A quick internet search about “business tips” or “marketing strategies” is almost assured of bringing up the phrase “network marketing.” Some people will wonder what it is, click on the link, and begin immediately to get sucked into an old idea that has been given a new name by enhanced technology.
What is now being called “network marketing” was once known to old-timers like myself as “multi-level marketing” or MLM. Many of you know that among the most successful users of this marketing technique is Amway. I’m not suggesting that Amway is in any way not legitimate, but they ride a very thin line in regards to their marketing strategy. The reason why is that MLM relies not on a person’s ability to sell a product, to make a product, or to provide a service. Rather, it is based primarily on their ability to garner more sales people. The advantages of actual sales are eclipsed by the advantages of selling the company.
The major problem is not in the companies themselves. Nor is it in the business model as a concept, which is basically a form of franchising on a very small scale. The problem comes from people who are not ready to actually participate and a structure that encourages people sales over product sales. People don’t realize that they are getting involved in a business, and that business requires that they treat it like any other business. In another business situation, you wouldn’t focus your efforts on encouraging people to compete with you, so what makes people think this is a viable strategy other than a graded payment structure that lends itself to recruitment?
MLM/Network marketing can be a viable marketing strategy, but the potential for it being nothing but a pyramid or Ponzi scheme is very high. Far too often companies base the profits on sign-up and renewal fees, with very few actual products being sold. This type of business is not sustainable and hurts both its employees and its clients, which happen to be largely the same people. Any business model founded on mindless acquisition of a larger sales force and not on the production of that sales force is highly suspect, and as a consumer and a business person you should be wary of any such model.
