The following are two articles I wrote for LinkedIn some time ago . Article 1 NETWORK MARKETING Published on LinkedIn on 28 January 2021 Yesterday morning there was an item on breakfast TV about network marketing. The context seemed to be about new business ventures. Apparently over half of new businesses are now 'side hustles' and they were exploring how this might work. Unfortunately, as usual, they had a rather unbalanced view of the issue (isn't the BBC supposed to be unbiased, or is that just in terms of political affiliation)? The item was in three parts. The first featured a young woman who was doing well in the sector and was making about £5,000 a month. The second featured another young woman who had lost money and said she was "...that mum at the school gate who pesters everyone in sight" and mentioned the 'C' word (cult)! The third featured a representative of the DSA (Direct Selling Association) talking about the sector as a whole. It was better than many media items about the industry (particularly in the 'tabloid' press), and at the end people were urged to do their research before embarking on a new venture, but they completely missed the main points. So I thought I'd write something to put things into perspective. Firstly, network marketing, or multi-level marketing, is simply a different route to market. Conventional routes have three stages: a producer, intermediaries (importers, wholesalers, retailers, logistics, advertising etc) and customers. Network marketing also has three stages - a producer, a single intermediary (usually called a distributor) and customers. But most of the usual intermediaries are done away with, including expensive advertising. This means that a large proportion of the cost of the end product (or service) - often around 70% of the retail cost - can go to the distributors (with a proportion of this going back to the company to help them produce even better products). Everyone benefits - the company has more income, the customer receives personal service and the distributors are exceptionally well rewarded. Within this framework (which is one of the most highly regulated in the UK by the way), there are two business models. In the small business model distributors simply have a small retail business with some personal customers (and, naturally, a small income - probably up to a few hundred pounds a month). In the large business model distributors still have their personal customers but also build a team and, in return for coaching and supporting that team, they receive a percentage of the turnover for part or all of that team (depending on the company's pay plan). With this second option there is no upper income limit whatsoever. Bearing in mind that at least 50%, and maybe more, of new business ventures in any sector go bust within five years, there's no reason to assume the same figures don't apply to network marketing. There is no guarantee of success - which is exactly the same for any business venture. However, the media coverage fails to ask WHY people aren't successful at network marketing. And the young woman who said she pestered parents at school gates gives us a clue. The reasons for lack of success in these businesses are pretty much the same as for any others, namely lack of motivation/aptitude for self- employment or lack of training and support. Anyone who pesters people clearly has never been told that it's counter-productive and simply doesn't work. Network marketing is about building relationships, not destroying them! Most people aren't cut out to run their own business. Network marketing differs from other forms of entrepreneurship in that most entrepreneurs are happy with - or actively seek out - risk, whereas network marketing is great for people who want to start a business but are risk averse. In the UK the maximum you can (legally) spend to get into a network marketing business is £200 (compared with tens of thousands for a franchise). And whereas with a franchise you pay the owner of the franchise, with network marketing the owner pays you. Otherwise the two are similar - a parent company, consumable products, a tried and tested system for operating your business (on a self-employed basis) and a great training and support network. In fact, what network marketing offers is three things: an income, a way of enhancing your personal and business skills and a support network (as reputable companies function like a community, which is great for people who want to work 'for themselves but not by themselves'). So, network marketing isn't a scam, it isn't a 'get rich quick' scheme and it isn't a guarantee of high earnings without effort. It is a real business and, as such, needs to be worked properly. If it isn't then lack of success isn't surprising. I've been involved in the sector for 18 years and it provides my main income source (which is like a royalty income - ie once it's established properly it continues even if you aren't working). It's a great insurance policy against ill health or economic downturn and it's an inexpensive option for the average person. The sector has apparently grown about 30% since Covid and now many of the 'side hustles' which I mentioned at the start, are in this sector, often providing a second income for people who already own a small business in another field. What I find sad is the number of people who would love a business of their own, or who desperately need another income source, but are put off by - no doubt well meaning - friends or family who come up with all kinds of reasons why it won't work for them, despite having no personal experience of the sector whatsoever. The potential can be life-changing and with what's going on in the world at the moment there's a great need for occupations that aren't stressful or precarious, but allow people to develop