The Truth About Network Marketing

“We all do network marketing, we just don’t get paid for it.”

Every time we tell a friend about a great movie an incredible restaurant we are network marketing. There is no force on the planet more persuasive than a friend telling a friend.

WHO DO YOU BELIEVE?

Do you believe the big budget advertising or a highly paid celebrity who may never use the product?

Do you believe your friend who tells you from their own first-hand experience?

whymmlm-2

WHAT IS NETWORK MARKETING?

Network marketing is nothing more than another form of distribution.  In traditional / retail  distribution  50% of the product cost is advertising.  In network marketing zero (0) is spent an advertising and those funds are paid to real people, with real results.

PRODUCT QUALITY:

You’ll find that network marketing products are higher quality that in traditional retail.  Retail is all driven by price.  When you compete on price the first thing that gets sacrificed is quality.

Network marketing products are results driven.  When results are key, quality comes first.

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What does the most famous ride in American history have to do with network marketing?  We all know about Paul Revere’s ride and his message, “the British are coming”.

According to Malcolm Gladwell in The Tipping Point a piece of extraordinary news traveled a long distance in a very short time, mobilizing an entire region to arms”.

Paul Revere’s ride is perhaps the most famous historical example of a word-of-mouth epidemic.  A piece of extraordinary news traveled a long distance is a very short time, mobilizing an entire region to arms.  It is safe to say that word-of-mouth is – even in this age of mass communications and multi-million dollar advertising campaigns – still the most important form of human communication.

Word-of-mouth:

Think about the last restaurant you loved or the last movie you saw that you told someone else about and how your endorsement influenced them to see that movie or eat at the restaurant.  The sheer overwhelm of being hit by advertisements from every direction has brought the market specialists back to word-of-mouth being the most effective.

Nothing embraces the power of word-of-mouth quite like network marketing.

There are plenty of advertising executives who think that precisely because of the sheer ubiquity of marketing efforts these days, word-of-mouth appeals have become the only kind of persuasion that most of us respond to anymore.

dsa

According to the DSA (Direct Selling Association) which publishes facts on network marketing this is a huge and healthy industry with:

  • sales of $32.67 billion in 2013
  • 15.9 million Distributors around the globe.

Sales grew right through our most recent recession.

  • 2010 sales rose by .8%,
  • 2011 sales rose by 4.6%
  • 2012 sales rose by 5.9%
  • 2013 sales rose by 3.3%

Timing
Every company will tell you that their timing is perfect… right now. Timing is very predictable, a factor of numbers. There is a sweet spot in every company when it transitions from small to big. That is where you want to be.

Over 3000 new network marketing companies are founded every year but only a handful survive.  95% of these new companies are gone in their first year.  Of the 5% that survive only 2% are in business after 5 years.  Of those that make it to 5 years only one will hit significant sales of $100,000,000

According to the DSA the average company has distributor retention of 8% the first year and 5% in the second year.

According to Business From Home the average Top Earner in Direct Selling is earning approximately  $20,000 per month / $240,000 per year.  This is based on 8,700+ rankings.

Approximately 300 distributors are making $1+ million a year. I’m very grateful to have been in this category over the last 10 years.

Number of People Involved in Direct Selling in the U.S.
The size of the direct selling sales force increased 5.7% to 16.8 million in 2013, a record high.

The industry experienced a surge of new direct selling independent representatives at the height of the recession. Due to normal attrition and the fact that some people join the industry for the short term, the slight reduction in force was expected in 2010 and 2011. The size of the industry’s sales force grew 5.7% in 2013 and is continuing to rise.

Number in Direct Sales

Estimated Direct Retail Sales by Methord
Person-to-person selling continues to account for two-thirds of sales, however, the industry is in flux in terms of how to approach and view online sales when they occur in support of other methods:

sales-by-method


HOW TO PICK A COMPANY

I’ve been in this business for 25 years and I’ve met many, many sharp talented individuals who are very hard working but they are not seeing the level of success you would expect.

Why are they struggling?

“No matter how good you are or how hard you work unless all 5 elements are in place you’re going to struggle.  You won’t make the money or achieve the level of success you hoped for. “    JH

The challenge in choosing a company is to separate the hype and the emotion from the critical facts.  This method will lead you to a rock solid decision in choosing a company.

The five critical elements are:

Company:  Why do companies fail?  The two biggest reasons for companies failing is poor management or undercapitalization.  Even with the best product or compensation plan if the company is poorly managed it will not succeed.

These are critical points to look for relative to infrastructure:

  • What’s the experience, history and track record of the executives /owners?
  • Is most of their infrastructure outsourced or in house?  If most of their services are outsourced such as commissions, IT, finance, accounting, shipping, customer service and marketing you have to ask if it’s a real company.

…..  WARNING …..

