According to a respected journalist, Richard Poe, in his Book Wave4 – Network Marketing in the 21st Century, Network Marketing is responsible for moving over a whopping **$100 billion** of goods and services yearly on the global front.
It is therefore very likely that you have already come in contact with some type of Network Marketing product or service. The concept of moving goods through an army of independent distributors has earned its place in the marketing world despite the negative publicity suffered by the industry. Network Marketing is here to stay; the question that remains is, “How do I choose the right business?” Here are some very important pointers that will guide you in the right direction.
Any business you can find passing these criteria is highly recommended…A) A business that has great financial backing, excellent management and a ‘distributor first’ philosophy. The business should also have a longterm development goal and not just be out for the quick cash.
Any business owner would admit that the first years are the toughest. This is the period when the company is just establishing a footing and income is most likely low, unless the owner is already a multimillionaire.
If the company does not have the proper financial backing it is not likely to survive. You would not want to join a company that is depending too much on the distributors for survival.
A Network Marketing business takes time to build momentum by the very nature of the business word of mouth advertising, people telling people.Before it reaches top momentum it must have the financial backing to survive the early hurdles.
Customer support for the distributors is also a critical part of the company. If their distributors feel neglected then they will simply not stick around. Especially in today’s market where there are thousands of Network Marketing businesses beckoning. The distributors are the consumers and salespeople, and to neglect them is to commit certain suicide.
B) High quality (unique if possible), reasonably priced products or services that should encourage repeat customers so users purchase from the seller over and over again.
Traditionally, Network Marketing businesses are able to produce higher quality products simply because they don’t have to pay outrageous prices for advertising.
Just think about the millions of dollars paid per year by companies such as Nike to sports stars for a 30 second commercial. This money, if Nike followed the Network Marketing model, could go into developing better quality products and paying their workers better salaries.
Because a large part of a normal company’s budget goes towards advertising, Network Marketing businesses are often able to deliver a higher quality product, all things being equal, per dollar spent.
Also remember that you want to be paid continually so you need a product or service that is either consumable so the customer has to keep refilling his supply, or set to a monthly membership model so you advertise once, and get paid monthly commissions forever. Nutritional and telecommunication companies fit this requirement very well.
Apart from being consumable, another important factor is how ‘needed’ this product or service is. The negative side of pushing nutritional products is that most people are only concerned about their health after it is already failing! (You’ll do well recruiting at the local hospital). If you are marketing a service such as web hosting, medical coverage or mediabased services you are more likely to have less attrition in your downline.
If the company is selling a product that you can pick up at your local department store, then you’re not likely to do very well. A unique or proprietary product will do better since you’ll have less competition—you learn very early that there is no such thing as zero competition although some companies will want to make this claim. (There is a new concept that actually does eliminate competition within your own downline, through a new concept called a “matching override” – more on this a bit later!)
The “acid test” question to apply to the price of the product or service is, “Would I purchase at this price if there wasn’t a compensation plan attached to it?” If your answer is “No,” then you are looking at a potential pyramid scheme where a product is just attached to the compensation plan to make the opportunity appear legitimate. In these cases you will always find that the compensation plan becomes the selling point and the product or service is rarely mentioned.
Here is an informational article on the subject of recognizing and avoiding such schemes: http://www.ftc.gov/bcp/conline/pubs/invest/Network Marketing.htm
C) A Compensation Plan that is fair to both fulltime and parttime distributors alike with leadership bonuses for those who build large and productive teams.
We have already mentioned that a successful Network Marketing business will have a “distributor first” philosophy. In no other place should this be exhibited more than in the compensation plan.
It takes only some simple arithmetic to see how many sales or distributors you need in your organization in order to be in profit. Most people don’t take the time to do the math and sometimes are “deceived” by the fancy potential income charts that are put out by the company.
The point here is that you need to read between the lines and the fine print to be sure what you are paid for your effort. Most people will skim this section because it may read like a tax code and who likes to do their taxes?
That’s why we hire accountants.
Compensation plans fall into basically four types:
1. The Break Away Plan. This is the oldest and most traditional plan and allows distributors to build and be paid on an unlimited number of frontline associates. When the frontline associates reach a certain
predetermined volume they can “break away” from their up line and form their own organization. In this break away plan the leaders are paid on all their frontline and also certain levels down in their break away groups. In this model if you don’t work you don’t eat. You have to recruit in order to be compensated.
2. The Unilevel Plan. Here you are only paid on a certain number of levels determined by the company. In this case there are no ‘break away’ groups. The larger your frontline the larger will be your total group size. The lower levels would therefore be much larger than the upper ones. Again if you don’t recruit you don’t get a check.
3. The Matrix Plan. In this plan you are limited to the number of recruits you could have on your frontline. So in a 3 X 5 matrix you’ll have 3 on your front line then 9 on the second level, then 27 on the next and so on. Compared to the two other plans we’ve looked at the matrix plan limits your success to a certain level. What’s so appealing about this plan though is that recruits are told they only need to get 3 and are even promised “spillover” from a “heavy hitter” in their up line. The results are that everyone joins looking for spillover and never makes any personal effort. Results? Certain failure. A matrix, though limited, can work but the distributors must depend on their personal efforts and allow the spillover (if any) to be just an added bonus.
4. The Binary Plan. This plan is a special case of the matrix where you can only have two on your frontline, hence ‘binary’. The only caveat here is that many such plans require you to balance both sides of your organization before you can get paid.
This is really a trick so that the company can keep your money as long as possible and sometimes forever. Some dishonest companies will start off by opening only one side of the binary—called a ‘power leg’—as there is no possibility of you getting paid until the other side is opened. By the time the other side is opened many people may have left the company leaving their commission checks behind as well.
You are forever left, not only with recruiting, but trying to balance the sides of your team. Beware of such plans!
There are variations of these plans that have come along such as the straightline plan where you are paid on every one that comes in after you.
Companies that follow these plans don’t seem to survive very long since most people just join and stand by waiting on their checks. There is no real incentive to work the plan.
There is another completely new and unique compensation plan known as the “matching override” and it basically means you make the exact same amount of money your downline makes on every sale! (you’ll learn more about this as you read further!)
D) Training and solid upline support for your team.
Many companies provide training and promotional materials for their distributors but it is often difficult to strike a balance between product promotion and distributor training. And distributor training normally takes a backseat.
You should be wary of companies that charge exorbitant prices for their promotional materials. You are investing your advertising dollars so the company should not seek to make a profit from you here—although many do. You should seek to align yourself with an experienced leader and learn as much as possible from his or her recruiting methods. Be sure to investigate your upline because that can be the one factor that determines success or failure for you.
Study the company literature to see who the ‘big hitters’ are and join their group. It is said that misery loves company; so does success.
E) A wide and even global market if possible.
You may find a company with all the great characteristics that we have looked at so far and then discover that it is not available in your area—ouch! With the advent of the Internet you find that many more companies are going global. This means that your market reach will be wider and chances of building a solid team are greatly improved.
Apart from the sheer geography of the company’s market reach, is the potential customer base as well. For example, many American nutritional companies are aiming for the ‘baby boomers’ who are now in their midlife years and make up a good percentage of the buying public—in means and numbers. This demographic of customers want to look younger and are very health conscious. Any product that caters to their needs will most likely have a ready market.
Another big “bubble” when looking at population demographics is the children of the baby boomers. Look at what they are spending money on!Choosing a company that has a product or service for which there is no ready market will make it very difficult on the distributor. And in this industry one needs