Network Marketing or Multi-Level Marketing.
The Elephant in the room.
Yes. Finally, we are going to discuss the tricky topic that most marketers, including your Affiliate Marketing Guru, will steer clear of.
So let’s get started… First things first.
A cursory search of the terms Network Marketing in the Google search console gives us this:
a) It is a “Business opportunity” i.e. an opportunity for people like you and me to make money, doing our OWN THING
b) You can work part-time or in a flexible fashion.
c) Some of the “best-known companies in America” fall under this umbrella.
d) Also called Multi-Level Marketing since “commission payouts occur at many levels”
So – why would your Marketing Guru steer clear of this topic, you ask?
Well, for starters, they themselves may not know how Network Marketing works, and whether it is a good thing or a bad thing.
Sometimes, just sometimes, they may even be scared that you may eventually stop paying for their advice, since many Multi-Level Marketing Companies (or Direct Selling companies) “Provide Support and Training as well” i.e they are an all-inclusive Business Opportunity.
Secondly, a SURPRISINGLY HUGE number of scams have occurred under the garb of Network Marketing – most of these being “Pyramid schemes”, or “Money chains”.
So, let’s first explore the first, and then see how to watch out for the other.
KEY FEATURES OF Network Marketing or Multi-Level Marketing Businesses
MLM is a marketing strategy in which you as the Affiliate Marketer are compensated not only for sales you personally generate but also for the sales of others you recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation.
You may start off by retailing too, and sponsoring people (as downline distributors) from, your “warm list” of prospects and then utilize more sophisticated marketing techniques such as the Internet, conference calling and other long-distance sponsoring techniques to extend your network across the country.
Conversely – A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services.
Some pre-requisites enforced by the Federal Trade Commission in the US, the Australian Competition and Consumer Commission and other similar Government agencies in each country in order to qualify as a legitimate Multi-Level Marketing or Direct Selling Business:
- Sales of viable products should be involved – This is a BIG one! Probably the most important. A product is described as viable if a) It fulfills a common, or projected consumer need. b) It is priced near-about the same as similar competing products in the market c) There is a current or reasonably researched future market need for the product
- There should be a buy-back or free-look period – ALL legitimate Multi-Level Marketing Companies offer a free-look or a buy-back period ranging from 1 to 4 weeks, with a refund clause for you, should you rethink your decision.
- There should be no forced buying of products yourself – While some companies may insist that you must own the product in order to showcase it, some others may throw in a product-set for you as part of the enrollment fee. In ALL cases these come with the buy-back guarantee, and in NO case should you be forced to go on purchasing the product repeatedly.
- Revenue must come from sales commissions, there should be no commission from recruiting – Once again, the keyword is “Marketing”. The revenue structure of the company, as well as the commission structure for you, should be based PRIMARILY on product-sales and NOT on recruiting other sales agents (down-lines). It DOES emerge that recruiting more sales agents to build your team WILL enhance company revenue (and your commissions), but if a company pays you primarily to get others to join (regardless of whether you or your downlines bring in any sales revenue), that should make you run out through the nearest door.
Conversely, a pyramid scheme will be conspicuous by the absence of viable products and the absence of a marketing model i.e. you don’t have to sell anything to anyone, and are only paid when you recruit other people to ‘pay into’ the chain or matrix.
More links about Network Marketing or Multi-Level Marketing, from marquee online magazines: