Natural Products and MLM Companies
What you need to know about supplements, pyramids, multi-level marketing, and your rep before you buy into an MLM
Oct 5, 2006
In the quest for well-being, an increasing number of people are turning to natural medicine for financial as well as physical and emotional health - a promise tendered by the growing number of network marketing, multi-level marketing ("MLM") and affiliate programs being offered by sellers of nutritional products.
As many as 13 million Americans (according to Kim Klaver, network marketing maverick), mostly women, have bought into the concept that wealth and wellness can travel hand-in-hand. Most of the wide range of antioxidant drinks available today are sold via multi-level marketing - as are a dizzying array of natural (and artificial) supplements. In proportion with this boom has come an astounding backlash against the industry as a whole.
What's the real deal? Do MLM's represent the future, or are they a scourge on fair business?
Pyramid schemes vs. an evolution of the marketplace
Multi-level marketing companies like to present themselves as the future of direct sales. If saw a movie you liked and you recommend it to a friend, wouldn't it be great to be reimbursed by Cineplex if your friend went to see it? This metaphor is often used to explain multi-level marketing programs which give everyone the opportunity to promote a supplement or other product from which they've benefited and earn paybacks from the supplier.
It's not as simple as telling a friend about a movie, of course; once you stand to earn from your recommendation, your reliability and integrity is suspect. How does a person know you're telling the truth about your experience of the product, and not just trying to make a sale? Multi-level marketing takes business to a whole new level, in which your integrity becomes at least as much a part of the transaction as the value of the product or service you promote.
In another sense, it's not terribly different from direct sales. When you walk into a health food store to purchase a vitamin C supplement, the woman or man behind the counter is (we should hope) invested in selling you the product that will do you the most good - from the selection on their shelves.
Most stores choose which stock they'll carry based on their own experience of it - much as a network marketer does. And just as in network marketing, a portion (A) of what you pay to purchase that bottle of vitamins goes to the direct seller - in this case, the shop owner (or part to the owner, and part to their employees) - and a portion (B) covers the wholesale cost charged by the company who produced it. That equates, in network marketing terms, to (A) the commission paid to a distributor and the "upline" who introduced them to the product (usually included in "wholesale" price), and (B) the remainder of the price which is kept by the company - the actual wholesale.
The biggest advantage of network marketing over other business structures is that once you've put in the time and effort to get it started, the business can virtually take on a life of its own. People you have referred or sponsored into the business refer other people to you, or go into business themselves - and since commissions usually (depending on the particular compensation plan) rise to those above the immediate sponsor, you can earn a steady income off of their efforts as well as your own - given that you've trained them properly and enabled them to do the business as well as you. Thus the "network" in "network marketing": the networks that are created through this kind of business can foster friendships, build supportive communities, and rally help with causes far beyond the scope of a typical business relationship.
Network marketing offers the opportunity to anyone to start their own business, small or large, with minimal overhead, from their home - and to potentially make a lot of money which will continue to roll in long after you've stopped actively seeking customers. Provided, that is, that you're involved with a company that is legal, ethical and fair.
The most common misconception by those who disparage network marketing is that MLM companies pay their distributors via a pyramid scheme: they assume that the "people at the top" who signed on early get rich, while the people at the bottom can never do as well. Although there is value to having a larger organization under you - thus the "multi levels," which are what makes network marketing so valuable in the long run for passive income - this actually depends on the structure of your company's commission plan. In most cases, the accusation of a pyramid scheme is absolutely false. (Note that pyramid plans are illegal in the United States and Canada.)
In most cases, a rep or distributor's earnings will depend on the amount of consistent and effective work they put into their business. Most plans today enable people lower in a company's organization to earn more than those higher up.
Next: The questions to ask before getting involved in an MLM business.
