|Dear Internet visitor,
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.
the internet that is exploding, thousands are rushing in
to start their Home Businesses through network marketing
(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
Most people would agree these companies, or at least the
distributors that do the questionable practices, are not
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
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
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
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
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But isn't it wrong to keep bringing in new participants, rather
than concentrating on selling a product like
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
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
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
Why would a company choose an MLM route to product
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
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
- 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
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
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
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
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
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
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
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
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
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
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
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
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