'
Success ' was the first national business magazine in the US to write
positively about network marketing industry. In May 1990, its senior editor
Richard Poe wrote a column called 'Network
Marketing : The Most Powerful Way to Reach Consumers in the 90s.' He followed up with a cover story on network
marketing called 'We Create Millionaires' in the March 1992 issue. Until that
point, MLMers could expect nothing but hatchet jobs from mainstream reporters.
Journalists painted the industry as a get-rich-quick scheme, a pyramid game for
the greedy, the desperate, and the gullible.
Nowadays, prestigious publications from
the Wall Street Journal to the New York Times have begun covering the industry
with a new tone of respect. Fortune 500 corporations, such as IBM and MCI, now
market products and services through third party MLM firms. CitiGroup, the
largest financial services company in the world, sells mutual funds and life
insurance through a network marketing subsidiary called Primerica. For the last
five years, the number one offering on the American Stock Exchange, in terms of
profit growth, has been Pre-Paid Legal Services --- an MLM firm.
So
completely has the industry’s image been rehabilitated that MLM now counts
among its champions such moral leaders as Stephen
R. Covey -- the world-renowned corporate ethics guru and author of the
ten-million-copy bestseller, The 7 Habits of Highly Effective People. 'Network
marketing gives people a creative opportunity to set up their own business and
improve themselves' Covey opines in a March 1999 cover story in
Network Marketing Lifestyles magazine.
History and Development of MLM.
According
to Richard Poe, MLM's evolution can be broken down into 4 waves:
Wave1
(1945-1979) - The Underground Phase
Wave
2 (1980-1989) -The Proliferation Phase
Wave
3 (1990-1999) - The Mass Market Phase
Wave
4 (2000 and beyond) - The Universal Phase.
Wave
1 began in 1945. This was the industry's Wild West phase, when neither law nor
order prevailed. Con-men thrived alongside genuine visionaries. At the same
time, government regulators targeted MLM companies with equal recklessness,
often making up rules as they went along. The chaos of Wave 1 came to an end in
1979. After a long and acrimonious investigation, the Federal Trade Commission
ruled that Amway Corporation--and, by implication, network marketing in general-- was a legitimate business, not a pyramid
scheme.
Encouraged
by the friendlier legal climate, the industry entered Wave 2. New technology
sparked an explosion of network marketing startups in the 1980s.Thousands of
new companies sprang into business overnight. Millions of Americans entered the
MLM sales force. But during this phase, the technology was immature. Like those
VCRs that require an Einstein to program them, Wave 2 network marketing proved
too difficult and complicated for most. As with the early VCRs, the technology
just wasn't ready for the market.
Wave
3. Innovations like the use of computers, management systems, and cutting edge
telecommunications made MLM fully accessible to the masses for the first time.
They lowered the cost of working a multilevel business, both in time and money.
As a result, millions of people flocked to the industry.
Wave
4 - The '90s will be remembered as the decade when network marketing became a
serious industry. According to a June 23, 1995, article in The Wall Street
Journal, the total number of network marketers in the US increased 34% between
1990 and 1994 and the number of full-time distributors doubled between 1993 and
1994 alone.
It
was during the 1990s that network marketing spilled over the US borders for the
first times, spreading, en masse into foreign countries. Many MLM firms grew
more quickly in China, Korea, and Japan than they did in the US. Also, the
closing years of the 1990s saw a quantum shift in the perception of network
marketing. Suddenly, major corporations were jostling one another for access to
MLM networks. Wall Street analysts praised multilevel marketing in their
reports. Blue-chip companies rolled out MLM subsidiaries and formed strategic
alliances with existing MLM firms. The race was on to cash in on the network
marketing phenomenon.
