Network Marketing (NM), also known as Multi Level Marketing (MLM), word of mouth marketing or referral marketing, is an industry that has been misunderstood for a long time.

For a start, it is not illegal pyramid selling. Nor is it any kind of “get rich quick” scheme, despite the endless, brainless ads you’ll see that promise instant wealth for no work. That’s the “pyramid selling mentality” at work, just as you’ll find it in investment property, share trading, real estate or any other activity in which genuine fortunes can be made – and just as easily lost.

What the “get rich quick” merchants never tell you, of course, is that those fortunes are made by hard work, astute judgment, knowledge, skill and time. Plus occasionally – very, very occasionally – by good luck.

Have a read thorough the following questions and answers to learn more about Network Marketing.

What is the difference between this and traditional business's?
What are the benefits of a Network Marketing business?
Is NM legal?
Is NM ethical?
Is MLM the same as Pyramid Selling?
Do I need to sell to succeed in NM?
Do I need to sponsor/recruit to succeed in NM?
What are the best kinds of products for NM?
What’s the best kind of reward plan?
Can anyone really succeed in NM?
Can you provide an unbiased third party opinion of NM?


What is the difference between this and traditional business's?

To explain how network marketing really works, its is probably easier to show the differences between traditional businesses and network marketing.

Distribution of product or services 

This is the major point of difference between network marketing and conventional systems. Instead of a complex system of wholesalers, warehouses, distribution centres, freight companies and retailers – with all the added costs at each point of handling – NM companies normally deliver direct to either the distributor or the customer. The savings in infrastructure, multiple handling, storage and transport are huge. In many cases, delivery can be made by regular postal or parcel delivery services.

Advertising

Most NM companies do very little advertising in comparison to more conventional companies, since word of mouth referral is the primary promotional medium. This represents enormous savings, which are normally channelled into network rewards.

Personal Selling Skills

In traditional business, sales people are employees or commission agents. Depending on the type of business, added costs are incurred in training, vehicles, support systems, travelling and accommodation costs and more.

In NM, the distributor network trains itself and provides all of its own transport, etc. While companies often provide training, costs are minimised by economies of scale, by the use of audio-visual or electronic media, newsletters and magazines, etc. In comparison to conventional selling skills, NM distributors require very little – most “selling” is limited to showing and telling. The products generally sell themselves, and word of mouth referral by customers is high.

Testing

NM companies usually conduct more rigorous testing because public expectations of NM products are unusually high, and are usually subject to much broader guarantees or warranties than other products. However, their testing can be more focused, because they don't have the same breadth of marketing and promotional activities and costs, so costs associated with testing are able to be reduced.

Pricing

The savings made by NM companies over conventional distribution methods enable them to pass on higher rewards to their distributor networks. In addition to these savings, there’s a major benefit in this system for NM companies… the relationships they enjoy with their distributor organisations.

There’s a synergy in this dynamic relationship that delivers extraordinary benefits to both parties, and ensures that they work together for their common good.

Start up Costs

NM is a business system in which you invest time and effort, not money. If an opportunity you’re considering requires you to invest more than £100 - £300 for an initial starter kit (including products), you may need to investigate a little more thoroughly.

What are the benefits of a Network Marketing business?

There are a number of key concepts that it is important to understand if you are to truly understand the power of network marketing. The most important of these are residual income and time leverage.

Residual Income

What exactly is residual income? Residual income means getting paid long after the work is done. It means getting paid today on work that was done last week, last month, last year, even ten years ago and longer! Get the picture? Traditionally the only ways to earn true passive residual  income was by investments such as stocks & bonds, or high interest accounts, property investments or even things like royalties on books or records.

These are all great methods IF you have a large sum of money to start with or you are a great author or songwriter. Network marketing allows people without any prior skills or knowledge of the industry to build a passive residual income, often with a low initial investment.

Time Leverage

Leverage is about creating a situation where your financial success is not longer dependant on the number of hours that you are putting in. This does not mean that you are taking advantage of other people like in a pyramid scheme, but instead you are working with a team of like minded people towards a common goal.

It's the teamwork that makes the leverage possible.  Without a team you're working by yourself....you're doing ALL the work....just like you would be if you were self-employed right?

When you put together a team of like-minded business people all with the same goal of getting leverage into their lives, something wonderful starts to happen...the team starts to duplicate. It starts to take on a life of it's own...everyone knows what to do because the team member that you showed how, then showed them how, it is then passed down to the next team member... and so on an so forth...as the team grows together

Here's what happens when you leverage yourself. You go away on a holiday to a beautiful island with crystal clear blue water and white sand, enjoying your family and friends for six days with no phones, no emails, no business whatsoever and when you come back........your business or team has grown !

Other Benefits

This will often depend on your reasons for getting started with your own business in the first place, but common benefits are - financial freedom, tax incentives, health benefits, personal recognition, being able to help others, and achieving personal growth.

Is NM legal?

Unless a particular country has laws that prohibit direct selling, NM is perfectly legal. Some countries, states or provinces have laws or regulations that may limit what you’re permitted to do in your NM business (such as Not For Retail, cooling-off periods, no products kit sales in the first week or month or similar).

These laws are usually a well-meaning attempt by authorities to prevent unethical conduct.

Is NM ethical?

