The Myths and Truth About Network Marketing

Network marketing, or multi-level marketing (MLM), is a booming industry – but it’s also highly controversial. Some see it as a beneficial business model that offers flexibility and the potential for high earnings. With network marketing’s rising popularity and complex reputation, it’s important to separate fact from fiction.

According to reports, the global multi-level marketing software market will grow at $8.3% CAGR between 2021 and 2029. As more individuals become involved in the direct selling industry, interest in understanding the reality behind network marketing myths grows. 

This article will uncover common MLM misconceptions like lack of regulation, high costs, and pyramid schemes. This post separates network marketing myths from fact so you can make informed decisions about network marketing.

What Is Network Marketing?

Multi-level marketing is a different way of selling your (or someone’s) products to the end user. In the traditional business model, the manufacturer makes the products, and then a distributor distributes them to retailers, who sell them to the end user.

Pro-tip

Network Marketing offers a legitimate avenue for individuals to build their businesses, but it's important to separate fact from fiction. The key is consistency, genuine engagement, and a focus on product value. Avoid get-rich-quick expectations; instead, invest time in understanding the products and developing strong communication skills. Thoroughly research any Network Marketing opportunity before committing. Look for established companies with a track record of ethical practices and transparency. Additionally, seek mentors who have succeeded in the field and can guide you through the nuances.

Network marketing, on the other hand, does things differently. Unlike the traditional model, in the mainstream business world, the manufacturer makes the products and ships them directly to the end user. With MLM, there is no need for middlemen – distributors and retailers.

They don’t do advertisements. They use their customers to recommend their products to other people. As a result, the money that would otherwise go into advertising is used to pay their customers, which is a clean way of doing business.

The Origin of the Multi-level Marketing Model

Network marketing was invented in 1945 by Carl Rehnborg to help boost the sales of Nutrilite, a supplement company. But the industry’s turning point came when his new consultants – Rich DeVos and Jay Andel- discovered the real power of the network marketing model. They also set up their (MLM) company – Amway – in 1972. Since then, the fire still keeps burning.

Despite the network marketing myths and a few ugly scenarios, multi-level marketing has grown into a US$ 200 billion industry with over 100 million marketers involved. Interestingly, tens of thousands of people join these networks worldwide every year.

Getting to know about MLMs and their darkest corners can be confusing. During these difficult economic times, no one wants to lose their hard-earned cash to dubious get-rich schemes.

The Power of Multi-level Marketing

Networking marketing may sound scary to you. But, once you execute it properly, it makes one of the best businesses currently available. Here are some of the reasons you might need to consider your entry into the business:

1. Time leverage

When working in regular day jobs, you must put up about 40 hours each week. In other words, you have to trade your tie for a payment. Network marketing, on the other hand, allows you to work around your schedule. Not one to push you or monitor your time in and time out. This flexibility is what attracts most people to MLMs.

2. Duplication

There is always nothing new about how MLMs do their business. When it comes to network marketers, you must learn and then teach and show others what to do or even help others succeed. Since everything revolves around the products you sell, you can ‘copy-paste’ the info and hand it to the trains. So, in other words, they will be a copy of what you are. So, no one, not even the CEO, has an informational advantage over you.

3. Residual Earnings

The actual power of MLM marketers isn’t the sales you are making. The actual energy of network marketing is the power of residual earnings. The ability to receive commissions over a long period for a simple effort you make today makes the whole thing attractive.

Common Myths About Network Marketing

While network marketing is a good business, you must separate all myths from the truth. What are some of the common myths about network marketing?

1. MLM Uses People

One complaint about networking is how the company encourages them to use their family and friends to make money. But the truth is, no multi-level marketing company rewards people for using others. Your success in your network marketing endeavors comes from helping others achieve their goals.

The truth is, you cannot earn anything from other people’s efforts if you are not willing to assist along their journey. You spend time helping them make their money, too. Well, some MLMs see recruits as dollar-minting machines but are never as successful as those who prefer to follow a genuine course.

2. MLM Will Eventually Get Saturated

One of the most common myths about network marketing is that it will get saturated. There is nothing like saturation because we’ll always have infinite people. People are born every day. Others turn 18 every year. That means the market will keep expanding, adding new potential end users and marketers.

Debunking the saturation myth in his book Network Marketing for Dummies, Zig Ziglar argues that everyone needs a refrigerator. While most households have them, that doesn’t stop manufacturers from making and selling more. 

3. MLM Doesn’t Work

That is not true. According to research by the Direct Selling Association (2015), the direct sales industry hit US$36 billion in retail sales in the US alone. The global figures could even be more impressive. Besides, 20 million plus marketers in the United States are involved in direct sales. Since network marketing forms part of direct sales, these statistics testify to MLM’s work.

