Network Marketing, The Business Model

Network marketing is a multi-billion dollar business. As a business model, it is taught in major universities around the world. The Wall Street Journal stated, “…between 50% and 65% of all goods and services sold in this millennium will be through network marketing.” It is a business model that is perfectly suited to the “information age.”

What is this “Business Model?”

Network marketing is a way of doing business that is different from the “traditional” model used by most consumer packaged goods, food and drug companies. It is one of the most promising income opportunities in American today. It is the idea of many people each doing a little work, as opposed to a few people doing a lot of work. To quote J. Paul Getty, the world’s first billionaire, “I’d rather have 1% of the efforts of 100 people than 100% of my own.”

Rather than using the customary distribution process of moving products from manufacturer to wholesaler to retailer to consumer, network marketing companies use a network of independent marketers to move products directly from the manufacturer to the consumer. Further, the cost structure of a network marketing organization is different than a traditional packaged goods marketer.

With a traditional company, millions of dollars are spent on advertising to entice consumers to buy that company’s products instead of the virtually identical product from another company. With a network company, the advertising expense is channeled into sales commissions for distributors who promote the product through “word-of-mouth” advertising, i.e. by telling other people about the product. In the traditional business model, money is spent BEFORE the sale in the form of advertising; in the network marketing model, the money is paid AFTER the sale in the form of commissions. Which model seems to make the most sense from a business standpoint?

With network marketing, you have two sources of income: (1) direct commissions from sales you make yourself, and (2) commissions from sales made by people you introduce to the business, called residual income. You can invest your time and money once and get paid multiple times for the effort. It means getting paid for the work of others. In traditional sales, you may be a great salesperson and have a few dozen good customers and earn your income from all their purchases. However, you probably have to nurture these customers and spend most of your working time making sure they are buying from you and not someone else.

In network marketing, you can build a downline of 100, 1,000, or even 10,000 people, most of whom you will not know nor ever have contact with. This is because the majority of the people in your downline will be people who know somebody, who know somebody, who know somebody, who know you. By having a downline that is working with you, and for you, you can multiply your efforts many times. The earning potential of a downline of 1,000 people, each putting in only one hour a day five days a week, represents 20,000 hours of work in a month. It would take one person 10 years to produce the same amount of work. That’s the power of a network.

Perhaps Robert T. Kiyosaki, author of the Rich Dad, Poor Dad series, said it best. “The richest people in the world look for networks. Everyone else looks for work.”

It is estimated that more than 50,000 people start a home-based business every week in the United States. The average person owning a home-based business earns more than $50,000 a year (often working part-time), while the national average annual household income is less than $45,000 (and most of those people are working at least 40 hours per week). Additionally, a home-based business owner can qualify for many legitimate tax breaks, and tax experts suggest that the average person can save between $2,000 and $10,000 on taxes every year just by starting a home-based business.

How is this possible? Well, consider these two tax structures: a wage earner first earns income, then pays tax on that income, and then pays for expenses with after-tax income. A business owner first earns income, then pays for expenses, and then pays tax on net income after expenses. In other words, a business owner can legitimately reduce the amount of tax he or she has to pay because business expenses are paid with pre-tax income, not after-tax, income.

Network marketing is a $36 Billion industry in the United States. More than 20 per cent of the estimated one million millionaires in America today have earned their fortunes over the previous six years through network marketing. Worldwide, there are over 3.5 million millionaires, and more than 700,000 have made their millions via network marketing. Conservative estimates are that network marketing in America is creating 40 new millionaires every month from average people. This means that a person’s greatest chance of financial success is through “networking.” Again, Robert Kiyosaki observed, “If I had it to do all over again, I would choose network marketing.”

For people who are interested in starting a home-based business, supplementing their income, and providing greater security for retirement and for their children and grandchildren, network marketing is an obvious choice.

Bruce Bailey, Ph.D.

