Network Marketing: Worth It or Too Good to Be True?
6 Questions to Determine if Network Marketing Is Valuable
There was a time when the Avon lady or Mary Kay sales rep would pound the pavement selling perfume and cosmetics door-to-door to neighbors. Today, anyone can reach thousands of people online as a network marketer and potentially become a millionaire from the comfort of their home.
It's easier than ever to create a sustainable business with little to no start-up capital, according to network marketing expert Adam Julius Adel.
Multi-Level or Consumer Direct Marketing
Dubbed a sharing opportunity in recent years, network marketing includes multi-level marketing (referred to as MLM), direct marketing, also known as consumer direct marketing (CDM), and hybrids. Avon, Mary Kay, Pampered Chef, Rodan Fields, ACN, and other reputable companies grew into multi-million dollar businesses using this marketing and distribution model, but newcomers often ask:
- "Do I really want to pitch this to all my friends?"
- "Can I actually make money at it?"
- "How do I know it's not a scam?"
Although network marketing is lucrative for some independent business owners (also known as agents or reps), it can be a challenge for others. Here are six determinants to research before diving in and potentially wasting your time, money and effort on an MLM, CDM, network marketing, or sharing opportunity.
1. Who Is Your Upline?
The idea of earning money and residual income quickly without skill or a large investment of cash is what attracts people to network marketing. However, it matters who is in the "upline" of people above you because they serve as your helpline to creating a successful business.
So before jumping in, find out exactly how much the senior vice president, president, and person who recruited you have earned on an annual, monthly, and even weekly basis from selling the product or service.
Treat the entire upline as a new potential business partner that needs to be nurtured. Their knowledge of best practices can only accelerate your efforts. If it’s a newer company, inquire about the founder’s background and what kind of success they had in their prior career or business.
In Adel's case, his upline included a senior vice president earning millions of dollars. “The other people in my upline are also making decent money because they follow the system,” he said.
Whether it’s one and done cosmetic sales or long-term central services, “following the system” includes teaming up with a good mentor, taking action, and being out there meeting people to share the opportunity.
2. What Is the Product?
When choosing what to distribute and sell as opposed to signing up based on a particular networking company, Adel advises selecting popular products that are inexpensive and fly off the shelves at retail stores, online or via other traditional marketing and distribution channels. If there's competition, it means people are looking to buy the product or service, said Adel. He was provided with a customer portal and back office when he started with his most recent network marketing company as an independent business owner.
Inexperienced independent business owners can get up to speed by distributing a product whose network marketing company provides frequent phone training as well as quarterly or annual conferences that are regional and even international in nature.
3. When Will You Start Actually Making Money?
In addition to building a sales team focusing on one category and gaining customers, MLM opportunities typically offer a bonus for recruitment and commission or residuals on sales.
It’s not unusual for independent business agents to work part-time in addition to developing other steadier sources of income.
Believing in the product or service that’s being distributed will help the product or service sell itself. If there’s a demand for the product that exceeds the competition, expect income to start flowing within just a few weeks.
4. What Is the Product Promotion Policy?
The core arrangement of a network marketing business model is that the company pays a residual to the independent business representative who buys the product at wholesale. The rep also funds their own overhead costs, such as credit card processing and utilities.
Be prepared to engage in marketing and promotion. “You're getting paid to do the marketing yourself so that the company doesn’t have to mark up their prices to pay millions upon millions of dollars in advertising,” Adel said.
Some companies have wide open policies that allow their independent business owners to engage in their own promotion. Other companies provide approved materials for the agents to use for promotion.
Approved materials can include videos and websites to protect the brand and reputation of the overall company.
“They don't want a representative hurting their reputation because they did something that's against their code of ethics,” said Adel. “A controlled message helps to maintain a good image.”
Whether the network marketing company offers controlled messaging or not, it’s better to be safe than sorry by requesting a list of restrictions on where and how you can promote the product, such as on websites and social media.
5. How Were You Recruited?
The ethical way to build a sharing opportunity is to enroll people as customers first. If they like the product, they'll be drawn to becoming an independent business owner/representative. Investigate whether the business model is focused on building a customer base or on recruiting. A hard sell on signing up as a rep at the start is a red flag.
When there is recruiting involved, question whether the company is focused on just recruiting or is it combined with customer acquisition and building a distribution team.
Avoid pyramid schemes where independent business owners are only paid when they recruit another representative and are not paid when they actually sell product or services.
Think seriously about getting involved in any enterprise with less than an A+ ranking by the Better Business Bureau.
6. Why Are You Doing This?
It's fine to have a vision, but don't bank on getting rich.
People have made a lot of money in network marketing while many others end up wasting a great deal of time and money chasing pipe dreams. At the very least, it’s safe to expect to supplement existing cash flow.
“It's an income and a lifestyle,” said Adel.
Tax benefits also go along with becoming a network marketer because you are a business owner, not an employee, and can use more tax write-offs.
While it’s important to maintain reasonable expectations, don’t expect to net a profit reaching out to one person every so often. That's a sure route to a garage filled with products collecting dust.