MLM, Network Marketing, Success and Failure: Two Uncles
This is a story about 2 of my uncles, MLM, Network Marketing, success and failure, each on opposite sides of the family.
Why did one succeed, and the other one fail? (They did not know each other)
The purpose of this article is to try to clear up a very popular misconception about MLM and Network Marketing. They are NOT the same thing, but the consensus on the internet is that they are the same thing.
I have been studying MLM, Network Marketing success and failure since 1989, and have also participated in a few programs.
Just like a lot of other things, once it hits the internet definitions and wording changes. I am going to refer to Network Marketing as Direct Sales for the purpose of this article.
I also need to make one more point before I begin. I am qualified to make these statements, and I am not involved with, nor am I promoting any MLM or Network Marketing company.
The misconception between MLM and Direct Sales creates a lot of confusion within the world of Direct Sales. It can be really difficult to define because the laws vary from State to State.
I did however find on site that explains this very well, that is the Direct Sales Association. You can also read more about it in my article; Is Your MLM Illegal? For now, I am going to sum this up real quick.
Network Marketing is a viable business strategy used in the sale of many products and services around the globe. It is a legitimate direct sales model. We all know of at least one, Mary Kay, Amway, Avon, and Herbal Life, just to name a few.
The Inherent Flaw in Network Marketing & MLM
I am going to start out with the inherent flaw in Network Marketing, so there is no mistake about my position on this business model. This comes in a couple of different parts.
1) Anyone can become a distributor that has the registration fee. It is not like an ordinary sales job with an application process. Most of the time people get involved that have no sales or marketing education or experience. Yes, most of these programs come with training, but it is usually outdated, limited in scope, and teaches high pressure tactics.
2) Because of reason #1, Network Marketing tends to attract a lot of shady characters and high pressure sales people. They will tell you just about anything to get you to sign up, mainly focusing on the recruitment of other distributors rather than product sales. This is mostly to earn commissions off of them, not commissions on a monthly subscription fee. Why should they sell the product when they can recruit others to sell it for them?
This is where the confusion between MLM and Network Marketing comes in. Network Marketing focuses on the sale of a product or service with a business opportunity.
MLM focuses on the recruitment of other people. Most real Network Marketing Companies have no monthly fee beyond the training, or the monthly fee is waived with product sales (this varies). The focus is on product sales, not recruitment. Please read this FTC article on this.
Now about the first Uncle; I am going to call him Bob (not his real name). Bob was in a Network Marketing Company that sold reputable personal care products. He had a regular brick and mortar store and kept regular business hours. You could go into his store and buy any of the products you wished. He would not try to sell you on the business, but if you were interested he would be more than happy to help.
Bob did very well by building a customer base and strong distributorship. I am not sure because he was an extremely private man, but I think I would be safe in saying he died a wealthy man. One more note I will add, he worked very hard; 60–70 hour work weeks were the norm for him.
In MLM; you earn a commission from the monthly subscription fee your downline is paying to access the “product” only available to the distributors. Too often the commission structure is very confusing, misleading, and not to your advantage.
This is illegal and why Empower Network is possibly an illegal pyramid scheme. Don’t believe me? Try to just buy one of their “training” sessions without signing up. I tried this and just got taken from a lead capture page directly to a monthly subscription page. I was told that I had to sign up in order to receive the training materials. Now they spam my inbox.
This brings me to my other Uncle, I am going to call him Uncle John, (again, not his real name). Uncle John got involved with MLM about 30+ years ago through some shady characters that sold him on it.
Uncle John held a regular job and was not much of a salesman. He was sold on the idea of the recruitment process, and the “just recruit 5 people” and your set for life idea. Uncle John never made a dime, and is today surviving off of his retirement. Good thing he kept his job.
If you are considering getting involved in a Network Marketing Company, please do your research, and if you are being pressured to “sign up”, run.
Ask if you can just buy the product. If you cannot just buy the product, or if they tell you the product is the subscription or membership; run, it is illegal.
MLM and Network Marketing Facts
Did you know that if you are involved with one of these schemes and it gets taken down, you can also be prosecuted? Of course this does depend on your level of involvement among other factors, but it could happen.
There is one more myth I would like to dispel before I close. I have heard many people say, “don’t join Xyz Company, they have a 97% failure rate.” It is a known fact that over 75% of ALL new business startups fail within the first 3-5 years. It is higher in Network Marketing due to the #1&2 reasons stated above, also people falling for the hype, lack of knowledge, resources, and drive.
In closing, do your research, in anything you do. Scumbags prey upon the misinformed. Don’t be scumbag lunch.
The woman pictured to your right also claims that if you do not see the value in the pyramid scheme, you are a “low information” person.
Psychology and bullying is a common tactic for these people, and they actually think you are an idiot if you do not join them.
The Codex of Money is a formula for success, Marketing 101