Multi Level Marketing

The idea behind multi-level marketing is straightforward. Picture that you have a product to sell. A common MLM product is some sort of universal solution, such as a vitamin pill. You could do one of two things: either sell it directly to consumers or find others who will buy your product from you and sell it to other people.

MLM systems require that you recruit people not only to buy and sell your product, but who will also recruit other people to buy and sell your product…and then recruit even more people. This may seem unusual since you are recruiting people to compete with you, but MLM will convince you that it is reasonable to recruit competitors because you will get a cut of their profits. This will take your mind off the fact that no matter how big your town or market, it is limited. There will always be a few people in MLM systems who will make money but the majority will fail, just due to the nature of the system.

Multi-level marketing is a system of marketing which puts more importance on the recruiting of people than on the selling of products which is makes for a flawed system. MLM is very attractive to many people though because it sells hope and appears to be outside the typical type of business. It promises wealth and independence but unfortunately MLM is much more likely to result in failure than success. The most successful MLM scheme is Amway which has millions of distributors worldwide with sales going into the billions. In the year 2000, an average Amway distributor earned about $700 a year in sales, but spent about $1,000 a year on products. Remember, that sellers also have other expenses such as transportation, communication, etc.

This type of system is very beneficial to those who own the company or supply the products, but to those lower down on the pyramid, this is nothing but a money eating scheme.

However, there are a few benefits to being an MLM member, such as getting certain tax write-offs, access to special products, the chance to meet new friends and maybe even a few bucks. But, while all of these things can be good, none of them will benefit you’re real financial situation. Other downfalls about being an MLM member is that you can never admit to others if you are doing badly. In order to sell products you always have to keep on a happy face to customers, which often include family and friends. So unless this sounds like a good career move to make, most people would suggest that you steer clear of this opportunity.

Should I Lead With The Business Or The Product?

That’s a popular question.

Some people insist you lead with the business (and they tell you to offer the product as a last resort only if the prospect says No to the business); others say they’d rather lead with the product.

However, there is NO best way for all. Just like there’s no product for everyone.

Here are five questions to help you decide what YOU should do.

Remember, you’re the one leading, so choose what suits YOU. And no, it might not be the same way your upline tells you to lead. But the two of you might not have the same taste in music either, and that doesn’t bother anyone, does it?

The questions:

1. What really excites you more: The product or the business?

2. What do you identity with more: the product or the business?

3. What do you believe you can do better - talk about the product (and your experience with it) or the business?

4. Where do you have more credibility and believability? With your product experience or your business (this or previous business) experience?

5. What is your tolerance for rejection? It’s 10-50 times more if you lead with the business than the product.

There is no best way. There is only the what works best for you way at this time. So follow your inner voice. Once you have given that an honest try, you can always experiment with another approach.

After all, isn’t the entire thing an experiment? We don’t know the outcome for sure, do we? So start with as many advantages as you can: Know yourself, act on that information. Then you will have given yourself the best chance possible.

Kim Klaver is Harvard & Stanford educated. Her 20 years experience in network marketing have resulted in a popular blog, KimKlaverBlogs.com, a podcast, YourGreatThing.com and a giant resource site, BananaMarketing.com which features hundreds of stories, tips, books and CD programs for those who want to learn the art of network marketing.

If I Were Starting A Network Marketing Company…

“If I were starting a Network Marketing company, I would say, what’s a different group of people that want to hear a story about how to succeed with network selling? What words, phrases and images do I use to help them understand what it is I have to offer?”

So opined our friend Seth Godin in an interview with John Fogg this past December (and thanks, gulliver, for bringing this comment to my attention.)

Why a “different” group (than those we have now)?

For one, too many visible people, including big name trainers, practice and teach the kinds of abusive, promise-them-anything kinds of behaviors that cause regular people, plus influential business people like Godin and Calacanis to tell us to our face that we’re low rent at best, and say they’d never even buy from a networker.

(And of course they recognize the recruit recruit approach with its emphasis on the big up-front order, as the fast-cash-grabbing method that it is for too many people doing and teaching it.)

