With thousands of network marketing companies out there, how are you to know which one is right for you? Learn a few good tips as to what to look for in each company you analyze. How to Choose a Network Marketing Company
What Is Network Marketing?
Network marketing is a business model that depends on person-to-person sales by independent representatives, often working from home. A network marketing business may require you to build a network of business partners or salespeople to assist with lead generation and closing sales.
There are many reputable network marketing operations, but some have been denounced as pyramid schemes. The latter may focus less on sales to consumers than on recruitment of salespeople who may be required to pay upfront for expensive starter kits.
- Network marketing appeals to people with high energy and strong sales skills, who can build a profitable business with a modest investment.
- A network marketing business can be a single-tier program, whereby you sell the products, or multi-tier, where you also recruit additional salespeople.
- Beware of network marketing companies that create many tiers of salespeople or require you to purchase expensive products or training material up-front, Make sure to thoroughly research the company before you join.
How Network Marketing Works
Network marketing is known by a variety of names, including multilevel marketing (MLM), cellular marketing, affiliate marketing, consumer-direct marketing, referral marketing, or home-based business franchising.
Companies that follow the network marketing model often create tiers of salespeople—that is, salespeople are encouraged to recruit their own networks of salespeople. The creators of a new tier (or “upline”) earn commission on their own sales and on sales made by the people in the tier they created (the “downline”). In time, a new tier can sprout yet another tier, which contributes more commission to the person in the top tier as well as the middle tier.
Thus, the earnings of salespeople depend on recruitment as well as product sales. Those who got in early and are in a top tier make the most.
The FCC advises that that single-tier network marketing operations tend to be more reputable than multi-tier schemes.1
Advantages and Disadvantages of Network Marketing
There is some stigma attached to the networking marketing business, especially those with multiple tiers, which can be characterized as pyramid schemes—that is, the salespeople in the top tier can make impressive amounts of money on commissions from the tiers below them. The people on the lower tiers will earn much less. The company makes money by selling expensive starter kits to new recruits.
The appeal of network marketing is that an individual with a lot of energy and good sales skills can create a profitable business with a modest investment.
A good rule of thumb, according to the Federal Trade Commission (FTC), is that an operation that ensures compensation which is based on actual sales to real customers tends to be more reputable than multi-tier schemes, in which people make money based on the number of distributors they recruit.1
Anyone considering joining a network marketing operation should do their research before making a decision. Consider these questions:
- Was it pitched as a chance to make money by selling products or by recruiting others?
- What is the track record of the company’s founders?
- Are you personally enthusiastic about the products?
- Are people you know enthusiastic about the products?
- Is the product being promoted effectively?
- Do you foresee a relatively fast pathway to profits or a long time treading water?
Is Network Marketing a Pyramid Scheme?
While network and multi-level marketing programs have been accused of being pyramid schemes, there are some important differences. While those who are able to recruit more members into the program are often able to enjoy greater residual commissions, network marketing is a legitimate and legal business structure that offers real products and services sold to customers.
Will I Make Money by Joining a Network Marketing Program?
It is certainly possible, although not probable. Some people do enjoy great success at network marketing, largely due to their ability to recruit more members to the network. There are two main revenue sources: selling products, and commissions from sales made by team members downline. The more people there are downline from you, the more money you will accrue – the larger the team you can recruit, the more money you can make.
Most people who join legitimate network marketing programs make little or no money. People may actually lose money. Some may become involved in an illegal pyramid scheme and not realize that they have joined a fraudulent venture, and can lose everything they invest. Do your research and ask around before diving in.
What Are Some Examples of Network Marketing Programs?
Several MLM programs exist such as Tupperware, Avon products, Rodan + Fields, Amway, Herbalife, Mary Kay, among several others.
What Is the Top-Grossing Network Marketing Program?
Amway consistently tops the list. Top-selling brands for Amway are Nutrilite vitamin, mineral and dietary supplements, Artistry skincare and color cosmetics, eSpring water treatment systems and XS energy drinks—all sold exclusively by independent Amway Business Owners. In 2021, it brought in $8.9 billion in revenue.
Network Marketing Top Company: 15 Most Profitable MLMs In 2023
- Market America
- Nu Skin
- Young Living
- Oriflame Cosmetics
- Rodan + Fields
Here is How to Choose a Network Marketing Company
Understand how these companies are marketed.
