The Principles that Govern Network Marketing are Superior to those that Govern Traditional Business

Are you remotely curious about Multi-Level Marketing? The Network Marketing Industry or MLM industry has been around for over 60 years and while the general public often regards the industry with great contempt recent studies have shown that the industry is stronger than ever. Now with companies such as General Electric, Verizon, GM Motors marketing some or all of their products via the network marketing business model a lot of consumers are begining to take this industry serious. Great economists such as Paul Zane Pilzer and wealthly men/authors like Robert Kiyosaki & Donald Trump have also spoken out in great extent recently about the amazing opportunities that exist for average people in Network Marketing.

The title of this post is “The Principles that Govern Network Marketing are Superior to those that Govern Traditional Business.”

Why Network Marketing? What makes it so unique? White traditional business delivers products to end consumers via a variety of third party steps such as distributors, wholesalers, and retailers the network marketing business model delivers products directly to the end consumer’s doorstep from the manufacturing facilty. Taking out all the middle men brings down total cost. Also by removing the middle men you remove geographic barriers allowing you to do business anywhere people are willing to listen, look, and buy. Are you starting to understand why the principles that govern this business model are superior. Lets keep going.

corporate pyriamid

Lets talk about opportunity in business. A traditional company is built in the shape of a pyramid with CEOs and presidents at the top all the way down through management and eventually to the large group of employees. The people at the top make most of the money and the people at the bottom do most the work. This is not a the bad part; on the contrary it is natural. The bad part is the lack of opportunity. The bottom line staff/employees don’t have the same opportunity to make money as the top level management. In fact there is a scarcity of money. The more money the staff makes the less there is left for the Management. True scarcity with no opportunity at all.

The next step up is the Commission pay model. This model is superior because the upper level management has an incentive in the successful of the regular bottom level salesman. The more sales they make the more money it makes both parties. Everyone is paid based on their actual production and so nobody can break the principle and therefore people are rewarded correctly. Opportunity is much stronger because of two things. First, abundance is much more present because the people at the top want the people to succeed even though there can still be a strong feeling of scarcity between same level salesreps. Second, Each person is resposible for their own results and so by working harder you can make more money. However there is still a fundamental flaw. Though opportunity exists for success it is not equal. A real-estate agent does not have the same opportunity as a real-estate broker because the realtor can not hire other realtors. The same is true for the insurance agent and for every other commision paid sales rep. Though there may be an opportunity for advancement and management positions, the opportunity will never be equal to the people at the top. What will eventually happen to the successful sales rep? He/she will go out and start their own company in order to have that equal opportunity. Now the salesrep has become the competition to the company that trained & coached him.

Network marketing is the answer to all these problems. Abundance is real because the marketplace is endless (or at least infinity larger than the traditional marketplace). Opportunity not only exists because you get paid on your own efforts but it is also equal because the compensation plans that exist in this industry allow for equal opportunity for everyone. People at the bottom of the pyramid can make more than the people at the top.

In fact it happens a lot. I sometimes explain it to people this way:

* Imagine buying a franchise.

* Now imagine that your franchise could sell it’s product in every country around the world.

* Now imagine that your franchise had no employees at all.

* Now imagine that your franchise didn’t handle any customer service at all.

* Now imagine that the complete upfront cost of your franchise is only between $500 to $1500 one time.

* Now imagine that the ongoing overhead expense of your franchise is only between $100 to $300 each month.

* Now imagine that you got a cut out of the production of every other franchise the company sells.

* Now imagine that you could stop working anytime after only your first 6 months to a year and not only would you continue to get a check but it continues to get bigger each month even without you.

* Now what you have is a Network Marketing Business.

Jacob S. Paulsen

1 Comment

  1. Dan Farfan on January 3, 2012 at 6:51 pm

    Good article.
    There is an additional dynamic worth noting. In the “old days” the “staff” and the “company” had an unwritten deal, “You give me your work that is actually more valuable than what I compensate you (company needs to make a profit), and you get job security in return for that difference.”

    Well, not so funny thing happened on the way to the 90’s. Job security all but disappeared. It certainly can’t be assumed any longer. In other words, “the company” stopped giving their part. And the employee stopped getting something. But the employee must still accept compensation for their effort that is less than their contribution to the company (because the company still must make a profit).

    The unspoken bargain between employer and employee is no more. Yet their compensation was never adjusted, because it can’t be under the old model. Employees are expected to just accept the new inequities of modern employment.

    I say ending that unfair relationship as quickly as possible is the only way for a person to maintain (reclaim) self-respect. Your compensation should be directly tied to your measurable contribution to the endeavor.

    That’s exactly why I created my social networking game website this way. I made a marketplace game out of all the photos on Facebook that Facebook users can play for free.

    Imagine, a social networking website that doesn’t make a few kids into billionaires, but instead shares revenues with all users … according to their contribution to the success of the game. The details are on the website after you “Enter Your Gallery.”

    Hope to see you there!

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