What is Network Marketing or Multi-Level Marketing (MLM)?

Does every Consumer of the product need to be a Seller of the product?

How can companies afford to pay commissions to multiple levels of distributors?

Why do companies embrace Network Marketing method of business?

Is MLM or Network Marketing Legal?

Is there anything immoral or unethical about MLM programs?

Why then is there so much negative publicity about Network Marketing?

Is it really possible to earn large commissions in Legitimate Network Marketing Plans?

What happens when the Network Marketing plan ends?

Why only too few people earn money in Network Marketing?

What is Direct Selling?

The term Direct Selling refers to a method by which the manufacturer of a product markets it directly to the consumer, without reaching them into the hands of a distributor, sub-distributor or retailer, as it is done conventionally.

What is Network Marketing or Multi-Level Marketing (MLM)?

Network Marketing or MLM is a form of Direct Marketing in which the ultimate consumers of the product also act as Distributors who sell the product to other consumers, earning a commission on the sales they make. It is called ‘Multi-Level’ because the commission paid is not only for the sales directly made by them, but also for the sales done down-the-line by the consumers who they have introduced. What’s note worthy is that in Network Marketing, people have two choices : (a) to be a consumer of the product from which they or their household benefit from its consumption or usage, and (b) by virtue of being a consumer, embrace the rights to distribute the product/s they use/consume and earn commissions.

Does every Consumer of a product need to be a Seller of the product?

Not at all! Direct Selling or Network Marketing companies are like any other company you can think of that sells products and / or services that are used / consumed by people at large. The only difference it that the products can not be procured by the consumers directly from the company or at retail stores but only through the existing customers of the products who have also obtained the rights to sell them.

It is important to remember however, that there are many people who remain to be only as satisfied consumers of products provided by the Direct Selling companies, though they also have the option to sell the products and for a commission. In other words, they do not pursue the business opportunity, which is optional.

How can companies afford to pay commissions to multiple levels of distributors?

In the conventional form of marketing or distribution of products, the manufacturer sells the products to a distributor and the distributor resells to a retailer who then sells again to the final consumer. The distributor and the retailer therefore act as middlemen in the supply chain of the product. It is important to note that there are many companies who have more than two middle-men and the numbers can vary. Every time the product changes hands from the manufacturer, the price of the product increases in the form of distribution cost. In addition to these distribution costs, manufacturers also spend large sums of money for advertising and marketing expenses so as to create brand awareness for their products.

Globally, the average mark-up from manufacturer to the ultimate consumer in conventional or indirect marketing varies between 300 to 500 % or even more. In Network Marketing however, the manufacturer sells directly to the consumer, by-passing (or eliminating) the distributor and retailer. This new-age distribution results in reduction in the need for two vital expenditures namely marketing and advertising; as both the tasks are done word-of-mouth by the existing customers of the products. Over the decades, it has been found by top companies globally that a significant volume of sales happens due to referrals made to new prospective buyers by the existing satisfied customers who have experienced the product!

In Network Marketing companies, a major portion of these savings are placed in a pool of funds that is utilized to pay the consumer-distributors commissions for the sales they make.

Why do companies embrace the Network Marketing method of business?

Network Marketing Plans are particularly suitable for marketing products that have a very wide potential market among the public at large, which requires high level of product specific knowledge by the one promoting it.

It is universally accepted that it is the ultimate consumer of a product who is often the most qualified person to speak to others about the pros and cons of a product, because he/she is a consumer already and has experienced it. Since Network Marketing distributors are also consumers of the product/service, they can effectively pass on or share their own satisfaction or personal experience to other prospective consumers who are also their social contacts.

Is MLM or Network Marketing legal?

Professionally designed MLM businesses and Network Marketing companies are legal like any other established businesses around the world. There are many companies in the business worldwide for more than 2-3 decades whose revenues are more than US $ 3 – 5 Billion. The global turnover of the Direct Selling industry is over US $ 100 Billion and is growing stronger every year. In Malaysia for instance, there are over 500 Network Marketing companies with the combined revenue of US $ 2 Billion. It is an industry chosen by over 50 million peoples around the world that is worth in the neighborhood of US $ 110 billion dollars in 2006.

Network Marketing has truly emerged as the new wave of opportunity for today’s work force in the new-age economy, an era in which many experts believe that the term ‘Job Security’ simply doesn’t exist!  The same, along with socio-economic imbalances across the developing economies and the growing need and realization to supplement family incomes, especially by the billions of people belonging to the middle-income group around the world, are seen as encouraging factors for tremendous growth potential for the industry.

Network Marketing is a highly misunderstood form of business, thanks to the unscrupulous companies and, not to forget, failed Networkers! People usually fail in this industry because :

1. they were ill-informed about the business by an untrained distributor 
2. they thought it can be a nice vehicle to get-rich-quick
3. they were not willing to get trained, or most importantly
4. even though they did put little efforts, they did not follow the System!

Is there anything immoral or unethical about MLM Programs?

Network Marketing is a creative method of marketing which offers significant benefits to consumers, enabling them to purchase any product they desire for themselves or their family and earn additional income that can supplement their existing income. Network Marketing is all about earning an income based on making use of one’s personal contacts and relationship with each of them.

