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Getting onto the multi-level marketing wave.
Multi-level marketing can be an exciting opportunity for many who might
want to earn some extra cash on the side. It is a very powerful tool and
should not be mistaken for pyramid selling. Lee Yoke Meng gives the lowdown
and shares three network marketeers’ experiences. It took the US by storm
in the 1980s. In Japan, it is now the biggest market of its kind anywhere
in the world, with sales in excess of US$30 billion a year. And it has
taken off rapidly in every continent it has reached. This amazing business
— which gives ordinary individuals the potential to turn into millionaires
— is multi-level or network marketing.
Through multi-level marketing, you can gain both personal and financial
freedom through independent business ownership. The concept is simple but
powerful: In a multi-level structure, you build and manage your own sales
force by recruiting, motivating, supplying and training others to sell
products supplied by an established company. Your compensation includes a
percentage of the sales of your entire sales group as well as earnings on
your own sales to retail customers.
This opportunity has made multi-level marketing an attractive way of
starting a business with very little money. And those who have made it have
seen monthly incomes rising easily to five digits within less than a year,
even if they were working only part-time on it. The concept is not
entirely new, having originated in the US some 50 years ago. But,
unfortunately, this form of direct marketing lived in its earlier years in
the shadows because of misconception and its being linked mistakenly with
the illegal practice of pyramid selling.
Pyramid selling, unlike network marketing, is fraudulent because it makes
little to no effort to market products to consumers; instead, its
perpetuators make their money on recruiting: One participant recruits 10,
and the next 10 recruits 100, and the 100 recruits 1,000, and so on.
Ultimately, such schemes collapse as the number of willing recruits runs
out. When that happens, participants at the end of the chain who are unable
to recruit any more members will suffer considerable financial losses and
hardship.
The proliferation of pyramid scams had, in fact, led to a blanket ban in
1973 by the Singapore government on all forms of multi-level marketing and
pyramid selling through the Multi-Level Marketing and Pyramid Selling
(Prohibition) Act.
Fortunately for genuine network marketeers, the situation is now changing.
Last year, after a lapse of more than 27 years, the Act was revised to
allow for certain exclusions to the ban. Multi-level marketing companies
that fell within the terms and definitions of allowable exemptions under
the revised Act are now legitimate businesses.
As Tang Guan Seng, senior parliamentary secretary for Trade and Industry,
pointed out at a seminar last year, following the change in the Act: “It is
not the government’s intention to discourage legitimate businesses or in
any way dampen the entrepreneurial spirit that we are trying to cultivate
among our citizens.
“If the government over-regulates, we will stifle innovation and push up
compliance costs for businesses.
“So long as a scheme earns revenue not primarily by recruiting additional
members, but through legitimate selling or leasing of products, we should
allow that business to go on as usual.” Hence the government’s enactment of
both a revised Act and an exclusion order to address the policy intentions
of clamping down on pyramid selling while allowing legitimate
direct-selling businesses to continue.
“The Act has tightened the definition of pyramid selling for a catch-all
effect, while the Exclusion Order excludes legitimate businesses from the
Act,” said Tang, adding that exempted businesses included insurance
businesses registered or approved by the Monetary Authority of Singapore,
qualified master franchise schemes and qualified direct-selling schemes.
“These schemes do not favour recruitment over genuine economic activities,”
he added.
The move by the Singapore authorities has come at the right time.
From established economies to rapidly emerging ones, network marketing has
reached what award-winning journalist and best-selling author Richard Poe
calls “Wave 4”, in which network marketing is acknowledged as a legitimate
marketing tool. It is clearly heading mainstream as even Fortune 500
corporations, from IBM to General Motors, use network marketing to
distribute their goods and services. Data culled from the Direct
Selling Association (DSA) in Washington, DC, USA, and other industry
sources show that annual sales through multi-level marketing organisations
have reached around US$20 billion in the US and US$80 billion worldwide.
The DSA conservatively estimates that about eight million people are
engaged in network marketing in the US alone.
“If the government over-regulates, we will stifle innovation and push up
compliance costs for businesses.
“So long as a scheme earns revenue not primarily by recruiting additional
members, but through legitimate selling or leasing of products, we should
allow that business to go on as usual.”
Hence the government’s enactment of both a revised Act and an exclusion
order to address the policy intentions of clamping down on pyramid selling
while allowing legitimate direct-selling businesses to continue.
