Much Ado About MLM

Ok. So finally my readers have got round to getting me to say something on this seemingly new phenomenon sweeping the world like a wildfire.

Network marketing companies promise a better life, wonderful incentives, unbelievable bonuses and really make it seem like some or even most of our childhood dreams can actually come true in our lifetime. Then you say to yourself, if its too good to be true, it really isnt! That may be true but is it enough to discount this marketing method that so many business 'gurus' can swear by? 

From research, interviews and close observation, this is what a network marketing business is about in plain language. No fluff, just facts.

So what exactly is the entire hullabaloo about network marketing?

Thank goodness for Google. There are currently over 690 million pages of information on Network Marketing or Multi Level Marketing. In summary, we can do a quick comparison between traditional marketing methods and network marketing structures to understand it better. It’s pretty straight forward.

Both business models have one thing in common; the chain begins with Manufacturing, usually from a factory. In the traditional model which we are more conversant with, when a consumer buys a product, the resulting cost is split between all the middlemen. So if you buy a bar of soap at say, 100 naira, you would be paying not only for the cost of producing the soap, but also for the cost of moving it along the chain to get to you. See Figure 1.

Factory==>Distributor==>Wholesaler==>Retailer==>Consumer
Figure 1. Schematic diagram of Traditional marketing Route

This route is what most companies we see with massive advertorial campaigns use; from Coca-Cola to Omo to Golden Morn. That’s the way many blue chip companies have run their businesses and they have been very successful at it. It is a proven system of marketing and so is network marketing.

In the Network Marketing or Multi Level Marketing Model, the chain is cut shorter and the product is made available to the public through a distributorship system (Figure 2). In other words, the market is thrown open to everyone to take part in the supply chain as well as enjoy the products. 

Factory ===> Distributor ===> Consumer

Figure 2. Schematic diagram of Network marketing Route

As a result, the network marketing companies ignore the television advertising and print adverts that their traditional marketing counterparts rely on. Instead, they rely on word-of-mouth recommendation which has over time proven to be much more effective than adverts. Think of the last time you tried something or patronised a service provider just because someone recommended it to you. Exactly!! So these companies design a compensation plan to reward distributors for creating the ‘buzz’ and that’s how they keep running. It also utilises a natural habit of human nature; creating a buzz. People like to recommend, and they recommend everything, from a good movie to cars to mobile phones. They are even more likely to recommend if the product or service is exceptional. So there! That’s it in a nutshell....really!

Having said that, it is also fair that I mention that there are many shady companies out there all claiming to be the best and offer the best. I have gone ahead to summarise the key indicators of a great MLM which I will post subsequently because contrary to what we are told, not all MLM's are created equal. Before then, if you have any additional questions or you have some comments to add please leave your comment in the box below.