Don't
be dismayed by the controversy surrounding network marketing. In its early
days, franchising endured similar abuse from the press and the corporate world,
and for almost identical reasons. It
all started back in the 1950s, when McDonald's and a handful of other daring
companies discovered that they could grow ten times faster than conventional
firms. Instead of shelling out millions of dollars to build and operate new
stores, they let independent 'franchisees' do it for them. And the franchisees
had to pay for the privilege! It seemed like a great idea. But the media
attacked like hungry barracuda. They featured destitute families who'd lost
their savings through franchising schemes. Attorney general in state after
state condemned the new marketing method. Some Congressmen actually tried to
outlaw franchising entirely. How
quickly things change! Today, franchises account for 35% of all retail sales in
the US. Many are among the top-rated public companies on the New York Stock
Exchange.
How does MLM Thrive and Survive?
1. The death of jobs -- In the last 10
years, millions lost their jobs through corporate mergers, acquisitions,
downsizing and closings. One reason is that technology has made many jobs
obsolete, from the factory worker displaced by automated production lines, to
the middle manager nudged out by computerized office network. Or companies
downsize because their plants have moved out of the country permanently. For
whatever reasons, most of the jobs slashed will never come back.
More
and more white-collar workers are being forced into what Fortune calls the contingent workforce. Consisting of
temps, part-time workers, consultants, and the self-employed. The contingent
workforce is growing at a staggering rate. Many of those under employed professionals
are going straight into network marketing companies. MLM recruiters are hard at
working reaping Corporate America's human castoffs including doctors, lawyers,
CPAs, stockbrokers, and corporate presidents tired of the rat race.
Based
on available data from Directing Selling Association as well as other industry
sources, annual sales through MLM organizations have reached about $20 billion
in the US and $80 billion worldwide. The DSA conservatively estimates that
about 8 million people engage in networking, in the US alone,
2. Conventional advertising and marketing
strategies no longer worked. Market share was evaporating before an onslaught
of interactive media, proactive media, proactive customers, and global
competition. An average American today
is exposed to 145 commercial messages daily. But the chances of any one
advertiser making an impact have plummeted. Armed with remote controls, today's
consumers now flit from one cable station to the next, bypassing all the
commercials. As the number of media outlets proliferates --from cable TV to the
Internet- advertising messages are lost in the ever-widening data stream.
The
21st century will see profound changes in shopping habits, instead of going to
the store, the store will come to the consumers. Billions of dollars have been
diverted from conventional retailers into catalog sales, televised home
shopping, and virtual stores on the Internet. Network marketing play an ever
increasing role in that shopping revolution.
AT&T
was one of the first corporate giants to get its nose bloodied by network
marketers. In the five-year period beginning in 1987, AT&T lost 15% of its
long -distance market share to MCI and Sprint.
MCI sold its long-distance service through Amway Corporation. Sprint
enjoyed similar success, marketing its service through an MLM company called
Network 2000. The Network 2000 independent marketing representatives were ten times more effective in acquiring
customers than Sprint's telemarketing groups.
AT&T
learned the hard way that network marketing is a fearsome competitor. But for
innovative executives, it offers opportunity as well. MLM presents a solution
to one of the most critical business lesson marketers will have to learn,
‘Don't expect consumers to come to you anymore’. You'll have to reach them in
the cocoon itself. In this respect no marketing method does it better than MLM.
Even the most elusive Cocooner will still lend an ear to the occasional friend,
relative, associate, or co-worker who recommends particular diet supplement,
investment plan, or Internet service provider. If handled properly, the sales
pitch raises no eyebrows and provokes no backlash. Word of mouth marketing
penetrates the thickest psychological defenses, with the efficiency of a
uranium-sheathed armor-piercing shell.
In
a world without shopping, more and more corporation will contract with firms
such as Amway to deliver their products straight to the consumer. Indeed, many
brand-name companies have already taken this step. IBM for instance, is now
selling Internet training programs through Big Planet, a division of NuSkin
International. Dupont and Conagra teamed up in 1988 to form a bio-technology
venture called DCV which launched a network marketing subsidiary called Legacy
USA to sell propriety nutritional products. In May 1999, the $572-milion
nutritional giant NBTY acquired a Dallas based MLM company called Dynamic
Essentials Incorporated (DEI), to use as marketing arm.
