What Is Network Marketing?
Network Marketing (also called Multi-level marketing or MLM) has been around since the 1920’s.
The profession falls under the umbrella of the Direct Selling Association (DSA).
According to the DSA the industry generates over $35 billion dollars per year in the United States and has 5.9 million part-time distributors and 27.3 million customers.
Is Network Marketing A Scam?
Let me state very clearly, Network Marketing is not a scam. It is 100% a legal form of product distribution.
Unfortunately, like any industry or profession there are going to be people who cut corners or attempt to take advantage of loopholes.
Look at the banking industry where you see multi-billion dollar ponzi schemes and many corporate executives that go to jail by milking money from honest Americans.
You can also use the real estate industry as an example! Do you remember the housing bubble of 2008? Banks and lenders were absolutely scamming the country and millions of Americans lost their homes and everything they had.
We don’t define industries by the actions of a few bad apples.
Yet, the Network Marketing industry doesn’t get that same benefit of the doubt.
For some reason people associate legitimate Network Marketing with a “pyramid scheme” and the two are completely different things.
Is Network Marketing a pyramid scheme?
A pyramid scheme is a business model that promises financial reward for simply enrolling others into the scheme without any sale of product or services.
This is NOT how Network Marketing works.
A legitimate Network Marketing company allows independent contractors (called distributors) the ability to become a marketing agent of the company for a small fee, usually under $500.
This fee covers their initial business materials such as their marketing website, tracking software and perhaps sample products used for demonstration.
There are no commissions paid on the enrollment of such a person in a legit Network Marketing company.
Now, if that new distributor also orders product during their distributor enrollment, then a commission is earned on that product purchase.
Note: the commission earned is on the product and the it’s the exact same commission that would be earned if a retail customer had purchased it. There is no difference.
The Network Marketing haters want to make you think that the only reason people buy the product is because they’re promised to get rich quick.
That is not the case for a majority of the Network Marketing companies out there.
Most people become distributors because doing so carries additional benefits such as bigger discounts or loyalty rewards such as free product.
This is no different than retail big box stores that have memberships to gain access to bigger discounts. Companies such as Costco or Sam’s Club have used this model for many years.
Perhaps the biggest user of this model is Amazon. Amazon charges a yearly fee for their Amazon Prime membership. They also give bigger discounts when Prime members sign up for things like automatic purchase on select products.
Why then does Network Marketing have such a bad reputation? It’s because people don’t understand how it really works and they buy into the myths…
Network Marketing & LEVERAGE Explained...
A COMMON MISCONCEPTION ABOUT NETWORK MARKETING:
“Network Marketers only care about recruiting people, not actually selling the product.”
The reality: Network Marketers want to create a large customer base through leverage.
Consider the Real Estate Broker profession…
In 2015 there were 5,250,000 homes sold in the US (source: National Association of Realtors narr.realtor).
At the time there were 2,000,000 active realtors.
That means that in 2015, 2.65 homes were sold on average per Realtor in the US.
So, how does a Real Estate Broker earn millions of dollars in commissions each year? Simple, it’s called leverage.
This is Bob, the Real Estate Broker. He can go out and sell homes personally and earn a commission. The problem is that Bob is only one person and he only has so much time in a day to show homes and make sales.
What does Bob do now? Well, if he’s smart, he’ll go out and start recruiting other Real Estate agents.
Bob doesn’t employ these agents, they’re 1099, independent contractors.
He simply allows them to use his brokerage name (the company name on the sign in front of the house that the Realtor then hangs their name under – such as Century21, REMAX, etc.).
In the image above you see that Bob sells 3 homes in the month. Then he recruits 2 Real Estate Agents into his office and those agents each sell 3 homes.
Now, Bob earns the full commission on his 3 personal sales (because he’s the broker). However, he earns a brokerage commission (an override commission) on the sales of the agent’s homes.
The agents earn a bigger commission but Bob the Broker gets a piece too.
This is called leverage and it’s brilliant!
Network Marketers can do the exact same thing:
As you can see, there is no difference at all.
Doubters just don’t understand how this is possible.
It’s possible because companies are choosing to circumvent the expensive model of traditional advertising and pay its raving, most loyal fans/customers to refer the product for them.
This is a brilliant strategy that works. Look at the global sales of these top industries compared to the global sales in Direct Selling:
Network Marketing works and people do make millions from it.
In fact, on average, about 50% of the revenue a company earns is paid back to the distributors in the form of commissions.
So that means that roughly 90 BILION dollars is paid out annually in commissions to people just like you and me.
But there is a catch…
The catch is, you have to actually do some work, and a lot of it.
What It takes To Succeed In NEtwork Marketing...
The people who earn significant incomes (more than $50,000 per year) are people who work very hard at mastering the skills needed for success.
I’m talking about mindset, lead generation, presenting, selling/closing, training, leadership and more.
The misconception is that people join and within a month or two they’re expected to get rich.
People with common sense understand this isn’t true.
Unfortunately, most people lack common sense.
This is where the bad apples in Network Marketing make it harder on the rest of us.
They run around on social parading a lavish lifestyle, huge homes, fancy cars and they say things like, “You can have this too with just an hour a day and without talking to anyone.”
It’s nothing but BS.
The reality is that they work their tail off, likely talking to dozens of people per day.
Here are my numbers from 2006 to 2018 (I stepped back from building in 2018 to focus on my coaching/training business – BTW, that business still pays me to this day in late 2020!!!)…
Leads Generated: 50,000+
Phone Conversations: 10,000+
Personal Recruits: 1,500+
Total Team: 40,000+
Total Customers: 150,000+
Total Commissions Earned: $9 million+
So, over that 12 year period I had to generate about 350 leads per month, have 69 phone conversations per month and recruit abut 10 distributors personally per month.
These are rough estimates but pretty darn accurate.
There were some months where I’d talk to more people than others.
In those first 6 years I talked to A LOT more people than in the last few years.
The moral of the story is yes, you can get rich, but it takes consistent effort that isn’t easy.
If you’re just starting out in Network Marketing and you’re looking to gain an advantage, then I’d encourage you to check out my Digital Networker Academy.
I created this program to give Network Marketers a complete A-Z process to follow that helps them become a Network Marketing master. Learn more here…