Why You Should Consider Network Marketing as a Business - Part1

Quick, tell me what comes to mind if I say this word: NETWORKING.

If I have been asked 6 months ago, I would have replied: SCAM! PYRAMIDING! FLY BY NIGHT! But if you asked me today, I would reply differently.

I no longer can trace why such a black eye exists for networking. But I suspect it’s largely because 1. It has been abused by illegal companies using MLM-like compensation plans for illegal purposes (e.g. Franc Swiss) and 2. People tried it, didn’t succeed, licked their wounds and added to the horror stories.

When I heard about Royale last May 07, I just raised my eyebrows, decided it was a scam and forgot about it.

5 months and a lot of text messages from Ellen (my sponsor) later, I was ‘forced’ to attend Doc Butch’s business presentation and 3 days later, I was a member.

It didn’t happen that fast. Before I became a member I noticed a few things:

1.Ellen seemed to be on fire. I see her on the bus going to Quezon City after her shift, she literally gets no sleep. But she seems to be always excited. Either she was on drugs or something else was going on. When I talk to her, I had the certainty she is going to succeed in whatever she was into. I seldom meet people as driven as her and I am always intrigued when I do.

2.Doc Butch is already wealthy. Not from networking but from his other businesses. I could not think of any reason why he would subject himself to the humiliation of being a networker.

3.The income they were generating was pretty impressive, even from a business standpoint. I thought if they could do it part time, why not me? I needed a challenge.

From the time I became a member, I researched about this business. And the more I know about it, the more I appreciate it. Here are a few things I have unearthed I would like to share to you.

HOW CREDIBLE IS NETWORK MARKETING?

For this part, I would like to quote Josiah Go verbatim. Josiah Go is a well known entrepreneur coach and teaches marketing in both La Salle and Ateneo De Manila Universities. He has written many marketing books. In one book titled Build, Grow and Sustain Your NETWORK MARKETING Distributor Business (picture at the top), he wrote specifically about Network Marketing.

“Let me start with some schools that have been teaching network marketing – University of Illinois at Chicago and the University of Houston in the United States. In Asia, the Asian Institute of Management (AIM) would regularly include it as one of their topics in their 2-week Marketing Strategy Course but the first known university in Asia that offered network marketing is located in the Philippines – the Ateneo de Manila University. They opened network marketing as a full semester 3-unit course in June 1999.” P.30

Wow. A full semester just for network marketing? That simply means, there is a lot more to learn about this business. And if AIM is teaching it, it tells us a lot about the credibility of using network marketing as a marketing strategy.

But why do network marketing at all?

Network marketing is a form of advertising. Instead of using the radio, TV or print, companies rely on word of mouth. They rely on people to spread the buzz about a product or company. Instead of spending on radio, TV or print advertising, they use the money to compensate people who do the advertising for them. Word of mouth advertising is no slouch either.

In Neilsen’s survey titled: Word-of-Mouth the Most Powerful Selling Tool released October 2007, word of mouth trumps all other form of advertising. To quote:

“New York October 1, 2007- Despite an ever-expanding array of advertising platforms and sources, consumers around the world still place their highest levels of trust in other consumers, according to a recent global Nielsen Internet survey.

Conducted twice-a-year among 26,486 internet users in 47 markets from Europe, Asia Pacific, the Americas and the Middle East, Nielsen most recently surveyed consumers on their attitudes toward thirteen types of advertising - from conventional newspaper and television ads to branded web sites and consumer-generated content.

"Advertisers around the world are able to reach consumers across an increasingly diverse range of media platforms," said David McCallum, the global managing director for Nielsen's Customized Research Services. "Even so, the recommendation of someone else remains the most trusted sources of information when consumers decide which products and services to buy...” source: http://www.nielsen.com/media/2007/pr_071001.html

NETWORK MARKETING VS PYRAMIDING

Because of the similarities of compensation plans used by legal network marketing companies and illegal pyramiding companies, it is no surprise people mistake one for the other. The illegal companies were quite good in blurring the boundaries between them and the legal companies. Some can even get SEC registrations!

There are multiple compensation schemes developed by network marketing companies. When Forever Living first became a hit, we were introduced to Stairstep Plans. Companies like GoldQuest introduced and popularized the Binary plan which was much more simple to understand. And there lies the rub.

Because of the popularity and simplicity of the Binary plan (Left, Right; Group A, Group B, etc.), most pyramiding companies also used it as their marketing plan of choice.

How do we distinguish pyramids from legal companies? There are hard and fast rules but there are some points you can check. Pyramiding companies usually:

1. Have no products. They just have some form of ‘membership’ or investment fee but you get nothing in return. Some pyramids do have products, but they are sold way, way above the price they sell outside. An example of this scam was the Prepaid Cards being sold at an absurd P12,000++ !
2. They promise BIG RETURNS WITHOUT ANY FORM OF WORK. You just sit back and let them do the work for you which is pretty tempting for most guys. Aside from big returns, they also promise FAST Returns on Investments.

People do make big money in legitimate network marketing businesses. But they do it through hard, consistent work selling the products and building their network of distributors.

WHY SHOULD I BOTHER WITH NETWORK MARKETING?

In business, you usually have 2 major components: Your Money and Your Sweat. Your sweat equity is the effort you pour into the business for it to succeed. I remember our first months in the laundry business. My wife and I did everything from washing, ironing, folding and packing to deliveries! I understood the importance of sweat equity back then. We poured our hearts out without taking anything back as salaries yet.

Some companies can succeed with minimal sweat equity and lots of money. Some businesses can grow big with little cash but lots of sweat equity and network marketing is one of them.

Robert Kiyosaki, in his book: Business School for People Who Like Helping other People (picture also at the top of this blog) lists the advantages of Network Marketing as a business:
1. It is a democratic business. Anyone from any and all walks of life CAN succeed in this business. No credentials needed.
2. It offers real life business education by requiring the distributor to learn street smart selling techniques (as opposed to learning in the classroom) before the person can succeed.
3. It is a business that pulls people up, not push people down. In networking, you can’t succeed if you do not help people understand the business.
4. Network Marketing uses the power of networks, just like any big business (internet, banks, gas stations etc.). Your success ultimately depends on how big you can grow your people network.

And a lot more values which separates it from most traditional businesses in its character.

Knowing these facts helped me understand this business more. And the more I understood, the more I appreciated it.

I hope this blog helped you understand some of the most common misunderstood aspects of this business. Since this is a business option in Royale, I’m hoping to write a multi-part blog to help you learn some of the techniques top networkers use in their success.

Till next time!