What is Network Marketing
... and how did it evolve
into the powerful business model
it is today?

• Sales?
• Direct selling ?
• A Pyramid Scheme?
• A form of franchising?
• An affiliate marketing program?
• Or is it a combination of all of the above?

For anyone considering a career in the network marketing industry these questions are very relevant and should be fully explored.

After all, would you launch into a new career without knowing anything about the industry you are joining? Most likely not, yet many people do take a casual approach to becoming involved with network marketing and never really ask themselves the all important question - What is Network Marketing and what can I find out about the history and evolution of this industry to better equip me for success?

Where an industry comes from has a direct relationship to where it is today and where it will go in the future. Network Marketing (or multi level marketing as it is commonly known) is no exception. In fact when I first looked into this myself, I was surprised and intrigued to learn about the roots and evolution of this industry through time - a rather interesting history lesson!

Now whether you're into history or not……….. I am sure you will want to learn a bit about the background of this industry to help you gain a perspective of where it came from, where is network marketing today and what is the future of network marketing? It is important that you have a clear understanding of these areas and if you are committed to network marketing success you will most certainly want to answer the question "What is Network Marketing?"

Before we get started on our history lesson, let me ask you this question - are you considering network marketing as a residual income opportunity or maybe you want to make money from home, earn extra income, etc…..? Whatever your reasons for exploring this exciting industry, have you really explored the answer to this question - WHAT IS NETWORK MARKETING?

Having this knowledge at your fingertips is important so you can position yourself to take advantage of the huge growth that is taking place within the network marketing industry today.

Network marketing and Direct Sales - What is the relationship?

Before we look more specifically at a time line which traces the evolution of network marketing it is important to understand that network marketing broadly fits into the direct sales environment. As we trace the history of both industries you will see how direct sales came first and network marketing evolved from direct sales roots.

The Direct Selling Association defines direct selling as "the sale of a consumer product or service in a face-to-face manner away from a fixed retail location in the home or the office".

With this definition in mind, author Nicole Woolsey Biggart, in her book Charismatic Capitalism traced direct selling in the USA to the "Yankee peddlers" - colonial peddlers or salesmen who sold tools, tea, and liniment from door to door.

This was the beginning of direct sales…..below is a summary of some milestones along the way……(as described in the book The New Professionals by Charles W. King and James W Robinson 2000 edition)

• Up to the 1840's - Peddlers used door-to-door sales as an important distribution channel

• 1840's to 1900 - The arrival of the railroad provided the opportunity for store owners to order their goods from manufacturers and have them delivered directly to stores - this saw the beginning of the retail sales model

• 1900 to 1920 - The sales team approach emerged as salespersons were recruited to work for a "home office". These sales people would order products via mail from the host company and sell them in whatever way they could - no training was provided by the host company.

• 1915 - The Fuller brush company reorganized as a "branch office" company. They opened branch offices that recruited, trained and supervised regional sales teams.

• By the end of the 1920's - direct selling companies such as Avon, Electrolux, W.T. Raleigh and West Bend Company were formed.

• 1925 - The National Association of Direct Selling Companies became the trade association for the direct selling industry - this organization is called the Direct Selling Association or DSA today.

• 1930's - saw the number of direct selling companies expand - e.g. Stanley Home Products & Encyclopedia Britannica.

• 1940's - saw three key developments within the direct sales industry - Firstly direct sales adopted the concept of "independent contractors", secondly the "Party Plan" model was introduced, and thirdly the creation of a multilevel distribution channel entered the equation. This began a new era in direct selling.

• 1930's - 1940's - founded in 1932, "Watcher's Organic Sea Products Corporation" adopted a multi-level compensation plan some time during the 1930's to 1940's. While the date that the first network marketing company started is not totally clear it is commonly believed that Watcher's is the oldest, continually operating, privately held network marketing company in the world.

• 1930's and 1940's - Direct selling companies like Stanley Home Products and W.T. Raleigh adopted network marketing programs

• 1941 - Since 1934 vitamin company Nutrilite had been selling its products direct to customers. From 1941 Nutrilite began to sell its products using a network marketing program. History has documented that Nutrilite played a crucial role in the way network marketing evolved and indeed the model of network marketing today
  
  
• 1950's - Rich DeVos and Jay Van Andel who had previously worked with the company Nutrilite formed their own manufacturing company called the American Way (the parent of Amway). Amway went on to become the largest network marketing company in the world with sales of over $5 billion in 1998.

• 1950's - 1970's - the network marketing industry continued to rapidly expand to include companies like Shaklee (1956), Amway (1959), Mary Kay (1962), and National Safety Associates (1970).

• 1970's and beyond - new companies continue to join the industry. By the 1990's network marketing was accepted as a legitimate industry with a bright future and rapid expansion around the globe which continues to this day……

But I hear you asking????

How does that answer the question - what is network marketing………..?

Let's explore that further by taking a look at some basic terminology which I am sure you will find sheds some light on this question.

If you are anything like me when I was new to this industry I constantly struggled over industry jargon…… not the least of which was something as simple as what is the fundamental difference between the terms network marketing and multilevel marketing or mlm? From what I could tell when I read information about the industry or heard people talking the terms seemed to be very much interchangeable, but I have to confess, I did find it confusing………….

So let's not be confused any more……….

Confusion is NOT a good thing when you are learning anything new……

How important is a name………?

Direct sales generally pay only on "one level" based on one specific sales transaction.

Network marketing seems to be the preferred term for today's world - it best describes what network marketers do!

Network marketing has been called by a number of different names such as referral marketing, relationship marketing, word-of-mouth marketing etc, but at the end of the day, the activity that is taking place is NETWORKING!

Instead of selling through shops using a retail model network marketing is:

• A process of building relationships and communicating with people that underpins a network marketing business, and

• A method of distributing consumable products direct to customers using a network of independent distributors also known as consultants or representatives

In short……

• "multilevel marketing"describes HOW network marketers earn their commissions and get paid

• "network marketing" describes WHAT network marketers do!

So can you answer that all important question now?

What is Network Marketing?

Let me give you a hand………..here's a summary of the key points……

Where to from here? …………What other gems can we discover that continue to broaden our understanding of the question - what is network marketing and give us confidence in:

• network marketing today ,

• the truth on mlm , and

• choosing a network marketing company