A short introduction into the history of network marketing
What Is Multi-Level Marketing?
Network marketing is just a means of selling things to the end customer. In traditional business, products are created by the manufacturers, then supplied to a retail establishment, and finally resold to the end consumers.
The product is created by the manufacturer and shipped directly to the end consumer, without any retail outlets. Companies will use the money saved on advertising to pay customers who endorse their products. This process is significantly cleaner.
Multi-level marketing is a fast-growing phenomenon in the global marketplace. No one, anywhere in the world, should be barred from making money from building the network, and that makes it highly enticing for people from all walks of life to try to join the network. A big percentage of direct marketing earnings in the United States comes from network marketing. Because of this, we estimate that over 50 million people are involved in Multi-Level Marketing all over the globe.
Nutralite experienced remarkable development and earnings in the decades following because of its fast-growing network which spread worldwide. Amway was founded in the early 1960s by two individuals, Richard DeVos and Jay Van Andel, who were the Distributors of Nutralite. Nutralite Company first began to sell household and cleaning products, which eventually led to a merger of Household and Cleaning products.
While the numbers suggest progressive trends and companies regularly publicize success stories of people who have become millionaires in the business, it should be stated that governments in multiple countries have grown increasingly suspicious of the pyramid compensation method, which they believe is fundamentally faulty and that the revenue or wealth creation does not occur due to sales of the product but instead through recruitment of distributors. Direct selling was banned in China in 1998. The trade appears to be increasing around the rest of the globe.
Multi-level marketing is a $170 billion dollar industry today. This form of business is growing very quickly with over 90 million people and hundreds more each year actively participating.
Direct selling and network marketing are different. Is this similar to pyramid selling and pyramid schemes?
It is hard to get a handle on this profitable sector at first. Read on to learn everything about this modal and how it was created. Additionally, you will also learn the different terms that you’ve heard of.
Network marketing in history
It is generally thought that the philosophy of multilevel marketing (MLM) owes its birth to Nutralite formerly known as California Vitamin Company, which manufactures food supplement products. In the early 1940s, the Company would participate in Direct Selling.
It all started in the 1930s, there was a man named Carl Rehnborg. While in China between 1917 and 1927, he first learned about the additional health benefits that come from supplementing your diet.
Upon returning to the U.S., Carl established The California Vitamin Company. In 1934, California Vitamin Company developed the concept of Multi-Level Marketing. A strange thing happened when distributors noticed that referring their contacts to the business opportunity available with Nutralite was increasing their sales. At this moment in time, there was no structure in place to recognize and compensate the distributors for their recruitment efforts. After recognizing the Distributors and the Company, the system of paying a 2% incentive to the Sponsor Distributor on the volumes that were achieved was established. This company began by signing up salespeople who used the product personally and sold it to their family and friends. Using this system, they would receive an extra $50 every month. With friends and relatives, customers discovered that they might also benefit financially by purchasing the goods at the wholesale price and then reselling it to others.In 1939, he re-named the company Nutrilite. Carl didn’t develop a multi-level marketing plan to improve sales of his company until 6 years later.This multi-level marketing approach has been operating for more than 50 years. The practice developed into modern-day ‘Pyramid Sales’.
So its said that Nutralite Corporation introduced the first truly multi-level marketing incentive structure in 1943. Everyone gets compensated on all levels of sales generated.
In 1949, Jay Van Andle and Richard Marvin DeVoss joined Nutralite Corporation as Members and for the next 10 years, the company developed and prospered. They considered standard sales employment as unjust – being paid only once for the work that they accomplished even though the corporation continued to generate a profit from their labors for several years afterward. Jay Van Andel and Rich DeVos, discovered the real strength of this business model and sales were expanding exponentially. They claimed they were owed money according to the benefits they helped the corporation maintain. Jay and Richard started a Multi-Level Company called Amway in 1959 and they took over Nutrilite in 1972. In 1994, Amway then gained control of the entire company.
Dr. Forrest C Shaklee, who already sold vitamins in 1915, went on to start another company called Shaklee in 1956 which deals with nature’s sunlight products, just like Amway did. Many more MLM companies entered the industry. In the early Eighties, the Multi-Level Marketing name was superseded by Network Marketing. Now hundreds of companies, who discovered the succes of the model, now employ or use multi-level or pyramidal sales and compensation strategies to offer their products. These brands including Avon, Tupperware, Electrolux, Discovery Toys, Herbalife, Kleeneze, and Oriflame have had excellent results globally by adopting this sales strategy.
The results show that the model has been successful in corporate growth in recent years. The Direct Selling Association of the US estimated that 25% of its members were selling via an MLM channel in the 1990s, however by 2009, it was determined that 94% of members had been employing this strategy, accounting for 97% of all Direct Sales.
The Federal Trade Commission in 1975 brought charges against Amway because they believed the company was operating a pyramid scheme. A pyramid scheme is when you sell a system with no product. Pyramid schemes were introduced together with multilevel marketing (MLM).
Since Amway was the largest MLM distribution organization, the Federal Trade Commission took the position that Amway was participating in illegal activity. Amway had to battle in the courts for four years before finally winning in 1979.
How the popularity started?
Like said above, network marketing organizations saw a surge in popularity in the 1980s. Women were becoming more drawn to MLMs due to the opportunity for financial freedom and schedule flexibility. Additionally, almost anyone may start and run their own business, no matter their prior experience, age, or location.
Network marketing has given the sector a negative reputation because of pyramid schemes and other companies pretending to be network marketing businesses. I
The industry nowadays
Today, there is a large range of items and services provided by direct sales, both face-to-face and online, and at house gatherings. A great part of distributors mentioned social media as their primary order-generating method, with social selling parties showing up via Facebook Live and Skype. Most direct sellers claimed a monthly income of $372.95, with the bulk (63%) also having another occupation.
Today, the Direct Selling Association (DSA) works to see direct marketing accepted and regarded as one of the finest techniques of marketing to customers.” All of the members of the DSA must adhere to a stringent code of behavior.