The word network marketing has a strong emotional pull to many online entrepreneurs. Some may recoil at the mere thought of being scammed, whereas others may salivate at the thought of a multi-level passive earning empire. The truth is that it’s hard to find a trustworthy and reliable network marketing program, but some do exist. The key is to separate the wheat from the chaff.
What is Network Marketing
Network marketing describes a marketing system that is based upon building a network to act as your sales team. Each person in your network acts as a sales person for a product or service. Whenever anyone in the network makes a sales, they are paid a commission. In addition, a commission is also paid to other members of the network.
Simply put, this is a form of affiliate marketing that utilizes a network of sales people, rather than relying on the marketing efforts of a single individual.
Many of you may have encountered network marketing programs of one form or another in the guise of a tiered affiliate program.
What is the difference between network marketing and affiliate marketing
In essence, these two systems build on the same concept. In each, the sales force is selling a product that is created by another and earning a commission based on that sales.
However, in most cases, the distinction appears to hinge on the key element that network marketing often describes an affiliate program where the affiliate is required to buy into the program itself. Whereas multi-tiered programs where an affiliate simply sells a product, but isn’t required to buy in is often simply referred to as a multi-level affiliate program.
This is an important distinction as a multi-level affiliate program doesn’t carry with it the negative connotations of network marketing while still passing on the primary benefit which is that the affiliate earns commission based on the network sales concept.
Is Network Marketing a Scam?
Often the reference to network marketing evokes the feeling that the program is a scam, pyramid or ponzi scheme. Quite often, people shy away from network marketing for that very reason. Many bloggers, including myself tend to stay away from network marketing programs because of that very fear. But are all network marketing programs a fraud?
In it’s basic principle, there isn’t any real difference between network marketing and affiliate marketing. You sell a product, you earn a commission. Network marketing on its face just takes that concept to the next level. If you build and manage a sales team, you earn a portion of the commission whenever anyone on your team makes a sales. This isn’t much different than the sales manager in a brick an mortar retail store. Well, in theory…
I believe the problem lies in the additional concept of requiring the sales team to purchase the product. Now, the sales manager starts to earn income just from the recruiting process itself. He makes some commission whenever he hires someone onto his sales team. And when you have more levels in the program, he earns more money when the sales person under him hires someone. This income scheme continues on down the line.
That in and of itself is not a problem as long as you are selling a legitimate product. Many companies practiced this concept successfully even before there was an internet. Avon may be one of the most famous companies that utilized this network marketing process.
The problem arises when people up the line realize that it’s easier to make money pitching the network marketing system than it is to actually try and sell the product.
That’s when you start to hear sales pitches about how great it is to earn passive income based on your downline. yadayada. Make money from the work of others!
Eventually, the bad guys at the top of the pyramid realize this whole thing would be even easier if they didn’t have a product at all. They just sell the system itself. They have some kind of subscription fee into the program and tell you how great it is and how you can earn money from other people that you recruit. They give you a bunch of numbers about how much money they earn, but nowhere in their sales pitch do you hear about an actual product. All you hear about is how much money you’re going to make.
Now, you would think that a sales pitch that has no actual product wouldn’t be successful, but the problems that people do buy into it. And the pyramid scheme does work in a limited way to make a very small amount of money for the recruit. However, only the person at the top of the pyramid ever actually earns any real money and it eventually all falls apart.
I’m sure many online marketers have been bitten by just such a scam. And over time, these programs have developed such a negative reaction that people are just afraid to get pulled into yet another scam.
Are There Any Good Network Marketing Programs out there?
That said, I don’t believe that all multi-level network marketing programs are fraudulent. There are a few things to distinguish legitimate programs from the fakes.
First off, I am wary of programs that require you to buy in before they allow you to participate. Quite often, these are the programs that you see that talk about how great they are and tell you that you can make a ton of money if you simply pay them a small fee to join. But these schemes will lack one key factor…
The key factor is to look for a real product. There are a million programs out there on the internet that promise riches and wealth if you only buy in and start recruiting people. Those programs are playing on people’s desires to strike it rich online. Be careful of those programs!
