What is the problem with network marketing and MLM?

Let me start by being very clear about something before I get into the hot topic.

There is no such thing as a “Network Marketing Company”. Network marketing or multi-level marketing is not an industry or business in and of itself.

Network marketing is really a distribution method used by many businesses in a variety of industries.

There are companies that offer services such as Web Hosting, Telecommunications, Nutritional Products, Drinks, etc… and use a method of network marketing or multilevel distribution to attract new customers.

Network marketing as a means of generating income has been endorsed by celebrities such as Donald Trump, Robert Kiyosaki, Robert Allen, Mark Victor Hanson, T Harv Ecker, James Ray, and more.

Still, some people would rather announce that they have a communicable disease than admit that they are involved in any type of mlm opportunity.

Network marketing (also known as multi-level marketing) is a marketing method used by many businesses to promote their products and/or services to the public.

Legitimate network marketing involves the actual sale of actual products and services to end users. To be clear, there is a profound difference between legitimate network marketing companies. This article is not intended to provide a comprehensive dissertation on the differences, but a solid test is simply asking, “Would you buy this product or service if there wasn’t some kind of ‘income opportunity’ attached to it?”

In other words, if you never made a cent selling the product or service itself, would you still be satisfied with the product or service you bought?

Fortunately, there are many companies where customers are able to answer this question with a resounding “yes.” And there are people who can also build significant income using this sales and distribution approach.

So why do so many people react negatively to network marketing and mlm?

Could it be the pyramid structure of the compensation plan? That wouldn’t make sense. It’s pretty hard to find a company these days that doesn’t use some sort of multi-tier (yes… multi-tier) compensation structure. Virtually every large sales organization in the world uses some form of multi-tiered pay plan. Sellers earn commissions on their own sales. Sales managers receive overrides and commissions paid from the sales generated by their sales team. Sales directors are paid on top of that. Then the VPs, upper level managers, CEO, etc. all get paid based on those same sales.

Look at the organization chart of just about any large company and you’ll see a “pyramid” type structure similar to that of the company. The United States government itself could be described as a pyramid-type structure when viewed as a whole.

Maybe people have a negative view of network marketing and mlm because they have to pay to participate. But that doesn’t make much sense either. Any standard franchise model requires franchisees to pay the franchise head office before they can start operating. And when you compare typical startup costs for a franchise and any mlm or network marketing plan, you’re talking a few hundred dollars compared to tens of thousands or even millions of dollars.

No doubt there are many illegal ponzi schemes operating in the name of network marketing or mlm, but that does not mean that all companies that use this approach are illegal. Companies like Amway, Melaleuca, PrePaid Legal have built strong businesses by selling their products and services to end users, many of whom are simply customers with no interest in the opportunity itself.

Personally, I am a client of several companies that take the network marketing or mlm approach. With some of them, I have referred some other clients and earn a commission. With some, I don’t refer anyone or earn anything, but I have been a long time customer because I really benefit from and/or enjoy the products or services offered.

When we look at it objectively, the problem with network marketing or mlm may be more of a perception problem than anything else. And if that is the case, we have to examine where the perception comes from.

When you look at mlm objectively, it’s really kind of an established “micro-franchise” where you can start your own business for a very low cost of entry. The potential to develop significantly higher levels of income is definitely there and there are people who achieve staggering, almost fairy tale levels of income.

Perhaps the problem with how network marketing or mlm is perceived is that it can often attract people who are not qualified or prepared to be business owners. These types of people tend to…

• Overselling the “opportunity” instead of focusing on the quality of the product or service.
• they lack tact when discussing your offer or opportunity.
  they seem to be desperate to “recruit” their friends and family.

• neglecting basic business principles such as support and customer service.
• they do not have your data together when presenting your service, products or opportunity.

As a result, these people tend to tarnish the overall reputation and credibility of those business owners who understand that network marketing success is based on knowledge and application of sound business principles and a level of professionalism.

Network marketing is, in my opinion, a great opportunity for motivated people to start their own business quickly and cheaply. The key is to recognize it for what it is: a business model that will require discipline, training, and focus.

The expectation that simply joining any opportunity is going to create wealth is ridiculous. Joining any company that offers a network marketing opportunity is just one step toward opening your own business. To be successful, you’ll need to learn about your product or service line, receive training on how to present your products and services, learn basic business and sales principles, and be prepared to work.

In essence, treat any network marketing opportunity you can join as a small business. Act like a business owner. So you can expect to be treated like a business owner.