What is Network Marketing
Network Marketing is often called Direct Selling, Affiliate Marketing, or Multi-Level-Marketing(MLM). It is an honest, viable business structure. It is designed to build a marketing and sales force by compensating not only sales made by the individual but also the sales made by the people that individual has introduced to the company. This structure effectively moves the task of building and supporting a sales force away from the company and onto the individual. The company benefits from this because it can focus on the product instead of building a sales force and the individual benefits because it can hire others and make overrides on their efforts in addition to their own. A company can use the structure to create a sales force quicker and easier than traditional means. That may be critical to the company’s success, particularly if the company has a new hot product.
What Network Marketing Is Not
Network Marketing is not a pyramid scheme. It is not a scam. A pyramid scheme is illegal, Network Marketing is not. A pyramid scheme is a business setup where the primary and many times the only way to be compensated is to recruit others into the business. In a pyramid scheme, there is essentially no product. Instead you simply sell “nothing” to others in order to get them to join. While con artists will attempt to use the structure as a guise for their pyramid schemes, it doesn’t mean all companies that use Network Marketing as a sales structure are themselves a pyramid scheme. In fact, it is fast becoming a recognized structure among business leaders today, including Donald Trump. It has also been used in part by respected companies such as PayPal, AT&T Wireless, Wachovia, and Vonage. It is also not a get rich quick scheme. As with any business, no matter the structure they choose to employ, you have to work to be paid. The same is true of Network Marketing. However, even though it doesn’t offer instant riches, it does offer some unique advantages over traditional employment opportunities.
Why Network Marketing
Network Marketing is a not a get rich program but instead a real business opportunity and one that requires real work. That being said, the unique advantages offered by Network Marketing are incredible compared with what’s available in the traditional job market. First, you get to set your own hours. You are effectively your own boss. So if you do not feel like working one day then you do not have to. Of course it goes without saying that just because you can doesn’t mean you should. But it is nice to know that you could if you wanted to. Another way to look at setting your own hours means that you can literally work as much as you want. You set your business hours and can operate whenever you want. This provides the potential to increase your earnings simply by working harder.
The second great benefit is the ability to work from home. We all hear about the work-from-home scams that are posted on those little signs on telephone poles along the roads. Well, unlike most other work-from-home offers, it truly allows you to work from home, provided you have the bare essentials to do business. By bare essentials, I mean a phone line and a computer if you need one. But you should consider that while working from home sounds great, it does require a certain level of self discipline to keep focused and get some work done.
Finally, the single greatest thing is the truly amazing opportunity that exists when they first begin. Imagine being there when Bill Gates decided to start Microsoft or when Google was first starting up and actually having a chance to join. Network Marketing provides that same kind of opportunity. Of course joining a Network Marketing company can be beneficial at any time but it is exponentially true when the company is just starting out. The expression of get in on the ground floor has a certain truth to it when regarding Network Marketing companies. This is mostly due to the fact that the earlier you get in, the more people you will have under you. That isn’t to say that you shouldn’t join a company that is well-established and been around for a while. For example, Mary Kay is still a viable business and you can make some money in that company. However, you have to consider that to get into the company you will be going underneath someone and that person is underneath someone else and so on. Imagine being that first person way up the chain that has thousands of people below them. That is the opportunity that exists by getting in early with a company.
Examples of Network Marketing Gone Wrong
Networking Marketing companies, like any other business out there, can be fraudulent, unethical, and in certain cases just plain scams. However, when a single business is caught in a scam, say an investment banker, it looks bad for the investment banker but not necessarily for investment banking as a whole. The same is not true of Network Marketing. When one Network Marketing company is caught in a scam people take the assumption that this one bad company represents all Network Marketing. We have all heard of people getting scammed by Network Marketing companies that go out of business, never end up paying out, or simply prove too hard to make a profit in. I’d rather not point fingers but a certain MLM comes to mind. This particular company recently boasted in a national magazine that they had sales of over $2 billion dollars a year. Right below this they said they had over 1 million distributors. For those who can divide, that’s only $2,000 per year per distributor. That’s assuming all distributors were performing the same. In reality, the top 5-10% made decent money while the rest made pocket change or even lost money. In an Independent Business Owner Compensation Plan released by the company itself, it stated that the average distributor earned $115 per month or $1,380 per year BEFORE taxes. Folks, that comes out to about $.69 cents per hour for an average 40 hour a week job. And these people paid to join the program! The good news is that not all Network Marketing companies are bad. There are indeed some very good, honest, and reputable Network Marketing companies out there. Many of which can earn you a decent living with some work. The key to avoiding these kind of Network Marketing disasters is to do some diligent research, run the numbers, use your head (too good to be true and it probably is) and make a sound decision before signing up with any company.
Examples of Real Network Marketing Success Stories
Like I said, not all Network Marketing is good, but not all is bad either. You can find several examples of successful Network Marketing companies out there. The key difference with a successful company is that it has a real product to sell. For the company to be successful with the Network Marketing structure, it must focus on the product. One such example is Mary Kay. Mary Kay started in 1963 and has since grown to a trusted global name in skin care, makeup & body care. It is an impressive organization in terms of volume and size. Mary Kay serves as one the few examples of a successful self-consumption company. In my opinion that is because they have a solid product that there is a demand for. Mary Kay offers some unique compensation to its beauty consultants including the very original pink Cadillac. Of course to earn the Cadillac requires you to achieve a certain level of success within the company. However, General Motor’s estimates that they have built over 100,000 pink Cadillacs for Mark Kay.
