Network marketing as an industry gets a bad rap. Who, in this Year Of Our Lord 2021, has not gotten that random message from a long-lost high school friend hawking a “miracle” product designed to make you thinner, prettier, or healthier? You haven’t talked to her in seriously 19 years and now here she is, rolling into your DMs to sell you a solution to a problem you didn’t even know you had.
“How thoughtful of her!” said no one ever.
But wait: there’s more! Because even if you aren’t interested in the product she’s selling, maybe you’d wanna be on her team of bossbabes? I mean, those girls are literally like sisters to her now. They have each other’s backs, and they’re killin’ it. Financial freedom is right around the corner!
If only it was that simple and easy, right? You just sign up and BOOM – money starts flying into your purse.
But here’s the thing: for every saccharine, passive-aggressive network marketer I’ve had the unfortunate opportunity to endure, I know at least one passionate, heart-centered woman who is promoting products she believes in and making a good living doing it.
So if some women are scraping by and annoying everyone within a 10-mile radius and other women are generating meaningful income and creating real relationships based on love and trust, then is all this negativity toward the industry really warranted? And if you do decide to sign on with one of these companies, what do you need to look out for? How can you avoid becoming another cautionary tale?
This is where I come in.
As many of you know, I spent 10 years in commercial lending. I’ve studied the inner workings of just about every type of business you can imagine, from machine shops to radio stations. Aside from a short (and unsuccessful) Mary Kay run in college, I haven’t dabbled in network marketing or MLMs myself. It’s easy for me to be objective here.
I have a sign in my office that reads: Have a mind that is open to everything and attached to nothing, and I take that message to heart.
So let’s dive into the ugly, beautiful world of network marketing together and see what we find, okay?
Ep 15: How to Decide if Network Marketing Right for You – Start, Grow, or Pivot: Business Planning & Strategies For Women Entrepreneurs
Why do companies market this way?
Before we can even have the conversation about whether network marketing is right for you, I think it’s helpful to look at this concept from the company’s point of view.
Why would a company choose to market its products via a network of independent representatives instead of using paid ads, its own social media clout, or putting products in stores?
Because it’s low risk, that’s why.
These companies can control risk in a couple of different ways, actually. The network marketing model offers them better control over advertising costs and less inventory risk. Let’s look closer at each of these strategies so we can understand how they benefit the company.
Better control over advertising costs
Normally, companies have to allocate a big chunk of operating expenses to marketing, advertising, and promotion. It’s not uncommon for a brand’s ad spend to be its third or fourth largest expense, usually behind rent or facilities costs and salaries, which tend to take up the top spots on the operating expense side.
And those expenses don’t come with any kind of guaranteed return on investment (or ROI, in consultant-speak). This means that a company could pour thousands (or hundreds of thousands) of dollars into an ad campaign only to have it flop. It happens all the time. And when it does, there’s no way to recoup that money. It’s just gone, having been paid out to marketing firms, publications, online media houses, social media platforms, broadcasting conglomerates, and the like.
In contrast, when a company uses a network marketing model, it generally only has to cough up the cash for marketing when product is sold.
It’s genius, really.
And, instead of hiring maybe 100 sales representatives to promote their products and work with retailers, they can hire thousands (or even tens of thousands) because they don’t have to pay these reps a salary. In fact, the company doesn’t pay a dime until—and unless—product sells.
Even better, the representatives the company signs often have to pay the manufacturer when they sign on. This payment is often a mix of joining fees, initial product purchase, and educational materials, but of course, this varies widely by brand.
To be fair, some of what you pay goes toward hosting and managing the online portal representatives use to track sales and get paid, although it’s hard to know whether there might be profit baked in. And if there is profit baked in, it means the representatives themselves become a new stream of income for the company.
Less inventory risk
Virtually all product-based companies take on some amount of inventory risk—that is, the risk that they’ll spend money making, packaging, shipping, and placing product that doesn’t sell.
But like all e-commerce businesses, companies that use networking marketing avoid the risk of shipping products to stores like Wal-Mart and Target only to have them collect dust on the shelf. When product grows stale in a store, this means wasted transportation costs—not to mention that some agreements allow retailers to send products back to manufacturers if they don’t sell. Ouch.
On top of that, companies that use network marketing avoid the very real risk of reputation damage that could occur if stores mark down their inventory to get products to move.
Will *you* be successful at this?
By now, I think we’re all clear about how a network marketing model is GOLD for manufacturers. But what about the hordes of women who sign on with them?
You might not like this next part, but I have to say it. As a coach for women entrepreneurs, I’m not here to tell you what you want to hear. I’m here to tell you what you need to hear. It’s one of those “hate me now; thank me later” deals.
