Network Marketing - Home Business Opportunity

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What is Network Marketing mean to the Internet Home Business Owner?

Network Marketing is very similar to Multi-level marketing, also known as MLM, is an alternate channel for a manufacturer to deliver its products/service to market.

With the internet that is exploding, thousands are rushing in to start their Home Businesses through network marketing programs.

(Other channels of home businesses include retail storefronts, catalog shopping, and door-to-door sales.) Depending on the particular company, the MLM channel may provide both word-of-mouth advertising and distribution.

Is MLM a scam? Is it legal? Is it moral, ethical, etc?

The short answer is: possibly.

This is the cause of 99% of the "Get Rich Quick Schemes and scams", as a result created unfavourable  arguments, and general disagreements about MLM or Multi-Level Makrketing. Many people contend MLM is immoral or unethical. Many Attorneys General (who ought to know what they're talking about) say a properly-run MLM or Multi-Level Marketing program is perfectly legitimate and ethical. Who's right?

The truth is, MLM is not inherently good or evil any more than capitalism is good or evil. Both can be done ethically, and both can be done unethically. It depends on how a particular company is designed and managed.

Since the MLM industry is very young (about 40 years old), the law is still in flux. There are admittedly many MLM companies that are nothing more than scams, get-rich deals for the owners and their cronies, glorified chain letters, etc. Some of them even manage to skirt around the legal issues and avoid prosecution.

There are other companies that have legitimate products/services, and may have been in business for many years, but which are run in such a way that many people get burned -- old ladies investing their retirement funds to buy a garage full of products, and so on.

Most people would agree these companies, or at least the distributors that do the questionable practices, are not very ethical.

On the other hand, there ARE many companies that are run legitimately, legally, and ethically. They produce good products that are valued by customers, and give many people the opportunity to improve their financial situation.

The anti-MLM people will often assert that MLM companies and people sell unrealistic fantasies of income potential, recruiting "greedy home business seekers" to fatten their upline's bonus checks. This view is understandable, but misses one critical point: in general, the new person has the SAME OPPORTUNITY to build a group as the fatcat upline guy. The upline has worked hard, maybe for years, to build the downline that is now rewarding him so richly.

The new person has invested maybe a couple of hundred bucks and a few hours. It's only fair that everyone starts out in the same place -- AT THE BOTTOM -- and everyone has the SAME chance to build a downline of their own.

The major exception to this is in the theoretical case of "saturation." In this situation the company has grown so much that a large percentage of people who would be interested in enrolling have already enrolled.

(NOTE that this does NOT mean "EVERY person is enrolled"!) The new person has a much harder time finding new recruits than the upline person did N years ago. The new person has several choices; go with the established company, and live with the saturation; go with another company that has no saturation problems; or give up.

On the other hand, while it may be a bit harder to find new prospects when a company is mature, the new person who joins the mature company has MANY more tools and support mechanisms available to him/her than the "old hands" did back at the start of the company. There are probably also many more products, more professional literature, etc.

While those pioneers may have had wide-open spaces to settle, they also got more arrows in their backs. It works out pretty evenly.

In actual practice, saturation is very seldom a problem. It may be easier or harder to find new prospects for a particular company in a particular location, but there are very few cases that are actually "saturated." The thing to understand is that saturation is not a clear-cut, yes-or-no situation; one company may be CLOSER to saturation than another, but neither might be actually "saturated."

The anti-MLM argument often runs calculations of exponential growth, and demonstrates that the entire population of the planet will be enrolled within a short period. This is an intellectual exercise rather like the example of "one pregnant mosquito could carpet the earth in mosquitoes by the end of the summer." In other words, in actual reality, it doesn't happen that way. The growth rate is normally much slower than people realize (especially once a company gets larger), and slows down as a company approaches saturation. It may get harder to enroll new people in a large and near-saturated company, but NO company in the history of MLM has ever grown fast enough to exhaust its potential marketplace. More people turn 18 every year in the United States than are enrolled in all MLM companies combined. So far, at least, the growth of MLMs hasn't kept up with the growth of population.

So, bottom line: In the opinion of many people, MLM *can* be done legally, morally, and ethically. It can also be done unethically and illegally. Choose your company carefully.

Here are some good recommendation for those who want to start up an Internet Home Business.

[1] Six Figure Income Group

But isn't it wrong to keep bringing in new participants, rather than concentrating on selling a product like "regular" businesses?

