Is Network Marketing Success Luck or Skill?

Network marketing otherwise known as multi-level marketing (MLM) is one of the fastest growing yet most misunderstood methods of moving products in use today. It has been in existence since 1960 starting from the United States of America. The first network marketing company that started in history is known as AMWAY which is the short form for American Way. Presently Amway is quoted on the stock exchange and their annual sales turnover is in excess of $200 billion. Certain people see this industry as a resort for persons who could not get a place in the traditional corporate business world i.e the white-collar job. But network marketing just like every other product/service distribution model is an honorable means of livelihood and business model. What is network marketing? It is important you understand what network marketing is so that you can correct the negative uninformed knowledge that is planted in the minds of so many people who were listening to those who could not wait to understand how this industry works before they quit in their network marketing business. Let us start from the basic. Marketing simply means moving a product or service from manufacturer or provider to the consumer. Network marketing refers to the system of compensation provided to those persons who are causing the products to move or the service to be provided. Multi-level marketing or network marketing means more than one (network) level.

There are only three basic methods of moving products. The first is wholesale/retailing model. This is the traditional distribution model which uses the advertisement media and wholesaler to move their products. It is the most common model but it is aimed to enrich the already rich wholesalers and advertisement agencies. The second is direct Sales. This just like network marketing is a model where the manufacturer or service provider sells the product direct to the consumer. But sales instead of sharing are emphasized. The third is network marketing. This is a model where the manufacturer or service provider offers their products and services direct to the consumer at the cost price and also pay them compensation for buying their products/services and at the same time for sharing the products/services with their friends, associates and relations.

Most objections that people have about getting into network marketing are due to not realizing the difference between network marketing and direct sales method of marketing. Network marketing does not necessary mean door-to-door selling of products but sharing of valuable products and services. What I mean by this is that you use the product which is of more quality than their rival in the market and at the same time share same with others. (Mostly family, associate and friends)The most significant difference between MLM and direct sales is that you are in business for yourself. But in direct sales you are not for yourself but for the company you are representing. Being in business for yourself, you are buying the products wholesale from the company you are representing. This means that you can (and should) use these products for your own consumption. Note that many people get involved in a company at first for this reason alone, to buy wholesale. And many of those will get serious in building a business along the line. Since you are buying your products at wholesale, you can, if you wish to, sell those products at retail band make a profit. The most common misunderstanding about MLM is the notion that you have to sell retail to be successful. The most important point is that you should let your sales come as the natural result of building the organization. More people fail than succeed by trying to do it the other way around, i.e they try to build the organization by emphasizing selling.

The word selling triggers negative thoughts in the minds of about 95% of the people. In MLM you don’t need to sell the products in the traditional sense of the word. However, PRODUCT DOES HAVE TO MOVE or nobody gets paid. I define selling as calling on strangers and trying to sell them something they may neither need nor want. Again, product has to move or nobody gets paid! To understand this, I will adopt Metcalfe’s Law which states that a network’s economic value equals to number of users squared. (Robert Metcalfe is one of the people credited for creating the ethernet, the earliest form of internet) Stating Metcalfe’s Law in simpler terms, if there exist just one telephone, that single telephone really has no economic value. The moment there are two telephones, according to this law, the economic value of the phone network is now squared. That is, the economic value of the network would go from zero to two squared which is four. Add a third phone and the economic value of the network is now nine. In other words, the economic value of network goes up exponentially, not numerically. Similarly, in MLM when you build an organization, you are building a network through which you can channel your products. Retailing is the foundation of network marketing. Sales in MLM come from members sharing with their friends, neighbors and relative. They never have to talk to strangers but what they do is to consciously make more friends and in share their products with these friends.