So we wouldn’t want those kinds of practitioners of NM in the new group, would we? So they can’t come.

Second, 95% of those who came in with high hopes of making some desperately needed extra income leave disgusted, confused, broke or more in debt than when they came in.

They’ve used up their friends and family, spent their money on systems that mostly benefitted their upline (leads programs, Internet sites, training stuff.) Not happy campers. They join the ever growing biased againsts. Chances are they won’t come back, at least not in big numbers.

So they’re out.

And last, we don’t want to raid anyone’s organization for those that are happy where they are, right?

So that leaves them out.

So who might be in our new and different group?

Here’s one that comes to mind: The amateurs, as defined in the previous post:

Those who do something for the love and challenge of it, and who therefore have less conflict of interest because they’re not saying what they say to pay the bills or please someone else (like an upline or adoring spouse they want to impress).

The members of this new group would not join because of any money lure. No. They’d be like hobbyists who don’t treat this “like a business” (if that means doing things you really don’t like just to make money.)

Yes, like hobbyists who squeeze in whatever time they can to do something they are driven to do. The new group I’m talking about forming is NOT in it for the money. Although they’ll of course be happy to bank any. It just isn’t what drives them. Imagine that.

Time out. Adult beverage break. To be continued next post.

Mothers & Daughters, Sells & Buyers

Who said language doesn’t matter in making relationships work?

In an interview with Deborah Tannen, whose new book, You’re Wearing That?

Understanding Mothers and Daughters in Conversation, has just hit the top sellers list, the New York Times and Tannen have this exchange:

“Q. Many of the women you’ve interviewed for your new book complain of mothers who criticize their appearance. Are they right to be annoyed?

A. “Right” and “wrong” aren’t words a linguist uses. My job is to analyze conversations and discover why communications fail. The biggest complaint I hear from daughters is: ‘My mother’s always citicizing me.’ And the mother counters, ‘I can’t open my mouth; my daughter takes everything as criticism.’

But sometimes caring and criticism are found in the same words.

When mothers talk about their daughters’ appearance they are often doing it because they feel obligated to tell their daugher something that no one else will.

The mother feels she’s caring. The daughter feels criticized. They are both right.

What I try to do is point out each side to each other. So, the mother needs to acknowledge the criticism part, and the daugher needs to acknowledge the caring part.

It’s tough because each sees only one.”

Tannen adds, “If you understand how conversational styles work, you can make adjustments in conversations to get what you want in your relationships.”

This is true for conversational styles between sellers and buyers as well. Any seller’s first challenge is to get the attention of the other person.

Often, the language sellers use gets in the way of that. Sellers have a way of talking that is instantly recognizable to the rest of the world. And in my classes, thousands of people, themselves in sales, say that when a seller starts talking, they want to run the other way.

How would you know if you come across like one of those sellers people love to hate?

Here are two tell tale signs:

1. They speak to us in technobabble - as if they forgot how to speak like a normal person. Glyconutrients that impact at the cellular level is not how normal people talk. Save the jargon for talking with each other. Sellers must relearn to speak in a human voice if they want to engage consumers - that’s us, all of us. We want to speak to people who speak our own language.

2. They hype. E.g. They make big promises about what will happen when the person buys their thing - but how can they keep a promise about someone else’s future? Or they give us the bombastic boasts - “We are positioned to become the preeminent provider of XYZ…” But no one that matters is listening. Consumers have become immune to this kind of fake communication.

Attention is in short supply. No one has time to give you their attention. To get it, you have to tell them something interesting, and in the first ten seconds. One way is to learn to tell an authentic story - yours, using a human voice that others can instantly relate to. (See “If My Product’s So Great, How Come I Can’t Sell It?” for suggestions.)

If you can’t get someone’s attention with the words you use, how can you hope to start a relationship?

Peddlers, Strawberries And Motives…

Most everyone earns a living doing something - working for an organization or peddling something.

