Network marketing or multi-level marketing (MLM) has occasionally had a negative reputation during its existence, much of it perhaps undeserved. A combination of unethical activity by
independent distributors or corporate executives, along with the unfortunate timing of developing in a period when illegal pyramid and Ponzi schemes rapidly increased, helped fuel many of these misconceptions and allegations.
With the correct business model, network marketing is an ethical and fair way of growing a business. A genuine company will follow the business and tax laws that apply to its country of operation and will observe and enforce the compliance laws necessary for its reps to operate within the boundaries of those laws.
In the United States, government organizations such as the Federal Trade Commission and Food and Drug Administration keep a close eye on the way network marketing companies operate and the products—particularly health-related ones—that are sold through every company.
The Australian Therapeutic Goods Administration (TGA) monitors all wellness products sold via network marketing in that country and is widely known as one of the most rigorous in the world. While their standards are seen by some as being overly severe, it helps to know that the products that pass the guidelines set by the TGA help make sure you are using a product that has been examined thoroughly and approved for your use.
The Direct Selling Association (DSA) also plays a significant role in helping network marketing companies abide by agreements in how they handle distributor relations. The DSA is a membership-based organization that helps support its members and advocates for network marketing and direct selling within the community. There is also a one-year probation period for any company that applies before it can officially be a member. This is to ensure that the company is legitimate and follows all the rules. When looking into a company, check to be sure it has applied for or is a member of the Direct Selling Association.
The industry itself has also formed its own watchdogs and overseers. The Association of Network Marketing Professionals meets yearly to discuss matters related to the future and betterment of the industry, and independent analysts such as Rod Cook, Len Clements, and Troy Dooly spend considerable time reviewing and commenting on events and company activities within the network marketing space.
So let’s take a closer look at some of the most common myths about network marketing and determine what are the facts and what is fiction.
1. Network Marketing Is a Pyramid Scheme
Perhaps the most common, most misunderstood belief is that legitimate network marketing is essentially an illegal pyramid scheme. As a network marketer, you may find this to be the first objection you hear from prospects. You will have to learn to deal with the fact that many people fear being caught up in a pyramid scheme.
While a network marketing program may sound similar to a pyramid scheme, there is one major difference: Network marketing provides a service or product that is used by an end consumer. A pyramid scheme is simply a money game, where funds are handed through a chain of people until the next person who rises to the top of the pyramid gets paid the accumulated contributions and goes back to the bottom, ready to entice others to participate. Genuine network marketing companies market a product or service through a chain of distributors or reps, but your income is not earned by getting to the top of a pyramid. Your income can only be earned by creating an organization of happy product users and promoters.
Dave Ramsey, one of America’s most popular and respected financial advisers, recently stated: “Multilevel marketing, network marketing, and direct sales are the names used by those in that type of company to describe how their business model works. These companies are not pyramid schemes; they are a legitimate method for some people to make some side money and some- times to literally build their own business.”
2. Network Marketing Is a Get-Rich-Quick Scheme
While it is definitely not a get-rich-quick scheme, many people view network marketing as a way to create wealth faster. Since the opportunity to grow your business as rapidly and as large as you possibly can is present, there is no doubt that the opportunity to create wealth is available to you. Just be aware that getting wealthy in this business takes the same commitment as with any other business. You’ll need to put in the time and effort in order to reap the re- wards. There are no shortcuts.
3. It Takes a Lot of Money to Get Started
Almost every legitimate network marketing company in operation has starting options that would fit into any budget. These options range from under $100 to $2,500. The average starting cost for a network marketing business today is around $500–$800. This first investment often covers a starter kit, marketing tools, an initial product order, and access to online tools, not to mention the support available through your upline and the company itself.
The company then handles delivering product, keeping track of your organization, organizing training events, and keeping you up-to-date through regular communication. You get a lot for the investment you have made. When you consider the costs incurred by starting most major franchises or businesses today, the price of getting involved in network marketing is extremely reasonable.
