- General notion about the network marketing /multi-level marketing/direct selling industry
- Understand how to differentiate legitimate and fraudulent network marketing company
As the world is progressing in technology and automation, there are also other developments and business models that are coming up which promise to help individual build their own system for residual income. Yes, we are talking about network marketing, famously infamous as multi-level marketing (MLM). Fortunately or unfortunately many network marketing companies have been under the spotlight lately for all the wrong reasons, wrong situations or false allegations.
Network marketing or multi-level marketing (MLM), is a system of retailing, in which the products and services of a company are sold by independent representatives. Generally, network marketing or a multi-level marketing company will encourage its individual representatives to build and manage their own sales force by adding distributors/business partners, keeping them motivated and training them to sell the products or services
Although the biggest advantage of network marketing is the opportunity to earn and make a good amount of residual income, it is important to understand that it is not a get rich quick scheme or get rich easily scheme. It is complete hard work and can become a full-time job if done with dedication and honesty.
There is also a general notion that anything resembling a pyramid is a scam or not completely a legitimate business. But what we forget is that every profitable and sustainable business model in the world works on a pyramid structure. A company is headed by one CEO under whom there are 3-4 VP’s , under the VP’s there are 9-10 DGM and so on. Even our Government is structured in a pyramid – One President, under him his Ministers and so forth. Every strong structure is a pyramid structure. People should be more worried about how a network marketing company is sustained rather than with the shape of the pyramid.
So how does one decide if the network marking company they are looking g at is indeed legitimate and not fraudulent money-making schemes? Here’s how to differentiate a legitimate business from a pyramid scheme:
Legitimate direct selling companies add value to the existing economy by selling competitive, high-quality products and services and provide a sustainable source of income for those who choose to sell those products. In particular :
- Legitimate network marketing companies provide accurate information about the company, its products, and usually have a website to research, understand and study their products.
- Business in simple terms means goods or services being exchanged for an equal value of money. Hence, a legitimate network marketing company has products or services that are competitive in the marketplace and is purchased by the end user.
- It is very vital to understand that no legitimate network marketing company makes any payment or has a compensation plan based on recruitment of people into the business. The payout or commission is and should always be based on the turnover made by the individual or his team. This means that each time a product or service is sold, the company pays commission to the individual representative on the total sales made. Having said this, anyone who purchases the product from a network marketing company can become the distributor or individual representative of their products and start earning a commission. However, each company has certain qualifying criteria for becoming an individual representative or a distributor, one of them includes the amount of purchase made by the individual as a customer.
- Based on the fact, that, a legitimate business, means an exchange of goods and services for an equal value of money, the compensation plan of a network marketing company should primarily be on the sale of products and services .The sale can be the personal sale of the individual representative or the sales generated by the team under the individual representative.
- A legitimate network marketing company will have a clear policy of return and refund of money in case the individual is not satisfied with the product .The website of the company should very clearly mention procedure for return and refund with contact details like email Id and phone numbers, in case an individual wants to retune and claim a refund. The time frame for claiming a refund should also be very clearly mentioned in their policy and strictly adhered to.
Indeed, network marketing companies face a lot of challenges since there is a lack of awareness, misconception and most importantly, because there is no legislation to administer the industry, especially in many developing economies including India. This gives way to doubts and apprehension when it comes to starting the business with network marketing or multi-level marketing companies. Another notion of people, in general, is that network marketing is an easy and fast money making way, but the fact is that the individual representative or the network marketers who are involved in a legitimate network marketing company have to put in a lot of hard work and efforts to achieve their goals. In this light, it is important to understand and become more aware of the new trends in the economy. Only awareness combined with correct information about the industry will help to differentiate between a legitimate and a fraudulent network marketing company.