Section 1: an overview of an exciting industry



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Jeff Babener: Network Marketing Book


SECTION 1: AN OVERVIEW OF AN EXCITING INDUSTRY



An Introduction to Network Marketing
Network marketing - also called multilevel marketing (MLM), person-to-person marketing, and one-on-one marketing - is a form of direct selling. You already know what direct selling is. Avon, Tupperware, Mary Kay, Fuller Brush ... these are just some of the direct selling companies that have been household names for decades.

Direct selling companies market goods and services through networks of thousands of independent distributors. These distributors either buy products from their companies and then resell them to consumers, or they sell products on behalf of their companies for a commission.

Network marketing gives direct selling a new spin. In both types of companies, distributors make money by selling products directly to consumers. But in network marketing companies, distributors can also make money by building their own sales organizations and receiving commissions or bonuses on the sales generated by the distributors in the organizations. They build these sales organizations (often called “downlines”) by recruiting new distributors, and helping those new distributors recruit other distributors, and so on.

Let’s say Distributor A recruits Distributor B, Distributor B recruits Distributor C, and Distributor C recruits Distributor D. In a network marketing company, Distributor A receives a commission on sales made by Distributors B, C, and D. The term “multilevel marketing” springs from the fact that distributors receive commissions on multiple levels of their organizations. Most direct selling companies today are structured this way.





Don't underestimate the power of compounding. An old story in Time Magazine, recounted the shipment of 1,000 Giant African Snails to the U.S., and noted that if one escapes, it can give rise to 16 quadrillion descendants in five years that will eat anything.

Much of the power of network marketing springs from the fact that most people tend to seek advice about products, services, and even business opportunities from their friends and relatives. Moreover, they generally trust that advice. In fact, a poll by the Roper Organization revealed that the advice of friends and relatives carries even more weight than the advice that comes from strangers with impressive credentials. The poll showed that for every person who seeks financial counsel from a financial planner or stockbroker, three go to friends and relatives for advice.

Network marketing allows people to put that trust to work in a positive way that can improve the lives of those who give the advice, as well as those who take it.
Hard Facts About a Growing Industry


  • Every week, more than 55,000 people in the United States alone sign up as network marketers - 150,000 per week worldwide.

  • In excess of 10 million people in the United States alone are distributors for network marketing companies; one in ten households have a direct seller.

  • Throughout the world, there are more than 30 million network marketing distributors.

  • In the United States, sales in the network marketing industry are in the $20 billion range. Worldwide sales exceed $80 billion.

  • The world leader in network marketing is Japan, with more than $30 billion in sales. Countries with at least $1 billion in sales include the U.K., Brazil, Italy, Germany, France, Canada, and Taiwan. Business is booming in the new frontiers as well: Eastern Europe, Russia, and the People’s Republic of China.

  • Seventy-five percent of all network marketing distributors are women. Men account for 25 percent. (These numbers likely reflect the demographics of long-dominant companies like Avon and Mary Kay. Recent growth in the industry has been among newer companies that have a more even balance between male and female distributors.

  • Approximately 80 percent of networkers are part-time and 20 percent full-time people who work 30 hours a week or more in their business. For the vast majority of networkers, it is a “second job,” with the hope of $300 to $500 per month in auxiliary income.

  • About 3 percent of all networkers will make more than $35,000 a year; 2 percent will make more than $50,000; 0.5 percent will make more than $100,000 annually; and about 0.1 percent will make more than $150,000.

  • About 13 percent of direct marketers are African-American; almost 5 percent are Latinos; 1 percent are Asians; and about 0.5 percent are native Americans.

  • Approximately 66 percent of distributors are between ages 25 and 44. Another 14 percent fall into the 45 to 54 age bracket. Seniors over the age of 65 account for about 5 percent of direct sellers.

  • About 8 percent of direct sellers have physical disabilities.

  • Over two-thirds of all network marketers have high school degrees or some college education, and 25 percent have a college degree or beyond.

[NOTE: The following is a side bar.]



This Myth is a Turkey

You’ve probably heard all those beloved multilevel marketing myths - “multilevel marketing classes are taught at Harvard Business School,” “Network marketing has produced more millionaires than any other type of business,” “MLM will dominate the economy in the 90s,” and so on.

Well, network marketers aren’t the only people who rewrite history. Believe it or not, there was no turkey on the table at the first Thanksgiving, according to The Book of Answers: The New York Public Library Telephone Reference Service’s Most Unusual and Entertaining Questions, edited by Barbara Berliner (Prentice Hall Press).

During the three-day celebration, they ate venison, duck, goose, seafood, eels, white bread, corn bread, leeks, watercress and various other greens, wild plums, dried berries, and wine. But there were no turkeys at the tables. On the other hand, you might consider this one of the first “opportunity” meetings in the New World.


[NOTE: End of side bar.]
Why Millions of People Are Getting Involved
Although network marketing isn’t for everybody, millions of people from all walks of life consider it to be the right opportunity at the right time. The fact is becoming an independent distributor can fill important needs and fit within the time and money limitations many people face.
Virtually No Investment Required

Most companies require only the purchase of a modestly priced sales kit ($25 to $100) to get started.