4. You Can Make a Lot of Money by Doing Next to Nothing
This may be a marketing ploy to get you signed up, but you can be sure that doing nothing after you are in the system will also earn you nothing. This business is not a get-rich-quick scheme. It offers no free rides. You get out what you put in, and in the beginning that can seem like a lot. It takes a lot of effort and patience to grow a team and your income. Sitting on your hands and hoping your business will grow without effort is not a game plan.
5. You Have to Sell to Friends and Family
You can sell to friends and family, and if the products are that good, you should. But the notion that you will be spending a large part of your time convincing family and friends to buy from you is an outdated one.
Many of today’s sales techniques revolve around conversationally marketing the product, mentioning it almost casually during normal banter with your friends and family. For example, if you are marketing a weight-loss product, your own results will show for themselves and have others interested in what you are using. You can then use the company’s videos or online resources to help share your excitement.
If you are using a service that saves you money, you can casually mention it to your friends and allow them to ask for more information rather than you harassing them to sign on with your company. The bottom line is the days of begging family and friends to buy from you are long gone. Product results will often speak for themselves, and exceptional marketing material provided by your company is all you need to stir interest with the people you know.
6. Only the People at the Top Make Money
A hangover from illegitimate pyramid schemes, the view that only those who get in first make the big money is no longer applicable with today’s compensation plans. Plans are now structured so anybody entering the business at any stage can earn as much or even more than a rep who has been working with the company since its pre-launch period.
Positioning and timing still play an important role, but they won’t benefit you if you simply take a position in an organization and fail to do what is required to build a business—selling products, creating sales volume, and developing an organization. If you are not focused on these key areas, a new rep who enters the business five years from today will out-earn you.
7. Network Marketing Is a Cult
In the late ’70s and early ’80s, the industry entered a new phase. Leaders within many of the major companies began to look for ways to help keep reps from quitting due to the difficulties of developing such an unconventional business. Many reps found it difficult to stay upbeat as they dealt with rejection and reluctant prospects. Company owners and upline leaders were struggling to find an answer. But not for long. The marriage between network marketing and the personal development industry became the perfect match. Books such as Think and Grow Rich by Napoleon Hill, The Magic of Thinking Big by Dr. David J. Schwartz, and almost anything written by Og Mandino were now featured at network marketing companies’ conventions and training events.
Today, How Successful People Think by John C. Maxwell and The 7 Habits of Highly Effective People by Stephen R. Covey are also among the books that network marketing companies recommend to their reps. A shift from training reps in sales and marketing skills to working on their mindset and attitude proved to be a winning strategy. Positive, upbeat reps are willing to do whatever it takes to achieve their dream, overcome their limitations, and take their opportunities.
At the same time, many large network marketing companies began to dictate dress and behavior codes for their associates and encouraged reps to stay away from family and friends who didn’t support their new career and outlook.
At a time when most people were unfamiliar with personal development pro- grams, and a friend or relative suddenly exhibited a personality change and began avoiding friends and family, it wasn’t uncommon for suspicions or fears to arise. As a result, some people began to theorize that these companies were cult-like. Today, more people are aware of training programs that focus on self-esteem, a positive image, and self-actualization, and the cult comparison is diminishing.
8. The Market Will Quickly Become Saturated
According to the saturation theory, if a network marketing company works the way it should, every person on the planet will be a distributor or rep within months and there will be nobody left to recruit or sell products to. While that sounds possible theoretically, there are several reasons that this is unlikely to happen.
The first reason is that, quite simply, not everyone will be interested in your business or product. No matter what you do or say, there are people who will find no need to be part of your team. That leaves a huge section of the population out of the equation. The second is the fact that there are millions of babies born every year, which in turn means that eighteen years later they are fresh candidates for a network marketing business.
There are more births occurring every year than the number of people joining network marketing, so the possibility of selling to everyone is extremely remote. And finally, many people try this business for a short time and then, for various reasons, move on to other things. Not everyone is suited to this type of business, so there will always be openings for people who are receptive to a career in network marketing.