Many startup companies are no more than someone with a product or an idea and everything else is outsourced.

Product:  As you consider products are they?

  • Something people will consume even if they are not doing the business?
  • Does the company have a legitimate customer acquisition plan?
  • Does the company have a real customer base?
  • Are the products cost competitive?
  • Are the products unique?
  • Is there a huge demand for the products?
  • Are the products easy to understand and explain?
  • Are people already spending money on the products or is it an additional expense for the customer/distributor?
  • How strong is product compliance?
  • Is it easy to sell?
  • Is it easy to consume?
  • Does it sell quickly or does it build up in your cupboard?

In talking to others about the product ask yourself these questions

  • “Am I trying to convince people and do their defenses come up? 

            ……  OR  …..

  • Is there a natural interest in wanting to try it or know more”?  

Compensation:  Every company will tell you that they have the best, most lucrative compensation.  The fact is that all companies have the same amount of money to pay out to their distributors around 40-50% of revenue.  If it’s less than 40% run.

Assuming the company is paying out in the 40-50% range then the most important questions are:

  • Who gets money?
  • What do I have to do to get it?
  • Is it fairly distributed at all levels of participation?”

Many companies struggle with this balance.

  • Are there a lot of gotchas, hoops, hurdles and structure that stand between you and your money?
  • Do you have to fill your garage to make the money?
  • Is the leader’s income at the expense and struggles of the masses?
  • Is compensation lucrative at all levels?
  • Is the compensation fair at all levels?

“People don’t quit network marketing because they are they are not making enough money but because they are losing money”.    JH

Timing:

Every company will tell you that their timing is perfect… right now. Timing is very predictable, a factor of numbers. There is a sweet spot in every company when it transitions from small to big. That is where you want to be.


What are you looking for?

Obviously it depends on what you’re looking for.  If you’re looking for $500 or a $1000 a month you can earn that even if the company is very large.  Based on our industries track record if you’re with a ground floor startup company you won’t survive.

If your goals are big to make 6 or 7 figures a year you need to be in that sweet spot between $1,000,000 and $5,000,000 a month.  It’s critical to take advantage of this window to get your base in place so that when the company transitions from $5,000,000 and beyond you are not alone but you have a large organization in place.

Training and Support:   Training and support are absolutely critical to new members.

  • Is there a simple duplicable system?
  • Is everything in place conference calls, events, 3way calls, websites?
  • Are the training materials available at low cost?
  • Is the website provided at no cost?

…………   BEWARE ………….

Beware of companies and leadership that charge for things such as websites.  Websites should be free.

Beware of companies or leaders who overcharge for shipping and tools such as DVD’s, CD’s, and brochures.   DVD’s, CD’s should be at cost or no more than a $1.00 or 2.00 each.  Brochures should not cost more than .25 each.

I’m happy to have a conversation with you on any of these items.  Please contact me via the attached reply form.

WARNING SIGN

The fundamentals of network marketing never change.  Remember that someone trying to convince you that they have a new fundamental is just like someone telling you they manufacture antiques.  You would have to be skeptical.

Network marketing is based on the fundamental fact that people do what their friends have done and liked. It is powered by word of mouth, by one friend telling another friend.

There are many scams that masquerade as legitimate network marketing companies.  The internet makes it easy for them to prey on unsuspecting individuals.  Unfortunately it is human nature to want something for nothing.

They may claim to have been approved by their States Attorney General or any other regulatory agency to get you to buy in and go against your better instincts.  ……..    This cannot be true!    ……..  Legitimate network marketing companies do not need these ridiculous claims to sell you or to defend themselves.

Sadly it will often take as long as 2 years for the authorities to catch them and take them down.

Pay attention to your instincts.  If it sounds too good to be true it probably is.  JH

WE DO IT FOR YOU  …… If someone tries to sell you a system that will build your business for you automatically ….. RUN.

We’ve all seen the ads.  “We have a system and we build your business.  You don’t have to talk to your friends.  You don’t have to make phone calls. You don’t have to sell products. You don’t even have to talk to anyone”.

This is a typical ad that promises you something for nothing …… takes your money……  and steals your dream.

“Are you ready to make automatic $2,000+ sales every day…without doing live webinars or selling over the phone? Click below to grab your spot. (It’s free!)

The only business they build is their own.  The only wallet they fill is theirs.

LEADS ……..  We guarantee that they will work!  (but they won’t)

You will find all kinds of organizations that offer to sell you leads.  These leads are often sold to multiple companies and in many cases the ‘lead’ does not remember what they were looking for.

My advice is that you do not buy them.  Focus your efforts on your warm market and everybody you meet. In my opinion you would do just as well picking names out of a phone book as you would buying these leads.

