Lessons from Network Marketing-Secrets from the Top Network Marketers Every Business Owner Should Know

The most prominent examples of direct selling companies include Amway, Avon, Mary Kay, Nu Skin, and Herbalife. In 2010, U.S. total direct selling sales totaled more than $28 billion..

Any business model that has achieved this kind of success probably has lessons that all business people can learn from. We define this family of business models as a method of distribution in which people are paid for sales volume generated by people they have recruited into the distribution network. 20% of American adults reported they are now (6%) or have been (14%) a direct selling representative — defined as “the sale of a consumer product or service, person-to-person, away from a fixed retail location.” In 2000, 55% of American adults reported having, at some time, purchased goods or services from a direct selling representative.

We are primarily interested in what lessons all business people can learn from successful network marketing practices. We recently interviewed some of the industry’s top experts and found seven lessons that all sales and marketing professionals can use to be more effective, regardless of their industry:

Every business is a relationship-based business
So says John Milton Fogg, founding editor of Networking Times, author of The Greatest Networker in the World, and one of the most successful teachers of network marketing. You cannot sell an inferior product with a superior relationship, but you need at least a functional relationship to sell your product. That is particularly apparent in multi-level marketing, an industry built around belly-to-belly sales.

Think analytically about your network
Shaul Gabbay, in his book Social Capital in the Creation of Financial Capital: The Case of Network Marketing, reports that the fastest-rising group of entrepreneurs [of the direct selling representatives whom he studied] were those who had initial weak ties to dense networks. In other words, successful salespeople penetrate an untouched market, and then work to gain a high market share in that market. This is easier to do if that untouched market is highly dense; everyone in it knows all the players. Why? Because word of mouth in that type of network will spread more rapidly about the value of your product or service. This principle is particularly evident in network marketing, an industry where “networks go to work.” However, the same idea applies to almost any business.

Create a community around your product
One of the great ironies of the software business is that not only do many software companies outsource their development off shore; many also outsource their customer support to their own customers! When Best Software encourages you to visit their user forums to discuss your issues in using Act! software, that is a very cheap way for Best to support their product. Multi-level marketing companies rely almost exclusively on their communities for sales, support, follow-up, and recruiting.

Leverage the unleveraged
In 2002, 79.9% of the direct selling sales force was female. 56% completed only a partial college education, technical or trade school, or have only a high school education. This sales force looks very unlike the traditional American corporate sales force, which typically is much more male and has a higher level of education. However, the direct selling sales force looks just like their customers. People can be very effective salespeople when selling to their own community, because the common culture and interests create a foundation to build strong relationships more quickly.

Build a relationship first
“Internet marketers and network marketers share a common, terminal disease,” Fogg says. “If you think of the whole process like dating, we bring someone to our Web site, and then we ask them to get married immediately. There has to be some courtship first.” One of the delicate aspects of network marketing is that people leverage their personal relationships to sell a product. Although that leverage makes some people queasy, the success of the network marketing model shows that many people do comfortably build multiplex relationships: Their friends are their customers, and vice versa. With delicacy, you can do the same thing.

Not everyone is a prospect
One mistake some network marketers make, as do many other sales people and marketers, is thinking of everyone they meet as a prospect. In network marketing, this is known as the “Three-Foot Rule”, i.e., anyone within three feet of you is a prospect. But top network marketers don’t do this. Max Steingart, creator of the “Success Online” training course for network marketers, says that it’s not just about figuring out when to make your pitch, but even if to make your pitch. “You just build relationships with a lot of people. Some will become prospects and some won’t,” he says. “There’s no timetable. If the time is right, you’ll know.”

Use online networks
The network marketing industry is a particularly good industry for leveraging online networks. Steingart teaches people how to “make the world your warm market,” specifically by using online networks. He reports that when he instant-messages someone to start a conversation about potentially joining his distribution network, 50% of the people he contacts will respond to the conversation. More and more sales and marketing professionals will use online networks to accelerate their sales.

What else can traditional businesses learn from the best practices of successful network marketers?