Network Marketing Industry

An overview on the network marketing industry and its history

The Network Marketing Industry is worth $100 billion dollar plus per year, in which the average person can start a legitimate business with the potential of generating a substantial income. It offers the opportunity to start a business on a part-time basis, and grow it into a full-time income. It requires the least amount of start-up capital and ongoing operating expense of virtually any legitimate business model. It is responsible for enabling the creation of an untold number of millionaires. It has been predicted that 10 million new millionaires will be created through network marketing over the next 10 years. If this is true, why is there so much negativity towards the network marketing industry? You have to look back into the history of network marketing to find the answer. I will take you through its origins and try to help people understand where the negative views come from, and show you how the industry is very different today.

A company named California Vitamins founded in the 1930's by the mid 1940's came to realize that many of their new sales recruits were in fact friends and family of their existing sales force. These new recruits primary motivation to becoming a sales associate was that they wanted to purchase product themselves at the wholesale cost.

That led the company to recognize it was easier to build a sales force with a lot of people who sell a small amount of product, than it was to find a small number of top sellers who would move mountains of product. From this California Vitamins designed its sales compensation model encouraging their salespeople to invite new representatives from happy customers, most of whom were family and friends. These new representatives in turn had the same right to offer the product and opportunity to become a representative to others.

This allowed the sales force to grow exponentially. The company rewarded its representatives for the sales produced by their entire group or down-line network, and so multi-level marketing was born. Also born out of this was the home party plan, the original party plan was the Stanley Hostess Party Plan, by Stanley Home Products. The idea behind this was to demonstrate the uses and benefits of the products right in the home. Distributors from within Stanley Home Products became the the founders of future network marketing giants - Mary Kay and Tupperware.

In the mid 1950s a new pair of giants arrived on the scene. First, Shaklee was launched. Then in 1959 was the birth of Amway. The term multi level marketing, or mlm became a part of the network marketing industry and direct selling would never be the same. The popular notion is that mlm companies really gained steam in the mid 1970s, this is when the Federal Trade Commission (FTC) charged Amway and its multi-level marketing structure was an illegal pyramid scheme. This made lots of headlines in the press, which is where a lot of negativity for the network marketing industry comes from. However in 1979 the court sided with Amway and deemed its multi-level marketing structure valid and legal and that its model represented a legitimate business opportunity. Still to this day however the myth that all MLMs or network marketing opportunities being pyramids lives on.