Network Marketing is Evolving...

Network marketing has been around for a very long time. A company named Wachter’s started as the first network marketing company in 1932, during the Great Depression of the 1930’s and the industry has moved on to become the largest industry by far, boasting a $189 Billion global turnover.

One of the most common objections to Network Marketing companies is the pyramid argument. Many people will argue that Network Marketing companies are ‘pyramid schemes’ but that is not usually the case. If it is, they will be closed down fairly quickly.

Pyramid Structure versus Pyramid Scheme

There is a big difference between ‘pyramid structure’ and ‘pyramid scheme’. Almost every business has a pyramid structure. If you look at a typical corporate organization chart, you will see one person at the top, a few underneath that person, and then it fans out into… a pyramid. Even if you look at a sales organization, you’ll see that senior salespeople get commission overrides from the people underneath them. That sounds like a downline structure in Network Marketing.

A Pyramid Scheme, on the other hand, is illegal. It is where all the money is being made from signing up other people, with little or no real product ever being sold or delivered. Some will argue that that certain MLMs border on this. The business emphasis on many MLMs is so heavily placed on the opportunity that the product seems unimportant. Or it’s difficult to buy the product without hearing about the opportunity.

Legitimate Network Marketing companies will focus on significant product movement along with selling the opportunity. That’s a balancing act, and those that cross that line to ‘scheme’ will likely have authorities to deal with.

The Industry is Changing

If you are thinking about joining a multi-level marketing business to earn extra money? Before investing your hard-earned cash, make sure you’re not dealing with a pyramid scheme – a scam that can cost you dearly.

The FTC announced a case against Texas-based AdvoCare International, a multi-level marketer of energy drinks, shakes, and supplements. AdvoCare claimed people could earn unlimited income, quit their day jobs, and gain financial freedom by selling its products and recruiting other people to sell them too.

If you consider that Network Marketing is by far the largest industry in the world and according to statistics, less than 5% of people joining actually earn a consistent and increasing residual income, it does raise questions as to effectiveness of the business model!

Some of the challenges are the price point of products being sold in comparison to a relatable product in the open market. Another challenge is that consumers of a direct sales product, on average, use the product for 79 days and leave. Consumers are not keen on autoships and many really don't need the product at all. The third challenge is the people joining Network Marketing as a way to supplement/replace their current income.

Starting a home-based business using Network Marketing is a low-entry model, which can be a blessing or a burden. In terms of starting your own business with pretty much unlimited earning potential, many people enter the industry with zero business skills, false expectations, and a "get-rich-quick" mindset. It may only cost a few hundred dollars to get started, but it is still a business and requires the same disciplines and attitudes of a conventional business.

The old model of Network Marketing is evolving. The days of only being able to earn money by enrolling others into the network who in turn self use the products and generated a volume, which in turn is converted into a commission with little to no independent customer-base, will be a thing of the past. The FTC is looking at such companies and closing them down as seen with AdvoCare!

Network Marketing is a highly effective, efficient business model along with high earnings, but before you ever consider it as a business, here are 5 points to review:

1. Where is the "ship" going - Who is at the helm?
2. The Vision of the company?
3. Customer Acquisition Model?
4. Timing?
5. Community/Culture?