“The Act has tightened the definition of pyramid selling for a catch-all
effect, while the Exclusion Order excludes legitimate businesses from the
Act,” said Tang, adding that exempted businesses included insurance
businesses registered or approved by the Monetary Authority of Singapore,
qualified master franchise schemes and qualified direct-selling schemes.
“These schemes do not favour recruitment over genuine economic activities,”
he added.
The move by the Singapore authorities has come at the right time.
From established economies to rapidly emerging ones, network marketing has
reached what award-winning journalist and best-selling author Richard Poe
calls “Wave 4”, in which network marketing is acknowledged as a legitimate
marketing tool. It is clearly heading mainstream as even Fortune 500
corporations, from IBM to General Motors, use network marketing to
distribute their goods and services.
Data culled from the Direct Selling Association (DSA) in Washington, DC,
USA, and other industry sources show that annual sales through multi-level
marketing organisations have reached around US$20 billion in the US and
US$80 billion worldwide. The DSA conservatively estimates that about eight
million people are engaged in network marketing in the US alone.
What’s not ‘pyramid’ in the Act.
With effect from 1 June 2000, legitimate multi-level marketing can operate
in Singapore under certain conditions.
This is because under the revised Multi-Level Marketing and Pyramid Selling
(Prohibition) Act (Chapter 190), the definition of “pyramid selling scheme
or arrangement” will no longer apply to approved insurance businesses,
qualified master franchises and anydirect-selling scheme or arrangement in
Singapore in which: the benefit received by any promoter or participant in
the scheme or arrangement accrues as a result of the sale, lease, licence
or other distribution of a commodity to any other person, and not as a
result of the recruitment of one or more persons to be additional
participants in the scheme or arrangement; the promoter of the scheme or arrangement
shall not knowingly make, or cause to be made, any false or misleading
representation relating to the scheme or to the commodity, or withhold
material relevant to it; the promoter of the scheme or arrangement shall
not make, or cause to be made, any representation to any person that
benefits will accrue under the scheme or arrangement in a manner other than
that specified above; and the commodity shall be distributed with a
buy-back guarantee that is exercisable on commercial terms.
In Japan, network marketing may have begun only about 20 years ago, less
than half that of thehistory of the US business, but it is already hitting
high notes. The Land of the Rising Sun is now the biggest network-marketing
market in the world: With US$31 billion of network-marketing sales in 1999,
it leads what the industry calls the “Billion Dollar Club” — countries with
more than a billion dollars in network-marketing sales a year.
That club is growing: Apart from Japan, the US is the next biggest, with
1999 sales of US$23.17 billion, followed by Argentina, Australia, Brazil,
Canada, France, Germany, Italy, South Korea, Malaysia, Mexico, Taiwan and
the UK.
What makes multi-level
marketing so attractive and powerful?
The reasons are compelling. First, network marketing is an ideal
form of direct marketing in this age of the Internet, of a borderless
global market, and at a time when downsizing has become a buzz word for
many companies everywhere. As Poe said in his book, Wave 4: Network
Marketing in the 21st Century: “As jobs vanish, millions of multi-level
marketing opportunities rise to replace them.” He calls it the wave of the
future because more people than ever before are now realising that it is a
viable financial alternative, one that has brought wealth and personal
freedom to people, from ordinary men in the street to retirees and
high-income-earning professionals. Given an interest in the product
and the concept, practically anyone can do it.
It is also the wave of the future because the perception of multi-level
marketing today is considerably different from that of the past. According
to Poe, corporate America had, for a long time, kept a watchful eye on the
network-marketing revolution. Most blue-chip companies, however, hesitated
to involve themselves directly.
However, since the late 1990s, a quantum shift in perception has taken
place. What brought that on was that corporations were beginning to realise
that conventional advertising and marketing strategies no longer worked as
well as before. Market share was evaporating before an onslaught of
interactive media, proactive customers and global competition.
The 21st century can also expect profound changes in shopping. Instead of
going to the store, the store will come to the customer. Billions of
dollars have been diverted from conventional retailers in the US to
catalogue sales, televised home shopping and virtual stores on the
Internet.
Views and tips on how to succeed Three Unicity Network marketeers share
their experiences on what’s so hip and great about network marketing
Bobby Chia, Henry Foo and Dr Lee Kay Hoon are only three of thousands of
Singaporeans who have gotten into network marketing within the past 12
months or so. But their experiences tell a similar story. Said Chia, who
joined Unicity Network a year ago when it was then known as Enrich: “So
far, I find the network-marketing business an exhilarating and challenging
one. It is a people’s business and you get tremendous satisfaction building
your organisation. It is a totally different experience, compared to
traditional businesses”. In that time, he has seen his income jump to a
point where he is now in the top five-per cent bracket of income earners in
Singapore. And he has only been working part-time on it.
