Is This One Of Those ________?

Many years ago, when I first heard about this industry, my initial thoughts were, “Oh no, I don’t like network marketing.” But something inside of me prompted me to take a really good look, to investigate exactly what the industry is all about.

There has been and still is a LOT of stigma and negative perception around the industry. Typically, network marketing, in many people’s minds is synonymous with, “multi-level marketing” which is synonymous with any or all of the following. “Pyramid scheme”, “scam”, “selling”, or worse still, “selling to friends and family”.

As with any other business, we want to be mindful of who we’re doing business with. There are businesses that are less than white, that’s for sure. Enron is a good example, even though they were a mainstream large corporate that most of us would never have questioned or thought of questioning. So, yes, scams do exist. But what makes it a scam or a “pyramid scheme”?

I’m just going to take a little side-trip here and point out that it’s not the “pyramid” that makes it bad. After all, every business and/or organization is pretty much shaped that way. There’s the chief executive at the top, then the few Board Directors just below, then a larger number of Senior Managers or Presidents, then an even larger number of Middle Managers or Vice-Presidents, and so the size of the organization grows as the business grows and it gets down to the “lower” levels. Distinctly shaped like a pyramid with people at the lower levels being paid far less each than the Chief Executive. So, it’s not the idea of the pyramid at all in that sense.

What makes it a “scheme” is when the investor is promised huge returns for their investment, usually a single investment, and then they recruit and fill up their downline. There are no products or services involved, merely the recruitment of people to join in and pay their investment fees too. The money is usually siphoned up to the person at the top and you have to keep on recruiting until you have enough people to reach the point where you are then siphoned the money from that group. There isn’t any value created at all. These schemes are illegal.

The unfortunate thing is that network marketing has been generalized and associated with this for those people who are mis-informed or not fully informed. So if those of us who are in the industry can be successful, then we can help to dispel those incorrect perceptions. This will make it easier to sponsor others in the long-run too, as the industry becomes more acceptable in their perception.

So what is network marketing? It’s simply a business model where the selling and distribution of the company’s products or services are outsourced to a network of people, like you and me. Those who enrol with the company as an associate or distributor then build their own organization or team of distributors that sell the companies products or services, all of whom are also independent business-owners. Each associate recruits or sponsors their own team of distributors and then helps the person they’ve sponsored to do the same. Essentially, it’s a direct sales network and the role of the company is to provide back-up and support in relation to product fulfilment and delivery, providing training and administrative support.

As best-selling author, David Bach, says in his book, The Automatic Millionaire, “The beauty of this industry is that it’s all done for you. The only thing you need to do is find a reputable company — one that you trust, that offers a product or service you believe in and can get passionate about.”

With “normal” companies, they pay for their own advertising – this is usually the most expensive part of their marketing budget. They also recruit and pay their own salesforce. But with network marketing, all this is decentralized, with the individual distributor doing the marketing themselves. The reach that a network marketing company can achieve can far exceed what another company can do with a traditional salesforce. The idea is that the wider the network, the more product you can move through those networks, for the benefit of all.

Robert Kiyosaki, author of Rich Dad, Poor Dad says, “You’re actually building an income-generating asset. Direct selling gives people the opportunity, with very low risk and very low financial commitment, to build their own income-generating asset and acquire great wealth.”

If you have 11 minutes, you can see and hear what Robert Kiyosaki has to say about the industry and why he thinks it’s the “perfect business”.

In exactly the same way as many companies pay their salesforce on a commission basis, networking marketing companies do the same. You earn through your own retail sales as well as a percentage of the income generated by the associates you’ve enrolled into your team (referred to as your downline). You can’t really take offence with that because this happens in “normal” companies too. The salesperson gets paid on commission, and their manager often gets an override too, based on that person’s performance, not to mention the bonuses that are then also paid to the sales director and eventually to the chief executive.

I think part of the challenge with network marketing’s image is that so many people fail at it. They try for a time and put in some money at the beginning but then they stop before they become successful. Running a network marketing business is no different to running any other business. Unfortunately, and I suspect this comes from the history of the industry, there are many people who decide to get into network marketing as a hobby. A hobby may help to generate some additional cash on the side, but the key here is that it is a hobby. If you want to create a successful livelihood out of network marketing, then you must treat it as a business and run it as a business.

It can provide you with the flexibility to choose your own hours and like any other business-owner, you choose who works with you in your team. So you become your own boss. For some people, that’s ironically part of the challenge!

One of the reasons for this, as I see it, is because of the low barriers to entry. It doesn’t cost much to become a business owner in the network marketing industry.

Contrast this with a franchise, as an example. The initial franchise fee to own a Subway location is $15,000, which one must pay at the time the franchise agreement is signed. The parent company estimates that one’s initial investment will run between $80,000 and $240,000, plus there is an annual royalty fee of 8%, which is based on each store’s gross sales volume.

Wow!  With numbers like this, is it more likely that one thinks long and hard before buying into a franchise, and even longer and harder before giving up, but not with a network marketing business? I think so.

The good news is that it IS possible to be successful in a network marketing business and the perception is also changing for the better.

In August 2004, Fortune magazine referred to Network Marketing as, “The best-kept secret of the business world,” while in May 2005, T Harv Eker, author of the #1 New York Times bestseller, Secrets of the Millionaire Mind, said, “The unusual and wonderful thing about network marketing is that everyone around you is working to help you grow, instead of trying to keep you down! In what other business do you have people making $50,000 and more a month – and they’re willing to tell you exactly how they did it?”

Finally, Paul Zane Pilzer on network marketing – “More than any other business, network marketing starts with the core: not with the product or the service, but with helping other people by teaching them how to be a success, regardless of their education or what business or field they’ve been in. What’s so exciting about network marketing is that you can offer this opportunity to anyone, and people can maximize the value of their life experiences instead of having those life experiences limit their opportunity.”

And get this… In his most recent book, The Next Millionaires, Paul Zane Pilzer forecasts 10 million new millionaires in the U.S. over the next 10 years, and predicts many of them will be people who are getting involved in their own Network Marketing business now.

How many across the world? And will you be one of them?

Leave me your thoughts in the comments below.

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