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Reinventing Network Marketing – Part 2: The P-Word

Last week we launched a video series created by network marketing millionaire and author Pat Petrini discussing a controversial topic:

What’s Wrong with Network Marketing – and How to Fix it?

In his introduction, Pat talks about a fundamental problem that lies at the root of many of the issues the business has faced and continues to face today. According to Pat,  most network marketing compensation plans reward the wrong activities by incentivizing the enrollment of distributors over the acquisition of customers.

Watch Pat’s Video – What Happened to the Customer?

In Part 2 of the series, Pat talks about The P-Word – Pyramid Schemes…

Here are the key takeaways from this video:

  • Network marketing, when done right, is NOT a pyramid scheme. A pure pyramid scheme has no product and focuses solely on recruiting, much like a chain letter. It’s illegal not so much because innocent people are taken advantage of, but because it’s damaging to any economy! There is no value being added or created. It’s guaranteed to fail because it’s mathematically unsustainable.
  • To understand if a business is a pyramid scheme, we have to ask, “What’s the motivation of the people who are joining?” If the reason they join is to make money from the organization, to participate in the compensation plan, it is at least a “half-pyramid scheme.”
  • When you say you love the product/service, but you are hoping to make money from the opportunity, or at a minimum sign up a few people so you get your product free, our question, “What’s your motivation…?” becomes a muddy question
  • The fact that participants have to “pay to play,” meaning they have to pay a fee to receive commissions (at the beginning, monthly requirement …) makes it difficult to answer the question, “Why do people join/buy?”
  • The “pay to play” factor also sends the wrong message to the company. How do they know they have a good product, and if it’s priced right? To know the answer to this question, they need to disconnect the compensation plan from the product purchase requirement.

What do you think of Pat’s observations? Please let us know in the comments. 

Coming up next: Part 3 – The Marketer-Centric Model & the Boom-Bust Cycle

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