We are the peddlers. That is, all of us who have something remarkable (we hope) for others. Something we believe in - products, services, ideas and programs - that we hope a few people like us will try, buy, and be happy they did.

Now there are all sorts of peddlers.

There is the peddler who shows the fat red strawberries at the top of the basket. You get wide-eyed when you see them, so you buy them, get them home, open up the basket and sigh - you know the story - the ones at the bottom are not nearly as red and plump as the ones on top.

Network marketers are not that kind of peddler. They don’t hide the yucky berries at the bottom of the basket.

We’re the kind of peddler comes as a friend. We’ve been taught that it’s bad to be a peddler of any kind. So many of us hide the fact that we peddle the many wonderful things we have, until after we’ve gotten the other person all wide-eyed about it.

Then, when someone says “Where can I get this?” the dance of fessing starts. Uh, well, you can order from this catalogue, uh, but be sure to put MY code in there. Er, well, I have some here in my purse…in my car…

“Ohhh really??” you can see and almost hear the potential buyer thinking. “Is that why you said all those wonderful things then? You are selling it? Ahh, that explains it.”

So now, even though everything you said about your thing may have been true, they don’t believe you - because you didn’t (dare) disclose that you were selling it up front.

What to do?

All the world is a customer. We ALL buy things from others. And we lilke to buy from people we trust.

So do yourself a favor. Stop pretending you don’t sell the product - lest your true story about what it’s done for you not be believed. If you’re discovered hiding one thing - your motive for connecting with the person - why should she believe the rest of your story?

So TELL up front. Victor Kiam (Remington) did in one of the most famous and effective TV ads of all time:

Walking onto the TV screen in his bathrobe, he held out a razor, and told every family watching in America:

“I liked this razor so much I bought the company.”

Aren’t you marketing your product because YOU liked it enough to think it might make a difference in the lives of others? Isn’t that a wonderful reason to be spreading the word about it? And shouldn’t your listeners know that from the moment you open your mouth about it so they know THAT is motivating you as well?

You are what the world is waiting for…the rare, authentic marketer. Isn’t that a good kind of peddler to be?

Why Your Leads Aren’t Working - And What You Can Do About It Now

You placed ads all over Google, you bought leads by the thousands from a service, you even had a sales letter sent to a big opt-in list. Then you couldn’t believe it when nothing much happened.

Your site probably got a LOT of hits, but nobody bought anything. How could that happen?

Experts have been arguing over that one for years. If you had that experience, you’re not alone. Adsense, opt-in, and purchased leads often deliver poor results. Why? Most often the reason is these leads aren’t NEARLY as powerful as leads you build yourself.

Send out an article like this one, get people to read your good information, then come to you as warm leads — and you’ll have a HOT lead that WILL buy something. What’s the difference?

The prospect read your information, got to know and trust you, THEN came to you sales information. At this point, the prospect has created a mental bond with you and your ability to help them achieve their goal. This lead, gathered with YOUR lead building system, is FAR more prepared to buy than any other kind of lead.

Don’t believe me? Look who is making good money online year, after year, after year. It’s people who have a big weekly newsletter, have sites filled with good information, spend a lot of time talking with prospects on the telephone, offer an e-book, or send repeated autoresponder messages. These methods all build a RELATIONSHIP with the prospect, making them 20 times more likely to buy. While Adsense might get you thousands of hits, building your OWN leads can get prospects who will actually BUY something.

“But I can’t write an article and don’t like to talk to prospects on the phone,” you say. No problem. Today there are lead building systems that pull in huge numbers of prospects, then use advanced Flash web movies to convert the best of these prospects into hot, pre-sold leads.

These systems are the new cutting-edge of online marketing. They have become so highly developed and easy to use that thousands of people just like you are earning big commissions non-stop with them.

It’s not at all unusual to set the lead building system in place, then watch the sales stack up at $1,000 per pop.

Clearly, building your own leads, then using an advanced Flash selling system is the easy way to profits these days. Don’t pass up this marketing method for your business.

