I had a prospect call me the other day and ask me if product based network marketing companies are better than network marketing companies specializing in some type of service. I thought that would be a great idea for a blog post, so I want to take a few minutes and share my thoughts on the subject.
As a quick disclaimer, I should tell you upfront that I have always participated in a product oriented company, other than my short experience in Send Out Cards (I was really only a customer in that). I have nothing against service based companies. I have just naturally enjoyed product based companies.
What I want to do in the paragraphs below is share the good and bad of each type of company. I don’t expect you to agree with every single point that I make. I understand everyone is a little bit biased toward their own company. I just want to share what I think are the “potential good and bad things” of each type of company.
What I Like About Product Based MLM Companies
- The products are typically consumable and need to be reordered each month
- The products are typically great quality
- In some cases, the products can be really unique
- Many products have a nice wholesale-retail markup which allows you to earn generous commissions
- Most products come with a strong money back guarantee
- Some products are backed by science and are endorsed by athletes and celebrities
What I Dislike About Product Based MLM Companies
- The products are often overpriced compared to similar products sold in the marketplace
- There are lots of companies in the industry with similar products making competition fierce
- Many of the products are “luxury items” not commodity items, so when a consumer is hurting financially their auto-ship will be the first thing they cancel
- In many cases, when a distributor quits building the business they stop ordering the products (not always)
- You can normally buy the products on Amazon or eBay at a cheaper price that you can buy it for as a distributor
What I Like About Service Based MLM Companies
- The services are normally services that people are already accustomed to paying for such as insurance, home electricity, cell phone, internet, etc.
- You’re not asking the customer/distributor to create a new spending habit since they are already paying for this type of service somewhere else
- In many cases, the distributor will keep ordering the services, even after they stop building the business (how often do people switch utility companies or cell phone companies?)
What I Dislike About Service Based MLM Companies
- Many services change with the times and a complete industry can go away almost overnight (ask Excel Communications)
- Many of the services offered by MLM Companies are overpriced compared to competitors
- The payout per customer/distributor (in most cases) is less than the payout per customer/distributor in a product based company
These are just generalizations and there are always exceptions to the rule. I don’t believe that one type of company is better than the other. What I think matters most is that you find a product or service that you are passionate about, that makes sense to you, and is a good deal for customers. If you pick a service based company, make sure the company has several different services they sell, because industries do change, and you don’t want the company to become obsolete overnight.
If you pick a product based company you must find a product that you are passionate about AND something that is great quality and at a competitive price. If your prospect can buy a very similar product for 90% cheaper somewhere else, it’s going to be difficult to build up a customer base and team.
One More Thing
If you were to look at the top 50 MLM Companies in our industry just about all of them are product based (probably 95%). There aren’t tons of HUGE service based MLM Companies other than Primerica, Ignite, Ambit, 5linx, ACN and Legal Shield.
In review, there are good and bad service and product based network marketing companies. At the end of the day, it’s your job to do your due diligence and find a company and product/service that makes sense to you. If you think it is a good deal and you are passionate about it, go for it! I suggest you start out as a customer first to see if it is a good deal for customers. If it is, you might just be on to something!
What are your thoughts? Do you prefer service or product based MLM Companies? Why? Leave a comment below to share your thoughts. I look forward to hearing from you.