What Network Marketing Is and What It Is Not

I hear this viewpoint fairly regularly, so I was not shocked. I also knew it was pointless to try and interject my experience. At least in that situation it was. But here, on this site, it isn’t. If you’re reading this you probably want to know more about NWM.

Simply put, NWM is not a pyramid scheme.

Definition: Pyramid Programs:
1) a program where people invest money based on the promise that other people will invest money and money will filtrate back to all who invest.
2) A program which is strictly a money game and has no basis in real commerce. Meaning, there is no product involved and only money is changing hands.

Based on the above definition, you can see how modern-day pyramid programs may have a product, but it's there just to disguise the money game. It’s not hard to spot these. Simply ask yourself if you’re getting value for what you would be paying for the product or service. To put it another way: does the price for the product or service seem inflated? Are you being told not to worry about paying that amount of money because you’ll “get it back and then some” once you get someone else to join?

Also keep in mind that if a program offers to pay commissions for recruiting new distributors, you might be dealing with a program that is bordering on being a pyramid. Most state laws prohibit this practice stating that a network marketing program can only pay commissions for retail sales of goods or services, not for recruiting new distributors. Why? To protect people who get involved in the program.

If a program pays commissions for recruiting new distributors, that program is in jeopardy of collapsing if no new distributors are recruited. When a program collapses, most of the people involved, except possibly those at the very top of the pyramid, lose their money and the benefits of all of their hard work up to that point.

To make sure you avoid pyramid schemes, look at the Six Differences Between an MLM and a Pyramid Scheme.

In contrast, network marketing is a not game and does not compensate for recruiting new distributors.

Network marketing, or multilevel marketing (MLM), is a legitimate business model. The cornerstone of the network marketing business model is leverage.

Many of us have heard the name J. Paul Getty. He created one of the world's greatest fortunes. Getty said, "I would rather make 1 percent on the efforts of 100 people than 100 percent on my own efforts."

Getty was illustrating leverage. Here is how one leverages oneself in network marketing:

Hank joins a network marketing company as an independent distributor. He starts talking to people about the company’s products and business program. Some people buy the products. Hank receives commissions on these sales.

Some of the people Hank talks to who purchase products and also sign-up to be distributors. Hanks new distributors start talking to people and some of these people purchase product. Hank receives commissions on these sales as well.

Hank has leveraged himself. In network marketing, the better a person is at training, teaching, and coaching the people they recruit into the business, the better that person does financially.

Hank can further leverage himself by helping the people he brings into the business (typically referred to as the people that he “sponsors”) to sponsor others, thus duplicating himself.

As this process continues, you create compound growth that can lead to hundreds or even thousands of people coming into your business. You leverage your time by helping others be successful and earn an income from all their efforts.

Being successful in network marketing takes skill, dedication, time, and work. Realistically, few people get rich and some make a part-time income. Those who do well in network marketing work hard, stick with it, and aren't turned off by the evangelism involved in getting others to try something or to join their organization.

We’ve covered the basics of what network marketing is and what it is not. Would you like to know a little bit about the history of network marketing? If so, click here: Some MLM History.

Before you decide upon a specific network marketing program: