Back in February 2010 I read a post on Glenn Burke’s network marketing blog with a title similar to this one. I replied (briefly), then I forgot about it.

Early this morning (when I do most of my research and writing, posting, etc) I clicked on a link that took me back to Glenn’s post and his reply, which I hadn’t seen before. You can view the entire thread at the link above.

I’ve posted a more detailed response, but it takes time to moderate comments and replies, so I’m posting it here before I forget about it (again). It clarifies the source of my own use of the 97% statistic — which I suspect was where the increasingly-widespread use (unattributed, unsubstantiated and unqualified) stems from.

Glenn raised the following points about my comment (quite reasonably and properly, too):

It would be very interesting to see what you used for the criteria, not that I doubt what you are saying. But, in using the internet archives I can only find where you said this online in 2005 and stated 90% failure rate.

And, since both of these studies occurred before the internet came into the picture, how has it changed since then?

The interesting story would be, has anything really changed? We have more support services today than we probably have network marketers.

Now finally at least here in the U.S. the FTC rulings companies have to show average earnings in their disclosures.

I finally found one network marketing lead generation system that coincidentally used almost the same numbers from Leaders Club. Which was definitely not what their advertising had claimed for years.

The real issues is why is this failure rate so high?

Why has it not change with all the information available today?

Here’s my reply:

Glenn,

If you used archive.org, my main site (profitclinic.com) is blocked (because of copyright abuse a long [time] ago), so you may not have received a definitive search result. I typically refer to a 90% failure rate in the context of more general results from our own and other surveys related to small and home-based business owners and their survival rates. [Example: click here — opens in a new window.]

The criteria for the 97% estimate from our own (anonymous) survey results were quite simple, and included:

• How long have you been actively involved in network marketing?
• How many companies have you represented in that time?
• Which companies do you currently represent?
• A check list of companies for them to identify.
• Does your total income from retail commissions and bonuses usually exceed your costs of doing business each month? (Explanation included with survey, either live or printed.)
• How many people have you sponsored personally?
• How many are still active? (Explanation included with survey, either live or printed.)
• How many people are there in your downline organization?  (Explanation included with survey, either live or printed.)
• How many of them receive bonuses each month (on average)?
• What are the mean and medium incomes of your downline members?  (Explanation included with survey, either live or printed.)

These are the main criteria used. Depending on the situation — which can be live seminars and workshops, online surveys, mailing list surveys, etc — we may use additional criteria, but this is typically related to other metrics not related directly to their survival or success, such as trend spotting.

Not surprisingly, we haven’t seen any kind of statistically-significant changes in this 97% rate from survey to survey over more than 20 years. The fundamental reasons for failure remain the same:

1. Most people join a network marketing opportunity based on EMOTIONAL appeal, not rational, objective BUSINESS criteria.
2. Those emotional appeals are usually to some form of…
   — fear of loss
   — ignorance
   — greed
   — laziness
   — gullibility

(Yes, most of these fit into the overall category of fear-of-loss, but we like to drill down a bit [further] for an indication of which manifestations are most prevalent or currently in vogue.)

Most systems that come and go are focused on lead generation and recruiting and, yes, some are quite effective. Some are duplicable, which does influence the failure rates in the short to medium term, but eventually it all comes down to the usual suspects:

• Are people making profit from their involvement?
• Are those profits consistent and growing?
• How long are people prepared to wait to acknowledge their lack of success and quit?

Interestingly, there has been a quite consistent pattern amongst people who are successful in network marketing (by our criteria, earning a regular monthly income equivalent to a reasonable full-time income under local conditions).

They tend to be people who learn to fail fast: to recognize and acknowledge that they’ve chosen a program that doesn’t meet their own needs, especially financially and, surprisingly often, ethically and to abandon it and search for one that does.

But this doesn’t alter the overall picture. Network marketing is still predominantly made up of people whose life-long conditioning has been to make them employees, consumers and imitators… not the entrepreneurs, marketers and innovators that they need to become to survive and thrive.

Hope this clarifies things a bit more for you.

John

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