Ask 10 people what they think about multi-level marketing, and you will get some very strong opinions.
You will probably find that most people have a very low view of MLM (or network marketing). At your next big family event, stand up and announce that you have just joined the fastest-growing MLM opportunity on the planet, and see how your loved ones react.
Why? Why does a simple business model for product distribution garner so much criticism? Why is there some much negativity associated with MLM? Why are there consumer advocacy groups that actively protest the entire idea of multi-level marketing?
Is all multi-level marketing a scam? What is the real problem with multi-level marketing?
It is not the multi-level aspect. Taking royalties and generating residual income is common practice in the insurance and financial service industries.
It is not the direct-to-consumer distribution model. Many successful companies (such as Dell computers, Sara Lee, and other famous brands) use direct-to-consumer models to sell their products and services.
It is not the concept of paying for the opportunity to distribute a product. MLM critics might knock companies for charging to become a distributor, but this is the same concept that a standard franchise uses. The only difference is that you can get set up with an MLM program for $200 – $500, where getting started with a franchise will begin at $250,000.
So why does MLM have such a bad reputation?
Most of the time, it is because of the second “M”.
Most MLM distributors are taught to leverage their “warm markets” to grow their businesses. They are taught to try and sell their friends and families products, and try to recruit them as distributors.
Why? For two reasons:
It Used to Work For The Average Distributor
Back in the 1950’s and 1960’s, when multi-level marketing first became known, people had much larger warm markets. They lived in suburbs, and had neighborhood picnics. Everyone knew everyone else. Our society was very close-knit, we truly lived in communities. Not only that, but multi-level marketing was barely known then. It was a novel concept – make money in your spare time by telling other people in your neighborhood to stop buying from the department store and start buy your products from an MLM company.
Fast-forward to today, and the picture is very different. People barely know their neighbors next door, much less throughout an entire neighborhood. These days, everyone has heard about some sort of “make money from home” scheme. Today we live in a society of guarded skeptics, and we do not want to be sold stuff from our friends and families. Leveraging our personal relationships for financial gain can be interpreted as insulting, and can seriously damage relations with those we most care about.
It Still Works Quite Well…For The Parent Company
The average MLM distributor will stay with a business 3-4 months before giving up. During that time, if they are chasing their friends and family, they will probably sign up 1 or 2 people and spend a few hundred dollars. From a distributor standpoint, it’s peanuts. But from a company standpoint, it’s great! They continuously have new recruits joining the business, and they pass on all the costs of marketing on to the distributors.
They can get away with making it sound like growing a business is a piece of cake by communicating the message that all you have to do to make a significant income is talk to a few friends and family, hand out some flyers and product samples, and you will wake up one morning with a gigantic business.
So can the average person make money in a home-based business? Absolutely. But they can’t rely on their warm market for sustained profitability. A distributor will eventually have to find their target market, and use sound marketing strategies and techniques to target people that are already looking for their products and services.
There are many different marketing tools that a distributor can use to grow a business. However, the reason that most MLM’ers get involved with a business is because they do not have tons of money to spend on their businesses. The three most cost-effective, best-bang-for-your-buck marketing tools that the average distributor can use to find their target market is: