Today, I want to talk to you about the major problems with network marketing, as I see it. While I am a big fan and advocate for the industry, I will be the first to admit that our industry is far from perfect. In fact, there are several things about the industry that drive me crazy.
What I want to do in this post is share some of the major problems with the MLM Industry and also offer a solution to each problem. I hope you find the information helpful.
Top 10 Problems with Network Marketing
# 1: No Screening Process
The first major problem with network marketing is that there is no screening process. Because of the low cost of entry, ANYONE can join. That is a blessing an a curse. With a traditional business, you need to have a certain amount of capital to get started, or you have to be able to get financing. You normally go through a background check and credit check. Because network marketing does not have this same screening process, anyone can get involved, even people who aren’t qualified and shouldn’t join.
Solution:
As a sponsor or enroller, it is your job to pre-qualify people. No, you should not judge people. However, you should have some type of filtering process or questions you ask your prospects to see if they are a good fit for the business. Most people who join our industry would be much better off as customers, because they do not have the drive, skills, experience, coachability, or mindset to build a successful business of any kind.
# 2: High Attrition
One of the major problems with network marketing is the high turnover. Attrition is very high in most companies. With most companies you will lose 50% to 80% of your team every single year. This means you will have a revolving door in your business and you will have to keep replacing people if you want your income to stabilize. Even if you have a great company and great product you will lose most of your team each year. People quit for many different reasons, but the most common reasons people quit are because of unrealistic expectations and poor self-discipline.
Solution:
The best thing I can recommend is to look for people who love the product line, rather than look for people looking to do the business side of things. People who love the products will keep reordering every month whether they ever build a business or not. On the other hand, when distributors quit the business, they typically stop ordering the products. You can also minimize attrition by building solid relationships with your team members and having a solid training program in place.
# 3: Forced Auto-Ship
Auto-ships have become a huge problem in our industry. Many companies require a $100 to $300 per month auto-ship, just to be eligible for commissions. The average person will only stay on auto-ship for about one to three months before they stop. This leads to high attrition. If people are only ordering the products to be eligible for commissions, your company has it backwards.
I do see the value in having an auto-ship, but it should be optional. Plus, there should be rewards for having an auto-ship set up, such as additional discounts on your purchase and the ability to earn free products. Ultimately, you need people ordering the products every month to create volume in your organization, but you shouldn’t be FORCED to order.
Solution:
Find a product focused company that does not require auto-ship to earn commissions. Find a company with an optional auto-ship program that offers great incentives for using it.
# 4: Overpriced Products
One of the major issues with most companies in our industry is that the products are WAY overpriced compared to similar products someone can purchase on Amazon or at another online store. If the products cost 2x, 3x or even 5x more than similar, non-MLM products, it will be very difficult to acquire customers. If your company’s products are not unique and are not patented, then your customer will just go where they can find the cheapest price.
Solution:
The solution to this problem is simple. Find a company that is product focused that has unique, but in-demand products at a fair price point. There aren’t tons of companies like this in our industry, but there are some. Find a company that is customer focused. Without customers you don’t have a business.
# 5: Shiny Object Syndrome
Network marketing has to compete with all of the other non-MLM type home-based businesses out there. If you spend any amount of time online, you will be exposed to hundreds of ads, emails and pitches about the next big thing! Shiny Objects are everywhere. This means many people who are “junkies” will join your business hoping to get something for nothing. Chances are, YOU might even be a junkie!
Solution:
I have two solutions to this problem. First off, once you find an opportunity that you like, and makes sense to you, you must make a minimum two year commitment to it. This means you do not consider any other opportunity during this time. Next, you must give your new team members realistic expectations about what it takes to succeed in the industry. Share the company’s earning’s disclosure with them. Find out their income goals and show them what they need to do to reach those goals.
# 6: Bad Reputation
Let’s face it, because of the Internet, the word “MLM” has a bad reputation with many people. Some people will tuck their tail between their legs and run for the hills as soon as they find out that your company is a MLM Company. Overcoming this “public persona” can be very tough to do, even if you have a great product, service or company.
Solution:
Your job is to be a professional at all times. Don’t act like a typical network marketer who is ignorant, untrained and uses hype and pressure. Educate yourself. Act like a Fortune 500 CEO. Be serious about your business. Educate people about how network marketing really works.
# 7: Outdated Training & Company Policies
Many network marketing companies are stuck in the 1970s, 1980s and 1990s. They still teach three-way calls and home meetings. Many network marketing companies even have strict rules about using the internet to grow your business. That is crazy! We live in a digital age. People use their cell phone and social media daily. Most people do not want to do home-parties and three way-calls.
Solution:
Research your company’s “internet marketing” rules before you join. Talk with your potential sponsor before you join to see how they build the business and what they teach their team to do. Find a company with internet friendly rules. Find a company with an easy to use website. Look for a company and upline who train you on different ways to build your business.
# 8: Effects on Personal Relationships
I don’t think this problem has anything to do with network marketing itself, but it does have everything to do with the way that people are taught to build their network marketing business. Bugging and pressuring friends and family is a waste of time and can lead to ruined relationships. The last thing you want to do is become “that guy” or “that gal” that causes people to run the other direction from when they see you coming. You don’t want to bug people so much that they avoid you at the holiday party or stop answering your calls. Of course, MLM doesn’t ruin relationships for everyone, but it does for a lot of folks.
Solution:
Learn how to work with your warm market the right way! Be a professional. Stop using pressure and hype. Your job is to notify people about what you are doing. It’s not your job to hard-sell, pressure or convince people. If you do this business the right way, you won’t strain any relationships.
# 9: Cult Like Behaviors
Some MLM Companies have cult like behaviors where they try to brainwash people. Not all companies do this, but some do. Some companies tell you to avoid negative friends and family, to disassociate with people who don’t support you and to only listen to people in your upline.
Solution:
Be open minded, but don’t follow anyone blindly! Seek input from a variety of sources and always trust your intuition. Don’t let your emotions trump your logic!
# 10: No Systems or Bad Systems
The system is the solution. All successful businesses have business systems in place. This includes sales, training, marketing and lead generation system. Most uplines and companies in our industry do not have EFFECTIVE or EFFICIENT systems for their team to use. Basically, they are taught to make a list of everyone they know and go get ’em! That is a recipe for failure in any business.
Solution:
Talk with your potential sponsor before you join the company and ask them the following questions:
- What is your system for getting leads?
- What is your system for selling the products?
- What is your system for sponsoring someone?
- What is your system for training your team?
- What is your system for launching new reps?
Without answers to these questions, you will fail!
Final Thoughts
In summary, these are the top 10 problems with network marketing, as I see it. While I do love the industry I do believe there are many things about it that need to be revamped and fixed. I hope that anyone who reads this post will take into consideration the solutions I provided, so they can get better results in their business and overcome some of these hurdles.
What are your thoughts? What do you think are the biggest problems in network marketing? Do you agree or disagree with what I mentioned above? Leave a comment below to share your thoughts. I look forward to hearing from you.
Sincerely,
Chuck Holmes
Network Marketing Professional (21+ years)
Top Recruiter & Top Rep
mrchuckholmes@gmail.com
Wow! Spot on! I have yet to see an MLM that doesn’t encourage contacting friends and family first. Some with the caveat to tell them you “need to practice” your pitch. That element seems very underhanded. Also, once a company starts telling me to cut out friends for various reasons I become skeptical. I’m excited to learn more about differing techniques.
There are many ways to contact people. Working with friends and family can be a good starting place, but it’s not for everyone. We all need to find a strategy that we feel comfortable doing.
Several times within this article your solution was the products. I believe that is a big key to being successful in network marketing–product first and distributors second. So many network marketers turn these around. The commissions may be low, but if you get out and sell a lot of the products, those you are selling to may soon turn into distributors, because you can then show them how to get the products free or at a lower cost.
Yes, network marketing has some problems, but where else can you start a business at such a low cost?
You definitely can’t go wrong by being product focused. All businesses need customers. And happy customers do make the best distributors. That being said, many companies have overpriced their product line so much that no one in their right mind would buy it and use it if they weren’t doing the business. You definitely want to find a company that offers a great product or service, even at the suggested retail price.
You mentioned low commissions. One thing that many top network marketers have done to help their incomes is to develop educational materials. It could be simple training manuals, or CDs that you can sell for 100% profit.
I believe many MLM companies need to rethink their commission structure. In many cases it is greed of the company wanting a huge piece of the pie. Hopefully, they won’t raise product or service prices, because many of those are too high all ready.
There can be residual income in network marketing, but it is usually short term. A person still needs to keep working to get more distributors and customers.
I’m a big fan of having multiple streams of income myself.
High turnover rate and low quality distributors have been some of the more discouraging problems I have faced in MLM. I remember thinking “How on earth am I supposed to build this to become anything substantial when people keep leaving and the people who stay aren’t pulling their weight?” Needless to say, patience became a lesson I had to learn as well as how to attract higher quality individuals. And though I had to wait some time to find some individuals who were truly invested in the opportunity, the work they did in a few months made the wait well worth it.
Yes, most people will leave and not pull their weight. What’s great about our industry is that you really only do need a few key people to make a great income. Most top producers make most of their income from three or fewer people, even if they’ve sponsored hundreds. That being said, finding these quality people can be frustrating and time consuming at times, but worth it.
I also agree with every single thing you said in this post.
I do believe that much of MLM has gotten a “bad rap.” Just because some network marketers lie and use hype, other network marketers have to pay for their BS.
To me, MLM is like any other business. It is less expensive, and there is a high turnover, but if managed correctly, a person can do quite well. It is my opinion that before joining an MLM, you need to perform heavy research and be sure it is the company you will be happy with.
Great post Chuck.
Yes, the problems in MLM are common in most businesses.
Research, research, research is so important. I know people who have gotten involved in a business, I mean investing their money in it and everything, before at the very least even reading the website to find out what the company was all about. Seems so silly, but it happens more often than people realize.
The desire to “get money” sometimes pushes out the reason and logic of taking time to really get to know the company before getting involved with it.
Before starting any business of any kind, people should do their due diligence and research so they can make an educated decision. This doesn’t just mean looking for negative stuff online. It also means seeking out people who have been successful in the business endeavor and talking with them. Hear both sides of the story and get all the facts and then decide what is best for you.