Today, the multi-level marketing sector has well over a hundred thousand companies since the advent of the MLM model was first created in 1945. However, despite this abundance only forty multi-level marketing companies have ever earned $100 million dollars a year in profits. An even smaller number–only eight have earned over $1 billion a year. The most successful companies today are AMWAY, Herbalife, NuSkin, and Forever Living Products, who have been in business for between one or two decades.
In the years ahead, the number of MLM companies and their respective income levels are expected to increase considerably as technological innovations impact manufacturing, marketing, and distribution. This positive forecast, of course, is contingent on the fact that the global economic crisis, the recession we are in, is somehow ameliorated or even reversed.
As we begin a new year, we thought it would be interesting to look over some top facts in MLM, particularly how the industry first got started and how it has evolved since its early fight for survival.
Some Top Facts about Network Marketing History, Pyramid Schemes, and General Public Perception
MLM in its present form is a result of the manufacturing and distribution innovations made by various companies after World War II. What most business analysts can agree on is that Nutrilite inspired the original design for a MLM company framework.
Nutrilite was instrumental in forming the shape and structure of the MLM industry that we know today. It created the essential framework for the multi-level marketing model, identified the nutritional supplement niche as highly lucrative, and originated the concept that a company ought to supply products that were not offered anywhere else. Nutrilite itself got its fundamental principles by synthesizing the radical business ideas that were prevalent as far back as the 1920s.
MLM is Innovative but Not Modern
The revolutionary nature of the MLM company framework has a given people the mistaken impression that the network marketing model is an entirely new business paradigm. This model has actually been with us for most of the 20th century in one type or another.
A New Order Born Out Of Chaos
As with many business innovations, the MLM model is a result of dissatisfaction with a previous paradigm. The roots of MLM can be traced back to a dispute between Nutrilite, a marketing company, and the manufacturers of the nutritional supplements that allowed Nutrilite to prosper. As is usual in almost any industry or company, the marketing and sales organization was making a great deal more money than the manufacturers themselves. These manufacturers thought that this was unfair and demanded more money from Nutrilite. Much to their surprise, however, rather than compromise their profits, Nutrilite invested its earnings to buy out the manufacturing aspect of the business. This idea of taking charge of the manufacturing, marketing and distribution process did so well that a new company was formed–Amway Corporation. Founded in 1959, Amway is still in business and it is reckoned to be the largest MLM Company in the world.
Pyramid Selling Schemes
Sadly as MLM flourished, a fake variation of it arose called a Ponzi scheme, a company practice that also originated in the 1920s.
When anti-pyramid laws were created, many MLM businesses suffered from the public calumny against pyramid schemes and were forced out of business. The network marketing model only survived after much interior restructuring to regain the public’s trust again. This reformulation of business principles and practices resulted in MLM businesses abiding by a strict code of ethics as a way to separate themselves from the much maligned pyramid schemes. Pyramid schemes were in effect elaborate Ponzi schemes.
However, despite this effort to distance itself from pyramid schemes, a new sales representative will still find it necessary to respond to the objection that MLM is a pyramid scheme. This is because certain companies still pretend to be MLMs, but are actually pyramid schemes. For instance, Zeekrewards was identified by the U.S. government as a pyramid scheme and shut down. However, associating all MLMs with pyramid schemes is as absurd as associating all stock investments as Ponzi schemes because of Bernie Madoff’s scam.
Incidentally, as an aside, here is one of our favorite jokes about pyramid schemes:
Prospect (belligerently): I’m not interested in joining your MLM because it’s a pyramid scheme.
MLM (indignantly): Pyramid scheme? Why the modern corporation is more of a pyramid scheme. After all, the chief executives make most of the money while the poor saps that do all the real work make very little.
Prospect: I didn’t realize that there were so many pyramid schemes.
Some Top Facts about Network Marketing Superstars
Despite these misinterpretations by the general public about the nature of network marketing, MLM has become a robust business system and has even been endorsed by business celebrities like Donald Trump, Robert Kiyosaki, and Robert Alan. The reason they champion the MLM business model is that this is one of the few ways that individuals working in a home business without any previous experience can create a 6 or 7 figure income.
Famous six figure earners include Eric Worre and Kimmy Everett. Eric Worre has made at least $ 15 million in his business. He has trained more than 250,000 people and has a personal a downline of 500,000 people. Kimmy Everett developed a 6 figure income within her first 2 years and developed a downline of 10,000 independent sales representatives.
Meanwhile famous 7 figure earners include David Wood and Dan McCormick. David Wood sold $ 1.2 million worth of products within his first year and recruited 2,252 independent sales representatives. Dan McCormick has been in MLM for 29 years and has produced at least $ 1 billion in sales profits.
Some Top Facts about the Benefits of Network Marketing
Multi-level marketing is ostensibly promoted as a business model that supplies some unique characteristics, rewards, benefits and perks for those involved in it. However, the facts are rather different.
• MLM should be considered more of a simple referral program than an actual business requiring a variety of business skills. Most people who sign up for an MLM program have little business experience. Moreover, other than learning about the product and the company, they are not given any business training. Instead, they are merely encouraged to go out and talk to anyone who will listen.
• Training and attending meetings do little to actually teach representatives anything. They are merely descriptions of products and personal testimonials about the product or the earnings.
• Success in MLM has little to do with the product. People do poorly or well with it depending on their approach. All promotions that talk about the product “selling itself” are mere hype.
• Success in MLM has nothing to do with the company. Again, some people prosper in whatever company they work for, while most people do poorly in whatever company they work for—regardless of whether it is an old, established company earning billions or a newer, “ground-level opportunity” which has yet to create much of a track record.
Some Top Facts about the Negative Side of MLM
Ironically, despite these many advantages available to the average distributor, advantages that are not readily available in other entrepreneurial ventures, as much as ninety-seven percent of brand-new distributors remain for just three months because they have inadequate advertising and sales abilities to remain qualified in their company as independent representatives.
Those who are successful are normally those who have actually had considerable company experience or who have the ability to rapidly understand how to build a downline.
Many beginners are educated in simple advertising and promotional methods that provide little chance for success. They usually spend a terrific deal of time and money trying amateurish techniques before they finally understand that they just do not work.
As an example, two things that lots of people who sign up with multi level marketing do that that results in them dropping out of the company is cold calling and public solicitation.
Cold Calling
There are three limitations to cold calling in MLM.
1. Low quality leads
Novices might get lists from a listing broker. While this could appear a logical method and strategy for advertising, it has some significant downsides. New reps often do not manage to get a high quality list of fresh leads because such lists are pricey. Instead, they get low-cost leads and wind up calling people who are upset and angry because they have been called lots of times by others in MLM.
2. No Training.
New reps might not be competent at cold calling and might loathe the procedure. Besides the intimidating factor of talking to irritated, uninterested people, they are also hampered by the fact that they do not have knowledge or experience. Brian Tracy calls this type of selling, where you simply call prospects and hope for the best, as the “blah, blah, blah” method. The rep hopes that by talking long enough and enthusiastically enough, something good will happen.
3. Public Solicitation
While some individuals do not mind being pitched in a public, many people find it invasive and are typically rude. Unless one is especially thick-skinned, completely insensitive to the opinions of others, this continuous cycle of rejections creates an inferiority complex.
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