as individuals and as colleagues. We can offer that, but only to those who are prepared to put in some effort, be coachable and take responsibility. If you know anyone like that I'd be delighted to chat to them about what's on offer. …………………………………………………………….. Article 2 MULTI-LEVEL MARKETING Published on LinkedIn a couple of months after article 1 I have been asked to write an article about Multi-Level Marketing (MLM) because many people don’t understand the concept. I did write an article on Network Marketing for LinkedIn a couple of months ago, which you can find if you check my newsfeed (or message me if you can’t find it and I can email you a copy), and, of course, MLM is simply another name for Network Marketing, as is Conversational Marketing or Relationship Marketing. This second article expands a little on the previous one and, I hope, sheds some light on the sector for those who are unfamiliar with it, or have only a second hand view of what it’s about. The person who asked me to write this second article mentioned a word that I haven’t heard in this context for some years now. That word is pyramid. When I was a child I wanted to be an archaeologist and loved visiting the British Museum in London. I always headed straight for the Egyptian galleries and was besotted with the mummies and the various buildings and artefacts. And, of course, the pyramids; to this day I’m glued to the TV whenever a programme comes up with a new angle on them. But the term ‘pyramid’, or sometimes ‘pyramid selling’, is something that people unfamiliar with the MLM sector occasionally use incorrectly and in a derogatory manner. “That’s pyramid selling” they say, with a pained expression on their faces, as if those words are enough to stop a conversation in its tracks and prevent any attempt to provide facts in an informed way. So, although I think the pyramid ‘label’ is becoming rarer, it’s still worth a brief explanation for those who may not be clear about the sector. What is a pyramid? It’s simply a geometric shape. It’s also how various organisations are represented graphically – although in that case a triangle is drawn, rather than a true pyramid. So the iconic structures in Egypt are pyramids, but so are the structures of many bodies, including corporate organisations, administrative units, schools, colleges and the church. In business, a pyramid shape simply represents a hierarchy. Of course in business the hierarchy is very often predictable; people at the top generally earn more and have more ‘power’. People at different levels have different roles and different types of expertise. And there is often jealousy and protectiveness involved as people may guard their positions and avoid sharing knowledge and information. So if there is nothing inherently good or bad about a pyramidical shape, why is ‘pyramid selling’ a dirty word, why is MLM different and why is MLM confused with ‘pyramid selling’? Let’s break this down into some distinct issues: 1 Legality. ‘Pyramid schemes’ have actually been illegal for decades. There was a US investigation into MLM, many years ago, and it was recognised as a legal business activity and not a pyramid scheme. Pyramid schemes (sometimes called Ponzi schemes) are a form of fraud which attracts ‘investors’ and pays them with funds that come from more recent ‘recruits’. So a scheme is pyramid selling when its participants are financially compensated by other people paying into the scheme, rather than by the selling of a product or service. In other words, schemes which ask people for money simply for joining, rather than for purchasing products or services, are likely to be pyramid schemes. In the UK people who ‘establish, operate or promote’ such schemes can be prosecuted under relevant legislation and be fined, receive a criminal conviction and sent to prison. If you join this kind of scheme you are likely to lose your money. 2 Regulation. In the UK, MLM is a highly regulated sector. The Direct Selling Association is the sector’s trade body and there are many requirements for operating companies, including not making unsubstantiated claims. Added to this, it’s illegal to ask anyone to spend more than £200 to start an MLM business (and that money covers the cost of products, literature etc. and is NOT a joining fee). Unfortunately, the low ‘entry’ cost sometimes means people don’t take it as seriously as if they had spent substantial amounts on setting up a conventional business or franchise. 3 Opportunity. One reason for misconceptions about MLM is that some people badly misrepresent the income potential. Actually the income potential in most MLM companies is literally unlimited. But this does not mean that it’s easily achieved or, in practice, is achieved by everyone. As with any business, income reflects activity. A business that is grown successfully will be profitable; one that is mis-handled will not thrive. The earning opportunity is OPEN to everyone, but is actually only accessed by those with the motivation and skills (learned through training, coaching and mentoring) to succeed. 4 Activities. Actually, MLM can be thought of as a kind of franchise, but with some differences, as I mentioned in my first article. And, although MLM is categorised as direct selling, it isn’t ‘just’ selling’ as people sometimes think. There are two distinct business opportunities within MLM companies. The first is for people who only want a small income, or have a very limited amount of time, or just want a new hobby or to meet new people. This first route simply involves building a small retail business with some personal customers (and this may involve products or it could be services). The income potential with this route is limited and people are unlikely to make more than a few hundred pounds a month, if that, from their activity. But it suits many people and most people who join an MLM company tend to stay in this area of activity. The second route is for people who want a serious business and a serious income. Those people still have a few customers (remember a defining attribute of MLM companies is that they have genuine products and genuine customers), but they also go on to build a team. Team building, coaching and mentoring is then their main role and they are rewarded by the company for doing this. So, as they help and support their team members, they qualify for payments from the company for doing so. It’s also important to remember that these payments come from the company and not from the person’s team members. 