What Is Network Marketing? The History of Network Marketing

The concept of network marketing has been present for over 70 years now and quite a few big businesses and brands took advantage of this marketing approach to enter the marketplace. In this article I will discuss the history of network marketing that will offer you more insight and understanding of the network marketing industry.

It all begins in the late 1800′s. The idea of multi level marketing that we are aware of will be shaped way later, but this phase in time is correlated to a major change in the sales industry. Certainly salesmen have been present far before the late 1800′s since, in order for a business to gets its product to the marketplace, it needed salesmen. These salespeople typically worked as individual salesmen. In the late 1800′s the amount of dealers begun to increase speedily and another phenomena aroused: the formation of sales organizations. Some of the traders started to develop their own organization of dealers on behalf of different companies and made training available to them.

Year 1931 is an additional significant milestone in the history of network marketing. This was the year that the “party plan” was formed. This marketing tactic has been utilized by numerous network marketing distributors. The majority of people know about this marketing stratagem from the Tupperware home parties. The former vice president of Fuller Brush Company, Frank S. Beveridge, and Catherine L. O’Brien had a dream to bring sales to a home business. They gave people the opportunity to set up their own sales business with a small investment. This way Stanley Home Products was born. Some distributors advertised the goods straight to businesses and organizations in order to direct more prospects simultaneously. This line of attack (to direct numerous prospects at the same time) was rapidly changed into a home setting. The distributors were seeking people that would like to host a home party by inviting their friends and family. In this way the “party plan” was shaped. This company turned out to be an educational platform for the leaders of well-known companies in this industry (e.g. Mary Kay and Tupperware).

The plan of Stanley Home Products was the reinventing of the home based business and the invention of direct sales. But nonetheless it did not incorporate the multi level marketing aspect since there was only one parent company that permitted people to initiate a business by selling their products. There was no option for the distributors to build up their own network.

So when was network marketing or multi-level-marketing shaped? This was 14 years later in 1945 by a company called Nutrilite and their American distributors Mytinger & Casselberry. When a distributor achieved the level of 25 clients they were permitted to introduce a new distributor. With the intention of encouraging the distributor to coach a new distributor the best he could, they would give the distributor 2% over the entire sales volume of his organization once the organization counted 150 consumers.

A number of people see this as a pyramid scheme, but it is not. If we look from the standpoint of Nutrilite and Mytinger & Casselberry, they wished for selling more of their products. If one of their distributors is excellent and that distributor can coach others to increase their sales, it is valuable for the parent company. With the aim of making it advantageous for the distributors to teach other people, they offered them a commission over the entire sales volume. This arrangement can be seen as the first acknowledged network marketing compensation plan.

The motive for the expansion in the direction of network marketing lies within the fact that smaller companies were in search of a way to get their products to customers in rural areas. Multi level marketing was the answer for them.

Hereafter, progressively companies began to use the network marketing approach. Older but well-known companies are: Amway, Herbalife, Mary Kay, Pampered Chef, Avon, Jafra. There are as well numerous famous brands that approached the market via network marketing (E.g. Gillette, Avon, Colgate-Palmolive, Home Shopping Network Direct, Texas Instrument, Dupont and even AOL).

There is one significant moment in time I would like to bring up. In 1979 a decision of the court came out announcing that the network marketing compensation plan of Amway is a legitimate business opportunity and cannot be perceived as a pyramid scheme.

I will put an end to this article by offering some figures of the network marketing industry. Sales last year were over 100 billion USD. At present there are approximately 56 million people worldwide engaged in the network marketing industry. Network marketing companies activate in more than 100 countries worldwide. The last 10 years this industry expanded 90%. Well known entrepreneurs such as Robert Kiyosaki, Paul Zane Pilzer and Donald Trump are supporting the network marketing industry.