Network marketing or Multi-Level Marketing (MLM) is a system of selling used by companies in which ordinary members of the public are recruited as sales agents, not only sell products but to further recruit more agents on the basis that each person receives a percentage of sales, not only of products directly sold, but of sales by those that this person has introduced to the company. In this manner, a network or hierarchy of sales agents is build up, and provided a person has recruited enough active agents "under" him or her, the kick-back from the company can be substantial.
MOST OF US have come across somebody involved in network or multi-level marketing. Although less popular in Europe, MLM is big business in the US where it accounts for up to $50 billion in total US annual sales or about 1% of all goods and services sold. The concept of MLM is particularly appealing in America because it has a more entrepreneurial bent.
There is a fine line between network or multi-level marketing and pyramid schemes, which are illegal to even take part in. The difference is entirely one of emphasis: in pyramid schemes, the agent makes his or her money primarily from signing up more agents, with gimmick product sometimes being used to try to make the scheme legal; whereas MLM schemes are basically pyramid structures that reward individuals for overall product sales.
Most people who sell products via MLM are good and honest people who genuinely believe in their products. I myself have been signed up for a number of years to an MLM company because I like the products, which I sell at cost to friends and family (although I personally stop short at recruiting anyone into a "downline"). MLM is a fantastic way of getting products out to the public without relying on the goodwill and acceptance of the retail distribution system, which strongly favoures big, established companies over small, newer ones. And instead of giving the trade margins to shops and distributors, a percentage of these are given instead to the agent for the contacts (and corresponding sales) that they have supplied to the company. (I say percentage, because the prices of MLM can still be relatively high even though they are bypassing the retail markups.)
But like any system that has the potential to make a lot of money, MLM has quite a manipulative side. I have personally lost two or three friends who were distributors for network marketing companies because they insisted on bringing in the products to our relationship, so that every phone call became a masked sales pitch. If you are a distributor for this MLM company too, and especially if one of you is in the other's downline, then a friendship around product sales can be sustainable. But if you have little to do with MLM, or if, like me, you want friendships that are non-conditional and that revolve around life rather than business, then you usually end up avoiding your entrepreneurial friend. The result is that most MLMers end up with a network of friends that includes many other MLMers
The reason why MLM can work so well is that people are much more likely to fall for a sales pitch from a friend or relative, or a stranger in a home setting, than they are from a stranger in a shop or market, or an advert in a paper, magazine or on the Internet. With the more traditional forms of selling, we are on our guard. However, with MLM, the sincerity and openness that we naturally resort to when that guard is down is exploited big time, with the result that the strengths of the product are less of a determining factor than the particulars of our relationship with that person, the setting, and our desire to make money ourselves by joining this scheme.
The last point is perhaps the most important: most successful MLM distributors tend to focus on selling the business rather than the products; the products are incidental to the business. In fact, some MLM companies can successfully trade in second-rate products because they have such a great payment plan for the distributors, and so the company can still do well, but usually only during the initial growth spurt stage, after which the company soon implodes. The problem when people are primarily focused on selling the business rather than the products is that the scheme looks more and more like a pyramid scheme whereby little actual product is being sold, and only those who have managed to get into the company early enough actually make any money. Pretty soon, most of those who are likely to fall for MLM schemes have either signed up or rejected the scheme, and it is much more difficult to recruit distributors. As the products aren't good enough or aren't seen as good enough to sustain the business themselves, the result is usually stagnation and then bankruptcy. The statistics speak for themselves: only 5% of start-up MLM companies will be around in just 3 years time. That is a dismal success rate to bear in mind for all those who eagerly join new MLM operations.
Because MLM is such a hit and miss operation, and as almost all distributors are desperate to quickly sign up more distributors to ensure maximum return, the selling methods used by MLM distributors tend to be quite manipulative and/or high pressure. Most present images to the potential distributors of individuals who have made significant amounts of money using the particular MLM scheme, usually with pictures of cars and quotes of huge monthly earnings. In this way, they appeal to our greed, without informing us that it is only a tiny tiny percentage that actually makes it this big. Most people who join MLM companies (and we are talking about 97% or more) make less money than they put in purchasing products. But, like everything, it is a gamble, and most people are willing to take a chance.
