What is the Difference between “MLM” and “Network Marketing”? by Clifton Jolley

cliftonjolleyIf you want to think of yourself as a “Network Marketing” company… that’s OK, so long as you don’t forget the folks who got us this far along: the middle-Americans who depend on whatever-we-call-it to provide the discretionary income they don’t get from their “day jobs”  “The direct selling industry, at one time, was Number One on the Federal Trade Commission’s ‘hit list’ for consumer problems. They actually circulated materials saying this.… Many of the direct selling companies were considered to be ‘high pressure’ what they used to call blue suede shoe guys. The industry really suffered. I think, it almost had an inferiority complex.” Gerald Gilbert, counsel to the Direct Selling Association “A strong public relations campaign was contemplated as a means of correcting the negative image [of direct selling]. Fortunately, more perceptive leaders prevailed.” Morris Mayer, Direct Selling in the United “Be true to your school.” —The Beach Boys

One of the biggest mistakes made by MLM companies is believing our bad press.

 NULL Over and over again we see our businesses caricatured by a media that knows nothing at all about our marketplace and has a thinly veiled contempt for us and the people we serve. And after a while we begin to think: “Where there is smoke . . . . .” But the “fire” in the marketplace right now is burning on the Internet. And many of the methods used for half a century in MLM are popping up in cyberspace and pretending to be “new.” They do have new names – affiliate marketing, referral sales, etc. – but when you peal back the polite rhetorical overlay, what you find are the fundamental principles of good old MLM. It’s curious that at the same time the Internet is adopting many of the principles of MLM to create “traffic”… we have been involved in a 25-year process to sanitize the language by which we describe ourselves.

A good example of this “sanitizing” is calling ourselves “Network Marketers” instead of “MLMers.”

My Aunt Delilah was one of Shaklee’s first distributors. She participated proudly and successfully in the early years of MLM… and she didn’t know squat about “Network Marketing.” Back then Shaklee and Amway were just good old-fashioned MLM companies, with great products and a compensation strategy that back then really was “revolutionary.” But even Amway doesn’t want to be known as an “MLM” company anymore. A number of years ago Amway’s coordinator of policy and planning – William Nicholson – was quoted by the Grand Rapids Press as saying: “There is the direct-sales industry and the network marketing industry. So far, the only company to legitimately come into the network marketing category is Amway.” Well, of course that’s what Mr. Nicholson of Amway would say. But I’m skeptical. As the Grand Rapids Press went on to quote my response to Nicholson’s claim:

“Jolley said he doesn’t believe Amway can separate itself from the rest of the direct sales and multi-level marketing pack. ‘In terms of having established itself as a horse of a different color… it’s still a multi-level marketing company.’… Jolley warned Amway must guard against drifting from its dream-oriented roots. ‘…they may be losing track of the community from which they sprang.’ The tradition and history of multi-level marketing has been to provide opportunity for people who otherwise might not have opportunities. It would not be to the benefit of the company at large to lose touch with them.” Grand Rapids Press

A while back I was in London meeting with one of Europe’s most dramatically successful entrepreneurial companies, a multi-billion-dollar, multi-national firm planning on funding the launch of an MLM company in the United States. Over dinner at the Vice President’s club, he said to me: “I don’t understand why there is so much disfavor for network marketing commission plans. At it’s simplest level, MLM pays out very much as my own company does: people earn money for training and supervising the work of others. And those people – who may be responsible for hundreds of others – receive a richer reward than the line worker who is accountable only for himself. Why do people have problems with MLM?” Good question. And I suspect the answer has something to do with the fact that we ourselves are suspect of our own methods, means and motives. I recently told a client – who was weary of what he considered the incessant efforts of his distributors to milk more and more money out of his compensation plan while doing less and less work – that what most MLMers want is an “opportunity” that will look like IBM when the regulators come knocking, but is in fact a hot little pyramid of which they have gotten in “on the ground floor.”

No amount of name changes and rhetorical sanitizing will change such motives. Not in MLM. Not in the general economy. It has driven the “momentum” of start-up MLMs and it inspired the dot-com boom. It also has brought down MLM companies, and we all remember what happened when the dot-com bubble burst.

Are these motives bad? More accurately, irresponsible. But they are the darker motives we share with a lot of other forms of capitalism, a kind of stripped-down, street version of John Kenneth Galbraith’s practical ethic and belief that people working for their own selfish interests are most likely to achieve the greatest common good. We dress that motive up by translating it into slogans about “Doing well by doing good” and “helping others to help ourselves. But it has more to do with money than with motive. The good accomplished by MLM is an economic opportunity that is as wide open as any in the free market. The irony is that just as the rest of the free market is waking up to the opportunities available in MLM, there are many MLMers who are insisting on a political correctness that has the potential to deny our roots and to dishonor the pioneers of our industry. So, if you want to think of yourself as a “Network Marketing” company… that’s OK, so long as you don’t forget the folks who got us this far along: the middle-Americans who depend on whatever-we-call-it to provide the discretionary income they don’t get from their “day jobs.”

And to give them a shot at the brass ring of SUCCESS with an OPPORTUNITY that looks a whole lot like… Aunt Delilah’s MLM!



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