You Got To Start Somewhere.

What is Network Marketing?

Multi-level marketing (MLM), also known as Network Marketing, is a business-distribution model that allows a parent company to market its products directly to consumers by means of relationship referrals and direct selling.

Independent, unsalaried salespeople of multi-level marketing, referred to as distributors (or associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc.), represent the parent company and are awarded a commission based upon the volume of product sold through each of their independent businesses (organizations).

Independent distributors develop their organizations by either building an active customer base, who buy direct from the parent company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization. Additionally, distributors can also earn a profit by retailing products they purchased from the parent company at wholesale price.

Distributors earn a commission based on the sales efforts of their organization, which includes their independent sale efforts as well as the leveraged sales efforts of their downline. This arrangement is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager. Commissions are paid to multi-level marketing distributors according to the company's compensation plan. There can be multiple levels of people receiving royalties from one person's sales.

What is a Pyramid Scheme?

Pyramid schemes exploit greed and gullibility. A successful pyramid scheme combines a fake yet seemingly credible business with a simple-to-understand yet sophisticated-sounding money-making formula. The essential idea is that the mark, Mr. X, makes only one payment. To start earning, Mr. X has to recruit others like him who will also make one payment each. Mr. X gets paid out of receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised exponential benefits as the ''business'' expands.

Such ''businesses'' seldom involve sales of real products or services to which a money value might be easily attached. However, sometimes the ''payment'' itself may be a non-cash valuable. To enhance credibility, most such scams are well equipped with fake referrals, testimonials, and information. Clearly, the flaw is that there is no end benefit. The money simply travels up the chain. Only the originator and a very few at the top levels of the pyramid make significant amounts of money. The amounts dwindle steeply down the pyramid slopes. Of course, the worst off are at the bottom of the pyramid: those who subscribed to the plan, but were not able to recruit any followers themselves.

Some network or multi-level marketing businesses, which sell real products and rely on the price differentials between the manufacturer's dispatch ramp and the retail counter, may verge on the borderline between ''smart'' and ''scam''. When a pyramid does involve a real product, such as Holiday Magic cosmetics in the United States in the 1970s, new "dealers" who've paid enrolling fees are encouraged, in addition to selling their products, to become "managers" and recruit more new "dealers" who will also pay enrolling fees. As the number of layers of the pyramid increases, new recruits find it harder and harder to sell the product because there are so many competing salesmen. Those near or at the top of the pyramid make a lot of money on their percentage of the enrolling fees and on commissions for the supplied products, but those at the bottom are left with inventories of products they can't sell. However, most multi-level marketing businesses are not pyramid schemes.

One of the many differences between MLM and pyramid schemes is that pyramid schemes do not offer a genuine product.

-From Wikipedia

Ross Decker

So, What’s The Problem With Network Marketing?

Is it the shape? Is it because it looks like a triangle (Gasp! Pyramid!) But you can't really take issue with a tiered compensation payout structure, every sales organization in the world has one of those. The salespeople get a commission, and the sales managers above get overrides or bonuses, and sales directors on top of that, and VPs on top of that.

Is it the fact that you have to pay to start? Can't be that one. That's a standard franchising model. And believe me, the franchise fee of most traditional franchises are way more than an MLM sign-up.

In reality, there are illegal pyramid schemes. This is one where money is made off of recruiting with little or no real product ever being delivered. But in spite of whatever perceptions people may have, the fact is that the giant companies that you know the name of, have sold millions upon millions of dollars of product to satisfied customers. So, there may be a perception problem, but if that is the case, the perception is out of line with the reality.

There is a giant pyramid scheme out there that I feel I just must make you aware of. You know that a pyramid scheme is where they take money from the little people at the bottom and give it to the people at the top. Well, the big scheme I want you to watch out for is called, THE UNITED STATES FEDERAL GOVERNMENT. Watch out! Don't get caught up in this one.

So what's the solution?

There's a first time for everything. And network marketing is a great opportunity for people to have their first business. The point is this, recognize it for what it is: it's a business, and you are a business owner. If you've never owned a business before, if you've never done sales before, you need to learn about how to do so, not just from the network marketing/MLM experts, but from established experts in those type of fields.

Network marketers who are serious about building this business should spend time reading and learning about the business fundamentals, the latest sales and marketing techniques, strategies for networking and business development, etc., not just swapping tips at your team's weekly conference calls. If you act like a small business owner, people will treat you like one.

-RD