Multi-Level Network Marketing

[jeffrey]

Your image of network marketing (also known as multi-level marketing or direct sales marketing) has probably been greatly influenced by who explained the system to you. Network marketing companies include such well known corporations as Amway, Mary Kay Cosmetics, Avon and Tupperware, along with thousands of smaller companies. These companies have successfully recruited millions of people to be independent distributors for their products by explaining the huge amount of wealth which can be earned working within the network marketing system. Those who have been successful claim that network marketing is the best thing since sliced bread, while detractors often say it is nothing more than a "sell to your family and friends" scheme. The truth lies somewhere between the two opinions.

The first, and most important, issue to make clear is that legitimate network marketing companies are not illegal pyramid schemes. Part of network marketing's huge image problem, however, comes from the fact that many illegal pyramid schemes today promote themselves as network marketing ventures and there are quite a few network marketing companies that live on the edge of being one or the other. Since it is often difficult for someone who has not thoroughly researched network marketing to tell the difference between the two, it is essential that you do your homework before committing any money to a network marketing venture.

The easiest way to distinguish between an illegal pyramid scheme claiming to be a network marketing company and a reputable network marketing company is to understand where the company makes the majority of its profits. Illegal pyramid schemes grow by requiring large initial sign-up fees or expensive initial product purchases from new members which make up their main revenue source. Reputable network marketing companies, on the other hand, derive the majority of their revenue from the products or services being sold to the public by their independent distributors. If a company claims to be a network marketing entity, yet demands a large fee before you can start selling their product, or requires you to invest a significant amount of money for "inventory" before you begin selling, the red flags should be raised and you need to take an extra careful look to make sure the venture is legitimate.

Another red flag is when the company explains that you can make huge amounts of money by simply recruiting others. When sales pitches wander off the subject of the companies products and begin to focus on recruiting others as your main revenue source, there is a good chance that the venture is an illegal pyramid scheme and not a legitimate network marketing enterprise. Another sign that things may not be legitimate is the company only having a single product for sale.

Network marketing's appeal is obvious to anyone who has heard a network marketing network company's sales pitch. Not only do you get commissions on the products you sell, you will also receive commissions on the products which other independent distributors sell that you have recruited. The extra commissions can often come from a number of different independent distributor layers (called the distributors down-line) and it is easy to see even by those who aren't strong in math the potential earnings which can be made if a large down-line is created.





Network marketing companies are able to offer commissions on products sold by down-line distributors because their operating cost structure differs greatly from a normal retail company. For instance, network marketing companies don't need to spend huge amounts on advertising since their products are sold by word of mouth. They don't have to deal with the high cost of retail space since most independent distributors work from their home, while products are distributed directly to the buying customer avoiding distribution middlemen. The biggest savings, however, comes from the fact that network marketing companies don't have to pay a sales force (you, the independent distributor) a fixed base salary. The network marketing companies pass these savings onto their independent distributors for recruiting more independent distributors to sell their product so the company can grow.

For example, after you become an independent distributor, you recruit person A to also be an independent distributor for the company. Person A in turn recruits person B and person C. Person C then recruits three more independent distributors, D, E and F. Each month you would not only receive the commissions on the products you sold, but you would also receive a smaller commission (i.e. 5%) on all the products that person A sold, a slightly lower commission (i.e.3%) on all the products which person B and person C sold, and an even lower commission (i.e. 2%) for any products which persons D, E and F sold even though you may have no idea who persons B,C,D E and F are. Since you can potentially earn commissions on products that you don't actually sell, creating a down-line below you can be quite financially rewarding and is what influences most people to join without fully researching what it will take to succeed.

The actual commissions received and how deep the independent distributor down-line goes varies greatly depending on the network marketing company, although between three and seven layers is common. One issue to carefully investigate when considering a network marketing company is whether or not there is a monthly quota which must be maintained to keep your down-line distributors' commissions coming to you. This is vitally important because one below par month when you don't meet your quota can destroy years of network building. Quotas can also force an independent distributor to buy unneeded merchandise in order to not lose their down-line distributor commissions.

One factor that is essential to understand to be successful in network marketing is that you have to enjoy sales. Becoming a independent distributor is basically becoming a sales agent for the company. Those with little or no sales experience will find success in network marketing difficult. Although the recruitment of others holds the potential to make you extra money, you should never join a network marketing company for the sole purpose of recruiting others if you don't feel that you can also sell the products they offer yourself.

The start up costs for a legitimate network marketing company are small compared with most business ventures available. You may need sample products to show potential customers, but a catalog of the company's products should suffice for most of you sales. Costs for a network marketing service industry company should be minimal to nothing since you won't need to show any sample products to your potential customers.

If you are considering getting involved in a network marketing venture, you should approach it with the same discretion you would with any other investment you would make. The biggest mistake people make when they decide to become a network marketing independent distributor is assuming it will be easy money. The potential to make a respectable second income exists, but it won't happen overnight. It will take years of hard work just as if you were beginning any other new business venture. SavingAdvice.com encourages thorough research in order to make a quality and informed decision when it comes to your money.

[The Budget Man]

After spending years working with, developing and mixing with network marketers there are a couple of very common traits that become obvious.

The people who make money in network marketing would make money in anything that did.