I’ll leave the candy-coated affirmations to your mom, your bestie, or your husband. They won’t get you where you want to go. I’m here to fight for your dreams, period. That’s what I do.
Check your mindset
I know, I know… another coach talking about mindset.
But hear me out: the honest, data-driven truth is that 75% of network marketers never turn a profit, and 50% actually lose money. This means that for every eight people who sign on, two of them make money; two break even; and four of them end up poorer than when they started.
Part of this phenomenon could be because network marketing gigs generally have a low or nonexistent barrier to entry, meaning anyone can sign up. This is great news when you don’t have thousands to invest in start-up costs, but it also means there is a lot of competition because, again… anyone can sign up.
And, of the 25% of people who do turn a profit, only 3% made more than $25,000.
But you probably already knew that. And yet here you are because, despite the odds, you’re still intrigued.
Here’s where mindset comes in. With such a slim percentage of network marketers making money, you’ve gotta believe in yourself 100% if you think you’re getting into that 3% club.
When I say you need to believe in yourself, I mean you need to take a long, hard look at the thoughts playing on repeat in your mind because your thoughts are going to create your results.
I’ve talked about this before, but if you’re new here, here’s a quick explanation: I teach my clients something called “The Model.” I didn’t come up with it (I learned it from Brooke Castillo), but I do use it every day.
The idea behind The Model is pretty simple: what we believe to be true manifests as our reality. When something happens, we have a choice about how we view it. For example, let’s say a prospective client balks at the price of your product. This is what we call a circumstance. It’s a thing that happened; a fact.
Where we go from here, though, is up to us. When something happens that’s outside of our control, we have thoughts about it. Thoughts are sentences in our brains that pop up in response to things that happen to us.
Thoughts, in turn, bring on feelings. And those feelings influence what we do—or don’t do (our actions). And ultimately, those actions create specific results for us.
As an example, let’s consider what might happen if you signed up with a network marketing company and sold zero products during your first 30 days:
Your Model: 1 – CIRCUMSTANCE ($0 sales in first 30 days) 2 – THOUGHT (I'll never be successful at sales) 3 – FEELING (defeated; disappointed) 4 – ACTION (shy away from marketing; pull back to avoid disappointment) 5 – RESULT (no sales)
So, your thoughts will literally make or break your network marketing career. Hence, mindset is critical. It’s probably the #1 thing I help clients do. I teach them to identify thoughts that are getting in the way of them being successful and help them re-wire their brain to choose more helpful thoughts.
Here’s an example of that same circumstance but a new, intentional thought:
Your Model: 1 – CIRCUMSTANCE ($0 sales in first 30 days) 2 – THOUGHT (I have everything I need to turn this around) 3 – FEELING (optimistic; determined) 4 – ACTION (seek help from others; study and try new methods of marketing) 5 – RESULT (attract more prospects)
What tends to work best for me—and my clients—is to start with a brain dump. Grab a pen and paper and start scribbling everything that comes to mind when you consider signing on as a network marketer.
Your brain will likely serve you some sweet thoughts at first, like:
“I love this product; it practically sells itself!”
“I’m going to make so much money!”
“If so-and-so can do it, then I can, too!”
But keep listening because your brain is more than likely also storing some not-nice thoughts in the background.
“I’m not good at sales.”
“I might fail.”
“My friends will judge me.”
And if (when) your brain presents these shitty thoughts to you? Rejoice! You’re human! Your brain’s mission is to keep you safe from enemies, foreign and domestic, and trying new things is scary and unsafe and generally to be avoided.
For the love of all that is holy, please spend as many hours untangling your wild and destructive thought patterns as you do watching TikTok. Because if you try to force the action of selling without the thoughts to back it up, you’re not going anywhere fast. This is exactly what I do with clients: show them how to sift through their thoughts to clean out the bad ones and put the good ones on repeat.
I know you want me to tell you which companies are good and which ones are bad. A chart with sign-up fees and median income and earning potential.
Sorry. None of that here.
I’ll leave that analysis to everyone else on The Google. You don’t have to look very hard to find that information.
To me, it’s practically irrelevant.
If you want to try your hand at network marketing, you need to choose a product you truly love. One you’d feel selfish not sharing with everyone you know. (Ooh that’s a good through to practice, isn’t it?! “I would be selfish if I DIDN’T share this with everyone I know.”)
If and when you find that product or that company that lights you up, go to work on your thoughts before you spend a penny on signup fees, inventory, or anything else you need to get going with them.
Drag all of the thought-skeletons out of the closet of your brain. Expose them to the bright light of day. Which beliefs are worth keeping? Which ones are you ready to let go of?
It’s up to you. And if you want help, I’m here.