Common Questions about Network Marketing
I ran a cool new software to find out the 15 most commonly asked questions about network marketing. It actually returned 20 or so but 6 were about individuals or particular companies.
We skipped those so we could get right to the meat.
# 15 – WHY DO COMPANIES CHOSE NETWORK MARKETING?
It’s a great model…for the company.
Think about it – the 2 biggest expenses and a huge liability are eliminated.
MLM companies don’t advertise. You do it for them. No million-dollar ads on the Super Bowl, no week after week newspaper, local TV spots, etc.
No account receivables – you pay for the product AND the shipping BEFORE the product leaves the warehouse.
Just those two things alone are massive bottom line subtractions.
If you want to get a product in a store – a big chain – these days you are looking at astronomical ‘slotting fees.’
If you are not familiar with slotting fees it means you, as a manufacturer, pay a ‘fee’ to get your product in the store…..then additional fees if you want to be at eye-level, end cap or at the counter.
Forbes points out…
“Small manufacturers complain that they can’t afford the slotting fees, which can run up to $25,000 per item per chain, depending on the number of stores and the appeal of the product. A food broker in the Midwest says he had to fork over $20,000 – nonrefundable – just to put a new product to a 90-day test with a big retailer. One New England chain charged a baked-goods company $1,100 per product per store for more than 1,000 locations, even though the bakery items were already on shelves.”
Slotting fees for start-up companies plus advertising plus accounts they don’t pay are 3 huge expenses that are put on the backs of distributors.
SHH – I won’t tell if you don’t
Ever had anyone call you about an MLM and tell you they WERE NOT well capitalized?
“They are well-capitalized, have no debt…”
Yeah, right…and the Tooth Fairy really exists. (Don’t fall for the ‘they decided on this model to bring their product to market because they really care, want to give others a chance.’) Doesn’t mean they are nice people, but as Don Corleone, The Godfather says, “it’s not personal, it’s just business.”
SHHHH! Most of them are undercapitalized.
You can start an MLM on a shoestring.
The model is great for a company because the rep takes on the responsibility for everything; pays upfront for the product, advertises and the field, collectively, creates 1000s of ‘outlets.’
The cool thing is you can get paid great bucks if you do it right.
Unfortunately, most people who join treat their business like a traditional business and spend money trying to advertise online, locally, etc., without realizing word of mouth advertising is not only free but also the best and most effective advertising in the world.
If we’re going to make some money, we need to talk to people. And that is an easy skill to learn and teach.
Companies pick MLM because it is cheaper to get their product to market…much cheaper.
Would you rather pay $25,000 per location, $1000 per item per location, wait 30-60 days to get most of your money back after fronting the product to the stores, spend 100s of $1000s to advertise to get customers who got to those stores to buy your stuff…or have 500,000 people do it all free on your behalf and factor in their commission on top of the cost and profit?