But your success or failure depends on your commitment. There are a lot of e-commerce online stores, bloggers, Amazon Affiliates, and eBayers out there. But not all of them do well in their craft, and people are not whining about how their businesses are not working.

4. Network Marketing Can’t Make You Rich

Not everyone succeeds in their businesses. In the same way, not everyone succeeds in their network marketing business. The top crème (1-10%) making fortunes with MLM are the same 1-10% network marketers that work tirelessly and consistently in their business.

5. MLM is Cult

Some network marketers are passionate about the industry, but fanatics exist everywhere, including sports, religion, or science. But you don’t have to be a fanatic to plunge or make cash in any MLM. Most legitimate network marketing companies work hard to keep their marketers grounded in figures and facts.

6. MLM is an Illegal Pyramid Scheme

A network marketing pyramid scheme often makes people think it is illegal. But, almost all organizations assume the same shape – schools, governments, churches, and business entities. Pyramid schemes are money games where you invest, bring other friends, gain some profits, plow more money, and eventually lose everything to a con artist.

What makes it different is that there is no exchange of any service or product. But when it comes to MLMs, your sales – whether products or services – determine your income. It is not the number of recruits you will bring into the company.

Legal network marketing programs compensate their distributors based on the sales generated from high-quality products or services. These programs provide useful offerings to customers while allowing distributors to earn commissions for their performance. Responsible network marketing firms are bound by legal obligations that include publishing average income statistics as part of their transparency efforts.

7. The Guy at the Top is the Overall Beneficiary

Some people think that the people at the top are the ones who make huge sums of money. Well, it has some truth, as it happens everywhere else. You can’t make more money than the CEO of your company, although some of the employees in the company might be working harder than their CEO.

But that is not entirely true when it comes to network marketing. With network marketing, you are always rewarded for your efforts. That means the harder you work, the higher you earn, so much that you can even earn more than your CEO.

8. You Have to be an Extroverted / Sales Person

We all buy what excites us and what solves our problems. Whether you are pushy or not, it is all about benefits. To be a perfect network marketer, you must be a good listener and, most importantly, a solution-finder. But not being pushy.

The Truth About Network Marketing

If you drive the highways in most Western countries, you realize many traditional businesses have closed shops. They haven’t just closed them to attend some functions elsewhere; the shops are closed for good.

Why is this happening? For one, the cost of maintaining the businesses deters them from competing with large conglomerates. It would be an uphill task for the average entrepreneur to battle fat-cheque corporations in the tumultuous business environment.

That is where we need to look at things differently by embracing more friendly business models. Unlike other businesses, network marketing is not more about investing money but about investing your time and resources.

Below are some of the truth of network marketing – 

1. The Risk Spectrum is Low

Starting a brick-and-mortar business will cost you fortunes. The start costs can be anywhere from US$ 1,000,000 and above. Give or take. Besides, the risk that comes with the massive investment is too high.

Fortunately, most businesses you might be involved in won’t require much for you to get started. In fact, you might be required to invest about US$500 or less. The low risk makes the model attractive to most people.

Unfortunately, the energy people put up to grow and sustain their businesses is directly proportional to their invested money. If you want the best for your MLM business, choose to believe that you have invested millions of money in it and you can’t wait to lose your massive investment. Work harder as if that were true.

2. You Can Work Any Time You Want

The traditional job requires you to appear for the job regularly and within a certain time interval. With network marketing, you don’t have to bow to the pressures of the 9 to 5 grind. Flexibility is everything. You can work when you want. For example, it is up to you if you want to work through the night or a few hours during the day. You are your boss here.

3. A Perfect Opportunity to Build a Future for Your Family

When you have children, you must know that if you pass away, your children won’t become paupers. Today’s economic climate, however, is very hostile. Others are wallowing in huge debts; they don’t know how to escape the debt rut. But, if you start a good multi-level marketing business, you are sure to leave something for your loved ones or the people who are left behind you.

4. Enjoy More Tax Benefits

At times, the tax can be burdensome. One way to get tax deductions is by starting your home-based multi-level marketing company. You could even work on it part-time. But the beauty of it is that you will enjoy several tax deductions. For example, you can deduct auto, housing, and other costs because you own that MLM business.

5. Increased Regulation

Over time, network marketing has gained a bad rep, and there are good reasons for that. The ugliest of all is that most con artists take advantage of the model to create “avenues” (pyramid schemes) that help them take and run with their customers’ money.

It is these unfortunate situations that have created mistrust in network marketing. More regulations are coming up to strengthen the industry and rid it of con artists, making it as safe and secure as the traditional brick-and-mortar/retail industry.

