Imagine a workday that consists of waking up whenever you want and Skyping a couple of business partners, on track to making a six-figure salary while sitting on your couch in plaid pajama pants, watching “Sherlock Holmes” and eating ramen.
That is the workday Eliot Browarsky, a senior at Elon University, wanted, and that’s what he got. He got involved in a network marketing business because the job pays well.
“I wanted to make money, and I saw it as a great way for young people to make money,” Browarsky said. “I’m very happy I joined. I’m excited it’s something that if you build it once, you’ll be paid forever, and I’m happy about being paid forever.”
According to the Federal Trade Commission, network marketing, also known as multi-level marketing, is a business model in which individuals sell products to the public, often by word-of-mouth and direct sales. Distributors earn commission not only for their own sales but also for sales made by the people they recruit. Network marketing relies on the work of the people, rather than commercial ads, to promote a product.
“It seemed like a good plan, and it’d be easy to make money,” said Jordan Darnell ’13, who Browarsky recruited to join in on the movement. “But if you don’t go about it the right way, then it won’t be a thing that can last forever. It’s not that easy.”
But network marketing carries risks. It involves the initial investment on the part of the seller in order to obtain the company’s products, and there’s no guarantee an individual will sell enough products to recoup their investment. Even riskier, some networking marketing businesses are in fact illegal pyramid schemes.
Network marketing companies get their pyramidal structure from the way products are sold through a network of distributors. Each member recruits and trains additional distributors to sell products and recruit more investors, and compensation is rewarded to those above them.
According to the office of the New York State attorney general, what separates multi-level or network marketing from a pyramid scheme is that a legitimate multi-level marketing company emphasizes reliable products or services in addition to recruiting business partners, while a pyramid scheme is a fraudulent system that uses products or services to disguise its pursuit of taking money from the “investors” on the bottom levels to pay other investors above them.
“If somebody wanted to get involved in it, I wouldn’t tell them to run away,” said Coleman Rich, business professor and chair of the Department of Marketing and Entrepreneurship at Elon. “I would tell them to do their homework on the company and see if its product is fit for them, if the company is financially stable, make sure pay is based on consumption, ask if they will be able to handle rejection and if they have the time commitment for it.”
Getting involved
Browarsky and Darnell took interest in the idea of network marketing when they were introduced to Vemma, a $100 million nutrition company that utilizes network marketing in its promotion of products.
Vemma spends no money on commercial advertising. Instead, it uses its $55 million advertising budget to pay people to promote its Verve brand through word-of-mouth advertising. College students are often recruited for this role because many see it as a business opportunity that allows them to manage their own business on their own time while making a considerable amount of money.
“The reason that the young people are really resonating is because we’re an opportunity that fits into their life,” said BK Boreyko, founder and CEO of Vemma. “It’s not something they have to fit into [their lifestyle].”
Verve, one of Vemma’s most popular energy drinks, quickly gained popularity on Elon’s campus just before students went home for Winter Break last year. Dozens of students got involved with the marketing opportunity, which required an initial investment by the individual.
According to a study by Nutrition Journal, 51 percent of college students are energy drink consumers. The study concluded that using energy drinks is a popular practice among college students for a variety of reasons, including late-night studying, partying and the need for energy boosts throughout the day. Verve, which is the official energy drink of the NBA’s Phoenix Suns, contributed to 65 percent of Vemma’s sales last year. Browarsky managed to make a profit by promoting it, but Darnell never regained the capital he used to break into the business.
“It sounded like a good opportunity and I came into it with a real positive state of mind,” Darnell said. “After contacting people and getting the word out, I realized it was hard for people to buy into the concept and I didn’t have time for it.”
Targeting students
According to the Direct Selling Association, 15.8 million people in the US in 2010 were involved in network marketing. Sellers between the ages of 18 and 29 made up 14 percent of that group, and 91 percent of sellers worked part-time.
More than 6,000 people attended a conference Vemma held recently in Las Vegas. According to Boreyko, around 4,000 of those present were excited young people in their twenties.
Despite the risk of losing money, Boreyko said college students are willing to take the risks of network marketing in the hopes of making a profit.
“It’s something different,” Boreyko said. “It’s outside the box of what everybody tells you to do to become successful and make a living, which isn’t working for a majority of the market.”
He attributes much of the interest on college campuses to economics. The weak economy, unemployment and rising student loan debts often motivate students to want to become entrepreneurs and not settle for minimum-wage jobs.
Darnell agreed.
“Everybody wants to make money, and that’s what everyone is worried about leaving college,” he said. “Learning the way things work in this business you realize you have so many resources and are meeting new people everyday.”
Thuc Phan, a sophomore football player at Elon University, got involved with World Ventures, a company that hires people to market everything from travel memberships to vacations and airfares. Other Elon football players and students at University of North Carolina-Chapel Hill and Winston-Salem State have also invested in the entrepreneurial opportunity offered by World Ventures.
“Entrepreneurship teaches you not to be afraid of taking chances,” Phan said. “Not only do you learn how to make money in the business aspect, but you learn so many other personal development skills that will propel you in life and allow you to be successful in other fields.”
For Phan, sharing this concept is a part-time job. It’s something he can do on the side to make money, especially as a Division I athlete whose schedule doesn’t cater to a traditional part-time job, much less a nine-to-five workday.
“This business takes a lot of motivation and personal development, just like playing a sport,” Phan said. “That’s what got me into it. It’s about the people you work with and teamwork and camaraderie.”
Vemma created Young People’s Revolution, a movement named and started by a small group of students at Arizona State University, to give college-aged kids the opportunity to make their own success in the business world.
“It’s really the accumulation of the frustration stemming from the student loan debt crisis, college graduate under-employment and unemployment,” said Lynn McGovern of Vemma Public and Community Relations.
The success of network marketing relies not only on the number of people who join in the effort, but also the popularity of the product the company is selling.
“A student has to be a user of the product if you’re going to be involved in it,” Rich said. “They need to drink [Verve] everyday and wear a Vemma shirt, be a walking billboard and talk about how good it has made you feel.”
Navigating the legal landscape
Not all network marketing opportunities are genuine. Some are designed to make a few people rich at the expense of the seller.
North Carolina law prohibits pyramid and chain schemes. A person who establishes or operates a pyramid distribution plan is guilty of a Class H felony, while a person who participates in a pyramid distribution plan is deemed to participate in a lottery and is guilty of a Class 2 misdemeanor.
Rich said he believes network marketing can be an entrepreneurial opportunity with the right company. He listed four criteria students should consider when looking into network marketing.
First, he said, it has to fit the individual’s beliefs, experience and interests. Second, sellers should make commission on products sold, not recruitment. Third, it shouldn’t cost more than $50 to get started. And lastly, the company should provide all necessary training materials.
Entrepreneur Magazine offers a how-to on researching a business opportunity ventures, which, includes guidelines similar to Rich’s.
“I still believe it could be a really good thing for people my age to get into, I would warn that this is a process that takes self-motivation and a lot of time, which is one thing that got me,” Darnell said. “We all thought it was going to be easier than it actually was.”