How To Make Prospecting And Selling Easy!

Most people starting a business forget about the most important part. They spend loads of time picking just the right product or service to sell. They’ll carefully weight the best kinds of office equipment to buy. They’ll even fuss endlessly over their workplace decor.

But none of that holds a candle to what is most assuredly the core of any new business: you can’t succeed until you master prospecting and selling!

“But I’m really good at what I do. Won’t word just get out and people will find me and want to buy?” you say.

Don’t bet on it. We live in a busy, crowded world where thousands of businesses are shouting their marketing messages. If you don’t get in there and promote — and promote WELL — your customer base will resemble a trickle more than an avalanche.

Here are several proven methods for finding lots of new prospects and turning them into customers. Then I’ll show you an exceptionally EASY way to do all this on a shoestring.

1) Get a web site, get it listed on search engines, and let your site grab prospects 24/7. By now you’ve surely seen scads of small businesses doing this. For those who do it right, the Net can pull in lots of new customers with very little effort. But remember, it’s not as easy as some make it look. Your site has to be good, your copy has to be right, and you must be visible in search engines to make the magic happen.

2) Sell over the telephone. I love email, and face-to-face meetings will always have their place, but good ol’ telephone conversations are a top-notch selling strategy. Prospects feel like they’ve made a personal connection with you when you give them information over the phone.

3) Finally, method number 3 is the one to use if you don’t want to or don’t know how to build your own professional web site, or can’t bear the idea of talking to hundreds of strangers on the phone.

Frankly, this 3rd method has become the only method I truly recommend to small businesses and individuals: OUTSOURCING. These days, you can OUTSOURCE all your online promotion and selling to companies that specialize in doing the work for you.

In the past, that would have meant spending tens of thousands per month to hire an outside selling team. Today, with online and telephone automation reaching new heights, you can have all the advertising, phone calls, and closing done for you by the pros for about what it costs to get a decent home office computer set-up.

Don’t hesitate, do it! Getting a really good marketing, prospecting, and selling machine working for you is essential to your success!

Guess Who Ford Motor Just Quit Selling To…

One of the very hardest things for a marketer of any kind to accept is that not everyone will buy their product, no matter how great they think it is. And even if someone else believes it’s fabulous too, that doesn’t mean they’ll buy.

I play tennis not golf. So no matter how stunning the new clubs are that Tiger himself uses, I won’t buy. I don’t do golf. So you’re better off to save your energy and find someone who DOES love golf. As obvious as this sounds, it’s almost impossible for marketers to do.

Ford Motor for example, just figured this out a few months ago. I posted on 1.23.06, the day they put out through the Wall Street Journal their five point plan to “restore profitability” to the company, and to “change their mindset.” Here’s #5:

“Quit trying to sell Fords to people who won’t buy them; focus instead on likely prospective customers.”

Think of all the advertising noise this will eliminate. No more screaming at the wrong ones. What if every marketer were to adopt this strategy?

Say you’re selling an insurance type of program. Who is a likely prospective customer? Here’s one group: those who buy extra warranties for things they get, from calculators to computers, to warranty insurance, flood insurance, earthquake insurance. Yes, I am one of those. This group also includes people who plan vacations ahead, have retirement plans in place. The planners. Or the sudden loss set, for example, who want to be ready next time.

Start describing the group by describing yourself. Why do you have the program? Ask your existing customers why they bought. They’re your customers, aren’t they? They comprise a community, if you will, and isn’t that who you want to go after?

Instead of doing therapy?

Say you sell nutritional supplements. Who is a likely customer? How about those who know nutrition matters and who know that they cannot get the nutrients they need from the food they eat, even if it’s all organic? These folks know they need to supplement. Like me. Or those who’ve had a close call or recent diagnosis and are responding to their wake-up call - they’re now ready to eat right and supplement.

Ask yourself why you take your supplements. Ask your steady customers (not just those who are selling). They’ll give you their why’s which will help describe your prospective customers.

It’s a start.