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About Network Marketing
About Network Marketing
Few industries are as
maligned and misunderstood as the multilevel marketing
industry (MLM), commonly referred to as "network marketing."
Visions of secret societies, "pyramid schemes," even "cults"
dominate most people's impressions of this industry; few think
of honest businesses moving high-quality products with
money-back guarantees.
And, though some of the
industry's poor reputation is deserved, it boasts many
professional companies that produce and/or sell
top-of-the-line products - in many cases not available
anywhere else.
AmwayThe most well-known network marketing company is
Amway, based in Adda, Mich. One of the oldest and best
established companies in the industry, Amway's checkered past
is one reason for the general public's negative perception of
the industry. The company was a trailblazer in the industry
and its multi-million battle with the FTC in the 1970s
demonstrated to the government and the public that it indeed
ran a legitimate business. Amway today is a
multibillion-dollar multinational company, divisions of which
are publicly traded.
More than 600 network marketing
companies are estimated to be operating today in the United
States, ranging from well-known names many don't normally
associate with MLM - such as Mary Kay Cosmetics and Tupperware
- to others that have generated much recent publicity - such
as IPO darling Excell Communications and 1996 Inc. 500
champion Equinox. The rapid rate at which companies organized
under this business model are able to grow has served notice
to the broader business community, which is in some cases is
trying now to emulate elements of this marketing
structure.
Estimates are that close to six million
people in the United States were distributors in network
marketing organizations by 1996.
Aim InternationalThough AIM International isn't
completely comfortable with the tactics some companies in this
industry choose to grow their businesses (AIM has always had a
product-focused - not business-focused - approach), there is
no denying that this is the most efficient way to market
certain types of products. For several reasons, health and
nutritional products are among the fastest-growing segment of
the network marketing industry, and conservative estimates
indicate that 30 percent of all products in this $17 billion
industry are now sold through network marketing.
Wholesale Buying ClubThink of network marketing as
the Costco concept. In essence, network marketing companies
create a wholesale buying club among their members. Most
people that become members pay an annual fee (about $25) for
the right to purchase products at wholesale. Others they know
then can buy products from a member at retail (a mark-up of
about 25 percent), or choose to sign up to become a member,
thus qualifying to purchase at wholesale themselves. Most
people who are Costco members are big fans of the warehouse
concept, and usually tell their friends who aren't members
"You've got to join." Network marketing, in principle, is
similar. People aren't typically involved to "get rich quick,"
but because the value of the products have proven so high. In
the case of health and nutrition-related products, they can
often have a dramatic impact on consumers' health, which
causes an emotional customer attachment and loyalty. The
concept is simple. For companies choosing this business model,
they eliminate much of the cost associated with traditional
businesses - most importantly, traditional marketing expenses.
Rather than hire a sales team, companies operating in this
industry devote moneys usually earmarked for advertising to a
commission structure that enables and encourages "independent"
agents of the company to recruit product customers and others
interested in also building a business.
DistributorsThese individual distributors - with
extensive corporate support from the company they represent -
train those recruited to their "downline" on how to sell
products and build their own business. This structure is, in
many ways, similar to how insurance companies operate -
selling company products through independent agents of that
company who are, in truth, self-employed. These distributors
are able to build profitable, and sometimes large, business
organizations without the costs associated with starting a
regular business. They earn commissions not only on their own
sales, but on the sales of those in their business downline.
These commissions, coupled with leadership bonuses and
overrides, can be as high as 36 percent (as they are at the
top commission level in AIM). Another benefit: the income is
residual, meaning money continues to be earned even from work
not currently being performed. For the companies structured
this way, it can be a successful way to build a business. For
example, Excell Communications of Dallas, Texas, now publicly
traded on the NYSE, has become one of the nation's largest
long-distance service reseller in less than 10 years.
Anticipating sales of more than $1 billion by 1998, the
company spends almost nothing on marketing - word-of-mouth is
how it captures business. Compare this with AT&T, which in
1995 spent more than $1 billion in advertising. Examples such
as this are what have major corporations intrigued about this
delivery model.
Home Based BusinessHome-based business is a dynamic
and rapidly growing trend across the United States and Canada.
Fueled, in large measure, by dramatic innovations and
cost-efficiencies in communications technologies - from
cellular phones to laptop computers running powerful software
to low-price fax machines to the Internet - one-person offices
are springing up across the county, doing the same
professional-looking work as those located in downtown
high-rises.
More than 50 million people today are
running home-based businesses full- or part-time in the United
States, and growth estimates peg their increase at 10 percent
annually. While these run the gamut from consultants to
programmers, many home-based business owners manage network
marketing organizations. Myth and misinformation continue to
plague this industry. But most reputable, successful companies
have several distinct things going for them: They have high
uality products that come with a money-back guarantee; they
have exceptional customer service and support; they offer
members the opportunity to do as much or as little with the
"business opportunity" as they choose (and most of the six
million distributors choose not to become business-builders);
they are forthright about the company, its history, its
products and the fact that it indeed is a network marketing
opportunity; and their main source of income is product sales,
not training, support and marketing materials for their
independent distributors. Goodyear Tires and MCI long distance
have been sold through Amway representatives for years. And
some established companies, including Rexall Sundown, have
formed new divisions established under a network marketing
model. There are business advantages to an MLM structure:
principally, it is the fastest, most direct and most efficient
way to deliver some products to consumers. As more
professionals venture into network marketing, as companies do
a better job of training their distributors to represent them,
and as more people begin to purchase products and services
from their friends and neighbors, this industry's perception
will begin to better match
reality. |
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If you have any questions, please call us at
1-800-627-4689 or send an email to
info@aimthisway.com
AIM This Way
19 Pemberton Street
Cambridge, MA
02140
Product prices and charges are subject to change without notice.
AIM products are not intended to diagnose, cure, treat, mitigate or prevent a disease or illness. Results may vary per person.
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