Monthly Archives: June 2010

Don’t be afraid of MLM Part 2: A brief history

There is no mystery to Multi Level Marketing, it’s just another form of sales and distribution. The core principles of MLM evolved during the late 1920s, within the vitamins and supplements industry – itself a new market at the time. These principles were subsequently brought to prominence by a nutrition company called California Vitamins.

MLM in its true form, however, was purely an accident.

In the early 1940’s, California Vitamins realized that the majority of recently hired sales representatives were friends and family of their existing sales force. The reason? These people wanted to work for California Vitamins primarily because they wanted the company’s products at wholesale cost! The company soon concluded that it was easier to create a large sales force who each sold a small amount of product than to create a small sales force which produced high sales volume.

California Vitamins subsequently designed a sales compensation structure that encouraged their salespeople to recruit new representatives from satisfied customers, most of whom were family and friends. However, each recruit had the same right to offer the product and representative status to others, thus allowing the sales force to grow exponentially. The company rewarded each rep for the sales produced by their entire group, or network of sales representatives. MLM was born! A few years later, the company changed its name to NutriLite Food Supplement Corporation.

In 1949, two young men named Rich DeVos and Jay VanAndel became NutriLite distributors. Within several years, they had built a large and very successful organization nationwide. However, in the late 1950s, a problem arose that almost destroyed their business.

The manufacturing arm of NutriLite was owned separately from the marketing arm, and the manufacturers didn’t like the fact that the marketers received a larger share of the company’s profit. Soon, a standoff developed between the two. DeVos and VanAndel watched, alarmed, as their distribution network dwindled rapidly due to lack of product and the resulting lack of sales.

By 1959, unable to bring the two parties to an agreement, DeVos and VanAndel decided to create a product line of their own that they could supply to their struggling network. They were to call this product line the American Way, or AmWay.

Within ten years, AmWay bought NutriLite, and has never looked back. Worldwide, Amway is still the largest MLM company.

As you know, success breeds imitation. Thus, in no time, dozens of MLM companies came into existence. With them came the dark side of the story – one that still plagues MLM to this day.

Coming up in Part 3: Why MLM gets a bad rap – and why it’s false.

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