Five Vital Pointers To Look For In A
Network Marketing Company
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 a company?”
Here are some very important pointers that would guide you in the
right direction. Any company that you can find passing these criteria will be a great
company to line up with.
1. A company that has been
in business for at least 5 years and has great financial backing, excellent
management and a ‘distributor first’ philosophy. The company should also have a long-term
development goal and not just be out for the quick cash.
This may be a pretty tall order to reach
but considering that the great majority of start-up Network Marketing companies fail
within their first three years you don’t want your income stream to suddenly dry up! It’s
no picnic to discover that after you’ve spent time, effort and money to build a solid
organization the company closes down because one of those essential elements was
missing.
There is the prevalent myth that the best
time to join a company is at start-up—the so called ‘ground floor opportunity’—, but if
the truth be told, the ground often caves in leaving many people very unhappy. This does
not mean that you should wait for five years to see if a company would do well, because
logically, this would mean that no Network Marketing company will ever get started. The
point here is that you should assess your risk and know that the chance of losing your
money is higher with a new company than with a company having a proven track record.
You know the saying that the proof of the
pudding is in the eating; just so the proof of the stability of a Network Marketing
company is in the duration of survival. In fact, in over 60
years of Network Marketing history and after tens of thousands of Network Marketing start
up companies, only around 42 companies have made it to their 5th
birthday.
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. If the company does not have the proper financial
backing it is not likely to survive these years. You would not want to join a company
that is depending too much on the distributors for survival. A Network Marketing company
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 companies beckoning. The distributors are the consumers and
salespeople, and to neglect them is to commit certain suicide.
A sad reality of the Network Marketing
industry is that there are many scam artists that come along just for the quick cash just
before they close shop and disappear. This would require that you do your due diligence
such as checking consumer alert websites as FTC.gov and
WorldWideScam.com among others. These scam
artists will normally emphasize the compensation plan over the actual product—if there
really is a product—and apply high pressure sales tactics to persuade you to join the
“ground-floor opportunity”. These criminals prey on human greed and have little sympathy
for the naïve.
2. High quality (unique if possible), reasonably priced
products or services that should be, ideally, consumable so users will have to buy over
and over again.
Traditionally, Network Marketing companies
are able to produce higher quality products simply because they don’t have to pay
outrageous prices for advertisement. Just think about the millions of dollar 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 companies will
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 consumable so the customer
has to keep refilling his supply. 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 legal services you are more
likely to have less attrition in your down line.
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.
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 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
3. A Compensation Plan that
is fair to both fulltime and part-time distributors alike with leadership bonuses for
those who build large and productive teams.
We have already mentioned that a successful
Network Marketing company 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:
(a) 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.
(b) 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.
(c) 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 “spill-over” 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. One
prime example is SOLOBIS.
(d) 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 straight-line 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.
Warning: You should always
be particularly suspicious of compensation plans that pay out over
60%. This normally means that the product is overpriced, qualification
quotas or volumes are almost unreachable or the breakaway structure can rob you of your
investment and hard work. If the company uses the breakaway plan you may find your down
line disappearing just as you are about to hit the big numbers. If a company intends to
be deceptive it will be in the compensation plan; so study it well!
4. Training and solid up line 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
up line 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.
5. 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 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 a lot of encouragement.
The above article is an excerpt from our upcoming eBook
"MLM-Power ... Join the Recruiting Explosion!
