Lesson 5: Network Marketing

In the last lesson, we talked about why home-based businesses are becoming so popular, and why I believe they’ll continue doing so. In short, they support what I said is driving today's trends: personal power.

We talked in that lesson about home-based businesses in which you trade your time for money one time, which is not the way to build a passive, residual income. And residual income is what you’re really after if you want to leverage your time and build real wealth (or even just pad your monthly income).

As far as home-based businesses go, there are a few ways of leveraging your time. You can produce a product, for instance, that can be sold on a passive basis online -- perhaps an e-book or software. You can use software to automate your actions online in order to generate income from web traffic or other means. But most of this is beyond the average person wanting to work from home.

The average person can succeed, however, with both network marketing and affiliate marketing IF ...

... IF they find the right program and apply themselves to it correctly. And again, that's what this course is here to teach. Because you can work as hard as you want but you'll NEVER do well with a crummy program. Or you can get the best program but either not give it much effort and/or simply not know what you're doing and you'll really make very little on your efforts.

Now before I talk about network marketing specifically, how exactly do affiliate and network marketing programs follow this drive toward personal power? Well, quite simply, people on the street have represented the best form of marketing for years now for many products and services. Few businesses can grow quickly without good "word of mouth." But no one was ever paid for being the best form of marketing. Instead, marketing companies were being paid for their "additional" help.

Today, as we're targeted by more and more ads, direct marketing pieces, phone calls, etc. every day, word of mouth is becoming even more important. Because no one wants to get slammed by ads anymore. We've learned to shut that off. So businesses are learning that if they can produce something worth people talking about, then they can distribute their products directly through family and friends.

To be fair, paid word of mouth is not as well received as that without any bias. But if people share with others in the right way, they can still get more attention than ads and can still be highly effective.

NETWORK MARKETING
Also known as MLM (multi-level marketing), networking has become hugely popular, and rightly so for the reason I've explained above. BUT ...

... there's still a problem, isn't there?

Over the years, network marketing got a bad name especially due to zealous distributors. No one likes a "Johnny One Note" who can only talk about one thing, and one of the dangers of becoming a network marketer is that you can get to the point where you're always looking for the next sale. So you try to work a sales pitch into every conversation, and pretty soon people are avoiding you.

I can assure you, I am well aware of this and this course will guide you AWAY from that kind of interaction and that kind of problem!

The issue wasn't only that people talked about just one thing. They were also typically trying to push a poor value because, all too often, products sold in this way -- even if they're good products -- are overpriced vs. comparable retail products. So in fact, part of the pitch is, "Yes, this is a little more expensive, but you can also make money by referring other people."

So in FACT what you were paying for in part was a business opportunity. You literally were NOT paying entirely for the product. You were paying in part for the opportunity.

The obvious problem: if you look to the end result of such a company, it’s always the same. Once the market is saturated (you’ve reached as many consumers as you can with your offer), the last ones looking into the idea will say, “There’s no one else to sell to. And since the product isn’t worth what you’re charging, why should I get involved?”

If, in the end, someone will think the product overpriced, the “lowest” distributors in the chain will find no one else to sell to, and eventually they’ll grow tired of investing in such an expensive product / opportunity themselves. So they’ll drop out, and now the next level up is paying too much without making money, so they’ll drop out. And so on. The whole thing collapses. And this has happened over and over again in network marketing. It’s practically the standard.

And by the way ... I'm ALSO AWARE that some of these companies will argue, "There is always another generation. There are always new consumers." But in my mind, what they're saying is, "There's a sucker born every minute." They're relying on someone new entering the marketplace and being sucked into a business model that does NOT honor value and does NOT honor the needs of each consumer. They are relying on an unstable structure that makes a lot of money for some people without much concern with what they're really providing the world.

I'll also add this: I'm not pointing fingers at any company in particular here. If you're involved with a network marketing company already, I'm not putting your company down. You know in your heart whether these points apply. I'm saying all this to make sure you know that I realize what the traditional problems are. This way, you know that I can help to lead you through them, because I will NOT get involved with programs like that!

In fact, I STRONGLY believe in network marketing because it can empower the average person like no other business model. It is endorsed by some of the world's wealthiest people for its ability to build millionaires and to leverage a person's time. But it MUST and WILL overcome these historical problems, and here's why:

OVERCOMING THE PROBLEMS
Right now, the idea of network marketing is growing on a lot of people, but still leaves a bad taste in some people's mouths because of the problems I've talked about. At the same time, companies are finding it harder and harder to get their message through to consumers ... UNLESS they reach them directly by word of mouth. So they may HAVE to rely more and more on the network marketing model.

As a result, those network companies that don't provide the best value will end up folding. There's no two ways about it. This was once an uncrowded marketplace, and having a "business opportunity" associated with your product really appealed to those who wanted to pad their income. But as this becomes mainstream, competition is going to push out the weak companies, and that includes all those with products that really are NOT worth talking about.

So what you'll see is that successful products sold through network marketing are going to be those that 1) are inherently excellent products and have no retail competition to drive pricing; or 2) provide equal or better pricing than those sold in the retail market.

In either situation, you can earn from providing other people with REAL VALUE, and that's the goal.

In difficult economic times, I tend to look for those opportunities that will save people money compared to the retail marketplace, but there will always be a market for premium products as well.

When you're providing value first, you can really HELP people by bringing them products they have no other way to get. You can HELP them by offering them solutions they have no other access to. And you can maintain your personal integrity, you can keep your good name, even when approaching friends and family in this way, since the value is there whether or not they engage in the business opportunity. This is key. This is true power, not the failing power offered by most network marketing systems.

In the next lesson, I'll talk about how to choose among programs, which includes thinking about how you will promote them.