Multi-Level Marketing & Network Marketing – Are They All Scams?

Ask 10 people what they think about multi-level marketing, and you will get some very strong opinions.

You will probably find that most people have a very low view of MLM (or network marketing). At your next big family event, stand up and announce that you have just joined the fastest-growing MLM opportunity on the planet, and see how your loved ones react.

Why? Why does a simple business model for product distribution garner so much criticism? Why is there some much negativity associated with MLM? Why are there consumer advocacy groups that actively protest the entire idea of multi-level marketing?

Is all multi-level marketing a scam? What is the real problem with multi-level marketing?

It is not the multi-level aspect. Taking royalties and generating residual income is common practice in the insurance and financial service industries.

It is not the direct-to-consumer distribution model. Many successful companies (such as Dell computers, Sara Lee, and other famous brands) use direct-to-consumer models to sell their products and services.

It is not the concept of paying for the opportunity to distribute a product. MLM critics might knock companies for charging to become a distributor, but this is the same concept that a standard franchise uses. The only difference is that you can get set up with an MLM program for $200 – $500, where getting started with a franchise will begin at $250,000.

So why does MLM have such a bad reputation?

Most of the time, it is because of the second “M”.


Most MLM distributors are taught to leverage their “warm markets” to grow their businesses. They are taught to try and sell their friends and families products, and try to recruit them as distributors.

Why? For two reasons:

It Used to Work For The Average Distributor
Back in the 1950′s and 1960′s, when multi-level marketing first became known, people had much larger warm markets. They lived in suburbs, and had neighborhood picnics. Everyone knew everyone else. Our society was very close-knit, we truly lived in communities. Not only that, but multi-level marketing was barely known then. It was a novel concept – make money in your spare time by telling other people in your neighborhood to stop buying from the department store and start buy your products from an MLM company.

Fast-forward to today, and the picture is very different. People barely know their neighbors next door, much less throughout an entire neighborhood. These days, everyone has heard about some sort of “make money from home” scheme. Today we live in a society of guarded skeptics, and we do not want to be sold stuff from our friends and families. Leveraging our personal relationships for financial gain can be interpreted as insulting, and can seriously damage relations with those we most care about.

It Still Works Quite Well…For The Parent Company
The average MLM distributor will stay with a business 3-4 months before giving up. During that time, if they are chasing their friends and family, they will probably sign up 1 or 2 people and spend a few hundred dollars. From a distributor standpoint, it’s peanuts. But from a company standpoint, it’s great! They continuously have new recruits joining the business, and they pass on all the costs of marketing on to the distributors.

They can get away with making it sound like growing a business is a piece of cake by communicating the message that all you have to do to make a significant income is talk to a few friends and family, hand out some flyers and product samples, and you will wake up one morning with a gigantic business.

So can the average person make money in a home-based business? Absolutely. But they can’t rely on their warm market for sustained profitability. A distributor will eventually have to find their target market, and use sound marketing strategies and techniques to target people that are already looking for their products and services.

There are many different marketing tools that a distributor can use to grow a business. However, the reason that most MLM’ers get involved with a business is because they do not have tons of money to spend on their businesses. The three most cost-effective, best-bang-for-your-buck marketing tools that the average distributor can use to find their target market is:

- The Telephone

- The Internet

- The Written Word

When used properly, these tools allow a distributor to leverage their time and their marketing efforts with relatively little investment. They can combine these tools to create effective direct-response campaigns that allow a distributor to see a faster return on their investment. And best of all…they can leave their friends and family members alone, and simply enjoy their relationships for what they are without trying to “pitch” them on their product, service, and opportunity.

If you want to make money in MLM, then learn how to become a good marketer. It is only with good, respectful, effective, target marketing that a person can build a strong downline. MLM is not a “get rich quick” type of program. It pays out via residual income, which means that you get paid tomorrow and the work you do today. It is a legitimate business only if treated like a legitimate business, and that means it takes time, effort, energy, and investment to make it work.

Relationship Marketing for Prospects

As personal selling to cold prospects becomes more difficult and expensive and as business-to-business marketers come to realize the prime prospects in their niche markets are relatively few, relationship marketing becomes the priority.

First there were the separate discipline of advertising, public relations, direct marketing, sales promotion, event management and personal selling, then integrated marketing communications brought all those separate disciplines together in one combined approach to the marketplace. Relationship marketing is integrated marketing communications to qualified individuals.

For the business-to-business marketer relationship marketing has four components:

- Developing and maintaining a list of key prospects, which means winnowing down a mailing list of 2000 to the best 200, or to the top 100, decision-makers in your specialty.

- Staying in contact with the list and requalifying it; “Still the same decision-maker? And assistant? Same address? Same general qualifications?

- Establishing credibility with key prospects over time by offering choices of content by trade media, the Internet, phone, mail or in person.

- Being on call when a need arises. On first contact perhaps 95 percent of your key prospects will have no immediate need. But over time, perhaps 100 percent will have a need.