The Chance to Own a Business

Because network marketing can easily be done part-time, and worked around a full-time job, it gives people who work for someone else the chance to own their own businesses and jump into the world of entreprenuership. In this world, they are rewarded for risk-taking, and have control over their working environments.



Extra Income and Possible Tax Benefits

Network marketing allows people to earn additional income in their spare time, or even create a full-time, high-paying career. Plus, they may enjoy some very real tax benefits through operating their own home businesses.



An Ideal Home-Based Business

The vast majority of network marketers run their businesses from their homes, making it perfect for those who want to earn extra income, yet still spend time with their families.



Social Interactions

In an age in which we find ourselves “cocooning” into our own homes, one of the greatest attractions network marketers point to is the plus of social networking. Because this is a people business, distributors make many new friends and acquaintances.



Self-Esteem

Every network marketing company gives its distributors recognition for their achievements. Thanks to this recognition, many distributors have found new self-esteem.



In Tune with the Times

With the nation’s leaders imploring citizens to become financially empowered and to take responsibility for their own financial destiny, and with the majority of new jobs coming from small business enterprises, networkers are becoming increasingly aware that they are in tune with the times.





There is no security on this earth; there is only opportunity. - General Douglas MacArthur

A Maturing Industry Overcomes an Old Reputation
During its wild childhood and adolescence, network marketing acquired a reputation that in some ways was less-than-sterling. Face it - any rapidly growing new industry attracts its share of scam artists, and network marketing was no exception.

Some of the image problems that it gained in the eyes of the press, regulatory agencies, and the public are unfair and undeserved. But some were rightfully earned. The biggest problem has been hucksters who talk people into making huge investments or buying garage-loads of inventory, then vanish into the night. Pie-in-the-sky, get-rich-quick, something-for-nothing promises and claims have been a continuing problem, too - not to mention the bad rap the industry takes every time someone is invited to come to a dinner party at a neighbor’s house, or for coffee with a friend, only to be hit with a recruiting pitch. Too many networkers, in their enthusiasm to recruit new distributors and sell products, have forgotten common sense and courtesy, and have become pests and a plague on their neighbors’ houses.

As network marketing matures, the rough edges of its youth are being smoothed out. Today, legal and ethical rules and regulations from both inside and outside the industry are in place to help prevent the abuses of the past from reoccurring. Most network marketing companies’ corporate leaders and top distributors, knowing that a reputation for integrity and fair-dealing is critical to their success, zealously promote and enforce strict standards of ethics. As a result, the industry’s old reputation is being replaced by its new, mainstream posture in the business world.

Here are some signs that this is happening:


Major corporations have adopted network marketing.

Giant corporations have marketed some of their own products and services through network marketing channels - companies such as MCI (Amway), Sprint (Network 2000), ATT (Shaklee), Avon, Tupperware and Primerica.


National trade associations represent it.

The industry is now served by two national trade associations: the Direct Selling Association (DSA) in Washington, D.C., and the Multi-Level Marketing International Association (MLMIA), in Newport Beach, California.


The industry has given birth to publications, conferences, and seminars.

Several national publications have appeared in the last few years to keep the industry informed. Major newsstand publications such as Entrepreneur, Success, Wealthbuilding and Network Marketing frequently cover network marketing topics. Off newsstand trade publications such as Money Maker’s Monthly and Upline are devoted to industry issues. National conferences and seminars on business and legal issues for networkers are commonplace. For more than a decade Legaline Publications (Portland, Oregon 1-800-231-2162), has sponsored the MLM Entrepreneur Series, a semiannual national conference on the industry, as well as the popular corporate conference series Starting and Running the Successful MLM Company. Legaline Publications also publishes educational brochures for distributors as well as two informative newsletters for Network Marketing corporate executives, Legaline and Start. Academic conferences on network marketing have been sponsored by such institutions as the University of Texas at El Paso, University of Illinois, and the University of Houston.


The federal government has recognized network marketing.

Congress recognized the industry by amending its tax laws on independent contractors to provide that, if distributor agreements were properly worded, direct selling companies are not employers and distributors are not employees for federal withholding and tax purposes. The IRS developed its own special publication (publication 911) to aid direct sellers in preparing their income tax returns. Since the famous 1979 FTC decision involving Amway, the FTC has increasingly recognized legitimate multilevel marketing activity. The Postal Service recognizes legitimate direct selling activity. Representatives of various federal agencies appear at industry trade conferences and assure the industry that they are not interested in stamping out legitimate business activity.


State governments have recognized it, too.