Perhaps
no MLM firm exemplifies the Wave 4 modal of third party distribution than
Amway. The company sells cars for GM, Chrysler, and Ford; appliances for
Hotpoint and Whirlpool; and long-distance service for MCI. With its virtual
mall on the Internet and its catalog of 6500 products and Corporation it is
showing the way to the future. Wave 4 networkers will provide a Distribution
Freeway through which thousands of client corporations will move their wares.
Another
MLM Success Story -- The Merger of Citicorp and Travellers Group Delirium hit
Wall Street on April 6, 1998. For the first time in history, the Dow Jones
Industrial Average soared above 9,000 points. The financial press buzzed with
excitement. Yet the most intriguing part of the story went untold. Pundits
completely overlooked the small but critical role that networking had played in
driving the Dow to new heights.
It
all began with the largest corporate merger in history, announced earlier that
day--an $85 billion deal between the world's second largest bank, Citicorp, and
the insurance giant Travelers Group. Together, they formed a new entity called
CitiGroup, which instantly took its place as the largest financial services
company in the world. CitiGroup boasted nearly $700 billion in assets and 100 million
customers.
So
what did network marketing have to do with all this? In fact, it lay at the
core of the Citigroup merger. One of Travelers Group's most valued assets was
an MLM subsidiary called Primerica.
It acted as a distribution channel for a wide range of Travelers Group
companies. Primerica sold everything from Smith Barney mutual funds to
Commercial Credit loans and Travelers/Aetna property and casualty insurance.
And it sold them with extraordinary vigor. Primerica had managed to sell nearly
50% of all outstanding Commercial Credit loans. In fact, Primerica sold more of
a new series of Smith Barney Inc. funds in 1996 than Smith Barney.
The
Travelers Group, in short, had synergy. Its MLM sales force provided the
perfect vehicle for moving financial services. And Travelers' numerous
subsidiaries kept Primerica well supplied with offerings for its customers.
With Primerica, the Wave 4 Revolution had come to Wall Street. On the surface,
the mega-merger of Travelers and Citicorp looked like a consolidation of
traditional corporate power--a move toward bigness rather than smallness. But
in fact, Citigroup sliding inexorably toward mass privatization. It cut
workforce by 6% in 1998, laying off 10,400 people. And while Citigroup's
conventional payroll dwindled, its MLM sales force grew, reaching 139,000
agents by 1999. Primerica agents descended on the market like birds in a flock,
targeting tiny or inaccessible niches that conventional marketers might have
overlooked. Thousands of entrepreneurs acting in concert accomplished what the
world's greatest financial giants could never achieve on their own.
What is a Wave 4 MLM Company?
During
the first three waves, network marketing grew and thrived. Yet it always
remained a kind of counterculture. Network marketers had no place in the
corporate mainstream. They did not appear in financial journals or Wall Street
analysts' reports. They were not mentioned in corporate boardrooms or business
school symposia. But as the Wave 4 era
dawns, MLM has emerged from isolation. It is widely acknowledged today as a
legitimate marketing tool. Its successes are noted in the business press. To an
ever-greater extent, the general public views MLM as a realistic alternative to
nine of five corporate employment. In short, network marketing has joined the
mainstream. Unlike MLM firms in the past, Wave 4 companies are fully integrated
into the corporate economy. They provide vital services to the Fortune 500, who
move goods and services through MLM's Distribution Freeway. Wave 4 companies
also provide real employment to an increasing jittery workforce, worried about
downsizing. They offer a living wage for full-time effort, a reasonable income
for part-time effort, and virtually unlimited earning power for the ambitious
and the driven.
The
simple-minded MLM concepts of the past promised these things but too often
failed to deliver on them. Wave 4 companies have turned the dream into a
reality. To accomplish this, they had to evolve, over the years, in 5 critical
ways :
The
Wave 4 company provides state-of-the-art telecommunications for its
distributors, Rank-and-file representatives use voice mail and e-mail
broadcasts to coordinate their activities, Video and satellite TV conferences
bring corporate messages into the home.
