The Hallmarks of Legitimate Direct Selling/Network Marketing Companies
By Jeffrey Babener, © 2012 / 2013
Every once in a while, those looking at our company have questions about the legitimacy of this industry. What
would be your advice on what we should say to them?
Some clear criteria for legitimate direct selling/network marketing companies have long been recognized.
In determining whether a program is a legitimate direct selling/network marketing opportunity, the would-be
participant should consider several important points:
1. Goods or Service. Legitimate companies offer high-quality goods or services and guarantee consumer
satisfaction. Goods and services must have a "real" demand in the marketplace, or an anticipated "real" demand if
the good or service is just being introduced. Goods and services must have their own intrinsic value, such that
distributors who purchase them would do so even if they were not involved in a network marketing business
2. Price. Legitimate companies offer goods and services which are fairly and competitively priced. This
eliminates companies which would attempt to benefit by "price gouging" the members of their own sales force. It
also ensures that distributors do not make purchases or encourage others to do so solely in order to receive
financial reward. Distributors must be able to purchase the company product at wholesale or at a substantial
discount from retail, based on volume of purchases.
3. Investment Requirement. Legitimate companies require no up-front investment. Distributors who wish to
participate in the business opportunity may be required to purchase sales kits or demonstration materials at or
near company cost.
4. Purchase and Inventory Requirement. Legitimate companies have neither minimum purchase
requirements nor inventory requirements in order to become an independent distributor. Companies are restricted
from requiring enrolling distributors to purchase any amount of goods or services. Once in business, however,
distributors may be required to maintain or achieve company-described minimum sales volume requirements in
order to qualify to maintain or advance in sales force management status and retain or receive the associated
privileges and benefits. These minimum requirements are usually based on personal purchases and sales, and the
total group volume of sales.
5. Product Use. Legitimate companies offer goods and services that people use. Purchasers may have need
for, or simply desire, these goods and services. Ongoing consumption by purchasers based on satisfaction with the
good or service is one of the keys to success of any business.
6. Sales Commissions. Legitimate companies pay sales commissions solely for goods and services
purchased. Commissions should not be paid on any sales materials, training fees, or any sort of non-product sales.
Back to the MLM Articles Navigation Page.
Brought to you by MLMLegal
MLMAttorney.com is a valuable resource to the MLM and Direct Sales industry. Use
thissite to explore the different compensation plans, browse articles written by Jeffrey
Babener, view the latest posts from attorney Babener's blog, and more. To find more
information about the direct selling industry, visit the best MLM resource on the web:
© Jeffrey Babener, 2013
The Sister Website to