Recent network marketing distribution statutes, which have been adopted in several states, are perhaps the clearest indication that the industry is reaching maturity. The new statutes specify requirements for distributor agreements, buy back policies, registration, disclosures of information, earnings representations, etc. Also, many states are following the federal government’s lead in exempting direct selling companies from unemployment compensation laws and other withholding laws in recognition of the independent contractor status of distributors. Most states are beginning to recognize that network marketing activity is a distinctly different form of business opportunity than that which is found in the area of securities, franchise, or the sale of other business opportunities. The threshold dollar amount of investment in most franchise laws now exempts network marketing companies. Similarly, most states which have adopted business opportunity legislation have carved out an exemption for sales kit materials sold at company cost.


Why They Do It ...
According to the Direct Selling Association, the five top reasons why people join network marketing companies are:
1. I like and believe in the product. (90 percent)

2. I like being my own boss. (73 percent)

3. I like working at home. (64 percent)

4. The harder I work, the more I make. (54 percent)

5. I enjoy selling. (49 percent)
The “Perfect” Products for Network Marketing Companies
In the early days of the industry, most network marketing companies carried cosmetics, nutritional, personal care, or home cleaning products. While these types of products are still heavy hitters, today’s companies have found that they can sell almost anything and everything through network marketing, including services.

If a product benefits from demonstration, explanation, or personal testimonials, it’s a good candidate for network marketing. That’s because networkers share their excitement about products with their families, social organizations, and co-workers. They demonstrate and explain the products, and tell others what the products have done for them. Products that might sit on store shelves indefinitely can blossom into top sellers when their applications or benefits are communicated one-on-one.

Of course the industry’s solid base has historically been dietary supplements, cosmetics, personal care and home care products.

In recent years, consumer service products such as prepaid phone cards, long distance telephone, prepaid legal, insurance and discount buying services have become highly popular to market through networks, benefiting by testimonials of savings. Major Telecom companies such as Sprint, MCI and LCI has signed on millions of residential customers through the efforts of network marketers. With deregulation of energy, even electricity is marketed by networkers. Designer toys and home and personal security appliances are just a few of the other items that are popular network marketing products these days.


Are You Right for This Business?
It takes all kinds of people to make the world spin. And it takes all kinds of businesses. But not every type of person is right for every type of business.

Are you right for network marketing?

To answer that question, here is a list of what you must do to become a successful network marketer.
1. Meet people.

This is a people business. To be successful in network marketing, you have to let your hair down and get out and mix it up with other people. The only way you’ll make sales or find recruits for your sales organization is to get out there and rub shoulders. If you are not a people person, this business probably isn’t for you.



2. Believe in your products.

If you don’t use the goods or services your company offers, and you don’t sincerely believe that you’re doing people a service by offering these things to them, it will show up in your sales. You need to be the type of person who can get enthused about sharing good things with others.



3. Be patient.

Network marketing is like any other activity. You have to give it time. When you find a good company, you should give your new business at least a year to succeed or fail.



4. Attend company training programs.

Most companies have high quality training programs to teach you to sell the product and to recruit new distributors. If you want to be successful in this business, you must be willing to take advantage of ongoing training opportunities and incorporate what you learn in your daily operations.



5. Work with your sponsor, and work with those you sponsor.

A network marketing sales organization is very much like a family. When you first join a company, you are like a child who should be anxious to learn the ropes from the person who sponsored you. As you learn and gain experience, you should actively work with the distributors you sponsor, and help them do the same for the people they sponsor. The more success they achieve, the more success you will achieve. If you’re not willing to help others and be helped, this business is not for you.



6. Think positive.

You’re going to be exposed to a lot of motivational speakers and materials in this business. This is true of any sales business. Some will be useless and frivolous. But some will put you in the right frame of mind to succeed, and help you keep pushing ahead when things don’t go smoothly. Remember this isn’t a get-rich-quick scheme. There will be hard work. There will be rejection. If it takes ten presentations to make one sale, you’ll have to wade through nine rejections. If you’re the type of person who can maintain a positive attitude, you’ll have an advantage in network marketing.


[NOTE: Perhaps a sidebar.]

“Remember you have to kiss a lot of frogs before you will marry a prince.”


7. Get organized.

This is a business. To succeed, you must be the type of person who can get down to business by being organized and methodical. Make good use of time planners. Use your home computer for tracking customers and recruits. Set aside a place in your home that is only for business.



8. Be loyal.

Don’t become a “multilevel junkie!” Some distributors fail because they bounce from one network marketing program to another. This is a prescription for failure. While many successful distributors may be involved in promoting two or three direct selling product lines at once, the most successful distributors are those who focus on promoting the products or services of a single network marketing company over a long period of time. Find the right company, and then stick with it. Loyalty pays.


9. Work!

Network marketing is not a quick, easy path to a lifetime of prosperity. Nor is it a free ride to wealth that requires absolutely no effort on your part. It doesn’t work that way. In fact, it doesn’t work at all unless you do! You have to devote time and effort to it especially at first. It can pay huge rewards. But regardless of what anyone tells you, you have to work for them.





Work is life, you know, and without it, there’s nothing but fear and insecurity. - John Lennon

If you think you can do these nine things that network marketers have to do to succeed, and do them well, this business may be right down your alley!


[NOTE: The following is a side bar to go with the preceding copy.]


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