Distributors access vital data at will, by means of fax-on-demand
services and Web-based information retrieval.
2. Infinite Momentum
The
Wave 4 company provides opportunities for sustained growth throughout the entire
life of the corporation .It does this, first of all, by opening foreign markets
to the average distributor, so that rank-and -file business builders can draw
from the unlimited pool of global customers. Growth is also sustained through
the constant introduction of new product lines and the launching of new
subsidiaries and trademarks, so that distributors always have fresh markets to
conquer.
3.
Turnkey Systems
A
turnkey system is any method or procedure that simplifies or automates part of
the business, making it easier for ordinary people to operate, Such systems
form the heart and soul of a Wave 4 company. Drop-shipping programs, for
instance, automate the retailing process. Instead of stockpiling inventory,
taking orders, and shipping products to customers, the Wave 4 networker just
gives his PIN number to the
customer, who then uses that number to order what he wants through a Web site
or an 800 number, directly from the company. Prospecting for new recruits can
also be automated, through recruiting videos, satellite broadcasts, and Web
sites equipped with auto-responders. Many companies automate the training of new distributors by providing
standardized, company-run programs.
4. Sustainable Commission
Wave
4 companies balance their compensation plan so that part-timers and high
rollers alike can prosper.
5.The Touch Factor
Automation
has built-in limitations. As technology accelerates, so will craving for the
friendly attention of human beings. Network marketing is uniquely equipped to
meet that need, since it moves products via human relationships. Wave 4
distributors will never have to worry about being replaced by advancing
technology. On the contrary, Wave 4 companies continually invent new ways to
complement their high tech advances with high touch service, provide by
flesh-and -blood distributors.
At
the turn of the millennium, e-commerce has revealed itself as the next great
economic frontier. In 1998, about 17 million Americans did $7 billion worth of
shopping on the Internet, Some experts predict that by 2002, those numbers will
more than triple, with at least 58 million people doing up to $41 billion worth
of shopping online. Network marketers are already taking a lead role in the
pending e-commerce explosion.
Industry
leaders are beginning to realize that customer service will be the litmus test
distinguishing tomorrow's e-commerce empires from today's fly-by nights.
Customer complaints are rising even faster than sales. ' Right now customer
service on the Web is really atrocious.'
Web merchants are now scrambling to add a personal touch to their
e-shopping sites with chatrooms and Internet telephony services. Without a live
person to answer questions or solve problems, the will to buy can fade in an
instant.
The
following example illustrate how MLMers would play an important role in
humanizing the e-commerce environment:
On
March 13 1999, Amway and Microsoft Corporation announced that they were teaming
up to offer what may turn out to be the largest retail Web site on the
Internet: Quixtar.com. Quixtar will
feature more than ten thousand different products and services. In addition to
its own branded products, Quixtar is expected to offer a representive sampling
of the existing Amway wares, which may include everything from Addidas sneakers
and Panasonic sound systems to Amway-brand SA8 cleaning products and Artistry
cosmetics.
The
really exciting thing about Quixtar, and one reason it's so important is that
it already has a huge following of loyal customers; so it's got a jump on all
the other sites even before the launch.--- That's a brand new paradigm for
e-commerce.
Since
e-commerce exploded onto Wall Street radar screen in 1998, its chief obstacle
has been attracting and keeping customers. Even Amazon.com is still running
millions of dollars in the red, despite the success of its affiliate recruiting
program and lavish funding from Wall Street investors. Quixtar will be the
first major e-commerce roll-out to enter the marketplace with a sizable
customer base already in place--- the 3 million Amway representatives world
wide. Three months before Quixtar's launch, over 200,000 people had already
registered at an Amway Web site promoting Quixtar.
What
really makes Quixtar different, however, is the ability of new customers to get
personal service and assistance from the Quixtar representative who introduced
them to the Web site.
Network
marketing, as exemplified by Quixtar, may will provide the magic bullet that
will finally made e-commerce universally accessible,