Pros of Network Marketing

When considering the benefits of network marketing, it’s important to recognize the potential for flexible income and the opportunity to be your boss. The ability to work from anywhere and the potential for exponential growth in earnings are also significant advantages. Find out more about these pros of network marketing below –

1. Building a Team and Community

You get to build a team working together toward a common goal. This creates a sense of community and support. It allows you to meet new people and form mutually beneficial business relationships.

2. Low Startup Costs

The startup costs for a network marketing business are typically lower than other business models. You don’t need a physical storefront or significant inventory. The parent company provides the products. This makes it accessible to many people.

3. Flexible Schedule

Network marketing allows you to be flexible with your schedule. You can work part-time around other commitments. It gives you the freedom to work when and where you want. You are not tied to a typical 9-to-5 office schedule.

4. Residual Income Potential

Network marketing provides the potential for residual income from your downline team. You earn commissions from your team’s sales, even if you aren’t actively selling yourself. This gives you the potential for passive income over time.

Cons of Network Marketing

While network marketing offers various advantages, being aware of potential downsides is crucial. These may include challenges in maintaining a consistent income, the necessity of recruiting to maximize earnings, and the possibility of facing skepticism from others. Explore more about these cons of network marketing in the section below –

1. Risk of Pyramid Schemes

Network marketing can be associated with pyramid schemes, which are illegal and unsustainable. Researching and choosing reputable companies is crucial to avoid getting involved in fraudulent activities.

2. Challenges in Building a Network

Building a successful network takes time and effort. Recruiting and training a team can be challenging, and not everyone may be motivated or capable of achieving success in network marketing.

3. Dependency on Downline

Your income in network marketing often depends on your downline members’ performance. It can impact your income potential if you struggle to generate sales or quit the business.

4. Reputation Challenges

Network marketing has faced criticism and skepticism due to misconceptions, scams, or aggressive recruiting tactics some individuals or companies use. Overcoming these reputation challenges can be ongoing.

Tips for Successful Network Marketing

Navigating network marketing requires a strategic approach and a solid understanding of the industry. Whether you’re a newcomer or looking to refine your tactics, these tips can provide valuable insights to help you succeed. From effective communication to building strong relationships, the tips are below:

1. Choose Products You Believe In

Pick products or services you genuinely use and love. Your passion will make marketing easier. Avoid products with questionable value.

2. Identify Your Target Audience

Don’t try to sell to everyone. Research your product and brand to determine what customer profiles would truly benefit from and appreciate what you offer.

3. Offer Incentives

Running promotions like free samples, gifts with purchases, or loyalty rewards helps attract interest and sales. Just don’t give away so much that profit margins disappear.

4. Leverage Social Media

Promote yourself and your product on platforms your target audience uses. Establish yourself as an authority. But don’t spam or be pushy. Focus on value.

5. Provide Excellent Customer Service

Go above and beyond to make each customer feel appreciated. Word-of-mouth based on great service will grow your business. Be reliable and responsive.

6. Focus on Quality over Quantity

Avoid pressuring people to sign up or buy. Build relationships and educate people properly on your products’ value. Quality interactions trump quantity.

7. Continuously Learn and Improve

Read books and blogs to improve your selling skills. Watch training videos. Learn from mentors. Refine your pitch. Successful network marketing requires continuous self-development.

How to Spot a Network Marketing Scam?

With network marketing, it can be hard to tell legitimate opportunities from exploitative scams. Here are tips for spotting scams:

• Be wary of any company that charges more than a nominal fee ($100 max) to get started. It would help if you didn’t have to invest large sums upfront.
• Ensure there is a focus on selling products or services, not just recruiting others beneath you. Multi-level marketing should involve real demand for actual products.
• Research the company online and read reviews from past distributors to look for complaints or shady practices.
• Look into the founders and leaders – do they have a track record of a failed network marketing venture or legal trouble? This is a red flag.
• Ask for documentation on average income statistics for current distributors so you can see expected earnings. Lack of transparency is a warning sign.
• Find out if products can be easily returned for refunds. Non-refundable inventory that can’t be resold is a scam tactic.
• Trust your instincts. If something feels too good to be true, it often is. Good network marketing companies won’t pressure you to join or make unrealistic promises.

Summing It Up

Indeed, there is still a huge number of people who don’t trust MLMs. The network marketing myths that are going around and some con artists that exploited the loopholes in the industry to trick unsuspecting people have tainted the industry’s image.

But the truth is that network marketing find success when you execute it well, and it’s still one of the best and most highly lucrative industries out there. Besides, because of current economic situations, people will have no choice but to embrace business models that don’t require them to dig deeper into their pockets and yet promise good returns.

Chirantan Patel

Chirantan Patel is the Product Manager at Softwaresuggest & Callhippo, an Inc. 275 company that researches and analyzes software to educate, advise, and connect buyers and sellers of business technology.