Hey guys, just wanted to start a new series of posts that I feel will be a bit more helpful than many of the debates I've participated in as of late. It seems to me that in a year's time, I've learned a great deal about the Network Marketing world, and many of the network marketing companies.  Just a couple years ago, I couldn't tell you what a network marketing company actually was, aside from deducing it from the phrase. What I've come to realize is that the good side to network marketing companies needs to be looked upon, and be separated from those that have given the mlm world a bad name. So I decided to just write a few posts for people like me that are just starting out and need a quick tutorial on the basic terms.

What are network marketing companies?

Network marketing companies are essentially any company that makes sales utilizing a "direct selling approach" where independent-sales people act as distributors of products and/or services. These individuals are driven to create and manage a sales force via recruitment and training. The entire process follows a framework or structure provided by the company that produces the product or service. Commissions are earned based on each person's sales revenue in addition to the revenue of  his or her sales-force. In most cases, If that were your sales force, you would refer to it as a "downline".
Network Marketing is also referred to as multilevel marketing (MLM) and is a multi-billion dollar industry with a product base that covers and distributes virtually anything you can imagine.

This form of marketing is very similar in structure to what are considered "pyramid schemes", which has led to the restriction of many MLM companies from operating in several countries. Its important to note that a solid, or legit MLM company is NOT a pyramid scheme, and although it's a separate topic for another post, there are differences which separate the two. Pyramid schemes have led to Network Marketing being given a bad name, because of Pyramid schemes having long been a vehicle for consumer fraud. Some very famous and highly successful network marketing companies are Amway, Nikken, Melaleuca, and Shaklee-Nagamuchi.

When I think of Network Marketing Companies I always think back to getting pitched on Amway, or as a group of followers were calling themselves, "The Network".

As far as I know, the original term for this kind of marketing business was "Multilevel Marketing Company". When that became associated with "pyramid schemes", the term "Network Marketing Company" cropped up. Other terms like "Direct Sales" company and now even "Multi Tier Marketing" and "Multi Tier Affiliate Programs" also appear but all seem to refer to the same type of business:

Network Marketing Companies that distribute a percentage of sales back to their rep force based on a commission structure that rewards for sales and recruitment.

I initially thought the premise behind Amway and other companies sounded great - instead of having a retail store charge a 100% markup on the wholesale price of a product - like detergent or household cleaning products - the company would instead market their product through a networ of distributors who would instead earn a percentage of that retail markup that no longer existed. The product could be offered at a lower price, reach a broader audience, and everyone wins.

Instead, what I've seen is most companies overprice the product so that there is more margin to be distrubuted as commission. Overpriced juice, overpriced vitamains, WAY over priced Internet marketing programs, all typically structured so that the few at the top receive the lions share but the average mom and pop who get involved just buy overpriced products and never earn a dime.

There are obvious exceptions, but I would love to see one Network Marketing Company offer a high quality product at a lower than retail price while still offering a reasonable commission to distributors. I think they would crush the market and maybe restore some faith in the "network marketing company" moniker.

Its an unfortunate but very truthful point you make Jango, its the sole reason why I seem to be infatuated with the concept, and never jump off the ledge and dive into any of them. Its almost as if the greed gene turns the dial just enough to make what might normally be a great opportunity be just shy of worthiness. Hopefully if we wait it out long enough, a truly awesome opportunity will arise, if it hasn't already.

I just signed up in Repspace so I hope you don't mind my busting in on your thread.

Many people think of network marketing and MLM as some sort of illegal pyramid or scheme that is top heavy with only a chosen few making all the money.

Most people work for a company just like that. The CEO make more than the President and the President makes more than the Vice Presidents and the Vice Presidents make more than the Department Heads etc.. Does that sound like a pyramid? Does to me.

Every company has people who are ambitious and work harder, work smarter and rise to the top, and rightly so. Others, (and that is usually most) are not that ambitious, and never amount to much but still seem to eek out a living, and many times, find contentment with that.  They are usually the ones that think of Network Marketing as some sort of Illegal Pyramid scheme!

Hi Randy, I don't mind at all sir, in fact I'm grateful to have your contribution to the thread. You stated something I've considered many times in regard to comparing most mlm companies to your typical mainstream company set up. The structure is definitely identical, whereas I think the difference is that the structure of Wal-Mart for example is more stable for the employees (whom equal the standard direct seller). Its much hard to fail at being a Walmart employee than it is to fail at successfully starting and maintaining an mlm business. I think the hype that gets most people interested in an mlm is the idea that under the right conditions and with a giant downline, you could end up making a fortune, but its rarely seen in real life. I think that's what Jango was pointing out, and in an interesting twist, there is similar hype when you join a company like Lowe's or Home Depot. I personally sat through more than a few orientations where they promised us the opportunity to make a million dollars if we worked for the company long enough and gained access to stock options. Sure, the possibility is there, but its very remote, or at least seems so. I try to keep in mind that it takes a very special person and maybe a bit of luck to hit the nail just right when it comes to making the fortune, and that perhaps I am simply not that guy. Call me lazy, or uninspired, or maybe I'm not financially intelligent, but whatever it is that it takes to succeed in these ways, I haven't met too many people that have it.