I am often asked about network marketing: Is this one of those ‘selling’ things?
My apologies to all those network marketers who say that you do not sell a product in network marketing. They prefer to tell you that you ‘share’ the product. If that is true, when was the last time you were paid for ‘sharing’ something?
Network marketing is selling; a highly evolved form of direct selling. It is also known as multi-level marketing or MLM for short.
What is direct selling and where did it come from?
Let me start by giving credit to Dr. Charles King of the University of Illinois for providing me with the research on all this:
The “Direct Selling” industry can be traced back to the original Yankee Peddler of colonial days. He drove a horse drawn wagon out into rural America and sold products and services. He was the original channel of distribution for reaching rural areas of colonial America.
With the advent of new communications and transportation systems, general stores in small rural communities became the next channel of distribution.
Soon afterwards, the manufacturers realized they couldn’t guarantee that they could reach the general stores in these communities, so they organized their own sales organizations.
By 1920, a complete sales organization system was in place and it was called “Direct Selling”.
From “Direct Selling”, a new wave of selling evolved which was intended to reach more consumers individually – on a direct one-to-one basis.
Eventually Manufacturers asked the question “how can we market more directly with consumers on a one-to-one basis?”
In 1940, the concept of consumer to consumer sales was invented to solve this. This highly improved form of direct sales became known as Network marketing (or MLM) in the 1950’s and has grown into a 30 Billion dollar industry, involving 13.3 million distributors in the U.S. alone.
Worldwide network marketing produces 90 Billion dollars, in 13 countries involving 50 million distributors.
What makes it better than direct selling?
In conventional direct selling, you make one sale, one time, never look back, and move on the next sale. In fact, in many of these early jobs you were not allowed to leave a business card because all future sales were pulled back into the manufacturer’s home office and they would collect all future commissions. The sales person was paid on a single transaction and nothing else.
Contrast that to Network Marketing, where you build a relationship with every customer from which ongoing sales can be made. If you nourish the relationship with your customer and they remain happy with your product you continue to receive residual income. You can also make commissions from the sales of those you recruit and train. They in turn can duplicate this with someone else, who duplicates it with someone else and so on.
It’s at this point that most uneducated people rise up and say “It’s a scam! You’re taking advantage of others!”
Let me point out that most sales organizations today now have sales managers residing over sales people from whom they receive sales overrides and bonuses based on the performance of the entire team. While the modern day sales manager is similar to a network marketing recruiter, the commissions of sales managers are very limited in comparison to what can be generated in network marketing. The residual income of conventional sales managers is limited or non existent. Residual income is how MLM is building lifetime retirement income for its members long after they retire.
Today, MLM remains the most efficient and fastest way to get products to consumers. More and more traditional businesses are now going towards network marketing.