Many anti-MLM folks think that the only purpose of ANY MLM is to enroll new people, instead of selling a products/service. What they don't understand is that ENROLLING NEW PEOPLE *IS* HOW YOU SELL THE PRODUCT IN MLM.

If you focus only on selling, it isn't MLM -- it's plain old sales. Nothing wrong with that; it's just not MLM.

MLM works with a DIFFERENT PROCESS than typical sales. Rather than finding a few people who sell a ton, you find a bunch of people who sell a little. (And, since each sells so little, self-consumption can account for a significant portion of those sales.) Enrolling new people, and building downlines, is how you find the people who each do the small amount of sales. (Note: EACH do a small amount of sales.NOT just the "suckers on the bottom".

In any legitimately-run MLM, ALL people, from top to bottom, contribute to the sales effort.) Product still gets moved -- that's how bonuses get paid in a legitimate MLM -- it's just done in a different manner than in traditional sales or retail.

MLM works differently than traditional methods, but just because it's different doesn't make it bad. It's just DIFFERENT. Just like franchising was different from traditional retailing, and was considered to be a scam for many years. But when properly implemented, franchising is not a scam; it's a very effective way to do business. Similarly, when properly implemented, MLM is different from traditional retailing AND franchising, but can be a very effective way to do business.

Why would a company choose an MLM route to product distribution?

There are several good reasons:

- Low overhead. There are virtually no up-front advertising costs. Unlike a typical retail company, the MLM company doesn't have to spend massive amounts of money to "pull" customers in. Instead, it pays distributors to "push" the products/service out into the marketplace.

In addition, the company only has to pay the distributors for *results* -- that is, a percentage of products/service actually sold.

Ordinarily an MLM company will use the money that *would* have gone into advertising to pay its distributors. (Using Procter & Gamble as an example: I have an unconfirmed report that says P&G's sales in 1992 were $25billion. Their advertising budget was $10billion. So they spent 40% of their sales on ads. MLM companies typically pay 40-80% of their sales volume to their distributors.)

- Low distribution overhead. Typical retail companies generally use: a series of national, regional, state, and local warehousers to distribute their products/service to the retail stores. Each of these intermediaries wants to make a living, and marks up the cost of the products/service. Using P&G again: my unconfirmed report says that a tube of Crest that sells for $2-3 in a store costs P&G roughly 13 cents to manufacture. If it sold for $2, 40% (80c) would go to advertising, leaving $2 - 80c - 13c = $1.07 for distribution costs and P&G's profit.

- Rapid growth. A well-managed MLM company can grow at an amazing: rate -- as much as 20%, 50%, even 100% per MONTH. (In fact one of the biggest reasons for MLM company failure is inability to keep up with explosive growth.) It would be difficult or impossible to generate this kind of growth in an overcrowded retail market.

- Specialized and motivated "sales force." There are hundreds of thousands of products cramming the shelves of retail stores. It's almost impossible for a new products/service to make a dent in the market, unless the company spends megabucks on advertising. Also, many MLM products need more explanation than can be done in a 30-second TV spot. A person-to-person word-of-mouth campaign can solve both of these problems.

That's the company's perspective. For the individual, MLM can offer an opportunity to build a part-time income source that can, with enough effort, grow into a significant income. With hard work (and a little luck) you can earn incredible incomes.

How? MLM is all about "a lot of people doing a little bit." In an MLM you are rewarded for the sales you create -- not only directly, but indirectly as well. You get profit for any retail sales you make, plus you get a bonus on the sales made by people you enrolled into the company, and people they enrolled, and people THEY enrolled, and... By getting a small percentage of many people, your income can grow to a very large number.

But wait. It's not that simple. It takes a lot of time and work to build up a group (called a "downline") in any MLM. What's more, even if you're a real hard-working go-getter, YOU can't do all of it.

You can't enroll the 90,000+ people in this group by yourself. Each person has to find 5 of his own -- and the sad truth is, most people are not that ambitous. It's hard to find the ones that will work.

So it's almost unheard-of for someone to actually build an idealized group like this. Some "legs" in the downline will build faster than others, and some will grow slower. If you don't work hard yourself, you might never start ANY legs that go anywhere.

But that's the concept: a whole lot of people doing a little bit each, and you getting a small reward on each one. If you have the initiative and work ethic to build that group, you can make a very nice income in MLM -- maybe even get rich.

