You almost never see the truth about what network marketing or multi-level marketing is.

Several years ago I was trying to get started in a network and multi-level marketing business and I quickly learned that there was a lot of varying information about it. Almost nobody was really clear about what it is because almost everyone looks at the ”associate” side of the business.

So, I had heard somewhere that there was a professor who taught network marketing at a hochschule in Germany and decided to look it up. It turned out that this was true, and I looked at the Hochschule’s website and sure enough, there are several courses on the topic.

So, I read the course description and guess what, nothing in that description was centered on the associate.  The course is taught in terms of building a business using network and multi-level marketing as a business model.

I was shocked!

I went to the professor’s website and purchased a CD about the facts about this amazing business model. It basically talks about the difference between a legal program and an illegal program that frankly nobody really was able to articulate to me before, in or outside of the business.

(First of all…It is NOT an investment. You don’t get paid by simply putting in money. So, it cannot be a ”Ponzi” scheme, because that is an investment with the expectation of a return.)

So here are the high points from an associate point of view:

1. There has to be a product of value sold.
2. The sale of products to customers is the main focus of the business. (The customer and affiliate side must be separated.)
3. The customer pays the company for the product through the associate’s company ID, and the company pays the associate a commission.
   1. (Unless the associate pays wholesale for products and sells retail to customers for profit.)
   2. (The wholesale/retail avenue doesn’t really exist for internet based products. With this it is a straight commission based on sale price and commission rate.)
4. There can be no compensation for members just signing up.

Those are the high points.

But, now I want to show you how to look at this business model the right way and that is from ”The Corporate Point of View.”

Network/Multi-Level Marketing is a Corporate Business Model  not a ”Get rich quick scheme.”

In the corporate world of businesses, there are different business models which are designed to best suit a company’s products or services.  From franchises, traditional brick and mortar retail businesses to banks, stock brokerages, airlines and thousands more, all have a certain way to build and market their business, and compensate the people who do the work of the business.

This holds true for companies who choose network/multi-level marketing as their most effective way of bringing their products and services to market. There are many good reasons for companies to choose this form of marketing to grow their business. Here are some of them…

1. Low waste in production. Companies can accurately predict how much product they are going to need to fill the needs of sales.
2. Low cost of distribution. The products aren’t paraded through the labyrinth of distribution centers and middle men to the end retailer.
3. Low cost of advertising…or better said…cost effective advertising. Since they have so little in advertising costs, they pay a commission to the associates only when a product is sold. It basically eliminates advertising budget waste.
4. Products are kept fresh, maintained, updated, and delivered within a short period of time after production, reducing storage costs and lower quality.

What is the goal of any company?  To sell as many products and to have as many people selling them as possible. So not only do they want customers, they want more distributors or associates working FOR them.

That is the key word. The associate is not unlike an employee in that the name on the check paying their commission is the name of the company.

This is the mistake people often make when talking about this business model.  Almost everyone says…build YOUR business, but it isn’t YOUR business. You are being paid by the COMPANY, not by customers. So you are a representative of the company. You work FOR the company.

The compensation plans drawn up in a company’s business model determines how commissions are paid to the associate/affiliate/distributor, and are designed to encourage specific behaviors. For instance, companies often offer commissions for every product purchased by a customer, or for reaching specific sales goals, and to build an organization based on direct sponsoring or indirect team building. This encourages leadership in the sales force and is rewarded by the company with higher commission percentages, sales award perks, car programs, vacation programs and other incentives for the marketers to become effective in their business.

So, is it true that in Network Marketing only the people at the top make the money? Well, yes and no. The corporation MUST make a lot of money so it can create, develop and maintain products, pay commissions to it’s sales force and if necessary reward investors with dividends and growth for a solid stock market presence. (Not all companies are publicly traded, in fact most aren’t) Yes, the people who make the most money as affiliate/associates/distributors are those who were able to sell more products and build a large organization.

People think it is unfair if someone gets started earlier than others is an unfair advantage, well it isn’t. Most people would agree that those who have worked for a company longer, created more sales and influenced more people should get paid more…or have I missed something in my fair minded way of thinking?

So, when Warren Buffet, Donald Trump, Robert Kyosaki and other financial gurus praise network marketing, it is mostly because of the solid business model it gives a company, not necessarily because it is necessarily beneficial to the individual associate who works hard to sell the products for them.

Yes, in order to be successful at this profession you need to develop skills. But, lets call it what it is, the associate/affiliate/distributor works for the company and the company pays out commissions based on the performance of the associate and the organization they have built. Totally fair way of doing business, and the customer gets a really good product.

This is a normal business model like any other and it needs to start being talked about like the real corporate entity that it is.

In addition, network marketing is very strongly regulated by governments so the magnifying glass is on it all of the time.

The one weakness in this business model is that there is nothing that is required to qualify as an affiliate/associate/distributor, so there is very little screening of those doing the affiliate side of the business. Anyone can do it, and sometimes you get some bad apples and at the least people who are clumsy because they don’t have any experience.

I think this business model will become a household ”requirement” in the future and those who start now can get ahead of the pack who still sits around complaining about all the ”don’t” know or understand about this business model.

Check out this blog and get started today…you won’t regret it!