I worry when I hear about friends or family entering into a networking marketing scheme. At a personal level, I worry about the implications this has on our relationship and professionally, it bothers me because of how little rational thought has usually been given to the “business opportunity”.
There are common themes in most, if not all, network marketing (multi-level marketing) opportunities. It is usually less about the product and more about you achieving the lifestyle of your dreams. The focus is on “residual income” so that you can go off and do what it is that you want to do and continue receiving an income with little or no effort. By the way, there is actually nothing wrong with residual income. Income from investments is a form of residual income, royalties from a book or film is another.
There is a strong emotional hook in most network marketing schemes and if you’re unhappy with your current job, looking for a way out, if you’re a mum wanting a flexible way to earn income, if you’re unemployed, then these words will really resonate:
“choose your own hours”
“unlimited income potential”
“no experience required”
I hear the reasons that people offer for wanting to join a network marketing program and I worry about their motivations and whether network marketing is the solution. I hear statements like:
“I don’t want to work for the rest of my life”
“I want the freedom to do what I want”
“I don’t want to worry about money anymore”
There are more variations and they all start to sound like the reasons why we buy a lottery ticket. It’s a dream that all our problems will be solved with easy money.
What is wrong with multi-level marketing? is a critique of the system and a worthwhile read if you are contemplating network marketing. While I agree with many aspects highlighted in the article, I had not intended to provide more criticism of network marketing. Instead, here is some practical guidance and food for thought.
Issues to consider before joining a network marketing business
- Your comfort with the product?
Aside from the potential income, would you use this product yourself? If your answer is no, think very carefully about whether you should proceed. In any case, most network marketing companies require or strongly encourage you to use their product or services yourself so that you have more conviction when recruiting others.
- The product’s marketability
Could this product survive without the network marketing structure? Is it a one-of-a-kind product? If it is not, is it competitively priced? If it is not competitively priced, does it have unique features to compensate? When you answer “no” to any of these questions, remember that most people in network marketing businesses sell to family and friends. Are you comfortable pushing a product that’s neither well priced nor has any unique features to compensate for any price differential? If the product is health related, are the claims validated? Do some homework. Don’t take the claims in the marketing material at face value.
- Are you comfortable selling?
Ordinarily, would you apply for a sales job? If not, why? Network marketing is effectively a sales job – you are either selling the product/service or you’re selling the opportunity. If you are not comfortable with sales, your success in this venture may be questionable.
- Thoroughly analyse the remuneration structure
Most network marketing remuneration structures are highly complicated but it is extremely important that you understand how it works. Is the remuneration structure heavily weighted towards recruiting new people? If it is, are you comfortable with the idea? Are you comfortable using up your goodwill recruiting family and friends? Think about your immediate network and work out who you could target and who would realistically join up? As many people are wary or have had bad experiences of network marketing, it would be prudent to be conservative rather than overly optimistic about your prospects. Once you have some numbers in mind, work it through the remuneration structure and find out how much income that equates to. The promoters of a network marketing business have one primary objective in mind and that is to recruit you. A bit of scepticism would not go astray when you are presented with figures and potential earnings.
- Going beyond family and friends
If you are serious about making this work, you will need to think beyond family and friends. How will you extend your network? Some people don’t like mixing business and pleasure and choose not to prospect amongst family and friends. If you feel the same way, consider this issue carefully. How and where will you get new prospects?
- Participation Costs
These days most schemes claim to have low participation costs e.g. annual fee of $50 or thereabouts but look for the hidden costs such as compulsory purchase of the product or minimum product purchase per year. These can end up being in the thousands of dollars depending on the product and scheme. If you combine this information with the analysis from step 4., you will get your rate of return on this business.
- Ask some pointed questions
Find out how long your recruiter has been in the business and how much they have earnt in that time. While this is a socially unacceptable question, as a prospective business owner, you have a right to know. Find out how many people your recruiter had to enrol to achieve their income and how long it took them to get to that level. As long as he or she is telling you the truth, this will be useful information.
A real-life example
I recently assisted a family member in analysing whether a network marketing business was appropriate. The service was a commonly available service. It was priced mid-high range but did not offer anything unique. The company appeared kosher. Unsurprisingly, the remuneration structure was stacked towards recruitment rather than sales. After some realistic analysis of who might be potential customers and who might be potential recruits, we crunched the numbers and worked out that he would be looking at $125 per month at best. Hardly life changing.
“Greed is good”
No, I don’t agree with Gordon Gecko (“Wall Street”). Greed is NOT good. It is a baser instinct that quickly erodes common sense and rational thinking. Make sure that greed and other baser instincts like fear, envy don’t drive your decision making. Remember that the network marketing recruitment process is a “seduction” and when you are starved in any way, spiritually, emotionally or your life is empty in some other way, the seduction becomes much easier.
I have been approached at least 5 times for various network marketing opportunities and have been at the periphery of another 2-3. I have lost 3 friends (and far more acquaintances) due to aggressive prospecting on their part and my refusal to participate. As such, I have a somewhat biased view against network marketing. However, as a business coach, I look at network marketing as a “possible” business opportunity and my aim would be to help you unearth any motivations that could be in conflict which could affect your success in such a business, and to help you consider the right issues so that you can get clarity about whether such a business may be suitable for you.