BIG DOLLARS FAST / MONEY GAMES:

Beware of anyone that promises big money fast.  In most cases it’s no more than a money game, a Ponzi scheme just like Bernie Madoff.  They pay new members out of revenue from old members until finally they crash.

Typically they do not offer a legitimate product or service.

Who makes money?  Only the founders.

If it’s easy, it’s sleazy

Remember this “there is no free lunch”.  A real and legitimate Network Marketing opportunity is going to take time, effort and commitment.

THE INTERNET

As you look at this section I want to be very clear.  I’m not saying that the Internet is not a good tool.  It is an incredible tool to assist you in building your business.  But it does not and cannot build your business for you.

The internet is an incredible tool to get information to your prospects and your distributors quickly such as websites, sharing documents, testimonies, webinars, and videos.

It can also be a great prospecting tool by utilizing websites, advertising, landing pages and social media to stimulate interest.

The KEY …. once person is interested …….  is to get on the phone live or get with them face-to-face.

This is a relationship business ….. a fundamental that will never change People buy people.  It’s all about building relationships.

Take a quick guess!  What percent of word-of-mouth do you think happens online?

From the New York Times Bestseller “Contagious”  “Why Things Catch On.”

Jonah Berger Professor of Marketing at the Wharton School at the University of Pennsylvania. He is known as the “Iron Prof” at Wharton.  His research has been featured in The New York Times Magazine’s annual “Year in Ideas” issue.

He has published dozens of articles in top-tier academic journals, and popular accounts of his work have appeared in places like The New York Times, the Wall Street Journal, the Washington Post, Science, Harvard Business Review, Wired, Business Week, and Fast Company.

Jonah Berger knows more about what makes information ‘go viral’ than anyone in the world.”  Daniel Gilbert Professor of Psychology Harvard University.

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Help me out with a quick pop quiz.

What percent of word-of-mouth do you think happens online?

In other words, what percent of chatter happens over social media, blogs, email, and chat rooms?

If you’re like most people you probably guessed something around 50% or 60%.  Some people guessed upward of 70% and some guessed much lower, but after having asked this question of hundreds of students and executives, I find the average answer is around 50%.

And that number makes sense.  After all, social media has certainly exploded as of late.  Millions of people use these sites every day, and billions of pieces of content get shared every month.  These technologies have made if faster and easier to share things quickly with a broad group of people.

But 50% is wrong.

Not even close.

The actual number is 7%.  Not 47%, not 27%, but 7%.

Research by the Keller Fay Group finds that only 7% of word of mouth happens on line.

Most people are extremely surprised when they hear that number (7%). “But that is way to low,” they protest.  “People spend a huge amount of time on line!” and that’s true.  People do spend a good bit of time on line.  Close to 2 hours a day by some estimates.

But we forget that people spend a lot of time offline.  More than 8 times as much, in fact.

And that creates a lot more time for offline conversations.

We also tend to overestimate online word-of-mouth because it’s easier to see.  Social media sites provide a handy record of all the clips, comments, and other content we share online.  So when we look at it, it seems like a lot.  But we don’t think as much about all the offline conversations we had over the same time period because we can’t easily see them.  There is no recording of the chat we had with Susan after lunch or the conversation we had with Tim while waiting for the kids to be done with practice.   But while they may not be as easy to see, they still have an important impact on our behavior.

Further, while one might think that online word-of-mouth reaches more people, that’s not always the case.  Sure, online conversations could reach more people.  After all, while face-to-face conversations tend to be one-on-one, or among a small handful of people, the average tweet or Facebook status update is sent to more than 100 people.  But not all of these potential recipients will actually see every message.  People are inundated with online content, so they don’t have the time to read every tweet, message, or update sent their way.

A quick exercise among my students, for example, should that less than 10% of their friends responded to a message they posted.  Most Twitter posts reach even fewer.  Online conversations could reach a much larger audience, but given that offline conversations may be more in-depth, it’s unclear that social media is the better way to go.

So the first issue with all the hype around social media is that people tend to ignore the importance of offline word-of-mouth, even though offline discussions are more prevalent, and potentially even more impactful, than online ones.

The second issue is that Facebook and Twitter are technologies, not strategies.  Word-of-mouth marketing is effective only if people actually talk.  Just putting up a Facebook page or Tweeting does not mean anyone will notice or spread the word.  50% of YouTube videos have fewer than 500 views.  Only 1/3 of 1% get more than 1,000,000.

Network marketing is word of mouth, its people buying people.  The internet, Facebook and social media play an important role in our business.  Understanding and using them correctly is crucial to your success.  Remember the internet is good for sharing information, research, building belief, sharing testimonies, stimulating interest and helping someone move to a decision. 

At the end of the day when it comes to someone taking their credit card out, spending money, buying a product or joining a company there must be some live interaction face-to-face or telephone.    JH