Network Marketing, Multi-Level-Marketing, MLM, are all terms for a common business structure in which companies utilize a sales force made up of “Independent Distributors” to market their products. It’s a business structure that has been around for a long time and the appeal of it comes from a distributor getting residual income, having their own business, and being their own boss. In short, it’s the American dream.
Unfortunately, for most distributors, it will remain just that, a dream. In this article, we’re going to discuss the most common reasons people fail at MLM and give you suggestions on how to succeed at network marketing.
Network marketing has a bad reputation and is often referred to as a pyramid scheme. The reason for this is twofold. First, there have been some companies out there promoting real pyramid schemes disguised as multi-level-marketing companies. The other reason is the average person doesn’t really know what a pyramid scheme is.
So, just to be clear the difference between a legitimate network marketing company and a pyramid scheme is how they earn their money. Network marketing companies derive a majority of their revenue through the sale of a product or service. An (illegal) pyramid scheme gets most of its income through the fees charged to its distributors. Now, does that mean that if a company charges a fee to become a distributor is a pyramid scheme?
No, and we can think about it this way. Legitimate MLM companies use a micro franchising model in order to sell their products. And like any franchise, (McDonalds) they charge a franchising fee. Then you as the new franchisee make money by selling the company’s products, be they hamburgers, makeup or supplements.
But, unlike the McDonald’s franchise, a network marketing company allows you to find other individuals who want to sell the products and when they become a distributor (franchisee), the company rewards you by paying you a commission on their sales too.
It’s this model that benefits the company through low-cost marketing and growth, and it rewards independent distributors for their efforts in expanding the business.
So, what does a pyramid scheme look like? Well, there are variations, but the classic pyramid scheme runs like this.
- A person recruits ten people who pay $100
- They then instruct those ten people to recruit 10 more people to pay $100
- The initial 10 people have just made $900 on their $100 “investment”
- But now there are a hundred people who each have to recruit 10 others in order for them to get paid
This process repeats itself over and over until it eventually collapses under its own weight.
But, enough about pyramid schemes, let’s talk about legitimate network marketing companies and how to succeed at network marketing.
Network Marketing, Pros, and Cons
As we stated earlier, network marketing is really just a way for a company to market its products. By using independent distributors, a company’s marketing and advertising costs go way down. It also provides a way for the average person to own their own business either full or part-time. But with that said, there are both pros and cons to network marketing.
- Low initial investment – Most network marketing companies only cost a few hundred dollars to join. Compare that to a Domino’s pizza franchise ($25,000) Mcdonald’s ($45,000) or Burger King ($50,000), making them one of the cheapest ways to start a business.
- Financial independence – Many people invest in becoming distributors for multi-level marketing companies because it offers them a chance to earn extra income. Whether full-time or part-time because it provides an extra income.
- Flexibility – Network marketing allows stay-at-home moms and dads to generate an income without putting the kids in daycare. It’s also a business that can be done in your spare time, it’s not a regular 9-5 gig.
- You can leverage your income – By recruiting others into your “downline” you’ll be paid a commission on all of their sales as well as your own.
- It can provide “residual” income – Residual income is just income that reoccurs over and over again. By building your business and downline sufficiently, you can develop a significant amount of residual income.
- Growth opportunities – It’s not always clear how to grow in your career at a “regular” company. In fact, for some jobs, there is no way to advance your career at all. With network marketing companies you’ll have a very clear idea on what it will take to advance up the ranks.
- There is no cap on your income – Unlike a job, there is no upper limit to the amount of money you can make.
- The internet has changed everything – The internet and social media have made MLM marketing much easier.
- Competition – Because most MLM companies only cost a few hundred dollars to join, they can be a lot of independent distributors located in any one area. This can impact sales and profitability as they are all selling the same products.
- It’s not a good fit for everyone – Because the barrier to entry is so low, basically anyone who pays the fee becomes a distributor. Even people who don’t have the time, temperament, or personality for network marketing can become distributors.
- Motivation – Being a distributor is a business there is no boss telling you what to do and when to do it. You need to be a self-starter.
- It takes time – As stated earlier, multi-level marketing is a business. And it’s also one that you are starting from scratch. Don’t expect to make a lot of money right away. It is normal for the average distributor to go two years without making any significant money.
- There is a lot of rejection involved – Many people will tell you “no” when you first start network marketing. That negative response is going to continue on and on… and on. The average person who is first getting started with this challenge may have a conversion rate of 1%. That means out of 100 people who are approached for a sale, 99 of them are going to turn the opportunity down. For those who get discouraged by such negativity, the rejection can cause a good network marketing opportunity to go away.
- High turnover rate – A lot of network marketers simply quit. They might move to a different company or product, or they might just stop with MLM businesses completely. That’s a problem for you because the most profitable way to operate an MLM is through recruiting other people into your downline. If those people quit, then you won’t be getting residual income from commissions on their sales.
- Constant recruiting – As a result of the high turnover rate, you’ll find yourself back out into the field spending more time recruiting people. This can also interfere with friendships and family relations if you are looking to those groups for your recruits.
