Network Marketing

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You have probably heard claims that you can make millions in network marketing!  At the same time, you probably thought that you were hearing a pitch for a pyramid or Ponzi scheme.  We are all now familiar with Ponzi schemes thanks to many unsavory individuals, like Bernie Madoff.  Madoff’s sophisticated plot illustrates that Ponzi schemes can be very clever.  So how do you tell the difference between a Ponzi scheme, a pyramid scheme, and a genuine network marketing opportunity?  It’s simple:  if participants are paid primarily from money received from new recruits, or if they are required to buy more product than they are likely to sell, then the company may be a pyramid or Ponzi scheme, which is illegal in most countries.  A Ponzi scheme is a system whereby money from new investors is used to pay earlier investors whereas network marketing always involves a product which will generate most of the revenue.  Now that you know how to spot an unsavory scheme, you can assess if network marketing is for you.  

What is Network Marketing?

Also referred to as MLM or “Multi-Level Marketing”, network marketing is a business model quite similar to a franchise.  Rather than moving a product from manufacturer to warehouse to wholesaler to retailer to end customer, network marketing companies use a network of independent individuals to market and move products directly from the manufacturer to the end customer. One of the most famous examples is Tupperware.  Compensation plans may vary, but typically the individual earns a commission based on independent sale efforts as well as the leveraged sales efforts of a “downline.”  Downline is the term given to all the individuals you recruit.  Each new recruit that a distributor brings into the organization is, in turn, encouraged to bring in his or her own recruits.  Eventually an active distributor develops a hierarchical substructure known as a downline that can be viewed similarly to an organization chart.  In this way, there can be multiple levels of people receiving royalties from one person's sales, just like a franchise.  A downline of other independent marketers are built below you and you earn a percentage of their combined sales. That being said, in a legitimate network marketing company, no money may be earned from recruiting alone.  

Is it for you?

Many in the industry regard network marketing as a business education—one that you won’t find in a university affiliated business school.  If you have always wanted to start your own business, you might consider network marketing as a way to fulfill your goal.  Network marketing is a small business model and attracts those with an entrepreneurial spirit.  Even if you do possess an entrepreneurial spirit, you still need to consider your personal skill set before diving in.  Are you ready for hard work?  Are you comfortable making cold calls and speaking in front of people?  Are you qualified and prepared to be a business owner?

 

 

 

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