The Top 10 Problems with Network Marketing

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 absolutely 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.

# 1 Low Commissions 

Without a doubt the biggest problem with the network marketing industry as I see it is the low commissions.  With most companies you need a team with at least 1,000 people in it just to make a few thousand dollars per month.  If you are only earning $2 to $5 per person in your organization who places an order that month, you need a big group to make any kind of serious money. For most people, it takes several years (or longer) to build up a group with 1,000 or more people in it.

Solution: Join a program where you can earn $500 to $5000 for each per person you sign up. This is known as Top Tier MLM.  Another solution is to join a company where you can earn at least $100 to $500 for signing someone up.

# 2 High Turnover 

Another problem with network marketing is the high turnover.  Attrition is very high in most companies.  With most companies you will lose 50% to 75% 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 be stable. Even if you have a great company and great product you will lose most of your team.  The truth is, most people in our society quit everything they do, even marriages.  MLM is no different.

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 like the product 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.

# 3 Auto-Ship Policies

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.

I do see the value in having an auto-ship, but it should be reasonable (less than $100). Ultimately, you need people ordering the products every month to create volume in your organization.

Solution: Find a company with no auto-ship requirements, or at least a low requirement (less than $100 per month).

# 4 Low Quality Distributors 

When a company charges less than $500 to get started, you typically attract the wrong type of person.  You typically attract unemployed folks, broke folks, or folks looking for a financial miracle.  When there is no money invested to start a business, people won’t take their business seriously. Obviously, someone who spends ten thousand dollars or more to start a traditional business won’t give up and quit in 90 days.  When someone only has a little bit invested, it’s easy to quit.

Solution: Focus on sponsoring product users.  Avoid hype.  Don’t promote your MLM as fast or easy money.  Look for quality people with prior business experience to sponsor into the business.

# 5 Shiny Object Syndrome 

The internet is flooded with shiny objects; lots of them.  Most people receive 10-100 emails per day with the next greatest system, business opportunity or money making idea.  Before the ink dries on their current distributor agreement they are off to the next greatest thing.

Solution: There is little you can do to keep your team from chasing shiny objects other than to tell them that all businesses require hard work, commitment and some money.  Give people realistic expectations and there is a better chance they will stick around.

# 6 Bad Reputation

Let’s face it, the word “MLM” has a bad reputation for most 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: Most of the time, I just lead with the products and don’t even tell people it’s MLM (unless they ask). By no means do I hide it from them.  Instead, I am a product oriented network marketer who believes in finding product users and customers.

# 7 Product Prices

Another problem with network marketing is that most companies price their products three to four times (or more) than what similar products sell for at the local store.  When a company sells a bottle of fancy juice for $60 that can be purchased for less than $10 at Wal-mart, it’s a tough sell (and rightfully so).

Solution: Find a company with great products that are priced fairly.  Shop around different companies.  Find a company that offers products that are a great value for customers (people not doing the business). Or, find a company with unique products that aren’t sold anywhere else.

# 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. Learn how to get people to contact you first.

# 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 The Lie About Passive Income

Many folks claim that MLM is residual income.  In 13 years of doing this, I’ve only met one or two people that truly had residual income.  Most MLM Leaders have to work harder just to maintain their large team than they did to build it.  Most top earners have nothing more than a high paying job that requires their constant time and effort.

Solution: You can earn passive income with network marketing. The key is to develop leaders and systems for your business.

the top 10 problems with mlmBonus – Poor Business Training

Most network marketers never receive ONE HOUR of real training on sales, marketing, lead generation or advertising.  Most network marketers are just taught to make a name list and talk to people they know.  As I see it, this is bad business advice.  You wouldn’t do this if you opened a traditional business.  With any other business you would have a business and marketing plan; you wouldn’t just call up everyone you know.

Solution: Be a student of sales, marketing and advertising.  Read books on these subjects.  Find a mentor who knows what they are doing and follow their lead.

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.

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12 thoughts on “The Top 10 Problems with Network Marketing

  1. R.G. Westerman

    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.

    Reply
    1. chuckholmes Post author

      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.

      Reply
  2. Greg Boudonck

    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?

    Reply
    1. chuckholmes Post author

      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.

      Reply
  3. Greg Boudonck

    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.

    Reply
  4. Diamond Grant

    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.

    Reply
    1. chuckholmes Post author

      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.

      Reply
  5. Greg Boudonck

    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.

    Reply
    1. Diamond Grant

      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.

      Reply
      1. chuckholmes Post author

        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.

        Reply

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