Network marketing has many benefits for the individual who wants to own his own business, and who wants to take control of his or her financial destiny. However, network marketing or MLM also has some negative features that tend to set people up for failure. I would like to share some of these factors:1- Cost- The cost for joining a network marketing company is often $500 dollars or more. Although this is a small price to pay for your own business, it can be a lot for some people who are looking into network marketing for generating some extra income. If they easily had $500 they might not be looking into making an extra $500 to start with in the first place.
2- Auto-ship- In some companies it’s required that the individual sign-up for “Auto-ship” in order to realize all the benefits of the compensation plan. That means that you have to order product every month equivalent to about $100 in order to go up in ranks and achieve a greater profit potential. For some people, $100 per month is yet another expense that may make staying in business difficult. Moreover, in one company that I was with, I had to order products every month and I couldn’t use them fast enough, nor could I sell them fast enough, so they tended to accumulate in my closet. The inventory got bigger and bigger. That was money sitting on the shelves!
3- Small Retail Profits- Often the difference between the wholesale and retail prices are only about 30%. This makes it difficult to make a full-time income just by selling the product. In order to make substantial income, you have to become a good recruiter and build a downline. This takes time and a lot of effort.
4- Small Volume Percentages- In the beginning when your volume of products or points (BV/PV) is small your percentage commission is also small. For example if your volume is 500 pts, your commission may only be 3-5%. At the top end when your volume is big, your commission may be 30-35% of volume. This may vary depending on the type of compensation plan.
5- Lotions and Potions- I’d say about 90% of the network marketing companies deal in lotions and potions. They market things like shampoos, toothpaste, make-up, diet products, nutritional supplements, etc. They may even be of superior quality. However, they may also be somewhat more expensive than what one can buy at Wal-Mart. What often happens is that a customer will buy the product for a few months, then decide that they can buy a similar product when they are already shopping at Walgreens or Target for a cheaper price. Thus, the distributor loses another customer and has to replace that customer with another one. The retention rate can be very small, and therefore there is a constant search for customers.
6- Friends and Relatives- I hate having to approach friends and relatives to either buy my products or join my business. They can be the most negative prospects to talk to. But, this is what many network marketing company leaders tell their distributors. . .”Make a list of 100 people that you know.” I also hate to make cold contacts. I will not go to the mall and prospect people who come within 3 feet of me! This is one of the most difficult things to do and tends to drive many distributors to quit within one or two months.
7- Inefficiency- In order to grow your business you have to consistently show the business plan to others. I remember I had to drive to other people’s homes to show the plan. I had to go to in-home meetings, and I had to go to hotel meetings. This I find to be very inefficient as I wasted a lot of time. I can now show the business plan to thousands of people, from my computer from the comfort of my home. No meetings! I also share my business only with those people who have contacted me for more information wanting to learn about my business. I don’t talk to people who don’t give a damn!
If you are struggling to succeed in your network marketing business, I recommend Attraction Marketing Formula for getting an endless supply of leads and prospects who want to know more about your business.
If you are looking for a highly profitable, highly efficient, low-cost network marketing business to join, I recommend GotBackUp where you can get 100% commissions and build your business using Facebook from the comfort of your own computer.
If you hate network marketing/MLM and would rather invest your time in online marketing like Amazon, Clickbank, or JVZoo, I recommend Elite Marketing Pro for a complete business and training center on internet marketing. Business is all done online and again you can earn up to 100% commissions without prospecting or recruiting.
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Be sure to also check out my post, “What is the Business of the 21st Century?”
David C Figueroa is a psychologist with over 35 years of experience teaching personal development. An awesome success coach, and internet marketer. Now retired, he has refocused his goals into helping network marketers grow their businesses online.