Network Marketing. Multi-Level Marketing. Direct Selling. We've all heard these terms before but what exactly are they and how do they differ from traditional corporate America? When most people hear of Network Marketing, they typically don't like it, don't really understand it and will say "it's one of those things" and run from it as they think it's some kind of ploy for someone at the top of the pyramid-like organizational structure to take their money. But why do people react this way? Let's start by taking a look at the organizational structure of corporate America and then compare it to the organizational structure of a network marketing company.
In corporate America, we understand that there is a hierarchical structure in place where the CEO is the top income earner and top decision-maker of the company. Underneath the CEO, you have Senior Vice Presidents, then Vice Presidents, then Managers and so on until you reach the most entry-level employee position within the organization. When we first enter the corporate structure, we come on board as an entry-level employee, typically work in a window-less cubicle, and are told to work hard to get noticed in hopes of getting a promotion to the next level. We devote many long hours and years of our lives with the anticipation of being promoted to a corner office with increased pay. Still, we work long hours and the process repeats as we strive to achieve another promotion, a bigger title and more pay. Ultimately, we seek to become the CEO of the organization after we've devoted years to work our way up the corporate ladder.
When we look at the corporate structure itself, it creates a pyramid-like shape, identically the same as the network marketing structure, of which we'll explain further down this page. Within this structure, the CEO is able to gain freedom of time and money by leveraging the efforts of his managers and his many employees. The employees, on the other hand, have no leverage in this model and are trading their time for money (also known as renting their income). Equally important is that the employees typically have very little to no ownership of the business itself and do not share the same mentality as the owner(s) to go "above and beyond" in their job duties.
Many people are drawn to the corporate model because of their core values and how they were raised. A person with an "employee" mentality likes the security of having a regular paycheck and company provided benefits versus having to go out and earn a living based upon their own efforts. In a nutshell, an employee accepts being told what they're worth, how much time they'll get off from work and is always at the risk of being let go.
The Network Marketing Structure
Now let's look at the structure of a network marketing company to see how it compares to that of corporate America. Network marketing companies use people as independent business owners (or business reps) to market their goods and services versus traditional expensive forms of marketing including print, tv, radio and/or physical storefronts. The goods and services offered by network marketing companies are not necessarily cheaper or more expensive than traditional business models, they are just marketed via the company's independent business owners to eliminate the expensive marketing costs. In lieu of paying these expensive marketing costs, the network marketing company pays sales commissions or a percentage of profits back to the independent business owners for generating the sales. If the products or services are consumed or ordered on a regular or on-going basis, the independent business owner has created a revenue stream for him or herself.
If a network marketing company is to be successful in selling lots of its goods or services, it will obviously need a large amount of independent business owners out promoting them. This is where we come into the concept of a "downline" or levels below you. Once you sign-up and become a registered business owner for a particular network marketing company and secure some sales based upon your warm market leads, you're told that you need to grow your organization by recruiting more people to do the same as you, creating your level 1, level 2 and so on. This is the part of network marketing where most people fail. Obviously, if any organization is to grow, it needs to recruit more people. Think of an insurance company or a real estate company as examples. If the insurance company is to succeed, it will need to recruit more insurance reps to sell more insurance polices. Likewise, a real estate company will not flourish if it does not attract new agents who go out and sell homes. This recruiting aspect is the genius part of network marketing that allows an independent business owner to duplicate themselves, similar to how a franchised business model is duplicated over and over.
Let's say that you're able to find two people who also want to do the same as you and become independent business owners for XYZ network marketing company. They will then become your Level 1. If you can train these two people to do the same as you, to secure "x" amount of sales via their warm market and then to recruit two additional people each, you will then have four people on your Level 2. Assuming this process is duplicated 7 levels down, you would then have a total of 256 people in your downline organization. This is the "leverage" part of network marketing. By leveraging the efforts of others within your "downline," you're able to create an organization that is able to continue generating additional sales and expand itself without your direct efforts. Once your organization is able to grow on its own, you will have essentially created a residual income stream for yourself (that you own) and you are no-longer trading time for money. This is the goal of every independent business owner.
Fewer people are drawn to the network marketing model because it takes someone who is not afraid of failure or taking risks in life to achieve freedom of time and money. The network marketer is someone who understands that their pay may not always be regular but they have the potential to truly earn what they are worth and is willing to put forth the effort to achieve it. They also have great job security because they are the CEO of the organization which they have built.
Robert Kiyosaki on The World of Business
Robert Kiyosaki, well known author of Rich Dad, Poor Dad, discusses the core values associated with employees, self-employed persons, big businesses and investors. Robert mentions that the biggest differences between these four types of mentalities are the core values in which we were raised. Watch as Robert explains the cash flow quadrant outlining these four types of people that make up the world of business.
The employee mentality, or lowest level in the quadrant, is someone who seeks a safe, secure job with benefits under by working for an employer. Next, you have the self-employed small business owner who has the core belief of "if you want it done right, do it by yourself." Next is the big business mentality where these business owners hire the best and brightest minds to run and grow their businesses for them. And lastly, we have the investor mentality where these people have money and other people work hard for them. They are interested in leveraging other people's time and efforts to give them complete freedom in life to do as they choose.
The real underlying theme of Robert's Rich Dad states that if you want to succeed in life, you need to build ownership in a business, and be able to leverage others' time and efforts to achieve the lifestyle we all dream about. As an employee, we can work very hard for an employer all our life, but we really have no ownership of the business and can be let go at any time.
The Direct Selling Network Global 25
The following is a list of the 25 largest direct selling companies based upon 2010 revenues. Quickly apparent is that these companies are very large with revenues in the multi-billions. Many have distributors (aka independent business owners) in the multi-millions as well.
The Direct Selling Association (DSA) & The Better Business Bureau (BBB)
Listed below are local franchise coaches and franchise consultants who are glad to assist you. These franshise professionals have assisted many in starting franchises along the Suncoast and across the nation. We encourage you visit their web sites to learn of their successes as well as to read client testimnonials further down this page.
To view further research on the above or additional network marketing companies, we encourage you to visit the Direct Selling Association (DSA) website or the Better Business Bureau (BBB). The Direct Selling Association (DSA) is the national trade association of the leading firms that manufacture and distribute goods and services sold directly to consumers. Approximately 200 companies are members of the association, including many well-known brand names.
The Direct Selling Association's mission is "To protect, serve and promote the effectiveness of member companies and the independent business people they represent. To ensure that the marketing by member companies of products and/or the direct sales opportunity is conducted with the highest level of business ethics and service to consumers."
The Better Business Bureau's mission is to be the leader in advancing marketplace trust. BBB accomplishes this mission by creating a community of trustworthy businesses, setting standards for marketplace trust, encouraging and supporting best practices, celebrating marketplace role models, and denouncing substandard marketplace behavior
The Direct Selling Association
The Better Business Bureau