What’s wrong with the Network Marketing or MLM business model?

What’s wrong with the Network Marketing or MLM business model?

I am always amazed as to the extreme views on the topic of network marketing and MLM. There are some people who are extremely passionate about it. You even have these top celebrity authors like Robert Allen, Mark Victor Hansen, and Robert Kiyosaki promoting network marketing, MLM and advocating it.

However, in many communities you may as well declare yourself as being the devil, as admit to being in the network marketing industry. Why this extreme shift in views? What is really the problem with MLM and network marketing?

Some say it is the pyramid structure system in place with most network marketing or MLM compensation pay plans. But, take closer look at most major corporations and you will see the same sales system in place. I.E., salespeople get their commission and of course sales managers get overrides and bonuses on top of that. Now don’t forget sales directors on top of the managers and the VP’s on top of that. So, you can’t really blame the pay plan.

Now, others will complain it is the fact that you have to pay to get involved. But, take a look at a typical franchise business model and having to pay to participate is the standard. If you have not looked at recent franchising fees, I can promise you that these fees clearly dwarf the cost to get involved with any network marketing or MLM program.

Let’s look at the illegal pyramid scheme associated with MLM. I would agree that there are a few “Ponzi” schemes out there, you know the concept. This is where all the money is being made off of the singups of other people, with no real product ever involved or being delivered. This is really a perception problem, allow me to explain.

The actual fact is that companies like Amway, Prepaid legal, GDI and many others have generated millions and millions of dollars thru the sale of their products. They have provided excellent customer service and have many satisfied and repeat customers. Many of these satisfied customers are not even distributors within the company. Certainly there may be a perception problem here, but is out of balance with reality.

With a more detailed look, we can see that the problem is not with network marketing or MLM itself, but with the quality of people the industry attracts. Remember, that MLM is just a business model. This business model more closely represents a micro-franchising model. The benefits are that it has a low start-up and operating cost associated with it and the opportunity to generate some very nice profits in a short amount of time.

The same benefits that make it attractive also make it attractive to many who are not ready or prepared to become business owners. Now, what happens is that people will over-sell their opportunity, neglect existing customers for new signups or come across as seeming desperate. While others will discuss their network marketing opportunity inaccurately. The problem is that people will pre judge a person based upon a small majority within the business.

The solution? If you treat and act like a small network marketing business owner, people will treat you with the same respect. Do not think swapping tips at your next web conference is enough. Learn new marketing methods, practice basic small business fundamentals and more. Treat it like a business and it will pay you like a business.

To Your Success,
Gerald Stidham

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