The last bullet point is why repeated direct mail canvassing of a large database to gain a few immediate prospects is not a wise relationship marketing strategy. Instead of harassing key prospects with that kind of mail (and cheapening the perception of your company), it is better to send valuable information to a much smaller, more qualified list and create a favorable perception with them. Include qualified opinion leaders on that list. So they may digest your information and have knowledge of your products/services when asked by a decision-maker.

How do you get the attention of decision-makers, and how do you get them interested in your products or services?

Today decision-makers are scan-readers bookmarking, or rolodexing, future resources. Unless there is an immediate need, they don’t have time to thoroughly read valuable, targeted content on particular products or services, they only have time to differentiate between good content and promotional schlock. The source of the good content gets filed, put in a rolodex, or bookmarked on a Web browser for the inevitable future need. That exchange, your good content for the decision-maker’s interest and attention, is the beginning of a marketing relationship. It is no coincidence the increasing dominance of the Internet and the World Wide Web and the resulting overflow of information have made credible, targeted content important to every business-to-business sales and relationship marketing effort.

How do you stay in touch with and on the short list of the majority of your prospects who do not have an immediate need?

Canvass your select prospects regularly offering content by phone, email or mail in exchange for more information about their needs. They will respond as their needs change and develop, or if they tire of their current provider(s). Sometimes making it onto a short list of invited bidders is as far as the prospect will allow the relationship to develop. But if you make that short list, you are conducting a successful relationship marketing effort.

Establishing the credibility of your company’s special expertise in solving prospective purchasers problems paves the way for your sales consultants to provide the decision-maker with expert professional service to customize your offering and close the sale. The consultant is introduced into the relationship as a person possessing valuable information needed by the prospect to solve a problem.

How To Successfuly Use Direct Linking In PPC Campaigns

If you are interested in Pay Per Click marketing using Google AdWords, MSN Adcenter, or Yahoo’s Overture you have most-likely heard people asking about how effective it is to do direct linking to an affiliate offer from your PPC ad. The idea in general is to cut out the middle man (your own landing page / website) and to redirect the customer instantly to the merchants landing page. Many merchants prohibits you from doing this, others do not. If you found one that does allow direct linking you still face the problem that is called Google Quality Score. Since you do not have control over the target website, you cannot modify the landing page and therefore a lot of steps to improve your quality score cannot be done.

Assuming you are still interested in that topic, I can tell you that it is possible to achieve very high quality scores and click prices of $0.02 with direct linking. But this requires some good research and does not work with every affiliate program. The most important thing to look at is to see if the landing page of the merchant is mainly made out of images or if there is actual text. Don’t even bother to work on the image-based landing pages with a direct linking campaign. You’ll see $5.00 and $10.00 minimum bid prices before you can say “Goodnight, Gracie”. ;) This disqualifies many affiliate programs from being used for direct linking, but still leaves some out there that you can use. I leave it up to you to find the ones that work.

Once you have identified the right merchant and found products providing enough affiliate commission worth doing PPC, it’s all yours. Scan the web page for keywords and key phrases and match those to product related searches. You’ll achieve the best results on 100% matches. Pick small pieces of the entire product name as an example. Often the online retailer will show the entire product name which can go up into more than 10 words. Nobody will search for the long name, but you can cut it into pieces and use those to build keyword lists. If you use so-called “buy” words, make sure they are located on the landing page and are in close proximity of your other keyword. The word “coupon” at the bottom of a page will not work well with the name of a specific contact lens in the upper part of the same page. Your quality score would suffer. Instead it might be worth looking at the actual page title and use parts of that for your keyword lists. Here comes an important piece of information. Pick your main keyword once you have build the Google AdWords campaign and dump it into the keywords tool. I had several cases now where Google actually suggested some really well converting and relevant keywords to me and upon adding them I was able to get minimum bid pricing as low as $0.02 per click.

Be warned – direct linking is difficult and requires a lot of work and volume. Volume in regards to ad groups and campaigns. Since you cannot modify the landing page there are only x number of words available. You can make up for that by promoting more products. Your ROI will be muss less compared to using your own landing page, but it can be a good indicator when testing stuff. If you break even by direct linking, try doing your own domain/landing page for the same product. If done right you can double or triple your profits and then expand the campaign. You probably now think about using Amazon for direct linking. Again, be warned. This can work, but there is huge competition and you will fight for the spots since only one display URL will make it onto a page showing search results. If you build up volume you could even promote book titles and then benefit from the tiered commission rate Amazon has. Build 500 campaigns for 500 different books and sell 25 books a day. Amazon is flooded by affiliates promoting Amazon products via direct linking. Most of them do not earn much money from it. Amazon’s reporting is 24 hours delayed and you do not always see when you’re outbid by someone else. It requires a lot of attention. But – there are many other affiliate program out there where you can use direct linking and easily earn a 20% or 30% ROI (again, think volume).