Network marketing is not a business opportunity in itself. It is just another marketing technique. Whilst it has exploded in the early 21st century with the advent of the Internet, its origins go back to the 1980s. Essentially, it involves the following 2 steps:
- Making your customer become the best driver of your business. Network marketing blurs the distinction between a "salesman" and a "customer". Why can't your "customer" be first and foremost your "salesman"?
- Based on the above, it involves recruiting and developing other people in your team, or often referred to as "downline" and organising them to recruit more people in your team and selling more of your products;
In this way, you are rewarded a commission based on what your team earns, as opposed to what you earn.
This marketing technique therefore incentivizes you to recruit as many people as possible in your team to sell the product. When your downline sells the product, it is seen as they are selling the product partly thanks to your initiative organizational and development skills and therefore you earn a commission on what other people are selling. This gives rise to what is often referred to as "passive income", i.e. income for which you are not directly trading off time and effort. Other examples of passive income can include rent, royalties, dividends and interest.
Can you make money through network marketing? Yes, many people do. However, many people also fail to make money in network marketing.
Let's go through the advantages and disadvantages of network marketing:
1. Compared to other ventures, their setup costs are often relatively low (about $1,000 or less);
2. Unlike many other ventures, the person recruiting you will be willing to develop you into a good salesperson for the business. Remember, the better you are, the more his/her passive income will be!
3. Network marketing companies often have well-documented instructions on how to sell and how to recruit other people;
4. The reward is definitely there for the earning, but not for the taking;
1. Many network marketing businesses will also require a monthly outlay from yourself, such as a monthly service fee;
2. The income claims normally made by your sponsor or upline may often be exaggerated. True, there are some people in the pyramid who are earning over $10,000 a month for doing virtually nothing. But what you are not told is that they often started in the very early stages of the business and therefore recruited other people like yourself very easily. It will normally be much harder for you to find potential recruits and sales;
3. The ethics surrounding the venture often ressemble those of a cult. You will be made to believe that the product is great, and you will have a duty to instill this greatness into other people's minds. It is difficult to analyze the product and/or venture critically;
4. Perhaps the biggest criticism of MLM is that it relies on you and your team to recruit as many people as possible in order for your earnings to explode exponentially. In a finite population of prospects, this is increasingly difficult in the later stages;
So my advice to you is as follows:
1. There is money to be made in MLM, but take all earnings claims of your upline with a pinch of salt. Chances are that you will find it much harder to earn similar amounts;
2. MLM is only as good as what you make it to be. If you have a good network that will be interested in the product, you are likely to do well. For example, if you are a member of a focus group on losing weight, chances are that you will recruit many people in your MLM business that aims to sell weight-loss products;
3. Make sure that the MLM business is compatible with your interests and your lifestyle. There is no point in joining a network marketing business selling cosmetics if you have no interest in cosmetics. Like in most businesses, you will be more motivated to learn and will pick up the skills required in the business much more easily if you are passionate about the business. I've learned that through bitter experience;
4. Be sure to establish how you will have to market the product. If it is done online, you need to set a budget for Google Adwords. If it is done offline, do you have the time and willingness to go out and distribute flyers?
5. If the venture requires you to accept payments online, just be mindful that many online payment companies like Paypal do not like their services being used for MLM. It is explicitly stated in their User Acceptance Policy and they will close your account when they find you involved in MLM;
6. Do not give up easily. Most people who lose in network marketing ventures are those who give up because they do not see the money flowing in quickly enough. Once the excitement of joining dies down and they don't see the money coming in as well as they expected, they write off their investment in the business and move on.
Altogether, treat a network marketing business like a business. Be sceptical of claims of high earnings quickly and with minimal effort. Instead, focus on building it over time and aim to see the rewards in 2 years, not 2 weeks. If you want to see the rewards in 2 weeks, then network marketing is not for you!
Also, never treat a new prospect as a means of making a quick buck. The incentive is there to sell the product or venture once to the prospect, make some money and move on to the next prospect. This practice is called "hunting", because you have been fed for only one day. Instead, work with that person in growing his/her business. Motivate him/her and be available for advice. This practice is then called "farming". In the long term, this person will be like you and will be recruiting new people and making you money!
Good network marketing skills will be useful in any business, whether online or offline. Here is a selection of books I have reviewed and handpicked for you in case you are interested in improving your network marketing skills. Again, the price of these books is insignificant compared to the time, effort and money you are likely to lose if you are off to a bad start.
Robert Kiyosaki, author of the best selling book "Rich Dad, Poor Dad", is a great fan of network marketing. So there is bound to be some truth in it!
1. MLM Secrets: A great ebook that goes into further detail on network marketing techniques and trains your mind into adopting the right attitude in a MLM business;
2. 5 bucks a day: A great ebook that is aimed mainly at those who intend to develop a network marketing business online;