Opportunity for Income

Network marketing offers numerous possibilities but distributors should research company

Posted: Thursday, July 25, 2002

After 15 years in the boat charter business, Keith Stephens decided to drop everything and work at his network marketing business full time.

"I sold my entire business in April of last year because (network marketing) was doing better than that was doing," said Stephens, an independent associate for Usana Health Sciences, a network marketing company. "And I was really busy in that charter business; I was doing about 1,000 people a summer."

According to the U.S. Federal Trade Commission, multilevel or network marketing plans sell goods and services through distributors who earn commissions for their own sales and the sales of people they recruit to become distributors. The recruits are sometimes referred to as a "downline."

"I call it back-end marketing," said Jackie Stewart, director of the Juneau Small Business Development Center. "Instead of a company putting out money up front in promoting products, it is using word-of-mouth and paying those who help spread the word after the sale is made."

Stephens said there are hundreds of companies in many fields that use network marketing, but he believes those selling health care products are on a fast track to prosperity.

"Three major trends are converging on each other, and are successful mainly because of the baby boomers," Stephens said. "The No. 1 business right now is anything to do with finance because people are looking toward retirement. The other is health and wellness products, and the third trend is home-based businesses."

Stephens said Usana sells health products that people take even when they are not sick, such as to help lose weight or look better, products that are popular with aging baby boomers.

"There are a lot of misconceptions about network marketing; they think, 'Oh, it's a scam,' " Stephens said. "I think once people are informed and they investigate they can make their own informed decisions.

"Network marketing has really come of age and the reason is because it's bypassed the middlemen," Stephens said. "Seventy-five percent of costs are middlemen. It goes straight from the manufacturer to the customer and channels the profits straight to you."

Though many organizations run fair and profitable networks, the FTC warns consumers about some multilevel marketing companies with plans that don't always benefit distributors and may not be legal. The agency urges prospective distributors to learn about the companies before getting involved.

The FTC says distributors are legally responsible for claims they make about the company, its product and the business opportunities it offers, so participants must be sure the information given out is true.

In addition, the FTC warns that distributors are responsible for claims made about new distributors' earning potential, and common sense should be used when evaluating a multilevel marketing opportunity.

Information from the FTC about what to watch for in multilevel marketing can be found at www.ftc.gov/bcp/conline/pubs/alerts/pyrdalrt.htm.

"I spent two and a half years researching," Stephens said. "You have to do your homework on a business like this; you've got to check them out thoroughly. Make sure you're getting a company that's equitable."

Stephens said there are several benefits to multilevel marketing, such as high income potential, tax write-offs, and the ability to run the business from home.

Stewart of JSBDC says word-of-mouth is one of the strongest ways to promote products or services.

"It's very effective, but the downside to the Juneau economy is that it is taking local sales," Stewart said. "The reality is that customer service in Juneau could use improving, and when national companies have excellent customer service they have the ability to enter the local market in this way."

Stephens can be reached at 789-9740 or kdstephens@gci.net, and his Web site is www.unitoday.net/lifelong.

"This is a business, and you're in business to make money," Stephens said. "What I like about it more than anything is where it's taking me."

Emily Wescott can be reached at ewescott@juneauempire.com.

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