Another great success story is that of Art Williams and his A.L. Williams company which later came to be known as Primerica. Art Williams was a football coach from Georgia. He happened across the idea of replacing old whole-life insurance with term life insurance (which is cheaper) and investing the amount you saved from switching. On a coaches salary, Art had very little chance of getting a company started with traditional means. He instead adopted the MLM or Network Marketing model. This allowed him to hire and train additional part and full-time individuals to help market his product. Using the power of Network Marketing, Art Williams went on to sell billions of dollars worth of insurance surpassing the top two insurance companies combined. Today the company has over 100,000 independent representatives and Art himself has a net worth of $1.4 billion. I have several people who I know that have made millions with the A.L. Williams company. You’ll hear more about them later. For now, just know that A.L. Williams is the perfect example of how a company with a great product can use Network Marketing to become hugely successful.
How to Choose the Right Network Marketing Company
One of the first things you should do when entertaining the idea of joining a Network Marketing company is research. Find out about the company and what it is offering. As with all real businesses, the product is the key. The company has to have a great product that people are willing to pay for. If the product is not great than neither is the opportunity. Try to put yourself in the customers shoes, would you buy the product? If so, is it affordable compared with the current market? Take the time to research and fully understand the product. Test the product if you can. At the very least try to get some real life feedback from existing customers who have bought the product. Doing so will put you in a position to make an educated decision about joining.
As a general rule, there are certain types of Network Marketing companies that you should avoid. The key among those are businesses without a product. That is, you make a majority of the money from recruiting. These are shady MLM companies that are closer to a pyramid scheme than a real Network Marketing company. The second and perhaps more important to avoid is the self-consumption companies. These types of companies depend on you to buy their product as well as sell it. Do NOT invest in these types of companies unless you absolutely love the product and can afford it. Otherwise, you will eventually run out of “friends” and family to market to and will end up with a garage full of “product” and no one to sell it to.
Even with a great product a company still finds that a capable management team is essential to long-term success. Before joining a company, do some research on the founders. This is particularly true of new companies. Find out who is behind the curtain and if they have a reputation, good or bad. You are looking for people with a proven track record and lots of experience to make this company work. Another consideration is if the management team has a plan to manage growth. I’ve seen several Network Marketing companies with a great product, build a sales force just to collapse under its own success. The company should be upfront and honest about what plans it has to prevent this from happening. These should be real concrete plans and systems that are in place not just a “we have it covered”. Funding is very important as well. While it is true that Network Marketing companies are easier to start they do take funding to keep going and maintain. Particularly in the beginning when sales are slow and people are just coming on board. And as history shows us, there may well be times when the company needs more money to operate than it is making. Having a management team with access to capital is crucial for long-term success of the company. Most of the companies you hear about going out of business were founded by people without sufficient capital. The last and also one of the most important parts of picking the right company is to evaluate the compensation plan. That’s what Network Marketing is all about right? Making money and hopefully lots of it. So you have to make sure the compensation plan is viable, realistic, and still profitable. Never join any Network Marketing company that isn’t up front and honest about their compensation plan. Always demand to see it and demand that any point systems be fully explained with realistic examples.
Can you make money without recruiting people. That is a key question to ask yourself whenever you are introduced to a new compensation plan. Even though you are (or should be) planning to build a sales team, it’s important to know that you can make decent money without doing so. For this to work, the commissions offered by the company have to be sufficient. Depending on the price of the product and the amount of volume you expect to be able to sell the commission will differ. As a rule, you should be very wary of any compensation plan offering commissions less than 20%. Obviously, the higher the commission the better. Almost as important as the initial commission itself is the idea of a residual. Does the compensation plan allow for residuals? It effectively allows you to stack your work. In other words, you can sell something once and continually be paid on that sell every time the client renews. Residuals allow you to build true wealth by earning money on work you already did. That’s exactly how the guys at A.L. Williams got rich. To this day they continue to receive checks on policies they sold more than 10 years ago.
The final question related to the compensation plan is how does team building work. It’s important to have a full understanding of the mechanics used in the system. If they use points you need to grasp exactly how points are earned and how they convert into cash. If they use a binary or front line system, you need to understand the rules of both. Again, the company should be very upfront about how their team building works and how you are compensated for it. I’m not usually too interested in the team building because, as a sales man, I usually go after selling the product and consider the team building to be just an added bonus. However, if you are a big networker or well connected, the team building can earn you more money. By hiring and training the right sales people, you can build a very profitable team and earn more money than you could possibly earn just selling yourself.
Do Your Research, But Hurry!
As I said, you can have success by joining a well-established company. However, if you can manage to find that rare company with a solid product and good management that is just getting started then you should research quickly and jump on it. One key to easy success in any company is getting in early. As the company grows, super stars and rock star marketer will take notice and be recruited into the system. If you can get into the system before them they will be working for you and that can mean a lot of money. The longer you wait the more saturated the market will become and the harder it will be to make money. Time is money no matter what business you are in but it is particularly true in MLM. Once you join an MLM you should within two weeks recruit two other people and sell the product at least once. This is absolutely essential to your long term success with the company. Something about getting that first sell and hiring those first two people just makes it so much easier. Trust me, if you do this you will find the rest seems to just fall into place.