The Ethics of MLM (Network Marketing)

So, your company is thinking of MLM as a route to market.

There are probably a number of questions you want answered. One of the first that always seems to come up is the question of the ethics of MLM. Over the years there have been many unethical people who have managed to tarnish the image of the industry. Their exploits usually land up in the news and they often end up in jail. Like any powerful and effective marketing mechanism, MLM is not immune to abuse.

There are however many ethical and successful MLM companies in operation worldwide. Avon is one that immediately springs to mind. Their awesome product range, enormous international network, structured compensation plan and the visible success of millions of consultants make them a great case study for how MLM should be done.

As with anything in life, it is up to you to ensure that you are honest and ethical in your business practices. The DSA has published a set of guidelines that govern the industry. The key issues are listed below:

The rules for keeping your business ethical

1. No member should be compensated in any way for the act of recruiting.
2. Products should provide value for money.
3. You should have a money back policy allowing dealers to return unused stock for a refund.
4. Dealers should not be required or encouraged in any way to purchase large amounts of stock. This is known as front end loading.
5. Training should be freely available or at the very least, provided at cost.

Network Marketing Vs Franchising
When it comes to Turn-Key businesses, franchising used to be the pinnacle. When it began around forty years ago, hardly anyone had heard of the concept. As a matter of fact, there was a drive in the USA to declare franchising illegal and unethical. It seems ridiculous to think of it now but there was a time when the future of franchising was doubtful at best. Now, with more than R600 billion in annual sales of goods and services, franchising has become a part of our life-style. Our appetite for hamburgers alone has helped McDonald's become the industry leader, with over R60 billion in global sales.

Anyone who wants to own their own business can do so, without consuming time and money in research and development. The franchisee will provide all of that. All you need to do is pay over your money and you can walk in and turn the key. Because of this, franchises are also called "turn-key operations." But there's a catch. The average start-up cost for a franchise is about R1.2 Million. Ouch! It also comes with its own set of overheads such as rent, staff, shrinkage etc.

So where does Network Marketing fit into the picture? Network Marketing gives any willing dealer all the benefits of a franchise for a fraction of the cost!


The following is a laundry list of facts about Network Marketing:

1. Network Marketing is open to everyone of legal age regardless of sex, education, race, religion, business experience, social standing, past successes or failures.
2. Network Marketing is a legal and ethical business structure. It is recognized in Canada, England, Australia Germany, Japan, Malaysia and other countries throughout the world. In most countries, it is regulated by the Direct Selling Association (DSA).
3. Although no precise figures exist (because most companies in the industry are privately held and are not required to publish their financial statements), experts believe Network Marketing is currently at a level of approximately R400 billion globally!
4. Network Marketing companies are also on the New York Stock Exchange and Fortune's list of 100 Fastest Growing Companies. A few examples are Avon, Shaklee, Amway, A.L. Williams and Mary Kay Cosmetics.
5. Dealers own their business.
6. Dealers are volunteers. They are under no obligation to do anything.
7. They can typically begin their business for a few hundred Rand. This money goes towards start-up kits, sales support material and initial product inventory.
8. Network Marketing is a professional career opportunity. Due to the fact that so many people are involved in it part-time, it might appear as a kind of money-making hobby. However, one look at the number of professionals and white-collar men and women entering the industry changes that perception.
9. There is no need to employ high-pressure sales tactics and manipulative closing techniques. Network Marketing is a "sorting" business based on finding the right people who fit with the dealer, the product and the opportunity.
10. Network Marketing is all about freedom of choice. The Dealers are free to choose who, when, where, why, and how they operate their business. Network Marketing puts them in control of their life.

What Network Marketing is Not:

1. Network Marketing IS NOT an illegal "pyramid scheme." It is not a chain letter or illegal lottery where people make money by recruiting others to join in the game. Network Marketers are paid only on the distribution of valuable products or services.
2. Network Marketing IS NOT a "get-rich-quick' business. Although fast money has happened for a few individuals, they are the rare exceptions, not the rule. But if you drop the "quick" and call it a "get-rich" business, that's another matter.
3. Twenty percent of all millionaires HAVE NOT become rich through Network Marketing. Yes, the industry has produced many millionaires, but compared to the number of real estate millionaires... Again, no way!
4. Network Marketing IS NOT just for professional salespeople. Of the countless success stories in the industry, most have come from individuals with non-sales backgrounds and little or no experience.
5. Network Marketing IS NOT taught at Harvard and Stanford Business Schools. A number of colleges and universities have used case studies of a few companies in their marketing courses, but that's all (at least for now!).
6. Network Marketing IS NOT a full-time commitment. The vast majority of the men and women in this industry work their business part-time.
7. Network Marketing IS NOT for men only. Actually, the majority of active, successful people in the industry are women. In the case of the Acorn business, it is heavily biased towards women.

Unfortunately, Network Marketing is misunderstood by most of the general public. There are those who have had an unfortunate experience of one kind or another. Others, because of what they've heard, think it's an "illegal pyramid!' But as Dr. Dean Black, author of "The MLM Simple Success Guide" says, "there’s nothing wrong with the principle, just with the way some people work with it!'

The truth is, it's legal and it works! It's working for lot of people who have learned how to make it work for them.