Many will say that network marketing is a scam, a pyramid scheme, or anything but a legitimate business - without actually knowing much, if anything at all, about the business model. Read on to find out where network marketing started, where it has been, and where it's going.
Network marketing, otherwise known as multilevel marketing, is a method of marketing that rewards not only the sales of products and/or services but provides the opportunity for anyone to build their own salesforce and make override commissions on the sales of their organization. This model can be found in many industries today, including insurance sales, real estate, services sales sectors such as satellite and cable TV, etc. Ever get a referral reward for sending friends or family to sign up for a product or service that you take part in? Then you've been part of the network marketing industry.
So where did this unique form of sales and rewards begin? Who came up with the idea of rewarding salesmen that would go on to build their own sales organization? By many accounts, it all started with a simple vitamin company called Nutrilite way back in 1934, founded by Carl Rehnborg. One day a customer suggested to Rehnborg that he would train his salespeople in exchange for a percentage of the profit. This was the beginning of the network marketing concept.
Of course, the most famous network marketing company has to be Amway. Founded in 1959 by Jay Van Andel and Rich DeVoss. The two had been Nutrilite distributors for almost a decade at that point. Today, Nutrilite is a subsidiary company of Amway, with its product line being distributed by Amway's global network of many millions of distributors.
So what's the deal with network marketing being called a "pyramid scheme" or a "Ponzi scheme?" Well, it all has to do with products, services, investment returns, and the flow of money. While Ponzi schemes are probably best left to another post for more details, let's just take a quick look at the FTC vs Amway ruling of 1979. There were many who felt like Amway was a pyramid scheme because of price fixing, misrepresenting the average income of distributors, product front loading, etc. However, after four years of litigation, the ruling was in favor of Amway as a legitimate business model. There was indeed an opportunity for anyone who wanted to join the company's distributor force to build their own sales organization selling the company's products and make money from doing so.
Two major things to come out of the ruling that still defines a legitimate network marketing / multilevel marketing / direct sales company today are 1) there must be a product that can be sold to an end user - the consumer, and 2) the main income for a distributor should be the distribution of a product or service, not simply the recruitment of other distributors or salesmen. The distinction here is that it's ok to have product sales commission overrides, but it's not okay to profit from simply signing up new recruits over and over again, building an organization that never sells any products.
In a pyramid scheme, the main money comes from new people buying a distributorship. This money is then distributed upline from the new recruit, making those above them more money. There is a fabricated or even no real product - perhaps just an "investment" into a project that doesn't even exist. Once the recruitment of new participants slows down, the money stops flowing and the pyramid collapses in on itself. This is the basics of a Ponzi scheme. In recent times, Bernie Madoff was convicted of operating the largest investment Ponzi schemes of all time. He was subsequently sentenced to 150 years in federal prison and was forced to pay $17 billion in restitution.
In 1994 - 1995, at the beginning of the internet's proliferation into the homes of people everywhere, network marketing evolved into a new medium of recruitment and sales, online. Online sales and marketing would take off over the next few years with the beginnings of today's behemoths such as Amazon.com and Microsoft. Network marketing took hold in the early days of the internet as well, with the creation of a slightly different alternative method, called affiliate marketing. This meant that you could sell a product, like a book from Amazon, and make a commission off of that sale from the retailer. You would be their affiliate. In some cases, this affiliate would be paid if they referred other affiliates, but this would only go down to 1 or 2 levels of referrals, unlike network marketing, where distributors could get paid down many levels of referrals within their sales organizations.
One such company to take advantage of the internet and its advances was SFI, today known as Strong Future International (formerly known as Six Figure Income). With the original product being a magazine that featured interviews and stories from some of the biggest names in network marketing, the company quickly built an organization for distributors online. Founded by Gery Carson, a former Herbalife distributor, the company has become one of the largest affiliate marketing businesses online. In reality, it's more of a hybrid between affiliate marketing and network marketing (or multilevel marketing). Hundreds of new affiliates sign up to the company every day. The business now falls as the exclusive marketing are for the Zing Network of sites and services and has a presence around the globe.
So where is network marketing headed? Today, marketers from around the world flock to where the internet traffic is in order to share their wares and opportunities - social networks. Social networking has become the premiere method of sales and recruiting for network marketers the world over. Who really knows where the next "big" push for network marketing will take place? It will be wherever people are who strive to better themselves, to make more out of their lives, who want an opportunity to own their own business and help others to do the same.
If you've read this far, then you have a bit more of an understanding of network marketing than when you started, and certainly more than someone who's never actually checked into it. If you would like to learn more about network marketing and the opportunity that it represents for people just like you, then sign up below for my team at SFI today. It's free to join, with no obligation to ever purchase anything. I'll mentor you from day one to get you started on the path to making real money online with an affiliate / network marketing / multilevel marketing opportunity.
The real question here isn't what is network marketing, but what can network marketing do for you and your future? The future looks bright and it's up to you to take advantage of one of the biggest industries of our time (see graphic at the beginning of this blog post)!