When you bring up the term Network Marketing what response do you get? Do you here the phrase pyramid scam , ponzi scam or I would never do that? Did you ever wonder what information people have to make such claims?

What is Network Marketing?
Multi-level marketing (MLM), (also called network marketing) is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a team of distributors and a hierarchy of multiple levels of compensation. The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.

So, what is the problem with MLM and network marketing?

Maybe it’s the so called pyramid structure? But you can’t really take issue with the tiered compensation structure—almost every large sales organization in the world has that. Salespeople get commission, and sales managers get overrides or bonuses on top of that, and sales directors on top of that, and VPs on top of that. Actually the shape is more of a reverse pyramid with plenty of room at the top for everyone.

Or maybe it’s the fact that there is a start up cost? But that can’t be it—that’s a standard franchising model. How many franchises can you open for $1000 or less?

Now certainly, there are illegal pyramid, or “Ponzi”, schemes. This is where the money is all being made off of signing up other people, with little or no real product ever being delivered. But in spite of whatever perceptions people may have, the fact is that Network Marketing companies have sold millions upon millions of dollars of products to happy customers, many of whom are NOT also reps. So, there may be a perception problem here, but if so, the perception is out of line with the reality.

But surely the bad reputation Network Marketing (MLM) has some more basis in fact than the occasional illegal pyramid scheme?

The real problem with MLM is not MLM itself, but some of the people it attracts. Network marketing is just a business model, and it really amounts to “micro-franchising”. Its upside is that it has a very low cost of entry, with the potential for exceptional revenue, and there are those who achieve that.

But those same things that make it attractive to many who are NOT really qualified or prepared to become business owners. The salient characteristics of MLM make it attractive to people who:

* have not done well in their business or profession and have little money saved up to invest
* have no previous experience owning or running a business
* have no previous experience in sales
* have little or no experience developing business relationships other than that of employer/employee/co-worker
* are not satisfied with their current level of income
* have unrealistic expectations of the amount of work involved compared to the revenue realized

Don’t get me wrong—I’m not saying that there’s anything wrong with any of these things, or that this describes even a majority of network marketers—only that it describes a disproportionate number of network marketers, and that many of them never do anything about it.

As a result, many network marketers end up:

* over-selling the opportunity
* inappropriately discussing business in social situations
* coming across as desperate
* over-focused on new recruits and neglecting existing customers as a result
* being either inaccurate or deceptive when talking about their business

This might sound a little harsh but my favorite quote is: There are 2 types of people in our business, Network Marketing Professional and MLM Morons. If you become a Network Marketing Professional this industry will reward you with everything you are looking for.

So what’s the solution?

There’s a first time for everything. And network marketing/MLM is a great opportunity for people to have their first business, their first sales role, etc. My point is this—recognize it for what it is: it’s a business, and you are a business owner. And if you’ve never owned a business before, if you’ve never done sales before, if you’ve never networked before, you need to learn about how to do so, not just from the network marketing/MLM experts, but from established experts in those fields.

Network marketing professionals who are serious about building a business should be reading and learning about business fundamentals, the latest sales and marketing techniques, strategies for networking and business development, etc., not just swapping tips at your team’s weekly or monthly meeting. Act like a small business owner, and people will treat you like one.