In this sense, it is similar to innovative programs like insurance, hire-purchase or leasing. Insurance, for instance, provides the individual with security at a fraction of the cost by distributing the risk among a large section of the population. Hire purchase on the other enables people to buy now and pay later out of their future income.

These and similar methods that tap a portion of the society’s unutilized potentials have contributed enormously to the development of the society. Yet all of them, especially during the early days of evolution, have been subject to abuse and fraudulent misrepresentation by unscrupulous elements. Network Marketing is no exception.

In spite of the industry existing across 5 decades in the west, it is only just emerging as an established industry in most countries of the world, especially in Asia, Middle-east and Africa. There are many countries that are keen to legitimize Network Marketing and give it an industry status, for which they are closely working with globally established companies. There are countries that are framing fresh new laws to enable MNC Network Marketing companies to set shop and operate so as to create thousands of self-employment opportunities.

Why then is there so much negative publicity about Network Marketing?

The reason is fairly simple. Like there are both honest and dishonest companies that exist, both reliable and unreliable companies have launched Network Marketing or MLM programs. In the United States for example, though the industry has been existing for more than 4 decades, even today, there are unreliable companies that open up and shut down. This is something that is inevitable.

Looking at things objectively, globally, 90% of conventional new businesses fail and close down within the first three years of operations! Another 5% of them too close down in another two years! Similarly, Network Marketing too is a business. For any start-up company, the product offered by them is very vital for its survival. A no good product, therefore, dies a natural death anyway.

Most of the companies that shut down are established with the right intention. Yet, the reasons why they had to close shop could be the lack of utility, bad positioning of the product, non-viability of business compensation plan, inefficient management or, in some cases, the legal framework not well defined for Network Marketing companies to operate in the country where they are established. The law of average of failed start-ups that applies to conventional business does apply to Network Marketing too. Having said that, let’s not forget that we’re talking about an industry that’s worth more than US $ 108 Billion worldwide in which more than 55 million people are involved.

In so far as Negative Publicity is concerned, globally, the billions of dollars of advertising and marketing spends saved by hundreds of established Network Marketing companies means less advertising revenue which is the cash-cow for both print and visual media. After all, before the industry came into existence, companies manufacturing virtually anything had to depend on the print / visual media for their advertisements & marketing. But now, after the onset of this radically powerful industry, all the ad spends are being distributed among millions of consumer/distributors making thousands of them millionaires in 5 – 10 years!

Is it really possible to earn large commissions in legitimate Network Marketing plans?

The simple and straight-forward answer is ‘Yes’, it is possible to earn huge income for those who work hard to resell the products to prospective consumers and ensure they enjoy the benefits of the product. One should always remember that in a professionally structured Network Marketing plan, no one loses. Yes, you read it right. No one loses! Though the reason is fairly simple, it takes an open mind to know how?

Each one of those who do not make money are one’s who have got a product that is worth the value of the purchase they did – just like any one who buys a product from a retail store (say, a refrigerator or a microwave oven). But apart from enjoying a product they are entitled to, they did not consciously embrace the business rights that they can pursue and therefore never made money.

In Network Marketing, each consumer has an opportunity to earn in proportion to his/her efforts and skill levels as a distributor. While those who resell earn good commissions; the others who evolve themselves into leaders owning a large organization earn Passive Income in the long run (3 – 5 years) by creating and putting a System in place. They are the ones make use of the world-class trainings provided by the company, so as to enhance their knowledge and skill levels to emerge as a leaders, and, in turn, create more leaders within their organization.

About two-thirds of the first generation millionaires in the world every year, become one, through this industry! That speaks volumes about the potential of wealth creation through this industry.

What happens when the Network Marketing plan ends?

There is no reason why a professionally managed company with a viable compensation plan and most importantly, a company having a quality product or service that can be consumed by a large section of the population - has to come to an end!

This is especially true for products that will by-and-large be re-purchased by individuals or families on a daily or monthly basis. On the other hand, there are products in the consumer durable segment, luxury and life-style products and services like televisions and vacation packages; whose consumption can vary anything between 1 – 5 years.

This means, hypothetically, even if the entire market is flooded with product or service provided by a company, there is a 100% possibility of re-consumption / re-purchase of the product/service offered by the company by the same set of customers – over a period of 5, 10 or 15 years! As long as there are households and as long as there are repeated consumption of products/services, an established company’s Network Marketing Plan never ends.

Why only too few people earn money in Network Marketing?

There is no quick money that can be earned in professional and well-established Network Marketing companies. The compensation mechanism put in place by all leading companies are such that if one doesn’t put in enough and the right effort working closely with successful people, they simply can’t make money. In addition, unless they follow the simple but well prescribed and step-by-step System for Passive Income, it is almost definite they wouldn’t be able to create wealth.

Most people try to work the business in their own way, not realizing that there is a prescribed Time-Tested System in place that they need to diligently follow. That’s why they earn few one-off commissions now-and-then but they simply can’t and won’t earn Passive Income or create wealth.

Nevertheless, with more than 55 million people in the industry world-wide, even if a fraction of people create wealth, we are talking about money being made by a few hundreds of thousands of people! In other words, there is no easy money in Network Marketing but there definitely is huge income for anyone who is serious about the business, put consistent efforts to reach out to as many people as possible, follow the System, be patient and persevere enough. Most critical of all, the real ones who make in the business are those who decide to make it a Career.