Chia’s high rate of individual growth, to a great extent, reflects
exponential growth in the industry as a whole. “Our network-marketing
business in Singapore has grown by more than 300 per cent over a six-month
period. Likewise, I believe the industry in Singapore is growing at a similar
or a greater rate. It’s increasing beyond expectations; it’s very
product-driven and, for example, the orders for Unicity’s nutritional
products have been fantastic,” he said. But do not expect quick
bucks. Chia says that in this business, it’s not “get rich quick” but a
case of “get rich slowly at the beginning”.
“You don’t see a great deal of income in the first few months and you need
time to build up your organisation,” he said. “But if the business takes
off, the exponential effect kicks in and you can experience huge jumps in
income month after month. A top producer can achieve a six-figure monthly
income within 24 to 36 months.”
Starting with a few people, he now has more than 3,000 people in his
downlines, which are already more than 10 levels deep. ‘Downlines’,
‘levels’ and ‘generations’ are typical multi-level marketing terms that
allude to the people recruited and structure of the network distribution
chain.
Like many other professionals who now make up a growing portion of the pool
of network marketeers in Singapore, Chia, who is a law graduate from the
University of Singapore (now called the National University of Singapore),
is adamant about taking the right step — from the very beginning.
“My advice to would-be network marketeers is that once they see the merits
and become converts to the concept, they must choose the right company to
join. Or else, all their efforts will come to naught. One can evaluate a
multi-level company by examining its products, compensation plan, proven
You don’t need any specialqualification in this business, but it is
definitely an advantage to have connections. That’s why I believe this
business is best for those in their 30s and 40s who have established
connections in the course of their personal and working life. It’s also
important to leave favourable impressions — to be serious about what you
are doing and the products you are distributing.
Henry Foo track record, whether the operation is international and
‘seamless’, and its growth potential. It should also have a strong
financial backing and have been in the business for 20 to 30 years.
“On the product side, one should raise questions like whether the company
has its own manufacturing plants, whether it has a strong R&D
department (if this is relevant), whether the products sold are consumables
and affordable, the range of products and whether the products are
proprietary in nature.”
The product, in fact, is a very important starting point as one must be
convinced about its efficacy. “Try the products first. Once you’re
convinced, marketing it would be much easier. Draw up a list of relatives,
friends and contacts, and then begin to introduce them to the products and
the marketing concept,” he said on how to make a start in this line.
Chia also believes that network marketing is ideal for people who are
already established in their careers, in particular, people who are in
their 30s and above.
Foo, who was a former CEO in a Hong Kong-based international real-estate
developer, agrees. “You don’t need any special qualification in this
business, but it is definitely an advantage to have connections. That’s why
I believe this business is best for those in their 30s and 40s who have
established connections in the course of their personal and working life.
It’s also important to leave favourable impressions — to be serious about
what you are doing and the products you are distributing,” he said.
Foo’s is another success story. Since starting with Unicity in July last
year — by sheer coincidence, he said — he nowhas around 2,200 people in his
downlines, created from an original 50 he signed on (of whom 10 were
active). His monthly income has grown from three to five digits after nine
months and, most of all, he is pleased with the excellent response he has
received for Unicity’s products.
There is no mistaking the products’ importance. According to Dr Lee, former
associate professor in biochemistry at the NUS, most of the health products
from Unicity are scientifically proven and tested. Otherwise, he would not
have been interested. He advocates network marketing to everyone,
including fresh graduates. “It’s a beautiful and fantastic concept,” Dr Lee
said. He likens it to planting a seed, from which springs other plants and
seeds, all of them growing to provide future income for you.
“I wish I’d known it earlier,” added Dr Lee who learnt about network
marketing at a seminar.
“When I retired a few years ago, I experienced personally what it was like
to have no more income coming in and seeing your expensescontinuing to run
on and on. But with network marketing, you can retire, enjoy life and still
get paid.
“Some people decide to start a small business when they retire. But you
need thousands of dollars to do that and you can still run the risk of not
even being able to break-even. But in network marketing, the outlay is so
little — I spend as much on such health products even before I started on
this line with Unicity. And there are no headaches over inventory, staffing,
expenses and the like. Where in the world can you find a business like
this?”
Where indeed. vNetwork marketeers play an ever-increasing role in this
shopping revolution and as an ideal distribution freeway for companies
because it makes use of the human touch.