5 Flexibility Unlike a job, or many businesses, MLM can be worked flexibly, either as a sole activity, or around any other commitments such as family, work, business or studies. And, because of the culture of collaboration in good MLM companies, there is usually someone on hand to help and support (or even take over temporarily) when needed. 6 Exploitation This is an interesting one. Sometimes people will say of network marketing “But you’re earning from other people”. I have to tell you this is true. But it’s incorrectly phrased. The correct description is “You’re earning from other people’s activities.” And this, of course, is true of almost every business. Unless you are a sole trader or freelancer who never uses the services of another person, then you will have employees, associates, casual staff and so on – all of whose activities help the business to be profitable. But nobody seems to say “You’re earning from other people” to a small shop owner with an assistant, a departmental head of a corporation with junior staff, or an accountant who employs a secretary. In network marketing you receive money from the parent company when your team produces results, but this money does not come from your team and you generally only receive it once you have done some activity yourself – you aren’t receiving commission on other people’s activities while sitting on your bottom doing nothing. Added to this, a person’s earnings do NOT relate to their position in a hierarchy, their ‘length of service’ or their title; their income simply reflects how well they have built their business. And with MLM, people give their time and expertise freely because sharing knowledge and skills with others helps everyone grow – both personally and financially. MLM provides the average person with a superb opportunity to run a business with absolutely minimal start-up cost, complete flexibility in relation to time and levels of activity and the chance to help others do the same. 7 The media While individual people may be forgiven for lack of awareness or misunderstanding, the same cannot be said for the media. MLM frequently gets negative coverage in the media and this perpetuates the confusion between MLM and pyramid selling and reinforces misunderstanding. ‘Everyone loves a good story’, we are told, but the media interpret this as ‘Everyone loves a bad story’. Constantly the newspapers, TV and other channels dredge up examples of people who have had ‘bad experiences’ of MLM. It goes like this: Young mum Tracy (it’s rarely young dad Tom – wonder why that is - because MLM is for everyone, not just women and not just young people) has lost money, upset her friends and been traumatised by getting involved with company X’. And then said Tracy is wheeled on to explain her sorry story. As I explained in my first article, what has invariably happened is that Tracy has not been taught how to build relationships and grow a business and has therefore fallen at the first hurdle; she might well have been extremely successful had she had effective coaching and leadership. Sometimes the media channels attempt to give the other side of the story but, more often than not, it’s biased, uninformed reporting with little or no attempt to check facts or understand why a particular person has not been successful. But then ‘Young mum Tracy learns how to build a business’ isn’t as newsworthy outside business or educational publications. I do think the DSA, which is MLM’s trade body, could be more proactive in this respect. Sometimes a DSA representative appears on TV or is reported on in printed articles, but if more was done to explain the workings of this sector to the general public it would be a great help. So to summarise the answers to the three questions I posed earlier? Q: Why is ‘pyramid selling’ a dirty word? A: Because it’s an illegal activity that has caused many people to lose money. Q: Why is MLM different? A: Because it’s a genuine business activity, which can offer real rewards to people prepared to learn how to do it properly. Q: Why is MLM confused with pyramid selling? A: Because they can both be represented by a triangle on paper (as can almost every other business), but only MLM has genuine products or services and gives recruits a real opportunity to build and earn from a genuine business. And here’s a summary of my experience of MLM (after 18 years’ involvement in the sector): It’s a genuine (and legal) business It offers the average person a simple way of earning an excellent income, without risk It works for pretty much anyone who has the motivation to do it (and not everyone has the motivation to run a business of any kind) and who is prepared to take the time to learn the skills required It is as much educational as operational – people learn all kind of personal, life and business skills along the way, giving them a good understanding of themselves and of other people and enabling them to perform well in a range of areas, not just MLM If you’d like to find out more, or possibly consider a second-income route for yourself or someone you know, I’d be delighted to have a chat. Carol Harris 2021