Wednesday, November 16, 2011

No More Apologies for Network Marketing!

Most of the time I discuss issues related to health and nutrition here. That is my passion and the place that I believe I can have the greatest positive impact on people's lives. I don't intend to change that. But the way I chose to be involved in the nutrition problem in America is through Reliv International, a network marketing company.

I know many of you are involved in network marketing, and I don't know what your personal experience has been. But my unscientific guesstimate is that 80% of the people I talk with have a strongly negative view of network marketing and are put off by the very idea. For a long time that intimidated me. Deep down I guess I shared their distrust to a great degree. I'd had at least one awful experience with the industry, and found many of the people that I had met who were involved with it to be, to be blunt, pushy and obnoxious about it. But as I became personally involved with a company and with other people who had high ethical standards and a genuine desire to be of service to people, my perspective changed.

Like most things, network marketing is what you make it. Network marketing blogger Sachin Goyal says that "Network Marketing is broadly misunderstood, has a large public image problem and is mostly ignored." I agree. But I also firmly believe that, for most people, it represents a solid and exciting opportunity to improve their financial, social and personal lives. At Reliv we say that we have a personal development opportunity disguised as network marketing. I believe that to be true for most people and most solid MLM companies.

So with that by way of prologue, I plan to spend the next several posts discussing network marketing, my own experience operating a MLM business and offering some ideas for anyone who may be considering entering the industry but is unsure of what to look for - and what to avoid. Please chime in with your own thoughts and worldly wisdom.

To start us out, I want to just share some statistics about the industry that some people (both within and outside it) might find surprising. These come from the Direct Selling Association, the industry's premier professional association and ethical watchdog. And no. "Network Marketing" and "Ethical" are definitely not antithetical.

Total revenue, worldwide, for the network marketing industry last year was $114 billion (US). There are a handful of MLM companies posting annual revenues of a billion dollars, but only a handful, so that number represents hundreds of companies (some great, some shady; some long tenured, some just out of the gate). Of that, about $29 billion (US) is generated in the United States by just over 16 million direct selling distributors. Again, these are all 2010 numbers from the DSA.

How are all these millions of distributors doing? Some are doing very well indeed. Many are doing very poorly. The average (actually the median) distributor in the US earns $2,400 annually, about $200 a month. Not exactly enough to retire on. On the other hand, I have never met anyone who would tear up a check for $200 that had their name on it. And in the US, the average monthly family budget shortfall leading to personal bankruptcy is $300. So for many people $200 a month extra income is not insignificant. And remember, it is largely residual, meaning it can be counted upon month after month.

When you look at how income is distributed, it is not exactly egalitarian. In fact it should give us pause regarding the use of huge monthly income numbers as a recruiting technique. The fact is, the great majority of MLM distributors make very little. The average income is below the median income (which for you non-statisticians means that the income distribution is skewed to the lower end). According to the DSA, in 2010, about 30% of US distributors made nothing at all or lost money. The next 30% made an average annual income of about $1,800. Only the top 10% of US distributors made more than $50,000 a year from their MLM business. That bottom 60% is responsible for a lot of the bad reputation that network marketing has acquired. But is it really that bad?

According to the Bureau of Labor Statistics, about 34% of new businesses fail within the first two years, and nearly 60% fail in 4 years. Not all that different from the MLM experience, is it? That is going to be a recurring theme through my next few posts. Network marketing is a business, and for the most part, all of the generally accepted business principles and practices apply. More about that later.

Next time I'll take a crack at defining "network marketing".