But MLM **IS NOT** a get-rich-quick deal. It DOES take a lot of work, and most people won't put in the work it takes. The large majority of people will never get rich; quite a few hardly make a dime. But the beauty of it is, as long as you pick a good company with a good product or service, the size of your success is 100% up to YOU.

What's the difference between MLM and Network Marketing?

Most people would say the terms are synonymous. MLM is an older term, and has taken on negative connotations in some people's minds. Network Marketing is preferred by some who are trying to avoid this stigma.

Some companies, such as Amway, consider "Network Marketing" to be a specific form of MLM: namely, combining a "network" of outside suppliers (AT&T, Coke, Reebok, etc.) with a network of "marketing" folks (the distributors).

How can I succeed in Network Marketing?

Short answer: Work diligently, work consistently, and don't give up.

Long answer: all companies are different, and what works in one company might not work in another. You should learn from your upline -- ask them what works and what you should do to succeed.

Draw on them for help. They've found out from experience what works and what doesn't, and they're interested in your success. The fundamental ideas, though, are the same in any company.

Do what a distributor/associate/whatever is supposed to do in your company -- and find others to do the same. Teach them to do what you do.

*Duplication* is the key to success in Network Marketing. You're not supposed to go out and enroll the world, or sell something to everybody on the planet. You're supposed to find a FEW people who want to build a business, and help them do it. More importantly, teach THEM to do what an Affiliate Marketer does, AND go out and find a few people to work with, AND teach those new people. Until you have "taught your people to teach their people to teach," you have not really duplicated yourself.

Keep plugging away. Unless you're incredibly good at this, it will take time to build a group. It takes time to find good people and teach them what they need to know.

If you have not had much success in the past... If the company's working well, and others are succeeding, you need to take a look at what YOU'RE doing that isn't working. It may be that you wouldn't do any better in another company, even if the grass looks greener, because you're doing the wrong things.

It is a sad fact that a very small percentage of people who enroll in any particular Network Marketing business will succeed big. This is NOT, however, a fatal flaw of Network Marketing; it's a reflection of real life. 90%+ of everyday small businesses fail within 1-5 years -- and the owners lose a whole lot more than the few hundred dollars an Network Marketer typically invests. 98%+ of corporate employees will never achieve executive levels. 95% of 65-year-old retirees in the US (according to insurance & Social Security statistics) are dead or broke. The sad fact is, very few people succeed big in ANY endeavor. Most people simply will not do what it takes to succeed. Affiliate Marketing is no different in this regard.

However, many people get into Network Marketing Home Business with the idea that it's some kind of "easy road to riches". It's not. It takes work. It takes time and dedication. But most people don't see that, either because their sponsor misled them with rosy predictions of instant wealth, or because they chose to hear the easy story. People like this enroll and don't do anything, or give it a try but give up after a few months. This is where the vast majority of "Network Marketing failures" comes from.

The biggest problem with Network Marketing is that it's "too easy" to get into it (usually no more than a few hundred dollars), so it's "too easy" to get out. With only a few hundred bucks committed, it's easy for someone to say "Ah, heck, I talked to 4 people and none of them were interested. This just doesn't work! Guess I wasted my $200."

You should approach your business as if it was a "real" business, one that you had invested your life savings into. If you had sunk $200,000 into your Network Marketing business, would you let 4 "no"s stop you? NO WAY!! You'd get back OUT there and KEEP working until you MADE it work, because you had too darn much money in it to give up! Well, guess what? That's what makes Network Marketing work too -- that dedication to keep working until you make it work.

If you work consistently, and effectively, and build your group faster than the faint-hearted people drop out, your group will slowly but steadily build. And if you've taught your people the correct ideas of "work consistently, work effectively, and teach your people how to duplicate your efforts", you should see a consistent rate of growth. It will probably take longer than you'd like (hey, that's the way life works!), but as long as you keep working at it, your income will eventually build to the level you want.

The problem is, most people don't do this. Most people who get into Network Marketing Home Business give it a half-hearted try, then give up the first time they get a "no" and complain that "It doesn't work". Only the people who determine to put in the effort, and actually DO what it takes to succeed, will stick it out and end up on top. 

Here are some good recommendation for those who want to start up an Internet Home Business.

[1] Strong Future International Marketing Group




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