Steps to Success
Despite what your company tells you, building a list of people in your warm market isn’t the best way to start out. When you look at the top performers, they have very few people that were on their original list in the business. Now, I’m not saying it’s wrong to let your friends and family know what you’re doing, but most of your warm market will only join after they see you succeed. So, the bottom line is to go ahead and let your warm market know what you’re doing, but if they say no, let it go.
- Target your market – Some companies call this “pre-qualifying” a prospect. You must understand who the person is that would be interested in your product or opportunity. What are your customers’ wants and desires? Only then can you tailor your marketing efforts to that portion of the population that is most likely to buy.
- Focus on gaining customer-first – People are naturally skeptical of “money-making” opportunities, so don’t focus all your energy in recruiting your downline. Instead, focus most of your efforts on recruiting customers. Once someone is a customer, they are going to be much more receptive to joining your downline.
- Don’t convince anyone to join your downline – This is why we concentrate on generating customers first. You will have already narrowed down your target market to people who have used and know the benefits of the products. Then you can offer them the opportunity. But, never convince, cajole or hound people to join your business, they won’t do well anyway.
- Be genuine and ethical – This is where network marketers can give the entire industry a bad name. Don’t come off as the clichéd “used car salesman” anxious to close the sale. This is a “people” business, your prospects are going into business with YOU, not your company. By the same token, be careful when marketing your products or services. Over-hyping or exaggerating the benefits of your products or services is a sure way to set people up for failure.
- Separate yourself from all the other distributors – This is one of the inherent issues with network marketing. You are just one of the thousands of distributors offering the exact same products at the exact same prices. You need to set yourself apart from everyone else and give the potential customer a reason to buy from you. Check out the resource section below for some great suggestions on how to do that.
- Have a system – If you really want to succeed at network marketing, then having a system in place is critical. Marketing to customers and prospecting for recruits takes a lot of time and effort. By putting a system in place you can; target your marketing efforts to those looking for your products, set yourself apart from other distributors, add value to the consumer giving them a reason to buy from you and finally to automatically follow up with the customer to build a relationship and for re-orders.
It happens to every network marketer, you run through your warm market and then hit the internet. But how do you use the internet?
Here’s how it goes for most people. They get on all of their social media accounts and post a link to their generic company website. Some people even join groups whose members would have an interest in the products. For example, if you’re selling weight loss supplements, there are a ton of groups out there talking about weight loss. And while there’s nothing wrong with doing either of these things, I have never seen them generate any substantial business for network markers. So, what should you do? CONTENT MARKETING.
Virtually no one clicks on a random link to a website that’s trying to sell them something. If they want to buy your product, they will do a Google search and find it themselves. But, that’s a problem. You see, most company websites are identical. Google doesn’t like that because all the content is the same. So, Google will only index one site, ignoring all the rest. Using content marketing will not only help in getting you ranked in Google, but it will also help to set you apart from the thousands of other distributors out there.
- Start by making a simple website of your own. There are a lot of companies that have a very simple drag and drop systems for building websites, including, [WordPress], Wix, and Weebly. Be careful, don’t make your website another advertisement for your MLM. It needs to be an informational site that provides valuable information to the people who visit. Once they are there, you can have a products page.
- Start creating valuable content with a blog. Again, this is not to be content-focused on your products or company, instead focus on creating content that would be helpful to readers. For example, “Tips on Starting an Exercise Routine for the Procrastinator” or “10 Tasty Snacks that Won’t Ruin Your Diet”.
- Post all of this valuable content to your social media accounts and in the various weight loss groups, you joined. Always have a “For More Information” link that goes to your website. This increases your profile and credibility within the community. People will only buy from those they trust, and you are building trust.
- Once someone visits your site you want to be able to collect their information so that you can continue to communicate with them. The easiest way to do this is by using a lead capture system or landing page.
- Generate additional streams of income by incorporating affiliate marketing into your website. Not everyone who visits your website will be interested in your products or opportunity, but that doesn’t mean you can’t profit from them. Affiliate marketing is a great add-on to any network marketing business. It allows you to sell other people’s products and services without having to stock, ship or service them.
Network marketing can be a fun and profitable business for the average person looking to earn some money. With a low initial cost, network marketing puts business ownership within the reach of almost everyone. The downsides are that you will run through your warm market fairly quickly and that the products you sell are exactly the same as every other distributor. However, you can overcome this by setting yourself apart from other distributors, providing more value to the consumer, and developing relationships within the online communities you associate with. Remember, if you can help people out with valuable information, they are more likely to trust you and become customers. And satisfied customers are more likely to become partners, so concentrate first on getting and maintaining customers and your downline will follow.
You can get a copy of our latest book “The Complete Internet Marketing Strategy” for free by clicking on the link below. After you get the book, take a look at our videos explaining the automated supplement marketing system. It was designed for Herbalife distributors, but can be modified for use in ANY network marketing business. It is designed to target consumers that are already searching for the products you have. Then offering the customer more value than other distributors makes you stand out and gives them a reason to buy from you. Finally, it automatically follows up with them for re-orders, offers on other products, and downline recruitment.