that is you have a calendar full of appointments and you are all, you will succeed no doubt. Numbers.
You learn how to deal with people. Even the most introverted person can succeed as long as you don’t judge your prospects. People who join this form of businesses are from all walks of life. In fact, those who join are more often those whom you least expect.
Top level earners (those that have managed to build huge downlines) in the business don’t have to work as hard as they did once their businesses establish. Many take the role of mentorship. They don’t need to recruit as often because everyone who came below them is making them money. They will often be traveling around the world attending training conferences.
Your income will be guaranteed for years to come. It’s possible to find absolute financial freedom in network marketing.
Be prepared to get way out of your comfort zone. I can’t stress that enough. You need to transform the person you are. Your friends will say you have changed since you joined the business.
Family members might even start avoiding you, especially when one word spreads out that you are involved in one of ‘those things’. You might even jeopardize your relationship with your spouse if you two are not reading the same script. Trust me, it happens
Be prepared to give up some of the things you like doing. No more catching up for the game. No more Friday night drinks with the boys. Believe me, some of the people around you will form a negative opinion of you. It’s easy to convince yourself that you are offering them an opportunity but let’s face it. Your success depends on them becoming active members within your business.
Your wardrobe will change. Dress well even if you can’t afford it. Be prepared to drive out every night from meeting to meeting as you become part of a cult-like group of members where success is often over-emphasized. I know that sounds harsh but I can’t think of a better way of putting it.
This industry suffers a serious reputation problem. Many people you approach probably might have heard of something similar and maybe it didn’t go well. You will have to work extra hard to convince them that it’s not ‘one of those things’.
If you are prepared for that, understand this.
- Less than 1% of those who join the network marketing industry succeed.
- Less than 10% percent actually make any substantial money.
- Most compensation plans will penalize you if you don’t hit a certain mark in sales.
My overall take…
I am not here to discourage you. Its best to go with what your heart tells you. If you are good at building relationships and making sales, then network marketing could work well for you. Just understand that in this industry nothing is ever in black and white. What your upline tells you is never close to the reality of it.
You will come to learn that makes money selling products. Recruiting is what its all about and you will have to do a lot of that. If you are not building a team, then you are headed nowhere.
Why run around chasing after people to join your opportunity and yet you can reach the billions of people who are connected on the internet today. It’s all about numbers, right? Here is a number for you. 3.7 billion people and growing by the day. If you can’t handle the pressures of network marketing then check out the alternative. This is how I make money online without recruiting. Easy peasy. It’s just me, my computer and the online space. Might turn out to be the smartest decision you have ever made in your life.
Many thanks for reading my review. If you have a question or a comment on the network marketing business, please leave it below. I would love to hear from you.
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