The History Of Network Marketing (Part 2)

While we're talking about the hisory of network marketing, the term “network marketing” specifically is 20th century creation.

Its’ genesis lies in the post World War era of the late 40s and early 50s. This was the dawning of the era of the subdivision in which genuine neighborhoods flourished with their own circle of trusting relationships and backyard barbeques.

It is out of this trend that the term “belly to belly” marketing – or warm market as you may better recognize it – was coined.

A company named California Vitamins came to the realization that many of their new sales recruits were in fact friends and family of their existing sales force. These new recruits’ primary motivation to becoming a sales associate was that they wanted the products for themselves at the wholesale cost.

That led the company to recognize it was easier to build a sales force with a lot of people who sell a small amount of product, than it was to find a small number of top sellers who would move mountains of product.

And so California Vitamins designed a revolutionary sales compensation model encouraging their salespeople to invite new representatives from satisfied customers, most of whom were family and friends. Each of those new representatives in turn had the same right to offer the product and opportunity to become a representative to others.

This allowed the sales force to grow exponentially. The company rewarded its representatives for the sales produced by their entire group – or network – of sales representatives. And so multi-level marketing was born.

It was also during this time that the home party plan was introduced.

The original party plan was the Stanley Hostess Party Plan, by Stanley Home Products. The focus of the party plan was to demonstrate the myriad of uses and benefits of the products right in the home. Out of the original Stanley dealer roster came the founders of such future marketing program giants as Mary Kay and Tupperware.

The introduction of the multi-level, person-to-person sales program in the mid 1950s coincided with another pair of new giants arriving on the scene. First, Shaklee was launched. Then, a couple of years later, in 1959, came the birth of Amway.

The term multi-level marketing, or MLM, became a part of the industry lexicon.

And the direct selling industry would never be the same.

The popular notion that MLM companies really gained steam in the mid 1970s when the US Federal Trade Commission (FTC) charged that Amway and its multi-level marketing structure constituted an illegal pyramid.

This made lots of headlines in the mainstream press.

In fact, in 1979 the court sided with Amway and deemed its multi-level marketing structure valid and legal and that its model represented a legitimate business opportunity.

Out of that court decision, the “Amway Safeguard Rule” set the legal standard for direct selling, multi-level, and network marketing based companies going forward. And it became one of the most profound milestones in the recent history of network marketing.

However, the myth of all MLMs or network marketing opportunities being pyramids lives on.

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