How to Evaluate a Network Marketing Opportunity and Avoid Getting Scammed

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By Diligent77
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Evaluate a Network Marketing Opportunity and Avoid Getting Scammed

Network marketing opportunities abound all around us. The only problem is that there are just as many horror stories about network marketing as there are success stories. How do you avoid getting into a network marketing opportunity that is a scam? This article will give you some key things to look for when analyzing or evaluating any network marketing opportunity

Difficulty: Moderate

Instructions

Things You'll Need:

A willingness to do your due diligence!

Step 1

Most of us are approached on a person-to-person level about network marketing opportunities, so it may do you good to first check out the character and integrity of the person that is presenting the opportunity to you. Do you know this person to be a little "shady", or do they conduct themselves in a professional manner? If there's anything about the person that may give you a "red flag", proceed with caution.
Step 2

Network marketing companies that emphasize product sales are usually more legitimate than the ones that primarily push recruiting and sponsoring. If you hardly hear anything about the products the company offers, and more about how "all you need to do is find six people who will find six people, etc.", then you can rest assured there is more emphasis on sponsoring, which is a serious red flag. Companies that offer financial incentives purely on sponsoring or recruiting alone, and not for selling a product or service, are actually borderlining on being pyramid schemes, which is illegal according to the Federal Trade Commission.
Step 3

Ask yourself this simple question: Would I buy this product if I knew nothing about the business opportunity side of it? If all that is driving you to join a network marketing company is its compensation plan, you will surely fail. You have to actually LIKE the product to some degree in order to effectively market it to others. If you're not convinced of the value of what you're offering, why should anyone else be?
Step 4

Is the product competetively priced? This is one of the major flaws that I have seen with many network marketing opportunities; the product is far from unique AND it's overpriced, and yet the company expects you to buy it through them at (usually) a higher price than what you can get at any retail store. This simply will not do for most people---it just doesn't make good common sense.
Step 5

Does the company offer a money-back guarantee on the products it sells? This should be a mainstay of any network marketing company you analyze. If they're not even willing to stand behind their own products, you might need to keep looking for other opportunities.
Step 6

Is the product consumable? Meaning, is it a product that people will use and replace on a recurring basis? It does no good to build a network marketing company around selling automobiles, color copiers, or diamond necklaces. Why? Because most people aren't going to be buying these things on a monthly basis. And since most network marketing commission structures are built around product sales, you don't want to get paid every once in a blue moon. Pick a company that markets consumable products, such as vitamins, personal care items (toothpaste, soap, shampoo) etc., so that you can have a consistent, recurring income.
Step 7

Is the company itself stable? One of the things I've learned to run from are all of the "ground floor" or "pre-launch" opportunities. A large percentage of network marketing companies go bust within the first 5 years of existence, and they normally leave a lot of disillusioned distributors behind them. Wait for the company to stabilize in the marketplace first. Check the company's Dunn & Bradstreet rating. Check their record with the Better Business Bureau--how many complaints (if any) have been filed against them? Check Google, Yahoo, and MSN for any company news, good or bad. Is the management team solid and experienced? Do you REALLY believe the company will be around for the next ten or twenty years? Be willing to wait and observe, and be willing to do your homework on the company's history. I know this runs contrary to the whole "get in early to make the big money" theory, but you don't want to be left holding the bag.
Step 8

Pick a company that has a strong support system, and one that will teach you the basic ins & outs of building a network marketing business. They should NOT charge exorbitant prices for teaching materials such as books and tapes--this is another red flag. Many network marketing "millionaires" are actually only making money from peddling the motivational books and tapes that are supposed to help their downline succeed. Most of the time they are just draining their downline's pockets in the name of "business education materials".

Comments

ljlapinski said

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on 7/2/2009 All very good points. I'm curious though, if everyone ran from start ups, how would any company get started? This is true in the retail business as well. If everyone waits for everyone else to begin consuming, the biz would be out of biz immediately. More scrutiny would be involved in start ups for certain. One needs to evaluate if the product is 1)consumable and 2)in need. A successful start up only happened 5 years ago and the company is very solid. MonaVie.

becbec77 said

on 3/14/2009 Very informative! I suggest anyone looking into network marketing follow these great suggestions. I wish I'd have had a checklist like this follow before becoming involved with several companies I gave money to. Check out www.payyoueveryday.com to see a company that meets these criteria and more!