Did Bill Clinton Endorse Network Marketing?

A reader sent me a video that has been making its rounds onFacebook. Apparently all the network marketers are promoting this one in an attempt to add validity to the MLM business model.

The thing is, Bill Clinton DIDN’T endorse network marketing. He endorsed direct selling. There is a difference.

On the video, when Bill Clinton says the words “direct sales,” the words “network marketing” appear. No doubt the person circulating this version of the video wants those two phrases to be interchangeable.

But direct selling means just that: selling directly to the consumer outside of a retail location. Think AVON. Think Tupperware.

That said, it is true that most of the organizations that are members of the Direct Selling Association have a multi-level component to their business, meaning if you recruit others into the business you make commissions from the sales those recruits make in addition to your own sales.

The endorsement of direct selling is not an endorsement of the pyramid-like structures of network marketing companies, although many of the people envolved in these MLMs are really trying to make it so.

Here’s the video. Enjoy!

What is MLM?

MLM stands for Multi-Level Marketing. It is also commonly referred to as Network Marketing, Relationship Marketing, One-on-One Marketing, Face-to-Face Marketing and Dual Marketing.

MLM is a way of selling products or services through distributors. In order to become a representative for the company, you sign an agreement and are also usually required to purchase a “starter kit” which contains training materials and a limited amount of full-size and sample-size product so that you can begin getting orders.

The aspect that distinguishes MLM from other businesses is that you make money not only on the sales of the company’s goods or services, but you are also encouraged to recruit others to join the company as a distributor. You then make commissions on the sales of those you recruit.

Many MLMs come dangerously close to being blatant “pyramid schemes” On a pyramid, most of the sales of products are made to the distributors, not to consumers in general. So really, the distributors are the customers. If a MLM pays commissions for recruiting new representatives, this should be a red flag. State Laws state that a MLM plan should only pay commission for retail sales, not for recruiting.

Even so, in most MLMs, the sales of the product seem to be secondary to recruiting new reps. Why? Because the turnover rate is so high. People sign up as representatives and then change their minds. Or they try it for a few weeks and quit. Without constantly bringing in new recruits, the company would soon be out of business.

The problem for many who join MLMs is they are led to believe that they will have success as so many others have. In reality, the vast majority of representatives not only flounder and quit, but lose money. Serious flaws in the fundamental design of these companies sets people up for failure at a home business, even as the company continues to thrive off of new orders from new distributors.