The term “network marketing” and MLM is usually met with skepticism. Just Google “MLM” and you’ll find pages upon pages of articles trashing the “annoying network marketer” in their lives, and tips on how to straight-up avoid them.Here’s the deal: the network marketing industry is saturated with bad entrepreneurs who give everyone else a bad name. If you’ve always wondered whether an abundant, fulfilling life is possible through network marketing, the answer — without a doubt — is yes.The caveat: not all opportunities are golden opportunities. You have to look before you jump. Before you start the climb up to success, let’s start with the basics. It’s time to answer some of your most pressing questions about network marketing:
- Is network marketing legal?
- Is network marketing a scam or is it a legitimate opportunity?
- Can you make money through network marketing?
If you’ve always wondered if network marketing is legit or just another hype, read on.
What Is Network Marketing?
Before everything else, network marketing is a legitimate sales technique. It is completely legal. It’s a time-tested strategy that involves the distribution of products through a network of salespeople, a lot of whom started out as customers as well. Members of the network sell the products through word-of-mouth, to people whom they are already connected to, and invite other interested people in their own individual networks (namely, their friends and family) to do the same.Network marketing, like any other form of entrepreneurship, can be a legitimate opportunity for people who are interested in making money while working from home. It’s also an excellent option for those who would rather work with the people that they care about — their friends and family, instead of strangers who might not have their best interests in mind. It is a business set-up that has allowed a lot of people to have more control over their time, and their lives, and to truly prioritize the important things in life.However, network marketing is full of so-called “founders” who jump from one “get-rich-NOW” opportunity to another. That is why what you’re doing right now is valuable — doing research before investing your time and money on a bad deal.So how does a network marketing business work?
How Does Network Marketing Work?
Network marketing is a person-to-person sales strategy that highly depends on network-building (hence the name). There are two ways through which a network marketing entrepreneur can earn money:
- Sales income – income made from selling products,
- Recruitment commissions – commissions made from recruiting other people (the “downline”), and commissions from recruits’ earnings.
The most common misconception about network marketing is that the latter will always get you higher commissions, but this is not necessarily true. When done properly, both have the potential to make money. Many people confuse network marketing with pyramid schemes because of the commission structure and also because there are companies who pretend they’re doing one when they’re really doing the other.
AVON — An Example of a Legitimate Network Marketing Company
AVON is a shining example of what network marketing truly is — it’s a multi-billion dollar company that’s been around for over 130 years. One reason AVON has succeeded and remained an international powerhouse is because they do not focus on making a quick buck. Their focus has always been on making friends and building relationships.
AVON is focused on its wide range of high-quality products that entrepreneurs offer to their friends and family as a brochure. They list down people’s orders, forward it to AVON, who will then send them the products. Entrepreneurs can then earn around 20 – 50% in sales commissions.According to this blog, an Avon entrepreneur can earn up to $50 for every person that they recruit. Should they be up to the challenge, they can build and train their own team, from which they could earn up to 13% of the team’s commissions.Notice the fact that AVON does not require new recruits to pay anything, buy a huge bulk of products that they would then have to sell. They are also not required to recruit more people. Everything is optional. If the opportunity that you’re thinking of grabbing does not have your best interests in mind, pressures you into giving up money and consistently asks you to constantly push products to your friends and family so you can be “successful”, pause and reflect on whether it’s worth it.
What Is Network Marketing NOT?
Network marketing is not a scam. Multi-level marketing, pyramid schemes, and ponzi schemes are terms that are often associated with network marketing, and it’s important to make the distinction.
Network Marketing vs. Pyramid Scheme
Pyramid schemes, on the other hand, are illegal in most countries. A pyramid scheme is more focused on recruitment instead of selling the products (some pyramid schemes don’t even have products at all). This is because the cash flow comes from the “buy-in” money that new recruits have to pay to join. Once you’re in, the money comes from those below you and not by selling products.Keep in mind that as someone goes further along their network marketing journey, they will want to share their knowledge and take on more people under their wing. While this is a natural progression, the product should always be at the forefront!
Network Marketing vs. MLM
Like network marketing, multi level marketing is also a legitimate business set-up. The difference is that while network marketing has the distributors as customers, MLM operates on a hierarchy of members who are drawn to higher-level positions in the company by selling products and recruiting, mentoring and training other people. When one sale is made in any level of the enterprise, commission is paid to entrepreneurs in all of the upper levels. Since the distinction between network marketing and multi-level marketing is thin, some people use the two terms interchangeably.
Network Marketing vs. Traditional Business
Traditional businesses often hire dedicated sales and marketing teams to sell their products and or services, and they get paid for that — a straightforward transaction. As for network marketing, the distributors themselves are the customers and salespeople. The nature of this business is such that if one sale is made in any level of the enterprise, commission is paid to entrepreneurs in all of the upper levels. This means that if a distributor recruits another distributor who then recruits another distributor who makes just one sale then all three will get commissions from the sale.
Is Network Marketing Legal?
It depends where you live! Different countries may prohibit different kinds of sales techniques. USA – According to the Federal Trade Commission, legitimate network marketing enterprises should have a sales-based compensation set-up. Since this is nuanced, the FTC takes factors such as marketing representations, participant experiences, and payment/incentive plans into consideration.Canada – Canada’s government restricts how businesses solicit clients and what they can offer in promotions or discounts, and also regulates the content of business names and advertising materials. Australia – In Australia, network marketing enterprises are legal as long as they make more money selling the product instead of recruitment.We suggest that you do your due diligence before joining any network marketing company or organization, and to read up on the laws in your country.
Can Network Marketing Make You Rich?
If you are willing to work hard, to learn, to innovate, and to get yourself out of the thought processes that are keeping you stuck, then yes! More than that, the greatest gift of network marketing is that it allows you to take back your freedom. Genuine network marketing mentors will help you visualize what you want out of this life, and to help you pave the path to get there.So yes, network marketing can make you rich, but more than that, it can change your life in more meaningful ways.
Is Network Marketing Worth It?
It is, but you have to examine three things: the product, the company, and your direct mentor. What kind of outlook are they “selling” you? Are they relentlessly pressuring you to spend money on products, or to hard sell to your friends and family (to the point of potentially alienating them)? Is the company focused on helping you, or making money off of you? The answers to these questions will, hopefully, nudge you towards the right direction.
Before you get into network marketing, take a look at the ethics and culture of the company. Examine the product, because you’ll be putting your name, your time, your faith, and your efforts in selling that product. Observe your mentor — is their life one of genuine abundance and joy? Are they living a life of integrity and kindness?These are the most important things in life. Success should never come at the cost of your peace and joy! Do yourself a favor: before investing in a business, invest in the most important thing first: yourself.