Network Marketing 101

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Lost in the antiquity of time, a certain business man must have decided, that in order to sell more and increase his profits, it would be great to have more people to sell his products.There was of course the option of hiring someone to do that, and then there was the smarter option of teaching someone his business for a fee and a cut from all profits. Thus was born the concept of Franchising.

 

The Wikipedia defines Franchising as “Franchising refers to the methods of practicing and using another person’s business philosophy. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee. “

 

In recorded (US) history, franchising was made legal by a very narrow margin of 5 or 6 votes in the US Congress and were it not passed as a legitimate business practice, the world would be a very different place from what we know it. There would be no Mac Donalds or Borders or KFC or Toys’r’Us or any of these chain super stores… They would not be legal!

 

But the bill was passed and franchising became a way of life. Obtaining a franchising license from a well run and established business requires a pretty hefty investment, usually upwards of a million dollars as an initial franchising fee plus space that you would need to buy or rent large enough as specified by the franchise agreement. Franchising created many rich people but it was still not the kind of money that a majority of the world’s population can afford.

 

Sometime in the 1959 in the US, two men Jay Van Andel and Richard De Vos founded a company called Amway based on what I would call the concept of micro franchising. Instead of having a few people with huge investments vying for an expensive franchise, they decided to dramatically lower the price for having a franchise and open their business up to hundreds, even thousands of people. For just a few dollars, you could become an Amway distributor and sell Amway products for a pretty nice commission. But that was not all, you were also granted the right to create more (micro) franchisees and given a few conditions, you would be given a cut on all their sales as well. They in turn could also create more distributors and they as well as you would get a cut on the sales of these new distributors… and so on.

 

Hence there would be a network of people in your “organization” and everyone in the network would earn money on the marketing of their “down lines” or the people they have sold the distributorships to. And so the term and the business of Network Marketing came into being. It is also called MLM business, meaning Multi-Level-Marketing.

 

This style of business gave a real chance to someone of any section of society to have a real stab at becoming really rich. The commissions along the downlines add up in geometric progression and could well be to the tune of thousands of dollars every month!

 

Along came some twisted minds who sought to make a quick buck by exploiting this system. They thought why should one complicate stuff by having a product or service there in the first place?

 

The so called pyramid or ponzi scheme was born. Here people would be “enrolled” for money into the pyramid and their sole job was to enroll more people under them and they would get a commission for every person enrolled by them as well as from people enrolled by those people and so on… Very similar to the Network Marketing model, but with one crucial difference, in this network, there was no marketing! Only enrolments… and so only the people at the very top of the pyramid would get any money.

 

Few crooks made a lot of money while millions of people fell for these get rich quick schemes and lost their reputations and their friends as well as massive amounts of money and this was the one big reason that even today Network Marketing has such a bad reputation among people who don’t know anything about it.

 

The many governments of the world quickly passed laws to make these schemes illegal. The law now decided that there has to be a product or service on sale in the network. Corrupt minds quickly found ways around this law too, they had utterly worthless products being sold for ridiculous amounts of money (the most outrageous being a pixel on a website being sold for $$$) and so now there was a network and there was marketing too… This further ruined the reputation of Network Marketing and many more gullible people were taken in.

 

Governments passed ever more stringent laws to combat this. But the tarnish on the name of Network Marketing had been well established by then and “respectable” people didn’t get “involved”.

 

Inspite of all this, Network Marketing in some form or the other is now an established and legitimate way of doing business in over a 100 countries worldwide and generates more than 100 billion dollars worth of business every year.

 

So, the question remains, what makes a great Network Marketing opportunity?

 

There are six factors you should consider deeply before taking the plunge.

 

    1. Beware of any company that sells dreams instead of products.

 

    1. The products should be fantastic! You will be talking about these products and recommending these products to family, friends and others. If they are no good, or you personally don’t like them, there will be little to none authenticity and integrity left in you and in your own eyes you will become a “conman”. You need to love the products. The products should be “real” products being sold to “real” people.

 

    1. The products could be great, but they should not be over priced. Here is the question you need to ask yourself… Would you buy these products if there was no business opportunity? Are they fairly priced for their quality? If the answer to this question is no, stay far away. Don’t do the business.

 

    1. Your compensation (commission) for doing the business should be very good. If you are getting Rs 5 as commission for selling something worth Rs 50,000. It’s not really worth your time. Study the compensation plan really well. Ask all the (even inconvenient) questions you want to ask. Don’t bother being polite.Don’t be taken in by smooth talk. And don’t enroll with a company that fails to give satisfactory answers to all your questions.

 

    1. Network Marketing is a very different way of doing business. Utterly different from conventional ways. So make sure there is a superb educational plan (mostly free) in place that will teach you how to do the business. Many companies charge hefty amounts to “train” their distributors. Stay away from these. If you are investing your time and money with them, they have to train you for free (or at nominal cost) to learn how to do the business.

 

    1. The company itself should be solid, not some fly by night operator. The usual advice is to wait until the company is at least 3 years old before investing with them. However if you feel everything else is perfectly alright with them, I would suggest you take the plunge right away instead of after 3 years while the market is still virgin and not many have heard about them. This is a risk for sure, but can pay great dividends.

 

There have been many people whose hands have been burnt by being a part of some (usually spurious) network marketing organization. There are others who have joined up with very legitimate organizations and simply not done anything. It’s like joining a gym and not going and working out. Of course you won’t see any results. These people say Network Marketing doesn’t work… I say to them, Network Marketing works, You don’t!

 

It’s not magic, it’s a business and like any business will require work to build up and see results.

 

I would encourage all these people not to give up on this opportunity. Read and re read this article and see what mistakes, if any, that they made.

 

Network Marketing is a full-fledged business and should be treated as such. Many people make the mistake of taking it up as a “hobby”. Always remember one thing before starting up any new venture: A hobby is something that takes money from your bank. A business or career is something that PUTS money into your bank. MLM might prove to be a viable solution to unemployment problem in India with the high number of people that we have and how the cost of manual labor is quite cheap.

 

You will require to put in tremendous amount of hard work before you will see tangible results, but if you persevere with commitment and consistency you will succeed, and most times, you yourself will be pleasantly surprised with the returns you have got on your investment.

 

A successful Network Marketer will surely have a solid chance at being really rich with very little monetary investment to begin with. In fact this industry has produced the maximum number of millionaires since the 1960s. You can become one of those too. Of course to compensate for the miniscule monetary investment, you will need to give a very large time investment. Be aware of that, and be ready for that.

 

Do remember that no legitimate Network Marketing company will ever peddle a “Get Rich Quick” scheme. If you even remotely smell something like this, shy away immediately.

 

However if all the six factors are in place, you work hard to grow your organization with integrity and authenticity, and you have that little spark of luck that any successful business needs, then a legitimate Network Marketing plan can definitely be a “Get Rich for Sure” scheme.

 

 

 

Khurshed Batliwala

 

 

[Image source:http://www.taxdrx.com/common/images/franchising/img-franchising.jpg]

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