How to Select a Network Marketing Company

How to Select a Network Marketing Company

Not all Network Marketing companies were created equal, and selecting the right one (for you!) may mean the difference between success and failure. It did for Darren Falter, and the following article is adapted from his book, How to Select a Network Marketing Company. It has sold over 40,000 copies in soft cover in 10 countries and is in its fifth revision.

Falter was introduced to Network Marketing while a full time university student in 1990. Between 1990 and 1994 he worked hard at several opportunities but failed at them all. What saved him, he said, is that he never blamed his failure on the industry. He continued to believe in Network Marketing but by 1995 he was “fed up”: “Up to that moment I had tried so many different strategies with so many different types of businesses, selling so many different kinds of products (that) I decided that if I was going to be successful, I had to select the best home-based business.”

Borrowing “quite a large space” in his parents’ basement, Falter compiled a list of over 200 top home-based business programs and amassed “files full of substantial information” on each. He eventually narrowed this list down to the five best programs and then picked one of the five and, “for the first time in my career, I launched a successful business that took me to a solid income that provided financial security for my family for years.”

To find the right company, Falter endorses two basic rules:

First, do your own research. Don’t trust someone else’s facts and figures.

Second, do not make decisions while you are in an emotional or hyped up state.

Questions we will be looking at in this article are:

Which product or service industry is the most profitable?

Should I go with a new idea, or with something tried and true?

During which phase of growth should I join a company?

Which distributor compensation plan is best?

How can I tell if a company’s management team has high integrity, and that they are experienced, competent and committed?

How can I find time to study and compare all of these companies?

And finally,

Which company is right for me?

Please bear in mind that while no scrutiny system is perfect, a good system is better than taking the first opportunity that presents itself, and certainly better than a stab in the dark. To make the task manageable, we break our quest down into four components:

1. Product / Industry

2. Timing

3. Compensation Plan

4. Company / Management

In this issue we will look at product, industry and timing. In the following issue we will examine the compensation plan, company and management.

Product / Industry

This includes Buying Clubs, Catalog Shopping, Household Products, Lead Generation Programs, Jewelery, Gold, Silver and Collectibles, Legal Services, Nutritional Supplements and Health Products, Personal Care Products, Telecommunication Services, Water Filters, Travel Programs and others. After reviewing over 200 Network Marketing companies, Falter found that the overwhelming majority fell into four categories:

1. Nutritional Supplements 71%

2. Personal Care / Skin Care 14%

3. Household Products 6%

4. Telecommunications 5%

This gives a good idea of the trends in Network Marketing. To further evaluate an opportunity, goods and services can be checked against the following seven criteria:

1. Emotional, Ideally the product or service should trigger an emotional reaction, which in turn creates an emotional bond to the product. It is easy to see how nutritional and skin care products may do this, if they make you feel better and look better. Telecommunications would however have limited emotional appeal.

2. Consumable, The product or service should be used regularly and replaced on a monthly, weekly or even daily basis. Vacations, exercise equipment and such are not “consumed” on a weekly or monthly basis and so do not generate residual income. Falter considers this to be the most important of the seven qualities.

3. Unique, The product or service should have a unique twist, something that the competition doesn’t have or can’t get.

4. Traditional, Although a product should be unique, it must not be so unique that people cannot recognize it or identify with it. Once you have to explain what it is, you are edging into dangerous territory.

5. Valuable, The product or service must be worth its price, yet allow for a healthy profit margin. If everyone (distributor, company, customer) benefits, you’ve got a winner.

6. Timely, The product or service must be in high demand, RIGHT NOW.

7. Stable, The product or service must also be in high demand LATER. Will the product or service be in high demand in 20 years? If the answer is yes, you have a winner. If demand increases with time, all the better.

Now check the product you are considering against these seven characteristics. Your objective is to get seven yeses.

Finally, keep your focus and don’t get sidetracked by personal biases, personal likes and dislikes; in the end what matters is what other people want.

Now double check your research results:

Make a list of the top twenty most successful companies and find out which products they are marketing.

Make a list of the top twenty income earners in Network Marketing and find out in which industries they are earning their millions.

This should give you a good idea of what works well in MLM. (This sort of information can be found in MLM books and trade journals.)

Timing is Everything
According to Dr King, professor of marketing at the University of Illinois and co-author of The New Professionals (about the rise of Network Marketing as the next major profession), a company goes through several major growth phases as it matures into a stable, long term opportunity. The first growth stage is known as the “formulation stage”. This is the start-up phase when companies are most vulnerable and over 90% go out of business within 12-24 months.

The second phase of growth is referred to as the “concentration phase”. During concentration, the company is getting its ducks in a row and working out the bugs. Similar to the formulation phase, the concentration phase is still considered a start-up phase and it is a risky time to get involved. These two phases are often referred to as the “pioneering phase” and most experts agree that the risk to reward ratio is too high to consider getting involved.

If and when a company reaches around $50 million in annual sales, the company experiences a phenomenon known as “critical mass”. This figure should not be taken too literally but it is a real phenomenon and will occur slightly before or slightly after the first $50 million, bringing with it the beginning of the company’s “momentum growth phase”. During this phase, if the foundation was properly laid, a company can go from obscurity to becoming a household name with 4-6 years.

According to Bruce Hedges, (Who Stole the American Dream? Pp131,132), when critical mass hits, suddenly everyone wants what you’ve got, growth goes into overdrive and sales begin to explode!

The last stage of a company’s growth is the “stability” or “maturity” phase. This is a great time to have a large downline but a tough time to build one. Growth in the stability phase is significant, but slower. However, it is now clear that many companies have learned how to maintain healthy growth during the stability phase.

One way they do this is by continuing to diversify the product line. Sometimes companies will go through second, third, and fourth momentum cycles as a result of this type of innovative marketing. Also, entering new international markets every year can keep a company profitable for decades. When a mature company expands into a new country, this creates a true ground floor opportunity without the risk associated with start-up programs.

As Network Marketing continues to evolve, distributors will realize that getting in early will become less and less important. An entrepreneur’s primary concern will be selecting a company that has long term stability, not short term “flash-in-the-pan” profits. But although selecting a company in the stability phase will be a much more inviting option than it once was, there is still no better time to build a Network Marketing business than during the “hypergrowth” momentum phase.

One further note: just as companies have momentum phases, so can entire industries, and indications are that the Network Marketing industry as a whole is entering a momentum phase (but now is not the time to elaborate on this).

Cheers,

Steve