History of Network Marketing

It's important to understand where our industry began. Here's a quick article about how Network Marketing evolved into the business we work in today.

The History of Network Marketing began in the 1940's when a vitamin supplement company called the California Vitamin Company (aka Nutrilite) realized that most of the incoming sales representatives happened to be friends or family of the current sales force. The incentive for these new sales reps to join the company was that they would be able to purchase the vitamins at wholesale prices.

The California Vitamin Company came to the conclusion that a larger sales force actively selling even small volumes of product was much more lucrative than a limited number of sales reps selling larger quantities.

Therefore, the California Vitamin Company began a sales compensation structure to encourage networking and recruitment of new sales reps to their company, as well as to promote vitamin sales. Sales reps would promote their business to family members, friends or good customers who would, in turn, join that person's group.

Each sales rep was compensated for the sales in their group or network. This "networking" model became more and more popular as other companies implemented it into their sales plan.

The History of Network Markeing continues and in the 1950's and forward, sales reps and/or distributors worked hard to find new and creative ways to build their network. They did this by meeting new people either in groups (house parties) or individually. The end goal was to recruit them to their business or add them as a customer.

Two of the more successful sales representative for The California Vitamin Company were Jay van Andel and Rich DeVos. After seeing how well, financially, van Andel and DeVos were doing, the California Vitamin Company changed their compensation program which minimized commissions. van Andel and DeVos therfore decided to take their futures into their own hands.

In 1959 Rich DeVos and Jay van Andel formed a company called The American Way, or Amway for short. They implemented the Network Marketing model which had worked so well for them at the California Vitamin Company.

Amway blossomed into a leading Multi-level Marketing business which was built on solid values and principles. The History of Network Marketing would be lacking without mention of this famous company.

Perhaps you are familiar with Amway? :)

With success, attention is attracted and there is another, less glamorous, side associated with Network Marketing - and one that still exists today.

The Amway Corporation faced the Federal Trade Commission in a test case which determined that Amway was NOT a pyramid scam, but a legitimate business.

This ruling opened up the world for more businesses to operate as Multi-level Marketing companies. Amway continued to grow and within 10 years, Amway purchased Nutrilite (The California Vitamin Company).

Amway and other reputable company owners knew they could not take advantage of their people due to the strict, ethical rules established for Network Marketing companies. They also knew it would destroy the integrity of multi-level marketing.

Unfortunatley, in the 1960's and 1970's many unethical business owners developed a method called the Pyramid Selling Scheme. This scheme was designed to pretend there was a "product" attached to a money pyramid, thereby making consumers and representative believe they were marketing something.

Interestingly enough, it was actually the reputable MLM companies that first petitioned the government to have pyramid schemes abolished. It's a shame that many people still accuse Network Marketing of being a "pyramid scam".

Network Marketing is highly regulated today and the govenment offers a good deal of consumer protection. But there are always shady characters out there creating new scams. It's still important to cross your t's and dot your i's when investigating any new company. Good choices are companies who are members of the DSA.

As the world evolves, so does Network Marketing. New, fantastic tools are available at our fingertips including Internet Marketing, Blog Marketing, E-Zines, Social Networking and so much more. This is the way of the future for business, including Network Marketing.

Source Notes: This article, The History of Network Marketing, was based off of information derived from Ken Envoy's article, Network Marketing Primer and Network Marketing History by Infinite Synergy Learning Systems Inc.