How to avoid broken business dreams when it comes to network marketing

Is there a problem with network marketing? Hands on a tablet image.
Network marketing, also known as multi-level marketing (MLM) or pyramid selling, is a marketing strategy for the sale of products and/or services where the revenue of the MLM company is derived from non-salaried participants. These “distributors” are sometimes referred to as “independent business owners” and they sell the company’s products/services and make their earnings through a pyramid-shaped commission system.

MLM businesses also sometimes describe their structure as direct selling or social selling. It’s extremely likely that you’ve come across or even bought from an MLM, sometimes without realising. The bigger names are Herbalife, Arbonne and Avon but there are millions of others and new ones popping up all the time. MLM may sound like a great business structure but there are plenty of controversies surrounding them. Let’s talk about the pros and cons of setting up or working for an MLM business so that you can make your own mind up.

The main issue that many people have with network marketing companies is in the way they usually work.

As a contributor, your profit doesn’t actually come from the products you sell but instead from recruiting people into the business as sellers under you (your ‘downline’, so to speak). You then make commissions on their sales and their downlines.

Some people don’t believe that this is fair and argue that it’s very complicated for people to earn a consistent amount of money by working for MLMs. Sales aren’t just to customers either. Normally, in order to join an MLM you need to buy products to sell which are often referred to as starter kits. Then, to remain a seller, you will need to make a minimum number of sales in a given time period. It is often said to be the case that in order to hit your sales target, you have to focus on recruiting people under you and make commission off their starter kits. Either that or by buying products yourself. The only other option is constantly trying to sell your products to the people around you which can very quickly make you feel like you’re hassling your friends, family, neighbours, and anyone you come into contact with. Often, there is an initial interest that later diminishes too. Pushy MLM reps get a bad reputation for network marketing brands in general but it’s nearly always because they’re in a catch 22 situation.

Our research tells us that in most cases, you usually need to pay to join an MLM. Once you’re in, you may need to sell a certain volume to receive your commission or even just remain a representative. The products are often expensive and can be hard to sell – especially if your area is already saturated which means that the only way to make money is to recruit. All of that said, there are plenty of people who love working for MLMs and the successful MLMs go to show that this business model can work. It doesn’t have to be the case that you’re lured in with what sounds like life-changing business promises and then end up disappointed. Sometimes working for an MLM really does transform your career and take you where you’ve always wanted to go.

Whilst we’ve addressed the fact that in 9 out of 10 MLMs you have to pay to become a seller, the costs involved in setting yourself up are significantly lower than if you were to start up a business from scratch. There is only a small risk involved in getting started. With a couple of hundred pounds maximum to put in to begin with, it is possible to get started with a company of your choice, marketing products that you consume and love already. Another point to note however, is that often, there is no marketing budget for each company representative. Websites, brand social media accounts and other marketing activities are often controlled by the regional head office which significantly limits your marketing options. You would need to get creative!

There are MLMs which don’t sell high quality products, just like there are low-quality businesses with traditional models. But there are a vast amount of network marketing companies that promote very good products.

The key to deciding which MLM to work with is to ask yourself; ‘would I still consume these products/services if there were no opportunity to market them?’, ‘do these products bring any benefits to a consumer besides the opportunity to make money?’ and ‘would I bring “value” to my customers if they consume these products?’.

If you answer yes to these questions then you’re already off to a great start. Every business needs repeat customers, MLMs or not. If you, as a seller, can guarantee that you have consumers for your products and, most importantly, repeat customers, then you will be able to create a continuous flow of income through your work.

There are plenty of other benefits. There is no cap on how much money you can generate. You don’t have to worry about employing other people, as an MLM affiliate program is a business of people independently working together. Possibly the biggest plus of all is that working with an MLM can be done wherever, from wherever. With the advent of technology, you can do today what distributors 15 years ago could not do and that’s to make your business completely portable. With phone and internet technology, can work anywhere you like and still stay closely in touch with your customers.

So, if you’re considering starting an MLM or have thought about working for one yourself, be aware of the downsides but also remember the possibilities that this kind of business can bring if you’re successful.

What are your thoughts on network marketing companies? Have you got any stories you’d like to share with us about your experiences with them? Talk to us in the comments below.

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