Most network marketing companies have a video presentation either online or on DVD which is shared person to person. These videos are created by professional marketing companies and include a lot of hype and excitement. Many may make you feel that if you don’t join “NOW” you will be missing out on a lot of money. Don’t let the hype tempt you into joining a company that may not be right for you. Always remember you are looking for a long term business that will provide you with a residual income for the rest of your life. Whether you signup today or next month it should not make a difference.
Look at how long the company has been in business.
You may hear terms like “ground floor opportunity” or “start-up”. All this means is that the company is relatively brand new. Statistics show that over 90% of all new companies fail within their first five years. If you are ok with joining a new company in hopes that it will still be around after five years and you are one of the few that “got in early” then this should not be a problem for you. It is however a gamble.
Try to learn as much as possible about the company itself.
If you can, try to talk to people that are currently involved with the company. Ask the person that is presenting the business opportunity to if they can introduce you to other members, preferably members not in their team and listen to their stories about their experience with the company. This should not be a problem. If it is, it should raise a concern.
Check to see if the company is a member of the Better Business Bureau or other business organizations.
In the Network Marketing and Direct Sales industry there is an organization called the Direct Selling Association or DSA (http://www.DSA.org). Out of the thousands of companies in this industry only about 200 companies are members of the DSA. The reason for that is that they require their member companies to abide by a high level of strict business ethics. Requiring that the business you join be a member of the DSA may limit your choices of companies to evaluate. But, it also eliminates any possible scams. If you can’t find a company that is suited to your needs within these 200 odd DSA member companies then maybe you are being extremely picky.
Analyze the product or products you will be marketing.
It is extremely important that you give careful thought to this part of your evaluation. You must completely and undoubtedly be committed to and believe in your product. If you don’t, you will never find success. Ask yourself if it’s something you can use. Then ask if you think others can use it too. Is there a benefit to others? Is there value to the end consumer? Is it unique? Spend a lot of time evaluating the product because it’s a very big part of your overall assessment of the company.
Examine the Compensation Plan.
Compensation plans come in all shapes and sizes. Some are extremely complex and others are very simple. If the comp plan is too complex how are you supposed to know how much effort will be required for a certain level of pay?
- The best type of comp plan is a binary with a twist. Now that probably doesn’t mean much to you and realistically this is a complex subject even when explaining a simple comp plan. Stay away from any comp plans that let you go wide. That means that you can sign up as many people as you like on your first level. The reason is because the only person that benefits from your first level is you. This business is all about helping others attain their goals and dreams and your goals and dreams will happen. You want a comp plan that helps as many people as possible. You also want to stay away from comp plans that “cut off” at a certain level. Again if they cut off at a certain level that means you can build wide on your first level. Simply look for a plan that makes you build deep not wide. That is why a binary plan is best. It requires you to build deep. Now most binary plans obligate you to build both sides evenly. That is where the twist comes in. There are modified binary plans that allow you to be compensated even if your business is not built evenly. If you have never been part of a network marketing business this is going to sound alien to you. Study various compensation plans so you can compare and get a feel for them. The best way to look at a comp plan is through the eyes of a person you sign-up. Ask yourself this, does my helping this new person succeed help me succeed? If the answer is yes then it’s probably a good plan.
- Another part to the compensation plan is the monthly purchase requirement. This is an obligation the company puts in place that requires that you purchase a certain amount of product every month. Usually that amount falls somewhere between $100 and $500 per month. Be very careful with this because the presentation doesn’t always come out a say what that monthly purchase requirement is. This is a sneaky way for companies to hook you with a small initial membership fee and then hit you over the head with a $300 per month bill. Taking $300 per month as an example gives you a $3,600 yearly expense just in products that you may not use. This one issue has left many people with a bad taste in their mouth about the network marketing industry. Do your homework!
Consider training and support.
You want the training and support to be company wide. Basically that means you want the company to be involved in your training and for them to have some sort of training system. You don’t want your training to come solely from your up-line sponsor. The reason for this is that your sponsor may not be a good trainer. You want to make sure you get trained well and understand the system the company uses. Know which is the system the company uses to market and promote their products. Not all companies have a system in place. Some let you do whatever you want in marketing their products and others are very strict on what you can and cannot do. Try to look for a company that has a proven simple duplicatable system that all members use. This makes it very easy for you to learn and teach to others. Duplication is the best way you can help others help themselves.
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