MLM is NOT the same as pyramid selling. It is firmly established in many countries as a respected means of achieving an income. In the UK, Network Marketing is regulated by The Direct Selling Association (www.dsa.org.uk). The DSA’s Code of Practice was endorsed by the Director of Fair Trading in 1987 and is administered by an independent Code Administrator. The DSA aims to ‘protect, serve and promote the effectiveness of member companies and the independent direct sellers marketing their products and assure the highest level of business ethics and service to customers’.
Any company can choose to use Multi-Level-Marketing to reach its customer base and any product or service can be sold this way. Network Marketing started in the USA and some of the longest-standing companies using this method include Amway, Ann Summers and Kleeneze. A more recent entrant is the award-winning Dorling Kindersley Family Learning closed down by new owners Pearson. Cabuchon is an example of a successful Network Marketing which subsequently failed. As with any business, there are no guarantees of success and rational preliminary research is essential.
Not all DSA members use Network Marketing to expand their distributor base. Some are purely party plan, such as Tupperware, and others are purely person to person, such as Avon; others use a mix of all of these to sell their products or service.
Network Marketing is based on the concept of ‘networking’. We all have a circle of people we know through the circumstances of our daily lives and each of these people will have their own circle of acquaintances, colleagues, family and friends. Network Marketing involves tapping into these networks not only to sell product but also to offer the business opportunity to potential new distributors who then start the process of developing their own networks for selling and recruiting.
As the networks widen, so the individual leader benefits not only from their own sales but also a percentage of the sales from their network. As more people join the organization, so residual income increases.
So, what is MLM (multi-level marketing)? This is network marketing which allows its distributors not only to network outwards in order to sell the product but also to benefit from their downline’s downline, either to a limited depth or ad infinitum. However, the two terms tend to be used easily indiscriminately.
As with any other home-based business, distributors need to work hard and have courage and determination. Finding a good sponsor is just as important as finding an interesting product and a good compensation plan which offers flexibility and just reward for effort. Contrary to expectation, the newcomer has the same potential for success as the long-term sponsor provided that the necessary research and skills training takes place. It is not necessary to be ‘in at the beginning’ and in some cases it may prove more difficult and risky to join at the beginning than to join a plan which has reached a more mature phase. Network Marketing is particularly suited to married women with family commitments as it offers them an opportunity to start a business on a part time basis with very little capital. The opportunities now exists for enterprising women to use their talents and the skills gained from motherhood to build businesses based both on selling and on finding and supporting the efforts of others.
Network marketing businesses close down every year (Bookbiz went into receivership earlier this year) – but still more product-based businesses are turning to network marketing as a means of getting their products out to their customers and cutting out the wholesalers and retailers. We are also finding lots of US companies crossing the Atlantic and bringing their products and greater razamatazz with them. It’s a high risk business but the rewards can be substantial. A lot will depend on you, but a lot will also depend on the business acumen, personalities and perhaps sheer luck of the people you’re signing up to do business with.