Many network marketing companies are rightfully concerned about consultants making unauthorized medical and earnings claims on their own websites, as well as creating keyword confusion in the search engines. Therefore, many leading MLM companies provide authorized replicated websites for their consultants and actually prohibit individually-created websites. Therefore, if you’re a consultant, chances are high that you will not be allowed to purchase, design or build your own website. Instead, you’ll be given access to your own replicated website, provided by the company, which is a website that looks much like the company’s main website, but has a unique URL that you can send your customers to so that they can order products through you.

The primary reasons why companies don’t allow consultants to host their own websites are:

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Every business should be concerned about market saturation. The direct selling industry is no different.

The direct selling industry thrives on marketplace competition in order to continue to deliver high-quality goods and services, especially as the population grows and consumer demands change.

In one significant legal case, regulators argued that a direct selling company was bound for failure by the prospect of saturation in the marketplace, both for product, as well as for distributor recruitment. In that landmark case, the court took notice of the concept of “saturation,” but it rejected the concept as an obstacle to success of the particular direct selling company involved. The court took note of a large market for particular products and explained that the direct selling company was merely taking its place in the competitive marketplace.

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There are a lot of outspoken bloggers and critics online, as well as negative opinions floating around the social networks, but the positives drown out the negatives. It’s not hard to find a loud voice criticizing the direct selling industry through a quick Google search. And it is true… there are many pyramid/Ponzi schemes, primarily internationally based, that parade themselves as MLM/direct delling… and they are not. They are merely pyramid headhunting recruitment schemes that often use bogus products and services as an excuse to move money. The entire emphasis of such organizations is to cause investors to pay money and cause others to do the same, with a thin veneer of an actual product or service. In fact, the revenue to pay commissions instead comes from distributor payments and not sales to the ultimate user.

Despite this, the facts remains MLM and direct selling are a major part of the fabric of commerce. Statistics on 2014 sales, compiled by the World Federation of Direct Selling Associations, indicate global sales of $183 billion and 100 million distributors. In the U.S., there are 18 million distributors posting $35 billion in sales. Numerous direct selling companies are traded on the NYSE.

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As a consultant, where did you first begin selling your products/services?

It is often said that direct selling/MLM/network marketing is about first sharing your product and services within your spheres of influence, that is to say, first harvest the low lying fruit. This means calling upon your friends, family, social acquaintances, co-workers, members of your church, religious group, fraternal organizations, etc. In other words, sell where you are the most comfortable. Generally, this includes territory close to home. Generally speaking if you sell products/services at a distance then it is because you have connections. As you mature, you may venture into other territories, but it likely will be through social networking or by having an online presence.

As a consultant, where did you first begin selling your products/services? How would you rate your success during your first year as a consultant?

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This blog post is the companion post to the video: Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes. Expert MLM Attorney, Jeff Babener, answers the question, when it comes to pyramid schemes, how do you tell the difference between one that’s legitimate and one that is not? How do compensation plans affect a company’s legality?

Jeff Babener: There’s a famous Supreme Court decision that where one of the Supreme Court judges was asked to comment on the definition of pornography. He replied that he couldn’t define it, but he knew it when he saw it.  Sometimes you need a metaphor to understand the difference between an illegal pyramid, headhunting, recruitment scheme and a legitimate MLM company.

This story is a good example of the difficulty in defining pyramid schemes. And, you may come to your own conclusion. Here is a metaphor that I use a lot to help people with the definition of pyramid schemes:

The metaphor is about a gentlemen, will call him Party #1, and he sells a case of canned tuna fish to Party #2 for $10. And, Party #2 sells it to Party #3 for $20, and Party #3 sells the case of canned tuna fish until it gets to Party #10, who buys the case of canned tuna for $500. And, Party #10 opens up the case of tuna fish and it’s rancid. It’s inedible.

He goes back to Party #9 and complains, “I bought this case of tuna for $500 and it’s rancid.” Party #9 tells him to take it to Party #8, and Party #8 tells him to take it to Party #7, and so on until Party #10 goes all the way back to Party #1 and says, “You’re the one who started all of this! I have a problem!”

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