This article provides a comprehensive overview of the history and evolution of the network marketing industry, highlighting the significant shifts in strategies and approaches over the years. It delves into the debate of whether products or business opportunities should be the primary focus in network marketing, and how the advent of technology has reshaped the industry.
Network marketing, also known as Multi-Level Marketing (MLM), was founded on the principles of offering high-quality products and sharing them with others. The oldest direct sales company in America, for instance, transitioned into a network marketing company, focusing on selling products and sharing the concept of retailing products to earn money. This was achieved through a strategy of networking to find others who would do the same.
Over the past 15 years, the face of the network marketing industry has undergone significant changes. The advent of computer technology and the internet has given network marketing a new look and emphasis. The internet has become an additional medium for networking, leading to a shift in the industry's focus.
Two decades ago, a prospective sponsor would sit down with you, present a catalog of products, show some samples, and explain how you could earn money by selling these products and setting up distributorships. The approach was product-centric, with companies leading with their products first. Some companies continue to use this approach today, as it makes sense for their specific business model.
In the 1980s, the concept of "business opportunity" began to gain traction as a way to attract people to MLM. This led to the emergence of "Mail Order" as a new approach in network marketing. Companies could manage databases of people, run commission checks, and lead with the business opportunity rather than the products. However, this shift also led to the rise of companies that were short-lived due to their lack of focus on product quality.
With the popularity of personal computers in the early 1990s, it became possible for individuals to start their own MLM programs from their kitchen tables. This led to the "Make Money" approach to MLM, where the focus was on making money, often regardless of the products. This phase of MLM, unfortunately, gave the industry a questionable reputation due to the emergence of illegal MLM schemes.
With the emergence of the internet, the focus shifted from just making money to making money fast. This led to unrealistic expectations, such as becoming a millionaire in six months. The internet also attracted individuals who could barely afford their monthly internet service provider (ISP) fees, let alone the cost of adequately marketing their business.
Despite the challenges, some legitimate networking companies have taken network marketing a step further, introducing the concept of "Referral Marketing". This approach allows distributors to refer customers and other potential distributors directly to the company, with the sponsor getting credit for any products sold from that direct referral.
The question of whether to lead with products or the opportunity is still relevant in referral marketing. However, due to the changes in the industry over the past few years, leading with the business opportunity has become a necessity, provided it is backed up with excellent products.
The truth is, there is no real loyalty in products. Loyalty is based on making money. If a person would use those products even if they didn't participate in the business opportunity, more people would make money because people are consuming the product, which is the basis of commission generation.
Today, the action in the MLM arena is all about making money. If the product is good enough to promote and if people can make money promoting the compensation plan, then that is what is attracting people to MLM. The ideal compensation plan is one that will keep the beginner involved long enough to make money quickly and lucratively compensate the leaders for reaching leader levels in the compensation plan.
The future of network marketing lies in aligning oneself with a company that has a stable and lucrative compensation plan, backed by good enough products to promote, and a company that is legitimate and stable. The old companies that are trying to continue and grow based on their heritage and products are not growing at the same rate as those companies that have developed state-of-the-art compensation plans.
