Network marketing: good or bad ?

David Zote *

Network Marketing is also called Multi Level Marketing or Direct Distribution System. Besides, it is also called pyramid selling and referral marketing and uses controversial marketing strategy for the sale of products or services. The revenue of such company is derived from a nonsalaried workforce while the earning of the participants are derived from a pyramid-shaped or binary compensation commission system.

The compensation is given from the commission of sales either by them or by the participants who have been recruited by them referred to as down line distributors. Since Network marketing disrupts normal business system, when it first appears on the scene, it was perceived with scepticism. In some countries they even succeeded in banning it.

In Network Marketing, the back end process of the business is completely automated and you can focus straightaway on building the business and expanding it. All issues like production and distribution system is in place. You can become a co-owner or join the network with a relatively small sum of money.

Comparatively to a Franchise business like KFC, McDonalds, or other big brands which require huge capital infusion, one can become a part of Network Marketing with a small joining fee having huge potential. They grow mainly by means of relationships referrals and word of mouth marketing and incentives are given to recruit other people to join the company.

The idea is to build up a passive income in the long run with small capital investment. The intention of this article, whether it is to promote or downplay Network Marketing, will soon unravel as you complete reading it.

Some valid question to ask oneself at this stage would be, What do I personally benefit from Network Marketing? Did I just get carried away by the hype thereby leading to loss of precious time and energy? The uniqueness of the model of Network Marketing is that once someone joins, be it upline or downline, they are bestowed with a sense of ownership of the company.

As such, they are ready to defend it, whether it is good or bad. They are in earnest to recruit all friends and relatives. Thereupon, it has become an emotional question and objectivity is gone. Some people campaigned for new recruits is as though they are possessed by a spirit and try to talk others into joining it by narrating non-stop for an hour or even a couple of hours straight.

That way they don’t give an opportunity to say ‘No’. Most of the network marketing available in the market may not be worth your time. It is not designed to make you rich, but to make the founders or promoters rich. Some of them are even close to ponzi schemes.

According to a report that studied the business models of 350 Network Marketing companies in 2017 and 2018, published on the US Federal Trade Commission’s website, at least 99% of people who join lose money. Nonetheless, this statistical improbability is de-emphasised by the underlying motivation of financial security, financial freedom and the freedom to do what you love without having to work anymore for money.

Most of the products in the Network Marketing business are overpriced and after a huge discount, it still work out profitably for them. It appears that the basis of their pricing is just a figure meant to be used for motivation of their members by offering them huge discounts.

Lets take a couple of examples to drive the point. For instance Amway soap Persona cost Rs.150/- for a pack of 3 whereas the reputed brand in the market Lux soap for the same pack of 3 cost only Rs.75/-. Again, Amway toothpaste Glister (190g) cost Rs.270/- whereas Pepsodent (190g) cost Rs.135/-. Thus, the network marketing product cost 100% more in pricing in both the above cases and they can afford to give huge discounts to their distributors.

Personally, I don’t join any network marketing. But I am a consumer because some of their products are of good quality. If you are in it just for the product, then you can be content as a consumer, just like me. The first time a colleague pitched Network Marketing business to me, I still remember vividly.

He kept on talking for a good one hour on how it is going to make me successful and achieve all my dreams. In between I kept on interrupting repeatedly asking him what the name of the particular scheme. After he’s done, he finally said, “It’s Amway”. And I was kind of like, “I will think about it”. I am not a joiner by nature. That was the end of it. However, over the years, my perception of Network Marketing has evolved.

What are the Schemes?

Amway, Tupperware, Oriens, 4Life, Herbal Life, Modi Care, Oriflame, Avon, Aviance, Jafra, Vestige, and many more. These are not recommended list, but just examples of some available Network Marketing business in the market.

On having a closer look at it, there is also an upside to it. Naturally, those who are successful in this business are diligent people. This is not a get-rich-quick scheme. Success in Network Marketing business, as in any other areas, depends on hard work. The mantra is the samehard work and persistence is the key.

Financial freedom and stuff like that will come much later as in any other business. With the New Education Policy 2020 coming out heavily in favour of training students to become entrepreneurs – i.e. Job creators instead of job seekers – we can safely conclude that Network Marketing provides a good platform for internship to hone their entrepreneurial skills.

The richest people in the world look for and build networks. Everyone else look for work. You can have the greatest idea or product, but it will only be successful if you have a network to tell people, to distribute it and sell it. The earning potential in network business is infinite since it operates on other people’s time and other people’s money working for you.

For those who are interested in helping people and changing lives of others, it is imperative to learn how to network. You have to learn and help yourself before you can help other people. You can replicate the same principle of success in other areas of your life.

The Learning Opportunity and Experience:

The upside of a good Network Marketing company would be the learning opportunity and experience which could change your life. Some of the areas of learning are leadership skills, communication skills, people skills, overcoming fear of rejection, goal setting, time management skills, financial management skills, etc.

Once you are interested and have decided to enter into this arena here are some suggestions what to look out for in Network Marketing business. All Network Marketing business are not worth your time or energy. Choose an organisation with proven track record, distribution system and compensation plans which have been successful for years.

Do your due diligence to find out what are the facts and what is merely an opinion. Look out for one with a good inbuilt financial educational content whose program may develop you as a human being besides becoming financially literate, financially intelligent and to become a savvy investor.

If you are in it just for the money or product, then Network Marketing is not for you. If you are in it for the financial education it provides, you may be able to go all the way and reap the benefits Some basic lessons in Network Marketing are that it helps you to overcome your fear of rejection.

Basically, if you consider yourself just as a salesperson, you may as well be a salesperson and nothing more than that. However, a true Network Marketing group attempts to develop you by harnessing your leadership potential. The platform gives you a chance to meet and interact with people coming from diverse backgrounds.

You can meet a mentor – not just an adviser- but someone who is successful in real life. These are the life skills which cannot be developed just by reading books but to get out in real life and interact with people. The ability to get along with people influence and inspire others are traits of good leaders.

Money does not necessarily go to the business with the best products or services. Money flows to the business with the best leaders and the best management team. If you want more money, simply become more of a leader. Ultimately, it is not what you make or get that matters in the end, but what you have become.

* David Zote wrote this article for
The writer can be contacted at kdavidzote(AT)gmail(DOT)com
This article was webcasted on October 07 2020.

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