I love a good debate. Today’s topic is “network marketing.” It is now my turn to rebut the opposition’s remarks.
Network marketing businesses, also known as home-based, direct marketing, relationship marketing and multi-level marketing businesses, can be a polarizing subject. In some circles, it’s as divisive as politics and religion. Why is this? I believe it’s because there is much wrong-thinking from bad analysis, weak problem-solving skills and insufficient or wrong information.
- These businesses are compared to a job rather than other business ownership opportunities.
- Opinions are based on insufficient number of data points (a few personal anecdotes).
- Opinions are formed from uncritical analysis of data.
- The opinions stem from bitterness about a bad personal experience.
- There is an assumption that all network marketing companies are the same.
I will readily admit that there have been some unscrupulous companies and plenty of independent representatives who misrepresent. In business there will always be some skunks. Network marketing does not have a monopoly on bad business practices and bad or poorly-trained people. By the way, was Enron a network marketing company?
I am sad when people turn down network opportunities because of their own malformed beliefs. But I am more disturbed when they ruin an opportunity for someone else. For whatever reasons, there is a segment of the network marketing opposition that seems to be on a crusade to save the world from evil “pyramid schemes.”
Rebutting Nine Common Claims
Claim #1 – It’s a scam because less than 1% are successful.
I question the 1% figure. But this one is easier to blow out of the water with a few examples that call into question the definition of success.
- Less than 1% of children advance to play intercollegiate football. Are children wasting their time playing pee-wee football?
- Less than 1% of college athletes go on to play professional sports. Are collegiate athletes wasting their time?
- Only a small minority of professional athletes end their careers financially independent. Were the others wasting their time?
What do these examples have in common? All mention people who are pursuing a dream, doing something they love, taking a shot. This claim has another flaw. It assumes the only measure of success is fame and fortune. Many people do network marketing to make a little supplementary income. Others are attracted to non-financial benefits such as: new business contacts, camaraderie, excitement, making a sale, business lessons learned, travel, new skills, character development, new friends and tax deductions. It’s not just about the income.
Claim #2 – It’s a scam because they only work when you get in early.
Some network marketing business models favor early entry. But, it’s also riskier and usually harder going to be at the front. A good compensation model will give the latecomers a fair chance for success, too. Besides being an illogical generalization about compensation plans, this claim is based on two more misconceptions:
- A market becomes saturated and stays that way. The truth is:
- the population is not static; new prospects enter the market
- new territories can be opened up
- new products/services can be added
- the sales force is fluid — people come and go
- it’s possible to take business from competitors
- Business expansion examples given in presentations, intended to illustrate the concept of exponential growth potential, are sometimes heard by the prospect as a growth promise . Some quick math leads them to the erroneous conclusion that the market will be saturated within months. At the same time, this explanation does not imply that exponential growth does not occur. Just that it is not a perfect progression throughout the entire organization.
Claim #3 – It’s a scam because there is no guarantee you’ll make any money.
This is actually partially true as it is about any commission-based business like insurance or real estate. However, the scam implication is wrong. There are no guarantees in life, period. However, life is chock full of opportunities. Opportunities are real, guarantees are illusions.
Claim #4 – It’s a scam because you have to pay “to get in.”
Of course, you have to pay. You are purchasing a distributorship. The typical cost is less than $500. I believe this is a tad less than a McDonald’s franchise. Compare the start-up costs of a real estate agent, insurance agent, stock broker, engineer and teacher. It took me 4 months and a couple grand just to become licensed in the insurance and securities industry. Then there were other expenses like a $200/mo. computing fee, continuing education requirements, a business phone line, business cards, office supplies and a new printer, all before I earned my first commission check. By comparison, network marketing seems like a bargain.
Colleges charge tens of thousands of dollars for an education with no guarantee of a better paying job. Certainly we don’t apply the scam label to colleges. So, what is wrong with buying a distributorship from a network marketing company? The typical retort is it costs nothing to get a job at [ insert employer here ]. Apples and oranges! Employers offer jobs — network marketing companies offer business ownership opportunities.
Claim #5 – It’s only about recruiting.
Sports teams, colleges, bricks and mortar businesses, churches, clubs, volunteer groups and network marketing businesses ALL recruit. I will concede that the naysayers have a point here even if they backed into it. That is, recruiting alone will not sustain a business. There must be products or services sold in sufficient volume or the parent company will collapse. This basic law of business along with a dose of government oversight and industry self regulation will continue to take out the pretenders.
Claim #6 – You have to pester your friends.
This word “pester” is a matter of perspective. If your product or business opportunity has value, is it bothering people to tell them about it? (Perhaps people who are bothered by inconvenient information. ) The truth is, you really don’t have to mention it to your friends — it’s your choice. But if you have a valuable product or golden opportunity, who would you want to share it with, strangers? On the other hand, if your belief in the product or the company is weak, consider whether you should even be in that business.
