Harvard University on Network Marketing

Network Marketing is being taught at more than 200 colleges, including Harvard Business School. After extensive research into the network marketing industry, Harvard Business School developed three criteria that a network marketing company must have in order to make it a most desirable opportunity. 

They are:

1.  The company must be at least 18 months old - 90% of all network marketing companies that fail, do so in the first 18 months.

2.  The company must have a product that is both unique and highly consumable. Being unique in this case means the company has an exclusive product that can only be purchased from the company’s distributors. Having a product that is highly consumable means repeated sales, thereby guaranteeing customer loyalty versus a one-time sale and having to source new customers.

3.  It needs to be a ‘ground floor’ opportunity. Harvard Business School suggests that in order for the opportunity to qualify as ‘ground floor’, the number of existing distributorships should be less than of 1% of the population in the c ountry where the network company is operating. In the United States, this figure is equal to 1.5 million people. Harvard Business School also states that if there are less than 500,000 distributors, this presents a cutting opportunity. If the company has less than 100,000 distributors, Harvard Business School considers it to be a once-in-a-lifetime opportunity.

Harvard Business School states there are four distinct stages of growth in a network marketing company. 

They are:

1. Foundation - This usually lasts approximately six months and is when a company develops its products and markets.

2. Concentration - This period lasts approximately 2 to 4 years from when the distributor network is started.

3. Momentum - This period lasts from 2 to 4 years also. This is when the company experiences phenomenal growth and distributorships’ businesses explode. It is during this period that the company virtually sweeps the nation. When a company’s sales reach $50 million, it reaches what is called ‘critical mass’ (sales go vertically right off the graph). Also, approximately 2/3 of the company’s growth of new distributors occurs during this period of time.

For example, when Herbalife reached $50 million, sales jumped to $151 million in only 12=2 0months and they added over 800,000 new distributors to their organization. Say an organization is producing a bonus cheque of $1000 per month. When the company reaches critical mass, distributors automatically experience a ten-fold increase in their earnings. In other words, $1000 per month becomes $10,000 per month. This is the reason for getting involved on the ground floor, so you will experience the benefits of explosive growth.

4. Stability - This period lasts for the life of the company. A network marketing company that is dedicated to the success of its distributors will experience longevity, thereby insuring that an active distributorship will realize continued earnings and growth.

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