MLM also tries to appeal to our innate herd mentality by giving the impression, invariably false, that everyone is involved in MLM, that it is the marketing method of the future, and that all the top business schools, business newspapers and futureologists are endorsing it. For example, many MLM companies have made the false claim that MLM is studied at leading business schools like Harvard, and that it has been praised by The Wall Street Journal. In fact, there are no legitimate business schools currently giving courses in MLM, and The Wall Street Journal has never endorsed MLM. Also, figures bandid around on the percentage of individuals who have become millionares on the back of MLM are hugely exaggerated.
These sorts of exaggerations and false claims are made because the MLM market is so competitive. MLM companies present themselves as "caring and sharing" whislt most of them run sales courses for their leading distributors that trains them in the art and craft of seriously manipulative selling. Of course, they will argue that its okay to "encourage" individuals to purchase products that are really going to make a positive difference to people's lives, but this is a specious argument because it makes the dangerous assumption that it is okay to manipulate others if we think we know what is best for them. (This is a justification for Big Brother if there ever was one!)
A few years back, I came across a closed-door training program for top distributors that was being run by a leading US network marketing company. I was a little disturbed by how this company wanted its distributors to manipulate their way to greater success, and I ended up making four pages of notes which I reproduce at the bottom of this article. These were shoved in my desk draws for many years until I glanced at them the other day and decided that they needed to be up their, on the web, so that people involved with MLM can take heed of the level of manipulation that can often lurk behind friendly smiles, "caring" companies and confident manners.
Here are my notes verbatim, with no embellishment or correction. Make of them what you will (some of them don't make sense to me any more), but bear in mind that these were an integral part of a successful MLM company's training program for its top distributors, a company that presents itself to the public as caring and sharing, whilst holding closed-door trainings that include this material. I have heard from a friend heavily involved in MLM that these sorts of trainings are pretty standard these days.
NOTES FROM MLM TRAINING PROGRAM
Each new agent you find must commit to the following:
- Continue to use the products.
- Keep doing what friends do.
- Influence at least 5 new people each year to take the products and become agents themselves.
There are only 2 addictions:
- The addiction to control.
- The addiction to belief systems.
Influence your friends to use these products.
Influence anyone you sell products to to become an agent for the company.
Influence your downline agents to continue being active.
Strive to attain an every increasing level of competence and confidence.
Do what friends do…
Causes to celebrate with friends:
- Anything to do with the company.
- Reaching sales targets.
- Reaching a new level of rebate category.
- Becoming a distributor.
- Sponsoring a new agent.
Know the tools of influence
Our vision is to be the largest and most successful network marketing company in the world, supplying our products to every person on earth - our global family - and training leaders capable of global stewardship.
The most compelling motivation on Earth is the desire to make a contribution.
Acknowledgement is the best way to establish rapport and the fastest way to change a person's state.
To be effective, you must be absolutely certain that what you are selling adds value to the person's life.
The best sales people on Earth know that if they don't sell the product they are actually do the customer a disservice.
If I believe something I no longer question it.
If I doubt something I no longer believe it.
Certainty = power
Make sure that people know what the product is worth before they know what the price is.
Never use the word "but" in response to on objection.
I am committed to expanding my sphere of influence.
I am committed to destroying doubt and installing certainty.
Expensive = Good
If someone objects that the products you are selling are very expensive, reply to them in the following manner: "I would pay ten times as much because… ". Remember to tell them that you get what you pay for.
Always sell the expensive products first, that way others won't seem expensive but cheaper in comparison.
We should try to repay in kind what another person has provided us.
Surprise is an additional influencing factor. Don't preannounce that you're giving a gift. It allows the customer to erect barriers and minimize the value of the gift.
Take away their worries and you will be successful.
Get people to make small commitment statements.
We view a behaviour as correct in an given situation to the degree we see others perform it. Therefore, show pictures of different people using our products, signing up as agents, and holding meetings.
What you believe is what you see.
People like to buy from people they like.
People like people who are like them.
People obey or respond to people they perceive as being authorities. Use authority in your presentation… talking about doctor's opinions, teacher's opinions and professor's opinions. Wear a suit and tie. Drive an expensive car and wear an expensive watch. Take clients out to expensive restaurants.