A “Wave 4” network-marketing company would be someone like Amway
Corporation, said Poe.
What began as a tiny enterprise selling a biodegradable all-purpose cleaner
called Frisk is now an almost US$6 billion transnational corporation, with
three million independent distributors worldwide offering more than 6,500
different products and services, and managing one of the largest websites
on the Internet.
Amway has sold cars for GM, Chrysler and Ford; appliances for Whirlpool;
and long-distance services for MCI. With its virtual mall on the Internet,
and its huge catalogue of products and services, it is an example of how
multi-level marketing companies have evolved over the years.
Even Citigroup has sold mutual funds and life insurance through a network-marketing
subsidiary called Primerica.
And today’s leading network marketeers are huge in financial resources and
capabilities. Unicity Network is an example.
Ranked seventh in the industry, Unicity is a mega-merger between Enrich and
Rexall, two of the most respected names in direct selling. The merger in
April this year has been hailed as one of the biggest developments in the
network-marketing business.
The new entity forms the network-marketing arm of Royal Numico, a
century-old infant-and-clinical nutrition manufacturer based in the
Netherlands with 28,500 employees, 300 scientists and annual worldwide
sales of more than US$4 billion. Together with another Royal Numico
acquisition — General Nutrition Companies (GNC), the leading nutritional
supplements supplier in the US — the Dutch company is now one of the
world’s most powerful nutrition-based corporations.
According to Paul Frampton, managing director of Unicity in Singapore and
Malaysia, the combined sales of Enrich and Rexall is around US$350 million,
and a US$400 million is being projected for their first year as
Unicity. The name of the parent company, Royal Numico, also adds
further legitimacy to the new entity, as the word “Royal” is given by the
Dutch monarchy only to the most reputable Dutch companies (like Royal Dutch
Shell) which have been around for more than 100 years.
With companies like Amway and Unicity in the Wave 4:
Network Marketing in the 21st Century
Review by Lee Yoke MengIf any book can lay claim to being one of the most
widely read on the subject of network marketing, it must be Richard Poe’s
Wave 4: Network Marketing in the 21st Century.
The latest in Poe’s series of Wave books, Wave 4 reports on the
unprecedented spread of network marketing — or multi-level marketing as it
is also known in the industry. It tells of its influence on the economy, of
its uniqueness and how it is exploding across borders and business
frontiers to become probably the ideal distribution channel for the new
millennium.
It is hardly surprising, therefore, to find practically every serious
network marketer sprouting praises about this book. And it does give those
less enlightened about the subject an ideal starting kit as Wave 4 is
chockfull of information, including all you need to know about network
marketing, how to go about it and how it can help people achieve their
financial objectives in the new millennium.
region taking big leaps forward, there is no mistaking that network
marketing is here to stay. In Singapore, the development, though still at
an early stage, is already moving fast. In fact, observers say this ‘early’
stage is an excellent time to get into this business as it offers the most
potential, and one gets to choose the best companies to work with.
The networking companies themselves have been quick to grasp the
opportunity. Since the exclusion order and revised Act took effect in June,
a number of these companies, including Unicity and Nu Skin Enterprises,
have already made their presence felt. While statistics are not possible to
arrive at, there is no doubt that thousands of Singaporeans are venturing
into it.
As Bobby Chia, director of Insurite and a participant in network marketing
with Unicity, said: “The Singapore market is just beginning to open up to
multi-level marketing and there are tremendous opportunities out there for
those who can recognise early the opportunity of a virtually untapped
market and are willing to act on it.
“Moreover, international Wave 4 multi-level networking companies subscribe
to the ‘seamless’ concept, whereby the world is regarded as one big market.
This allows a networker in any one place to cross-sponsor another person in
a different country who can then build his organisation, assuming the
network-marketing company has a presence there. Singapore is in an enviable
position as it is a global city. People here have wide contact with many
nationalities around the world and they can capitalise on their network.
“In the US, surveys estimate that 60 per cent of households purchase goods
and services through network-marketing channels. This gives you an idea of
the size of the value of goods transacted. Imagine, Singapore going on this
same path and the opportunities that will open up in the coming years as
people catch on to this worldwide trend.”
But as Chia and other networkers also emphasise, there will always be some
wolves in sheep’s clothing. So, never throw caution to the wind. Network
marketing can create significant spin-offs — but only if you are working
with a genuine networking company, not a pyramid set-up. Note that
qualifier and you certainly cannot lose.
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