Claim #7 – I tried it and it didn’t work, so I quit.
This is sad. While quitting is sometimes necessary in life, it is usually an excuse to fail. This claim shows how the focus is shifted away from the quitter to someone else. I’m the hero because “I tried.” The opportunity was at fault — “it didn’t work.” Quitting was the most sensible course of action. By this logic, college must be a scam because close to half of all who start, quit.
“Just 54 percent of students entering four-year colleges in 1997 had a degree six years later — and that figure is even lower for Hispanics and Blacks, according to some of the latest government figures. After borrowing for school but failing to graduate, many of those students may be worse off than if they had never attended college at all.” — Associated Press, Sep 27, 2006
My two oldest children earned college degrees in less than 6 years. Based on the 1997 numbers and law of averages I’d better advise #3 to skip college and get a job. Oops, watch out! There seems to be a similar problem on the job front.
“Overall U.S. voluntary turnover increased slightly to 23.4% annually, up from 22.7% the previous year.” — U.S. Department of Labor, Bureau of Labor Statistics, October 11, 2006 (Source: http://www.nobscot.com/survey/index.cfm)
I guess you can run, but you can’t hide.
Claim #8 – People are recruited who have no chance for success.
Probably. However, those with the least chance for success rarely have the courage to say “yes.” So it becomes almost a moot point.
There are two schools of thought. One says no one can predict success with 100% certainty in a network marketing business. Immigrants who barely speak English and have a limited natural market have succeeded. I know a kid who was employed as a go-cart jockey who is now wealthy. So, some say don’t play God – everyone deserves a chance.
The second school of thought says this is a bad business strategy. A smart business person would “recruit up” instead of focusing on low achievers. Low achievers are where they are for a reason. They will distract you, slow down your growth and create more discontented network marketers.
Claim #9 – It’s a cult.
This may be the most outrageous of the claims. I guess promoting certain philosophies and having conventions with motivational speakers is what they mean. If so, that would make football a cult, too. Players and fans would be the victims. When faced with the choice of being either motivated or bored in my career, guess which one I’ll choose?
I had a friend say he knew someone who got involved with “one of these things” and committed suicide. Out of respect for his pain, I held my tongue. For the record, I know of a respected college football coach who killed himself in 1986. These are tragic stories. But it’s a stretch to use them as evidence of a cult.
Here’s my mental list for prequalifying candidates desiring to become part of my network marketing business. If I see them anywhere in this list, they’ll have to work hard to convince me they are right for my team. As a matter of fact, I would question whether they are ready to start any type of business.
- I only believe in traditional business models.
- I will never pay money to be in business.
- No amount of risk is tolerable.
- I will never share product or business information with my friends.
- I hate excitement in a business setting.
- I’m willing to base my business decisions on a statistically insignificant number of data points.
- Recruiting my friends is wrong under any circumstance.
- I don’t do anything unless there’s a guarantee of lots of money.
- I don’t like working with people.
- I am unwilling to make changes in my life.
- I am afraid of the unknown.
- My life is exactly where I want it and my future is secure.
- I will never try anything in which lots of others have failed.
I tried a network marketing business sometime around 1990. I made more mistakes than sales and ended up about ten grand in the hole. I wasn’t happy, but I wasn’t deterred either. I had learned a lot.
- If at first you don’t succeed, learn and try again.
- Find a company that sells services rather than products. This eliminates the temptation to fill the garage with inventory.
- Make sure the service has high quality at a competitive price.
- Compensation should be based on sales volume, growth and position not levels.
- Pick an industry that markets revolutionary or disruptive technologies such as VoIP. This is where wealth trends occur.
- Check out the business philosophy and integrity of the leaders. Look into their eyes. Observe to see if their actions match their words.
I had a far better idea of what to look for in my next opportunity. Entrepreneurs don’t give up. Over the next 10 years I kept my eyes and ears open and found an opportunity in the telecommunications industry marketing services people already pay a bill on. I had found the right industry! However, it took me two tries to find the right company. I am now marketing VoIP with a video option and positioning myself for other disruptive technologies that are on the horizon, like mobile convergence and Internet TV.
When I factor in the education I’ve received, the fun I’ve had, the new relationships I’ve established, the places I’ve gone, the people I’ve helped, the tax benefits of business ownership and yes, the money I’ve received, I have been more successful than I could have imagined. Some of you are saying to yourself, “He phrased it this way because he hasn’t made any money.” Think what you want. Others will see the totality of a great opportunity. The transition to digital calling is happening today whether or not any of us gets involved. What will you do? The choice is yours!
I yield back the balance of my time.
© Copyright July 2008, Clancy Cross. All rights reserved.
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