How to Evaluate a
Network Marketing Company
The process of choosing a network marketing company to work with can be daunting if you are new to network marketing. Below are the factors which you need to take into account when deciding which would be the best network marketing company for you.
- The History of the company
- Management integrity and experience
- Membership of the Direct Selling Association (DSA)
- Company capitalization
- Availability of the product or service
- Demand for the products or service
- The nature of the product or service
- Replacement buying
- The company's compensation plan
- Technology
- Is your potential sponsor committed to your success?
- Can you do it part time?
Should you go with an established company that's been around for some time or will a fairly new company be the right one? There is no hard and fast rule for this.
Note that most business start ups do not see it through their fifth birthday. Although there is no clarity as to the exact figures, indications are that more than 60% of all business start ups fail within the first five years. This includes network marketing companies.
So choosing an established network marketing company gives the assurance that the company is not a fly-by-night.
What if the network marketing company you are considering is relatively new? Then you would need to do more research on the company. One way to do this is to search for the company on the internet. If they don't have a website, how serious are they about their future?
On their website things to look for are their year of establishment, their mission or vision statement, as well as their management team. Once you have this information you can now go wider and search for each individual member of the management team through a search engine.
Let me illustrate by way of example. I was researching a company called Multisure (Pty) Ltd, a network marketing company registered and operating in South Africa.
First I wanted to establish if the company is duly registered. I went http://www.cipro.gov.za and entered 'multisure' under the 'enterprise name' search box.
I found that it was registered during 2000, which gave it a 10 year life span at the time of my search. I also picked up pertinent information like a residential and postal addresses. The results also showed that their main business is the provision of legal and funeral cover.
Then I went to Google and searched for 'multisure'. Clicking on the first result took me to the company's home page. I went through all the menu buttons to learn more about the company. I particularly liked their testimonials page.
I phoned the number provided on the 'contact us' page to test its authenticity and learned in the process that their founder and Chief Executive Officer is a man named Denton Goodford.
I searched for Denton Goodford on Google. Most page results were the common ones like Facebook, Twitter and similar entries.
At this point, given the number of years that Multisure was in existence, I concluded that it was probably the right network marketing company to work with. But making a final decision on this factor alone is risky. So I proceeded to look at other factors.
You need to be reasonably assured that you are going to deal with people of sound integrity and good business experience.
In my Multisure example above I found that Denton Goodford has had 10 years experience as a practicing attorney before founding Multisure. This gave me the assurance that he knows his business well.
Membership of the DSA adds to the credibility of the company because as a member, the company has to comply with certain ethics laid down by the DSA. These are aimed at regulating the industry and making sure that each member company is genuine.
Is the company well capitalized?
You need this information to establish whether the company you are considering has the cash it will need to grow, to maintain a solid infrastructure, to attract talented management, to keep pace with technology — and, more importantly, to pay your commissions.
Information on company capitalization is not easy to obtain for privately owned network marketing companies. However, for listed companies the published financial statements are a good source of this information. Ask a friend to assist if you can't read financial statements.
So if you place heavy emphasis on capitalization you would be better off looking at listed companies only.
Ideally, the product or the service being offered for sale must be available only through independent business owners like you. If the products are readily available at the local stores, competition will be stiff and it is more than likely that the product consumers will go to the stores instead of buying from you. This is not good for business.
What would happen if the products you sell are not in demand?
Chances are that you will end up with a garage full of unwanted products. If you offer a service you will end up with many customers leaving for a better service elsewhere.
So the products your prospective company offers must fill a real need and at a fair price. There should an ever growing market for it.
Is the product or service consumable in nature? In other words does the product or service require regular repeat purchase?
The repeat purchase should preferably be no longer than one month. Imagine selling automobiles through network marketing. How long would you have to wait before you sell another automobile to the same customer?
Coupled with the nature of the product is the financing of the actual purchase. Will the customer require outside financing before the sale is complete?
The best products are those that require a cash payment, not credit. If the financing company says 'Sorry, we can't grant you credit" to your customer, you have no sale, and therefore no commission.
In a nutshell choose a network marketing company that offers a product or service that requires repeat purchase and is paid for cash up front.
Are you currently using the products offered by the company you are evaluating in your home?
It pays to go with the company which supplies products you are already using, apart from product brand.
For example if you currently use company A's product, you may consider using company B's product if company B sells its product through network marketing. This is called replacedment buying and is an important factor if you consider that most of the purchases from network marketing companies is for home use.
What will you be paid for, recruiting or the sale of products/service?
Take a closer look at the compensation plan. If the company pays its distributors for recruiting, it is more than likely that it will not survive for too long. Don't even bother to look any further. Paying distributors for recruiting other members is the hallmark of any illegal pyramid scheme.
The product/service must not rely on the compensation plan to be sold. In other words, were it not for the business opportunity would you still buy the product or the service? If you answered 'Yes' to this question chances are that the product or the service offers value to its users.
It is also important that the compensation plan is easy to understand because as a distributor you are going to have to explain your company’s compensation plan to people you recruit. So choose a network marketing company with a compensation plan that is viable and easy to understand.
In addition, are commissions paid on the sign-up fees of people joining your organization?
If so, the company may be operating an illegal pyramid scheme. However, some network marketing companies do pay a once off commission on the sign-up fees of new entrants. This does not necessarily mean that the company operates an illegal pyramid scheme. Exercise your own judgement at all times.
Does the company's marketing system take full advantage of technology?
In today's world any network marketing company that does not take full advantage of technology is doomed to fail in the long term. This is particularly true of network marketing companies because...
By combining the leveraging power of network marketing and the global reach of the internet, you can build a global networking organization.
How many people does he/she recruit per month?
This question is particularly important if you are going to be marketing offline. Offline, anyone who recruits more than 5 people in a month will not have the time to give individual attention to each of them.
This is one of the reasons why so many people quit network marketing soon after joining. They can see the potential, but become frustrated because there is no one to guide them through the initial stages of starting a network marketing organisation.
If you will be doing your business mainly offline, ask your recruiter if you can attend one of his/her training sessions before committing to anything?
Chances are that there is none. You will most probably be taken to what is known as a business opportunity meeting, where one person explains the network marketing company's marketing plan and some distributors give testimonials. This is not training.
Is he/she pushy?
Does he/she want you to sign up there and then?
Someone who is pushy or is desperate that you sign up will leave you for the next person soon after you sign up. You would be lucky to hear from such a person again.
One of the benefits a network marketing company offers is the ability to be a distributor on a part-time basis. Find out if this is possible with the company you are investigating. If not, you will be just another employee.
The above list is by all means not exhaustive. There might be other factors not listed here that you can think of. But if you take the above factors into account when evaluating a network marketing company, you should be able to come to an informed decision.
At the end of the day the final decision is yours, so do make sure you look at as many factors as you can.
Related articles:
How To Tell A Network Marketing Company From A Pyramid Selling Scheme
Click here to check if your company is a member of the DSA.
