Franchises and Multi-Level Marketing 11
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What is network marketing?
Network marketing is another name for multilevel marketing.
What should I look for in an MLM company?
The most important thing to look at is whether or not you like the products the company sells and would buy them yourself if you didn't join the MLM company. People who don't believe in a product or service or think it is too high-priced will have a difficult time convincing anyone else to buy it. Since your income will be dependent on residuals from future sales, you also need to look very carefully at the overall financial stability and the management ability of the company and its founders. Obtain Dun & Bradstreet or TRW credit reports about the company and try to determine if the founders have been involved in any litigation (perhaps in other MLM organizations) in the past. In addition, request the names of other distributors and ask about payment of commissions and what they think about the organization as a whole. Says Bretzke, "Since it will take three to five years or more to truly make any serious money in this business, you have got to be sure that the company will be there with you." Be cautious about newly formed MLM organizations. Don't get taken in by overzealous invitations to "get in on the ground floor." Many new MLMs, like many other types of new businesses, fail as a result of undercapitalization, poor accounting practices, inexperienced management, and other problems. Thus if you join a new MLM, don't risk more than you can afford to lose.
What is a compensation plan?
The compensation plan is the mechanism by which you get paid. It tells you what volume of sales you need to do before you get paid, how many levels deep you get paid, and under what circumstances you will qualify for bonuses. The plans typically have names like stair-step breakaway plan, unilevel, and matrix. There are also "hybrid" plans that combine one or more elements of the basic plan structures. The various types of plans are discussed at length in Learning By Doing, by Gary Molatore .
Which type compensation plan is better?
"A lot of people in network marketing feel that whatever plan their company uses is the best, and that is understandable," says Eldon Beard who is a Watkins distributor. "Some plans are designed to pay a higher percentage of the available bonus money up front for personal sales and on commissions for group sales in the first l-to-3 levels. Others are constructed to pay more in the deeper levels, and some spread the bonus payout fairly evenly across all levels of the plan. Regardless of the type of plan, the key to remember is that you can make money with all of the legitimate plans. The product, and your effort, is the key. Good products, at a fair market value, are what drives any compensation plan," he adds.
How are MLMs different from illegal pyramid schemes?
The primary difference between a legitimate MLM company and a pyramid scheme is that an MLM company makes its money by selling products or services. In pyramid schemes that masquerade as MLMs, people coming into the organization pay money for the right to sell a product and the right to benefit by recruiting others into the organization. Selling the actual product or service, if it even exists, is incidental to recruiting. Because of their emphasis on recruiting and other practices, some MLM companies that do sell products have been accused of illegal practices in various states. A few have been banned in some states. If you have any doubts about the legitimacy of an organization, check it out by calling your state attorney general's office or city consumer affairs office.
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