However, if you are discerning and look for legitimate multi-level affiliate programs that sell real products, they can be found. The legitimate programs realize that network marketing is just a method of spreading the word about their legitimate product. It’s an incentive to bring on more sales people. But they have a real product. They don’t try to sell the program itself, they are selling their product.
Look for those key elements as you review programs and it will help you steer clear of the scammers.
Example of a Multi-Level Marketing Program with a Real Product
There’s a few tiered affiliate programs that you can find online. I learned about one months ago that I thought was a promising program that had a legitimate service. I’ve kept an eye on it since to see how it would grow.
I’ll discuss in this section how I discovered Moolala and followed up and researched the program to protect myself. This section of the article will give a brief review of Moolala and does contain affiliate links. You can skip it or read it simply as an example of how I assessed this program.
I first heard about Moolala during an interview of Jon Dale, one of the companies founders, on The Rise to the Top podcast. I watched this video interview in the early part of this year. (I don’t rightly remember, but probably in January)
You can watch that interview below:
This interview intrigued me because I thought that Mr. Dale gave a very forthright interview about this new company and went into some detail about the concept behind his new company.
Basically, Moolala is a daily deals site along the same lines as groupon or living social. The difference is that they build an additional incentive for you to refer people to their deals. They give you 2% of any purchases that your referrals make. In addition, they give this 2% incentive for 5 levels of referrals.
Here’s how they describe their program:
This struck me as a sustainable process. They essentially build in a 10% commission on their daily deals and pay out 2% of that up to 5 levels. And they are applying this multi-level marketing concept to a popular and growing business of daily deals.
After watching this interview, I was intrigued. However, I wasn’t sold yet. I had a couple of concerns that I wanted to research:
- First off, at that time, Moolala was just starting out and did not have any deals to offer yet. So, as a fledgling business, I wasn’t sure I wanted to support their program
- My next concern was that I wanted to learn more about their program and service. Was there a hitch? Did they operate the same as other daily deals sites?
- Finally, theres a deep negative sentiment surrounding these multi-level marketing programs, so I was wary about joining in.
My first step was to do more research about Moolala. I started doing more reading online and learning about the program. After doing some reading online, I found that the concept of the service (giving daily deals) appeared sound, but I was most concerned that they did not have any deals in place yet. This set off a pretty big alarm. (See my section about pyramid schemes that sells no products)
Since it was free to sign up, I did take the plunge to sign up and see how it goes. But I did not recommend or write about the program because I wanted to see if they turned out to be a legitimate program. If it turned out to be a scam, then I’d be taking one for the team. And so I waited…
I signed up in mid-February and for the first couple of weeks, I didn’t see any deals. In March, I got my first email from Moolala with an actual deal:
After that, I started seeing some deals come in every few days.
This is starting to look promising..
Here are a couple of examples of some of the deals that I’ve been getting from Moolala:
At this point, I’ve been getting a steady stream of deals that have been arriving every couple of days since March. I can literally see this company’s growth as they get more and more deals.
After seeing that they have deals in place, Moolala has satisfied my most important criteria of actually having a real product to sell. I’ve waited to get some experience with the company and ensure that they are actually growing as a company and not just going to fade away as many other network marketing programs.
Over the months, I’ve seen more and more deals from various sources and have realized that this is a legitimate and growing company with plenty of potential.
What I can say about the program is that it is not an illegal pyramid or ponzi scheme. They have a legitimate product/service that they are offering. They have real deals in place and they don’t require any sign up fee to join in.
You simply sign up for free as you would with any other daily deals site and you’ll start receiving deals by email and you participate in the program exactly the same way as you would with groupon or living social. The key difference is that when you do refer others to the program, you earn some money when they participate in the deals.
So, interested in getting daily deals and earning 2% from friends that you refer? You can sign up for Moolala free right here. (This is a Riches Corner affiliate link)
Final Thoughts about Network Marketing Programs
As you can see, I attempt to be extra careful when evaluating a multi-level program. In particular, I watch out for programs that require their members to buy in before they allow you to participate. Along with this, I make sure that the program has a legitimate product or service that gives real value to its customers. Lastly, if it sounds too good to be true, then watch out!
Legitimate programs do exist, but you want to be careful and do extensive research before you jump in.