The Real Problem with Network Marketing or Multi-Level Marketing (MLM)

So, what is the problem with MLM or network marketing?

Maybe it’s the structure? But you can’t really take issue with the tiered compensation structure—almost every large sales organization in the world has that same structure. Sales persons get commission, and sales managers, sales directors and VPs get overrides or bonuses on top of that.

Or maybe it’s the fact that you have to pay to participate? But that can’t be it because that’s a standard franchising model. And I assure you, the franchise fee of most traditional franchises dwarf the sign-up cost of any MLM companies in comparison.

Certainly, there are illegal pyramid, or “Ponzi”, schemes. This is where the money is all being made off of signing up other people, with little or no real product ever being delivered. But in spite of whatever perceptions people may have, the fact is that Amway, Excel, Meleleuca, PrePaid Legal, USANA, and many others have sold millions upon millions of dollars of products to happy customers, many of whom are NOT distributors. So, there may be a perception problem. The perception is out of line with the reality.

The real problem with MLM is not MLM in itself because it’s just a business model, but some of the people it attracts. It really amounts to “micro-franchising”. It has a very low cost of entry, with the potential for exceptional and exponential revenue over time, and there are those who achieve that. But the same things that make it attractive attracts many who are NOT really qualified or prepared to become business owners. The most important characteristics of MLM make it attractive to people who:

  • have not done well in their business or profession and have little money saved up to invest
  • have no previous experience in business
  • have no previous sales experience
  • have little or no experience developing business relationships other than that of employer/employee/co-worker
  • are not satisfied with their current income
  • have unrealistic expectations of the amount of work involved compared to the revenue realized

I’m not saying that there’s anything wrong with any of these things, or that this describes even a majority of network marketers—only that it describes a disproportionate number of network marketers, and that many of them never do anything about it.

As a result, many network marketers end up:

  • over-selling the opportunity
  • inappropriately discussing business in social situations
  • coming across as desperate
  • over-focused on new recruits and neglecting existing customers
  • being either inaccurate or deceptive when talking about their business

Again, I’m certainly not saying that this describes a majority of network marketers, but it does describe enough of them to tarnish the reputation of the rest. To pre-judge someone based on the basis of a small minority of people in that group is horribly unfair, but we must realize that most prejudices have some basis in reality, even if it has been slightly distorted.

So what’s the solution?

Network marketing or MLM is a great opportunity for people to have their first business, their first sales role, etc. My point is to recognize it for what it is: it’s a business, and you are a business owner. And if you’ve never owned a business before, if you’ve never done sales before, if you’ve never networked before, you need to learn about how to do so, not just from the network marketing or MLM experts, but from established success in those fields.

Network marketers who are serious about building a business should be reading and learning about business fundamentals, the latest sales and marketing techniques, strategies for networking and business development, etc., not just swapping tips at your team’s weekly or monthly meeting. Act like a small business owner, and people will treat you like one.

 To your mlm success,

 Jake De La Cruz

 P.S. Kindly share this or re-blog or re-tweet if you appreciate it and spread the idea!

 © 2014 All rights reserved.

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