On the Level

The Internet makes MLM easier--but it won't do the work for you. Before you commit, make sure you're prepared.

Three years ago, Cynthia Marshall of San Antonio, Texas, was looking for a business opportunity. She'd recently signed up for pre-paid Internet access with FlashNet Communications, based in Fort Worth, Texas, and was happy with the price and service. "I was thinking, 'I wish a real company like FlashNet would try network marketing,' " Marshall says.

Marshall had tried her hand at selling diet pills and Tupperware but hadn't managed to build what's needed for success: a "downline" of people she'd recruited into the business. Then she received an e-mail: FlashNet was launching a new division, FlashNet Marketing Inc., to sell its services directly to consumers through a network of independent sales representatives. Marshall attended the first opportunity meeting in San Antonio in July 1997 and signed up immediately.

Since then, Marshall has personally signed up more than 100 customers, who pay $17.95 per month or $129.95 per year for Internet access and the seasonal promotions to buy electronics at a discount. By recruiting friends and family members into the business, who in turn have recruited others, she's built a downline of 360 representatives serving 3,200 customers. As with other distributors in network marketing (also called multilevel marketing, or MLM), she receives overrides on the sales generated by everyone in her group. Soon she cut back to part time at her airline job to focus on her burgeoning business.

Like other independent representatives and distributors in the industry, Marshall has found that the Internet is a valuable tool in building her business. She has a customized Web page linked to the official company site, which her customers use as a portal to the Internet. She places classified ads on various Web sites to attract potential recruits. She uses Internet technology to keep track of sales generated by her group. But she knows she can't simply rely on the Net alone. "The Internet is just a tool, just like the classified ads," she says. "Once you establish contact, you have to spend a lot of time building relationships."

It's partly because of the Internet that the MLM industry is growing so fast all over the world. The Direct Selling Association estimates that retail sales in the U.S. direct-selling industry (consisting almost entirely of network marketing companies) grew steadily from nearly $13 billion in 1991 to more than $23.17 billion in 1998. During the same time period, the U.S. sales force, of which 90 percent work part time, grew from 5.1 million people to 9.7 million. The Internet-which allows distributors to get information out quickly, keep track of their organizations, stay in touch with other distributors and meet people they wouldn't otherwise meet-is largely responsible for that growth.

However, the Net also poses a threat to the very people it helps. "Just because an MLM distributor puts up a Web site doesn't mean it will generate queries on its own," says Dr. P.K. Kannan, a marketing professor at the Robert H. Smith School of Business at the University of Maryland in College Park. "It's basically word-of-mouth. People are not going to compare Web pages and join."

"A Web site won't help you with training new recruits on how to get started," nor will it necessarily bring in the right people for your business, adds Jerry Vitale, director of sales for Enviro-Tech International Inc. of Las Vegas, a network marketing company that sells waterless cleaning products, personal care products and food supplements. "People become obsessed with some guy in Germany, while ignoring the guy two doors down who's praying for the right business opportunity."

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This article was originally published in the July 2000 print edition of Entrepreneur with the headline: On the Level.

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