Network Marketing

The best article we found about Network Marketing was by Scott Allen in theEntrepeneurs section of The name of the article is The Real Problem with Network Marketing and Multi-Level Marketing (MLM). Feel free to read the entire article, but here are some points that stuck for us.

Polar views on the topic of Network Marketing and MLM
Some people are passionate about it in the extreme (even top celebrity authors like Robert Allen, Mark Victor Hansen, and Robert Kiyosaki). Yet, in many circles, you might as well declare yourself a leper as admit to being in network marketing.

So, what is the problem with MLM and network marketing?

  • Maybe it’s the pyramid structure? But you can’t really take issue with the tiered compensation structure—almost every large sales organization in the world has that.
  • Maybe it’s the fact that you have to pay to participate in it? But that can’t be it—that’s a standard franchising model. And the franchise fee of most traditional franchises dwarf the sign-up cost of any MLM program by comparison.
  • Now certainly, there are illegal pyramid, or “Ponzi”, schemes. This is where the money is all being made off of signing up other people, with little or no real product ever being delivered. But in spite of whatever perceptions people may have, the fact is that Amway, Avon, Mary Kay, Herbalife, NuSkin, and many others have sold millions upon millions of dollars of products to happy customers, many of whom are NOT also reps.

So other than the occasional illegal pyramid scheme (Bernie Medoff), why does MLM get such a bad reputation?

The real problem with MLM is not MLM itself, but some of the people it attracts.

Network marketing is just a business model, and it really amounts to “micro-franchising”. Its upside is that it has a very low cost of entry, with the potential for exceptional revenue, and there are those who achieve that.

But those same things that make it attractive make it attractive to many who are NOT really qualified or prepared to become business owners. The salient characteristics of MLM make it attractive to people who:

  • have not done well in their business or profession and have little money saved up to invest
  • have no previous experience owning or running a business
  • have no previous experience in sales
  • have little or no experience developing business relationships
  • have unrealistic expectations of the amount of work involved compared to the revenue realized

As a result, many network marketers end up:

  • over-selling the opportunity
  • inappropriately discussing business in social situations
  • coming across as desperate
  • being either inaccurate or deceptive when talking about their business

This certainly does not describe the majority of network marketers, but it does describe enough of them to tarnish the reputation of the rest.

So what’s the solution?

There’s a first time for everything. And network marketing/MLM is a great opportunity for people to have their first business, their first sales role, etc. The point is this—recognize it for what it is: it’s a business, and you are a business owner. And if you’ve never owned a business before, if you’ve never done sales before, if you’ve never networked before, you need to learn about how to do so, not just from the network marketing/MLM experts, but from established experts in those fields.

Network marketers who are serious about building a business should be reading and learning about business fundamentals, the latest sales and marketing techniques, strategies for networking and business development, etc., not just swapping tips at your team’s weekly or monthly meeting. Act like a small business owner, and people will treat you like one.