Solving the Problems of Network Marketing
- 1 Being Employed vs Self-Employed
- 2 Network Marketing for Online Business
- 3 What Is Network Marketing?
- 4 So Why Isn't Everyone Doing It?
- 5 The Problems of Network Marketing
- 6 Revisiting MLM
Being Employed vs Self-Employed
Working to support myself rather than a boss and several layers of management has always been my aim – and for all but a few years of my life, that's what I've been able to do.
No…. the click here above doesn't work, because I have finally given up on MLM / network marketing.
As I get a little older I want more time away from the keyboard, I'm exploring my options to find the best way forward.
In my last post (click here if you missed it) I wrote about the challenges I have faced with blogging and product creation as a business that have resulted in my decision to go full circle and continue building my online business using Network Marketing instead. Click that link to watch videos produced by my support leader to explain the product.
However…. if you came here looking for information about network marketing, I CAN give it to you from hard-won experience…..
Network Marketing for Online Business
My readers probably fall into one of four categories:
- No idea what Network Marketing Is
- Tried it once (or more) and will never try it again
- Tried it once (or more) and like the concept, but hit too many of the problems of network marketing, so “off” it right now
- Love it – and open to looking at an MLM business to run full-time or alongside other commitments
What Is Network Marketing?
Briefly, it's a low cost way of running your own business as a “distributor” supplying products sourced by the parent company to a “network” of contacts that you build. Some of those contacts will be customers, and some will also be distributors with their own customers. Depending on the exact compensation plan, you will make a small profit on the sales of all products within your network.
Here's a slightly longer definition of MLM.
The structure is very much like the conventional business structure shown above – EXCEPT that network marketing is a “meritocracy”. If the people on the “lower” levels work hard enough (sell enough product) they can surpass the earnings of those “above” them.
Everyone has access to the same products and business plan, what determines your success or failure is YOU.
So Why Isn't Everyone Doing It?
The theory is great, but it has to be admitted that in many companies there are some problems you can face with network marketing if you're not careful.
Hence the reason for me being “off” it until very recently, even though it was the online business model that, about six years ago, earned me more than anything I've tried since then. £2000+ per month part-time, at the height of my success. Unfortunately, instead of the income continuing to rise, it started to fall, because I fell foul of….
The Problems of Network Marketing
Having built a big team (2000+) – with the help of some very active distributors who joined me – the biggest problem of all was….
Losing the Team
One reason was that there are certain types of compensation plan where distributors in your network fall outside your earning capacity.
This happened to me in that previously successful business, and soon there was a huge part of the team I wasn't earning on. This can also happen with Binary plans, where the “legs” have to stay balanced – which I have found very hard to do. People tend to love them or hate them – depending on whether they can perform that balancing trick! Many people can't, so they don't earn on the unbalanced leg. Sounds complicated? It is, and however much people dress it up, people can lose out with binaries, so be careful.
The other reason my income started falling was that my team (network) started to leave in droves, faster than I could replace them. Here's why I had to spend my days scurrying to replace distributors who quit….
Don't Want To Make A Monthly Purchase
The reason for most of them leaving was that they weren't making enough profit to cover their monthly purchase.
Having started a business to MAKE money, they were pretty quick to leave when after a couple of months they weren't in profit, yet were still having to shell out to buy a monthly product.
This is particularly galling if you are having to buy (and theoretically sell) a target volume of product to retain a promotion level earned in a previous period. There comes a point when even the most devoted distributor can no longer ignore (or use) that legendary pile of stock in the garage.
At this point some companies recommend you “give samples” to prospective customers – and I don't mean a couple of 20gm taster pouches. I have been cold-called by hopeful distributors who then turned up on my doorstep with huge multi-packs of free products as samples that they left for a week for me to try. The intention was that at best I would be so delighted with the product that I would buy it, or at worst feel obligated to buy something out of pity.
Don't get me wrong – these were great products, and some I bought and still use. I just question the fact that the only way some distributors could find to meet their monthly sales targets was by giving away boxes of products.
Giving out free samples at that rate is a serious cash outlay and not a great sales tactic in my opinion, but I guess it has the virtue of shifting product from the garage!
As a slight aside, if you were to pay several thousands for a conventional business, you wouldn't expect to be in profit in a couple of months – but it's a sad fact that people are talked into MLM with grandiose ideas that you can be rich in weeks. The average distributor won't be. Fact. Most will quit, more broke than when they started.
Related to the above is the fact that most of us can't sell, and don't want to sell, or “Share” or whatever euphemism is used to dress it up. If we COULD sell, we'd probably be high-fliers in well-paid sales jobs instead of hassling friends and family to relieve us of pills and potions they could probably buy for less down the High Street – which leads us onto…
However the company dresses up the “quality” and special ingredients, the fact is that a large proportion of the sale price is distributed as profit to distributors. So when you or your customer see a similar looking product at half the price on the High Street, and with no P&P to pay, it's easy to pop it into your shopping trolley and forget “buying as your own customer”.
High mark-ups aren't just a feature of network marketing companies. I have done freelance work for two High Street chains of retailers where the selling price was SEVEN times the cost price. They had nothing to do with MLM, they were conventional retailers.
Don't Want To Bother Family And Friends
The traditional (pre-Internet) model of network marketing was to approach your family and friends. This does not sit well with me.
Since the day that my poor sister bought an MLM burglar alarm (don't ask!) from me, I have steered well clear of family and friends as customers. The wretched alarm packed up a month after she bought it, by which time the company had gone bust anyway. She kept it blinking at me balefully on the sideboard for many months to remind me “Never again”.
Of course with the advent of the Internet your network can stretch way beyond family and friends and so it should. Because you can easily ruin important relationships by continually badgering family and friends to support your ailing business.
If you had a conventional High Street shop you would tell you family what you're doing and HOPE they might buy from you occasionally. You wouldn't (I hope) keep badgering them to “Buy my products”.
Not Enough Time To Run Your Business
Although we blithely talk about a part-time business it's completely unrealistic to expect that you can sign up for an MLM, do nothing, and money will flood in.
To make fast money you need to make fast sales and build a team to do the same. You may start off with the best of intentions, and plenty of time to build a customer base and team of distributors…. but unless you, AND your team, can sustain this, many compensation plans will penalize you by demoting you from the qualification so hard-won.
My offline business has peaks and troughs – sometimes it's really quiet, and I have time for my online business, other times I'm so busy I'm working round the clock and can't handle having to try and sell products or replace flagging distributors.
For me, part-time must really mean part-time… and occasional too!
Poor Support and Marketing Resources
Another problem you might have that drains your time is lack of support when you have questions. I joined one business, brought in several people and had a decent down-line but I couldn't get my upline to answer my questions. Perhaps he didn't know the answers either. It wasn't obvious who HIS upline was, and it was only a very low cost business so I lost interest (blush).
Are there good marketing materials? One of my reasons for joining a network marketing business is to tap into professionally created marketing material ready done for you, such as videos and professionally hosted webinars. Maybe even local meetings. Otherwise you may as well follow a conventional wholesaler / retailer model and produce your own material.
There's A High Failure Rate In MLM
All the above add up to the fact that there's a high failure rate in network marketing. Maybe as high as 97%. Ouch!
There's a high failure rate in ANY business venture. Everyone is different and some people just aren't cut out to be in business for themselves. They'd rather sit at home and watch TV. Nothing wrong with that – just as long as they don't criticize any business model for their results. At least with an MLM business you shouldn't have spent much money getting started, unlike franchising where you could have paid many thousands.
Being aware of the problems of MLM means that I knew what to avoid when choosing the business to build my retirement income.