Is Network Marketing Losing Its Luster?
The network marketing business model has been around for at least a hundred years and scammers existed even then. However, most legitimate companies were able to reign in their rogue distributors and, with the help of government regulators, the amount of money lost to illegal scams were minimized. However, with the growth and expansion of the internet, network marketing opened a new market for many legitimate businesses as well as the scam artists.
Network marketing is a fairly simple model. A company has a good product that sells better if demonstrated by a trained distributor that also has sales techniques that enable them to close a sale in one visit. Everything from vacuum cleaners, house wares and health and beauty products were, and still all, sold through a network marketing model. The company produces the products and enlists the aid of outside sales representatives to take their product to market and put it into the hands of consumers.
Prior to the internet, these so-called licensed distributors worked in a territory protected against competition from other distributors and could earn a decent living selling whatever product line with which they were involved. Typically, the distributor had to purchase a sales kit in order to demonstrate the product and some companies may have even charged them for training on how to use the product or close the sale.
The money paid for the sales kits was usually enough to cover the wholesale cost of the kit, preventing the loss incurred by the company from the distributors who took the kit, made no sales and disappeared with the products. These distributors that worked well and earned their money were offered additional incentives to recruit others into the business. There was rarely any financial reward for signing up a new distributor, but for every sale they made, the person who recruited them received a commission.
Unfortunately, a few individuals came with an idea that they could recruit people simply for the sake of recruiting other people and no real product ever changed hands. Commonly referred to as a pyramid scheme, most are outlawed in countries around the world. The only way a person could recoup the money they paid to join was to recruit others into the scam and take a piece of their entry fee. Sometimes, they would have to recruit as many as five other just to break even.
With the growth of the internet, there are many people making unrealistic promises of how to make a ton of money without having to do a lot of work. These companies rely on a person's laziness and greed to get them into the business and promise them that every recruit they sign up will make sales on their products or services for which the sponsoring member earns a commission, in addition to the bonus for recruiting them.
Many of the people focus on recruitment to make their money and no product is ever sold. That is OK though, because that was the illegal intent from the beginning. These scams have turned most people away from network marketing giving even legitimate businesses a bad name.
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