The rewards for network marketing are just around the corner and will always come if you try a little harder or stick with it a little longer or so the sponsor says.

The comment "This has to work because I need the money" is a heartfelt cry, not a reason why something will work.

Yes there are benefits in multilevel marketing but those benefits require hard work and there is no guarantee that the situation won't change tomorrow.

Enjoy Your Money
The Budget Man
www.PersonalityBudgeting.com wher you discover how to enjoy the money you have!

[TMoney]

curious to see how many people (if any) have ever engaged in this, and how is/was the experience?

[Broken Arrow]

I haven't, but I have a friend who did (Equinox). He lost 6k before the "company" was legally slapped for fraud or something like that. Then they were banned from doing business in our city.

There is another one that was doing hugely well a few years ago. I got "propositioned" quite often, and didn't know why until I foudn out that it could be because I lived close to where their main regional office was located.

Finally, one of my erm co-workers is involved in a travel-agency one. He's a decent man who hasn't tried any gimmicky tricks, which I applaud him for. Istead, gave me the bottom line on the numbers and their internal documents. From the looks of it, very, very few people will make money off of it. This co-worker is out $500 at this point, and will continue to cost him $50 per month to maintain his web presence.

[TMoney]

Originally Posted by Broken Arrow

I haven't, but I have a friend who did (Equinox). He lost 6k before the "company" was legally slapped for fraud or something like that. Then they were banned from doing business in our city.

There is another one that was doing hugely well a few years ago. I got "propositioned" quite often, and didn't know why until I foudn out that it could be because I lived close to where their main regional office was located.

Finally, one of my erm co-workers is involved in a travel-agency one. He's a decent man who hasn't tried any gimmicky tricks, which I applaud him for. Istead, gave me the bottom line on the numbers and their internal documents. From the looks of it, very, very few people will make money off of it. This co-worker is out $500 at this point, and will continue to cost him $50 per month to maintain his web presence.

so in other words not lookin to good from your perspective. Thanks for your input.

[The Budget Man]

I always find the people in MLM companies are great and over the years I've earnt far more money speaking at their meetings (about non MLM products) than I ever have made from selling their products.

Enjoy Your Money
The Budget Man

www.PersonalityBudgeting.com
Discover how to enjoy the money you have

[Broken Arrow]

Originally Posted by TMoney

so in other words not lookin to good from your perspective. Thanks for your input.

Well I admit I am not too fond of MLMs. But that's largely because I have yet to meet one that I actually like. In fact, here's my latest rant on it at the time of this writing.

But, to be perfectly fair, I don't see anything inherently wrong with the direct/network marketing model if it actually conducts honest, sound business. The unfortunate fact is that many (perhaps most) does not. For example:

1. As mentioned in my link, I was propositioned by a loan-based MLM. Making commissions based on loans. Think about that for a moment. You basically benefit by encouraging other people to go into as deep in debt as possible. It may not be illegal, but it certainly puts a bad taste in my mouth.

2. Another co-worker of mine is involved in a travel agency MLM. Here, the problem doesn't lie in the core products/services. Rather, it was the business model. Specifically, they make you buy a version of their own website. Why do we need to do that? Doesn't it make more sense to establish a one-stop shop? The answer becomes painfully obvious when you look at the startup cost: $500 for them to set it up for you(!) AND $50 a month to maintain it! Please take a few seconds and let that sink in for a moment.

3. Another friend of mine was involved in a MLM that sold health aids and beauty products. The main draw? Special ionized ginseng tonics that can be used for anything under the sun, from healthier skin to improved virility. Seriously! He lost $6,000 before our fair city sued that "company" for fraud, and was ultimately banned from doing business here.

When people are considering MLMs, I hope they will ask themselves one simple question: Why are they trying to woo you so hard? The reason is simple: They are actually selling TWO products, not one. The first is a core product / service, and really, it could be anything under the sun. The second is that they are selling you a dream. They are preying on your ego, enticing you with hopes of quick, easy money. Yes, it's may be possible for some... but if you want the real truth, all you have to do is look at how YOUR hard-earned money is leaving your pocket and going into theirs. Remember, you're not just a potential "business partner". You're also their customer! That is the inherent nature of MLMs.

But let me end this tirade with some balance. As I mentioned in the beginning, I DO think that it is possible for MLMs to do honest business. In the end, it's just a more elaborate version of a door-to-door salesman, and really, there's nothing wrong with that.

However, as both a potential business partner as well as a customer, we need to put on our business hat and suit, and look at this with objectivity and critical thinking. If they want to do busines, let's do business! If they want to talk shop, let's talk shop! Don't let their flowery sales pitch fool you.

Look at what they are selling. Is it a good, honest product?

Look at how they are structured. Is it a good, honest networking model?

Look at what you are investing in. Is it actually a viable investment for your own hard-earned money?

Then decide if it can work for you. And I honestly do believe that it can work for some.

But whatever it is, don't let them insult your intelligence. Be that savvy business man that they claim you are. Listen to everything, weigh everything, then decide if MLMs are actually right for you.

[The Budget Man]

Broken Arrow you have put the situation perfectly.

Enjoy Your Money
The Budget Man

www.PersonalityBudgeting.com
How to live happily with the income you have!

[ScrimpAndSave]

I never even knew about this stuff...thanks!