Like the question above, the answer is yes — depending on your motives and methods (why and how you do it). The principles on which NM is based are completely ethical. However, unethical people can introduce practices (such as "front end loading") which are entirely unethical. Others try to cover up the fact that their business is NM, or the identity of their NM company.

None of this means that NM itself is unethical. It just means that, like in industries where a great deal of money can be made (cars, white goods, real estate, etc), you’ll find people who are prepared to exploit and manipulate others for gain. NM is no different. All this really proves is that there’s obviously a lot of money to be made in NM, or those parasites wouldn’t bother.

Is MLM the same as Pyramid Selling?

Absolutely not. NM has been around, at least in principle, since the late 1920s and early 1930s. After World War II, it began to rise to greater prominence when enlightened managements recognised the extraordinary leverage and equity that NM could provide — when properly applied for the benefit of all involved.

In the late l950s and into the 1960s, a few disreputable drop-outs from legitimate NM companies became frustrated by the fact that the ethics of NM prevented them from exploiting others — so they devised the Pyramid Selling system.

They recognised the potential for huge personal profits if the rules were changed. Now the key appeal was to greed — at the expense of others.

The irony of their scheme was that no-one victimised by it could legitimately call ‘foul!’ because they were, in fact, victims of their own greed. Willing to turn a blind eye to any personal misgivings, they sought to get rich by introducing others, just as willing (and greedy), into the scheme. For the predators behind the system, it was a dream come true. For a short time at least… until the bubble burst.

Some of the legitimate NM companies, concerned that the Pyramid operators were undermining the integrity they had so carefully nurtured, drew the attention of the authorities to the problem. Victims were also beginning to complain to the government and media. Before long, the scams were outlawed, and have remained illegal ever since.

Do I need to sell to succeed in NM?

For most NM companies, one way or another, you need to be able to sell in order to succeed, no matter what anyone tells you. Even if it's only yourself as a potential sponsor. Or your business opportunity. Or the need to set goals and action plans for success. You even need to sell yourself, from time to time, on the vision you originally had when you got involved in NM.

But selling doesn't have to be pushy or manipulative. In fact, the best the sellers are usually teachers and leaders, not hype merchants. Selling is WHAT you have to do to succeed. Pushy and manipulative are WHY and HOW you do it. There are better reasons (why) and methods (how) that produce faster, bigger results.

In addition, many NM companies are now are combining the power of catalogue direct selling, to make the "selling" of products much easier for the distributors.

Do I need to sponsor/recruit to succeed in NM?

You can make some money and save some money in NM. But, if you really want to take advantage of the unique leverage offered by NM, you should really look into sponsoring/recruiting.

It’s like riding a bicycle. You can get yourself an old single-speed bike that has no gears. If you want to go faster, you have to pedal faster. If you want to climb a hill, you have to push harder, even though your speed is almost at a standstill. It's hard work, and it takes a long time to get anywhere.

On the other hand, a 10-speed bike means you can cruise at high speed in high gear, with very little effort then, when you need to climb a hill, you simply drop the gears back to low and put in a little more effort and get there much quicker for a lot less effort.

Sponsoring increases the amount of product flowing through your NM business, exponentially. And it boosts your rewards exponentially, too. It reduces the amount of time and effort required.

Best of all though — and you should never, ever lose sight of this reality — it gives you the opportunity to help other people become successful, financially independent, confident, and provides you with a large group of people, who share your own values, with whom to enjoy the journey and share the rewards.

What are the best kinds of products for NM?

If there’s one kind of product that's best suited to NM, it’s products that are genuinely consumable. That is, people use them up, then come back for more, regularly. That means you acquire a customer once, then just keep on selling to them over and over and over again.

Products that cost a lot of money and are bought only once (or only every few years) can be successfully sold by NM. But you have to keep finding new customers every month.

Low margin products are usually not very successful in NM, either. Especially food and grocery lines, and especially if they put you in direct competition with large supermarket chains. For every company that succeeds in this area, there are many more that fail. Sure, lots of people join, because everyone buys these types of products. But, when margins are tight, and supply is often unreliable (lots of "out-of-stock" lines), the cost of making more than one delivery to supply a single customer order can make the business unprofitable very quickly.

What’s the best kind of reward plan?

"One that works!" is the obvious answer to this question. But, seriously, there are many types of reward plans, and people succeed and fail in ALL of them. 

Can anyone really succeed in NM?

Yes, they can, providing they meet the conditions on which that level of success depends. This is what separates the winners from the losers in any area of life, not just NM.

The difference in NM is that those conditions are achievable by anyone willing to create a clear vision for themselves, then invest the time, effort and discipline needed to realise that vision.

It requires some basic knowledge, attitudes and skills. It does NOT require any particular gifts or talents, although these can help speed up the rate of success.

The secret of success in NM is leverage — the extent to which you can duplicate your achievements through sponsoring, training and supporting others to do what you do.

Can you provide an unbiased third party opinion of NM?

To provide a truly unbiased opinion of the industry, I have included the following article written by the Government (Trading standards), which explains exactly why so many people are turning to Network Marketing to earn a living.

Click here to open this document.

You will need to be able to open the document in pdf (Adobe) format. If you do not have Adobe Acrobat, then you can download a free copy here