1. What Is Network Marketing?
Network marketing (also known as multi-level marketing) is where independent salespeople make their own money beyond their base salary by recruiting others to sell products on commission. They recruit their recruits by using a variety of techniques including social media, cold calling, emailing, text messaging, referral bonuses, etc. Once they have signed up, the salesperson's commissions depend on how many people she/he manages to sign up under them. In this type of business model, everyone involved earns their income based on the amount of volume brought in by their recruits.
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2. Why do People Consider It Good Or Bad?
People who do network marketing often find that it is less stressful than having employees due to the flexible nature of the work schedule. On top of that, they sometimes get to build a team of loyal customers because they tend to be more hands-on. Many people consider it positive because it gives them the opportunity to earn extra income without quitting their day jobs. However, if not done properly, it can lead to poor financial outcomes and even injury.
3. How Does It Work?
There are two ways that network marketing companies operate. One method involves selling a single product; whereas, the other method involves selling a service. When companies offer a product, they may charge upfront fees for joining and ongoing monthly fees depending on what package the person chooses. This is called direct sales. When a company offers services, they may require upfront fees to join and ongoing monthly fees to use their services.
4. Pros And Cons Of Network Marketing
Pros:
- You don't need to spend much time training your downline
- No minimum investment
- You get paid immediately upon signing someone up
Cons:
- There's no guarantee of getting rich unless you're able to reach a certain level in the company
- It takes years before you start seeing any significant returns
Why do people consider it a scam?
1. Bad Pay Off
In network marketing, you’re not really making money until you hit your upline's sales target! If someone else makes the sale, they get paid first. When it comes to joining a team, if you're not willing to sell for them, then you’ll never make any real income.
2. No Stability
You might find success right away, but what happens when you hit a plateau? What do you do? Most companies don't have an answer for that. They either ask their reps to keep selling their product at full price even though they aren't making much money (and this is illegal), or they simply terminate their reps without warning (which is unethical). If you've been working hard to build your dream downline, why would they just pull the rug out from underneath you?
3. Poor Training
There's no way around this one, when you sign up with an MLM company, you join a team where the average person knows nothing about business. And sadly, most people who do know something about the business will only help themselves while leaving you in the dust.
4. Low-Quality Products
Let’s face it. We all want to enjoy our products more than once, but how many times can you use the same mascara or conditioner before it stops smelling good? Unfortunately, most MLM companies only offer top-of-the-line quality products, so after a while, you won't want to use anything else.
5. Unethical Business Practices
Do you work long hours for little pay? Is your boss controlling everything you do? Does he/she tell you what you can and cannot say outside of the office? Do they expect you to recruit others, but if you fail, they don't care about you? These are some of the ways MLMs operate today.
6. Boring Work
As mentioned above, most networks require their reps to spend their time recruiting rather than actually building their business. The best MLM companies allow their representatives to focus on building and maintaining relationships with current customers.
7. Hard To Get Into
Getting started is difficult enough, but getting approved for most MLM teams requires a ton of paperwork and a personal interview. Many people think they can just walk in off the street and become instant members of a team, but this isn't always true.
8. Conflicted Leadership
Sadly, not everyone who joins a network thinks it's wrong, but rather they believe it's the path to financial freedom. While I don't agree with this idea, it does exist. So if you're going to join a network, you need to choose a team that is based on values and principles that align with yours.
9. A Second Job
Most people who try network marketing end up doing two jobs instead of one. They do their day job plus market the company's products. That means less time spent at home with family and friends, and more time stressing over whether or not they did enough calls last night.