Desire to own business lures many to network marketing

Published 8:36 pm Tuesday, March 2, 2010

You or someone you know has lived through the dinner-party sales pitch where instead of a friendly meal, you are asked to join Amway or another once-in-a-lifetime opportunity.

It’s certainly not a recommended practice if you plan to keep your friends. But it works. From humble beginnings in 1959, Amway has grown to nearly $11 billion in retail sales in 2009, second only to Avon in so-called multi-level marketing, and there are dozens of copycats.

While Amway’s origins focused on cleaning supplies and hygiene products, today the corporation appears to have everything for consumers and lots of competition. There are network marketing businesses specializing in jewelry, skin care, food and nutritional supplements and even travel.

The attraction is the desire to own a business.

How it works

The greatest challenge these business owners face is recruiting a large number of people to join the movement and to link up their own networks. In the process of recruiting new talent, many of the faithful will over-promise and under-deliver. In fact, most will fail.

When we refer to the network, we’re talking about a traditional model that engages friends and family. While there is seemingly low financial risk in starting a business where everything is already set up, many people will be put off by the prospect of losing friends or alienating family to make a buck.

If the product or service is not unique — most aren’t — then why does it need to be delivered through network marketing? Traditional channels are much more efficient. If substitute products or services are available that are similar in value, benefit or use, the network concept should fail.

What owners say

Ruth Shapovalov sells Isagenix nutritional products through her company, Laughing in the Rain. She’s been at it for for more than two years and has 750 independent agents in her network. Her experience of weight loss and improved health fueled her passion for the products.

When asked how she was able to recruit so many associates without alienating people, Shapalov responded, “I see myself as a flashlight seeking reflectors.” She explained that her approach was not to talk people into signing up, but to see if they might be a good fit for the product before inviting them to sign up.

Michele Johnson still works her day job at Everett Community College. For the past five years she has been a Creative Memories consultant. While she enjoys crafts and designing memory books, she considers her network marketing activity more of a hobby. When asked if she’s ever been exhorted to do more to grow her business, which benefits everyone higher up the pyramid, Johnson said she has never felt pressured.

“It’s really a great opportunity for people who want to work from home,” she said.

A relative newcomer to network marketing, World Ventures was founded in 2005 as a travel marketing network. New consultants are charged with signing six others to promote the company’s exclusive Web site for travel bargains.

Janet Hickox has been working with World Ventures for less than a year. She’s established five new accounts with her business partner and mentor. “I like the idea of working from home and being my own boss,” she said. “I feel as though this type of business will help me in the future.”

Do your homework

Network marketing is not for everyone. If you’re considering testing these waters, it’s important to do your homework.

Make sure the products and services being offered are differentiated and unique. Ask plenty of questions. Limit your risk by hanging onto your money until you’re convinced this is a good fit for you. Don’t get stuck carrying product inventory, and don’t let anyone convince you to use the product exclusively to show your loyalty to your business. That’s a lot like insisting that the owner of a Pizza Hut franchise eat pizza for breakfast, lunch and dinner.

Do not sell out friends and family. Consider the opportunity cost — what else could you be doing to start a business and earn money? If you’re not passionate about the product or service, do yourself a favor and just say no.