Network Marketing History

Let's look at some network marketing history. If we take the term “network marketing” literally, then, in practice, network marketing has been around probably since people began trading goods. We all have a network of people we know. We all tell people we know about goods and service we buy that we like. Often we do not get paid for making such referrals. However, we’re still engaging in “network marketing.”

At some point industry decided to use to its benefit the natural tendency for people to refer people they know to goods and services. Hence the birth of network marketing as a business model.

Most everyone knows Amway. In terms of network marketing history, Amway paved the way for companies to adopt multi-level distribution systems (aka network marketing systems). Amway has also been one of the primary targets of network marketing critics.

Why? Because back in the days of Amway, distributors usually had to carry their own inventory (in their homes or garages) of product. As more network marketing companies entered the marketplace, people often decided against getting into network marketing for the simple reason they did not want to carry inventory.

In addition, critics of network marketing began to expose Amway for generating considerable revenues from selling instructional and motivational materials to its distributors. In reality, often it was various distributors who profited from instructional and motivational materials versus the Corporation. It was certain distributors who developed and pushed such materials to their down line distributors, not necessarily the network marketing Corporation.

However, in the case of Amway, the FTC filed a lawsuit against Amway in 1976. Amway won and its victory paved the way for companies to adopt a multi-level distribution system.

Other changes followed. In the 1980s there was a major shift when network-marketing companies began managing the stocking and distribution of products as well as commission payments to their members. Why? Because then their distributors could focus solely on marketing.

Now, the network marketing business model has evolved such that most MLM companies act as logistics companies, taking orders, shipping products and calculating and paying commissions.

In addition, the Internet has become a key component in the evolution of network marketing. Most MLM companies are now online and provide to their distributors, at little or no cost, Internet marketing tools to facilitate recruiting new distributors, marketing, and ordering products.

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