Is Network Marketing A Scam Or A Real Business?

How MLM (Network Marketing) got started and grew to meet the needs of the customer and the entrepreneur. It’s fascinating

The first company to offer the option for their salespeople to "own" their own business, was back in 1868. J.R. Watkins founded the J.R. Watkins Medical Company, one of America’s first natural remedies companies where associates marketed directly to consumers.

1945 – Nutrilite contracted with Mytinger & Casselberry to become the exclusive American distributor of Nutrilite products. Mytinger & Casselberry created the first documented MLM compensation plan. It worked like this: A Nutrilite distributor bought his supplies at a 35% discount. (Ex: A distributor bought a box of vitamins for $13 and then sold them for $20 = $7.00 profit.)

Once the distributor proved that he could get 25 customers he was allowed to become a DIRECT distributor – which meant that he could find others who wanted to sell the Nutrilite products and then they would buy their products from him. In essence, once he proved that he could get customers he was “promoted” and allowed to find other distributors and to train them to get customers. As an incentive to train his distributors well, once he and his distributors amassed 150 customers, he received an additional 2% of the total sales volume.

This is not a pyramid – it’s a quota-based system of management. Those who sold the most boxes of vitamins got a higher reward than those who sold little. The MLM compensation plan was simply an extension of the Fuller Brush Company rewarding production. With MLM (Network Marketing), the company could motivate a salesperson to not only sell more products but to train others to sell more products as well.

The industry became controversial in its business practices as people weren't accustomed to this method of practicing business, which resulted in The FTC (Federal Trade Commission) filing a suit against Amway corporation for operating a pyramid scheme in 1975.

1979 – An administrative law judge ruled that Amway’s multi-level-marketing program was a legitimate business opportunity, as opposed to a pyramid scheme.

It would be worth mentioning that the first famous pyramid scheme occurred in the early eighteenth century in France, which the banking system was responsible for!

Let’s start with a couple of definitions, since many people do not really know correct definitions to these words.

Scheme

1. Someone’s plan for achieving something.

2. A secret or devious plan.

Scheme comes from Latin word schema, which means figure.

Therefore, a scheme can mean either a plan for something good or something devious.

Scam

A fraudulent scheme.

Fraudulent comes from the Latin word fraud, which means deceit.

Deceiving someone means to trick them.

FACT: There is no industry (including stocks, charities, legal, medical, religion, MLM and government) that does not have a history of fraudulent activities. Fraudulent activities of some people in an industry does NOT constitute a fraudulent industry.

In looking at scams, it is important to locate the actual source that is carrying out the scam; there is ALWAYS at least ONE person.

Source

One that causes, creates, or initiates; a maker.

If a person kills someone with a rock, don’t blame the rock! The rock isn’t the source and didn’t kill the person. A person with bad intention is the source and USED a rock to do damage.

If a scammer uses telemarketing to seduce its victims into a scam, don’t blame the telephone. The scammer (a person) is the source and USED a telephone to deploy his scam.

If a scammer (a person) uses MLM to deploy his scam, don’t blame MLM.

An industry can’t be a scam as it’s not capable of tricking people. People are the only ones capable of tricking people.

MLM is not the culprit in scams, pyramids, investment fraud, chain letters or Ponzi schemes. The culprit is the unethical activities of a person or a group of people.

The reason scams sometimes use MLM is because MLM is a powerful way to distribute anything. Just as a telephone or the Internet is a powerful way to reach people.

Confused

1. Being unable to think with clarity or act with understanding and intelligence.

2. Lacking logical order or sense.

The government and the media have done a fantastic job of confusing people on the subject of pyramids and their association to MLM. The government (FTC – Federal Trade Commission) has publicly sued companies for running an illegal pyramid scheme and announced it to media; then the media has announced it to the public with very accusative statements like, “(Name of company) is an illegal pyramid scheme – ACTION IMMINENT!”

Then, after researching the company, the government drops the case because of no wrongdoing. But the media doesn’t announce this – therefore the public continues to think that a particular company is a pyramid scheme when it’s not. Pretty soon people just generally think that all MLM companies are pyramids when they are not.

This is the primary reason for the “controversy” around MLM. The controversy comes from people being confused on what is a legal and ethical MLM business and what is a pyramid.

When an individual decides to get involved in Network Marketing as a solution to their pain or desire, they typically fall into three categories:

1. Posers
2. Amateurs
3. Professionals

Posers join the business with the intention of contacting a handful of prospects whom they know will join and expect to be rich 6 months down the road. When this expectation isn't met, they quit and make sure they tell the world. They will say things like, "I've been there and it doesn't work. I spoke to everyone I know (six people), and no one was interested. Save your money and don't get involved in this scam!"

Amateurs join the business with absolutely no idea about business. The will typically do a bit more than the Poser, but ultimately fail and make sure they tell the world their story.

"Network Marketing is an industry of Marketing and Promotion, pursued by people who don't have a clue how to do either!"

Professionals join the business with the intention of building it as such. They realize that it is a business and therefore they will have to develop skills relating to their new found venture. They manage their time, set goals, and have the right expectations. Ultimately, they succeed. The know that success doesn't come within six months, and will take the time to establish.

To become an expert at anything (even Network Marketing), it will take around 10,000 hours of study and practice in a given field. That equates to seven years with four hours per day on the subject. Posers and Amateurs want instant gratification, and therefore want to skip this part!

"Network Marketing isn't perfect, it's just better".

The typical "low point of entry" into the industry, is a blessing and also a curse. It attracts people who think that becoming rich is a five-minute deal. Additionally, there are many people out there who aren't leaders, trying to lead people. The results are inevitable...

People at the top, make all the money?

From the overall industry turnover, only 500 from the 96 million people who are involved worldwide, make an annual income in excess of $1 million - That is equivalent to 2% of the overall registered distributors.

It's a Pyramid?

People get confused by the shape of an organization. If you look at any business or organization, it always starts with the CEO followed by the rest of the hierarchy.

The world has already begun to move towards a "performance" based society. The old ways of earning money are beginning to wither! People are waiting for the economy to bounce back! It's not coming back the way which we are accustomed to.

We were taught to go to school, learn how to get a job and find a company who would employ us. We learn the job and repeat the process for a number of years until we retire with a percentage of what we earned whilst we were employed. In recent years this has become almost impossible to achieve because technology has taken many of those jobs. We now have to change jobs every few years and find that retirement requires much more than we have in available resources, so we need to keep working after retirement age. Even if you are self-employed or a business owner, it is becoming increasingly more challenging to stay ahead of the game. Currencies are failing, commodities are becoming more expensive and the list goes on.

Network Marketing is becoming increasing more attractive for companies distribute their products and services, as this fits the new economy. Network Marketers get paid solely on performance, and use the most powerful form of advertising: "word of mouth".

The industry is endorsed by people like Robert Kiyosaki, Sir Richard Brandson and Bill Gates to name a few.

The industry will take some time to establish a more positive image, as more and more quality distributors are joining. Uneducated and misinformed people give the industry the bad image, and not forgetting scrupulous people out to make a "quick buck"

"People aren't against Network Market(ing) per se, rather Network Market(ers)"

So, is Network Marketing a Real Business or a Scam? I think you will agree that $167 billion of anything isn't a Scam, rather a Real opportunity. It is one of the most effective business models for leverage and lifestyle development, which can be started with much less than any conventional business or franchise.

I would like to thank #Tim Sales for providing me with data which helped me write this article.